31 December 2012

We Don't Want The Confusing Truth?

A new law review article makes the fascinating claim that the executive branch has gained ascendancy in national security matters despite institutional efforts to restrain it mostly because other institutions don't understand them and promptly abdicate the responsibility formally assigned to them. (The title is a reference to the portion of the movie "A Few Good Men" (1992) featuring Tom Cruise, and in particular to the scene shown in the linked video).

Aziz Rana (Cornell Law School) has posted Who Decides on Security? (Connecticut Law Review, Vol. 44, No. 5, 2012) on SSRN. Here is the abstract:
    Despite over six decades of reform initiatives, the overwhelming drift of security arrangements in the United States has been toward greater — not less — executive centralization and discretion. This lead article for the annual commentary issue explores why efforts to curb presidential prerogative have failed so consistently. It argues that while constitutional scholars have overwhelmingly focused their attention on procedural solutions, the underlying reason for the growth of emergency powers is ultimately political rather than purely legal. In particular, scholars have ignored how the basic meaning of “security” has itself shifted dramatically since World War II and the beginning of the Cold War in line with changing ideas about popular competence. Paying special attention to the decisive role of actors such as Supreme Court Justice Felix Frankfurter and Pendleton Herring, co-author of 1947’s National Security Act, this Article details how emerging judgments about the limits of popular knowledge and mass deliberation fundamentally altered the basic structure of security practices.

    Countering the pervasive wisdom at the founding and throughout the nineteenth century, this contemporary shift has recast war and external threat as matters too complex and specialized for ordinary Americans to comprehend. Today, the dominant conceptual approach to security presumes that insulated decision-makers in the executive branch (armed with the military’s professional expertise) are best equipped to make sense of complicated and often conflicting information about safety and self-defense. The result is that the other branches — let alone the public writ large — face a profound legitimacy deficit whenever they call for transparency or seek to challenge coercive security programs. Not surprisingly, the tendency of legalistic reform efforts has been to place greater decision-making power in the other branches and then to watch those branches delegate such power back to the executive.

From here.

Geezer Care Drives Excess U.S. Healthcare Costs

From here via here. (Note that commentary is skeptical and suggest that the presentation may be misleading in some respect.)

The United States is somewhat less efficient in providing healthcare to its citizens than other developed countries through age fifty or so.  But, it is dramatically less efficient in providing healthcare to older patients, despite the fact that healthcare for Americans over the age of sixty-five is predominantly via a single payer system called Medicare.  Less obviously, many not quite old enough for Medicare age Americans who have disabilities receive expensive health care via Medicaid.

The chart above illustrates this fact although it is important to remember that the older cohorts are smaller than the younger ones.  There are far fewer 90 year olds than there are 70 year olds, for example.

Of course, despite spending much more than other countries on geriatric care, the United States does not appear to achieve better outcomes.


Several stories below the almost top of the page headline at the Denver Post this afternoon, "Jax Fish House to close for renovations for a week," our esteemed newspaper of record deigns to tell us that:
[A] deal to avert the "fiscal cliff" was in sight but not yet finalized. The emerging deal would raise tax rates on family income over $450,000 and individual income over $400,000 a year, increase the estate tax rate and extend unemployment benefits for one year.
Other details of the proposed deal are available via the link above. Sometimes life seems more like the Onion and less like reality.

Unfortunately, there is no indication concerning how the potential deal would impact capital gains and dividend tax rates.

28 December 2012

Fiscal Cliff Timebomb Still Ticking

It is a Friday which is the second to last business day of 2012. 

A host of taxpayer friendly provisions of the Internal Revenue Code expire Tuesday (most of which were tax cuts made while George W. Bush was President that were given expiration dates in order to comply with Congressional budgeting rules).  A 2011 deal on the federal budget deficit mandates automatic major federal government spending cuts as well in 2013, only a few of which (apparently among them the Defense budget) have been modified in subsequent legislation.

Transfer Tax Expiration

As of this post, Congress has not taken action to address these matters, which are collectively known as the fiscal cliff.  This is particularly relevant in the case of gift and estate taxes: "In 2010, after a year in which the estate tax was zeroed out altogether, Congress passed a law that set the estate tax at 35% and exempted all estates under $5 million, adjusted for inflation. That law expires in January 2013 when the exemption will fall to $1 million and the tax will rise to 55%."  The expiration of transfer tax cuts is particular partisan, since, by definition, it involves tax cuts for rich people who haven't earned what they are receiving.  Republican calls to repeal the transfer tax system entirely have been replaced by efforts to make the generous provisions of the transfer tax laws in 2012 permanent.

Estate tax reforms are also more time sensitive.  If Congress doesn't reach a deal by Monday, people will die in 2013 and be subject to the less generous transfer tax laws unless Congress changes them retroactively, a prospect that grows more faint as each day passes.  In contrast, while income tax rules govern transactions taking place in 2013, (almost) no one is required to file a tax return paying taxes on those 2013 transactions until April 15, 2014, leaving Congress plenty of time to make retroactive changes that have no impact on anyone but tax professionals and business transaction planners.

Prospects For A Deal By Year End Are Modest

The President has offered to preserve the tax breaks for taxpayers making less than $250,000 a year and made some spending proposals.  Congressional Republicans discussed, but apparently have failed to pass, a counterproposal that would preserve tax breaks for taxpayers making less than $1,000,000 a year and some different spending proposals.  Neither side in the negotiations have indicated that a deal is imminent or outlined the terms of a deal seriously being considered by both sides.  This is a game of chicken that most conventional wisdom had assumed would produce a deal and hasn't.

A week from now, the winners of the 2012 elections will be sworn in, but this doesn't change the partisan balance of power in Congress or the Presidency, although it does slightly shuffle the deck by bringing new players into the discussion.  Mostly, however, the 2012 elections were not kind of moderates, so the party leadership the controls the flow of bills in the House and Senate respectively may take an even harder line.

Not A True Crisis, But A Serious Moment

Public opinion polls indicate that Republicans will pay a higher price than Democrats for failing to reach a deal on the fiscal cliff.

A resolution of the fiscal cliff is not "must pass" legislation that would trigger a constitutional crisis.  The tax laws that will take effect are laws that the United States managed just fine under during the Clinton administration.  Everyone knows what the laws will be if no action is taken.  The changes will increase tax revenues and reduce government spending.  This will reduce the $1,327 billion a year federal budget deficit by an estimated $560 billion dollars a year (which is about 42% of the current federal deficit), and this is what a significant number of Americans want. 

The government will not shut down if Congress doesn't reach a fiscal cliff deal.  Also, nothing prevents Congress from reaching new deals in 2013 and even making changes to the tax code retroactive. 

But, a failure to act will leave a pall of uncertainty over a wide variety of transactions whose tax treatment may be the subject of ongoing discussions and over any plans based on federal spending that faces automatic cuts.  Where Congress will not act, it should make this clear immediately to reduce uncertainty. 

This sudden shift in the federal government's public finance policies could (according to Keynesian economics) slow down a tepid recovery from the worst recession since the Great Depression that followed the financial crisis of 2007, or even trigger a double dip recession before we have fully recovered from the last recession.

The Details

Key elements of the specific elements of the fiscal cliff are discussed here

Tax Increases

Some highlights are the tax changes other than those in estate and gift taxes are as follows:

* The earned income tax credit will become much less generous.
* A temporary cut in the employee share of Social Security tax rates to 4.2% from the usual 6.2% will expire.
* "People earning more than $50,000 would face an increase in the tax rate on capital gains to 20 percent, from 15 percent. Dividends, which are currently taxed at a 15 percent rate, would also be taxed as ordinary income, with the top rate rising to 39.6 percent. . . . the Affordable Care Act ["Obamacare"] applies a new surtax of 3.8 percent on capital gains for wealthy Americans, pushing the top capital gains rate up to 23.8 percent."
* "Singles who make over $200,000 and married couples who earn over $250,000 would see their tax brackets rise from 33 percent and 35 percent to 36 percent and 39.6 percent, respectively."
* The exclusions from the Alternative Minimum Tax which currently impacts 4 million to 5 million taxpayers with annual incomes between $200,000 and $1 million will expire, causing it to apply to 31 million taxpayers.

The total tax increase will be about $400 billion a year (an increase of about 16%).

The estate and gift tax changes are very abrupt and rather arbitrary.  While the 2012 estate and gift tax rates and exemptions were extraordinarily generous, the 2013 transfer tax provisions will be more strict than those that Americans have grown accustomed to for many years.

I have very little sympathy for people who have lost the benefit of extraordinarily low and economy distorting low capital gains and dividend rates, and also have little sympathy for upper middle class and high income families seeing modest increases in their marginal tax rates at a time when the nation is running a large budget deficit.

The earned income tax credit rollback will affect a lot of people who are still struggling after the financial crisis, and the AMT expansion is also probably somewhat overbroad.

A number of alternatives to the scheduled tax provisions for 2013, such as the taxation of some municipal bond income, limitations on the mortgage interest deduction, and limitations on the state and local tax deduction, make better sense than some of the tax changes that are scheduled to take effect.

Spending Cuts

On the public spending side:
* "more than 40 percent of the nearly 5 million Americans [i.e. 2 million people] who have been unemployed for more than six months will lose benefits at year's end."
* Defense spending must be cut by $55 billion a year for each of the next ten years.  In 2012, this part of the budget was $716.3 billion, so the cut is about 7.7%.
* non-Defense discretionary spending must be cut by $55 billion a year for each of the next ten years "in everything from infrastructure to schools, to public health and homeland security." In 2012, this part of the budget ws about $655 billion, so the cut is about 8.4%.
* Payments to Medicare providers will be cut by 2% in 2013, an $11 billion cut.

But, "Social Security, Medicaid, supplemental security income, refundable tax credits, the children's health insurance program, the food stamp program and veterans' benefits are excluded from the cuts scheduled under the cliff. The White House has also said that military personnel would be exempt from the cuts."

The impact on the long term unemployed will be harsh, although some if it may be mitigated by migration to federal and state welfare programs.

The non-Defense discretionary spending cuts are probably steeper than can be made without really dire cuts to critical federal government services and programs.  The Defense discretionary spending cuts are less catastrophic since they can mostly be dealt with by partially delaying new major military procurement programs muting the impact on operations, but are still deep.

Bottom Line

Most of the provisions of the fiscal cliff are quite tough but most are not horrible and address a genuinely big federal budget deficit by dealing with unduly lenient Bush era tax cuts, temporary tax code provisions meant to be temporary, and by putting pressure on federal spending.

Congress and the President would be best advised to use the fiscal cliff status quo as a baseline to tweak, rather than undoing it on a wholesale basis.  At least partial relief for the unemployed, EITC receipients, some of the people newly subject to the AMT, and more urgent aspects of non-defense discretionary spending programs are the areas most in need of tweaking.  But, on balance, we are right to end a long era of debt financed tax cuts for the wealthiest Americans, which makes up the largest share of the fiscal cliff.

26 December 2012

How Do Publicly Held Firms Set Compensation?

The basic liberal and academic criticism of the way that compensation for related parties, including senior corporate officers, is set in modern American big businesses was set forth succintly by Judge Posner, of the United States Court of Appeals for the 7th Circuit, one of the most distinguished judges in the nation in law and economics matters, in a case where a major mutual fund advisor was sued for gouging investors in its captive mutual funds with fees much higher than what it charged mutual funds that negotiated their fee agreements with it at arms-length. 

Notably, his dissenting opinion and the U.S. Supreme Court's unanimous reversal of the majority opinion, came after the financial crisis in a case that was argued before the appellate courts just a couple of days after Lehman Brothers filed for bankruptcy.  The timing favored a narrative of corporate malfeasance over the opinion of the majority of the appellate panel which called for blind reliance on the workings of an efficient marketplace.

In particular, this criticism of American corporate governance notes that directors of publicly held companies are almost always chosen by Soviet style proxy ballots with a slate of names hand picked by insiders and no meaningful way for alternative candidates to compete for shareholder support, notwithstanding the legal fiction that directors are elected by and meaningfully accountable to shareholders of public companies through the internal director nomination and election process. 

Typically, directors only meaningful discretionary role is (1) to leniently adjudicate the incompetence of a CEO who has already been shown to be manifestly unable to act due to scandal, unbalanced mental health, illness, or utterly disasterous company collapse due to mismanagement, or (2) to fill an unexpected vacancy when the incumbent CEO has not designated a successor.  Directors sometimes also participate in negotiations over share prices when someone seeks to acquire the company in an unsolicited take over bid.  In all other respects, directors act as little more than a self-perpetuating collective ceremonial monarchy in a corporation, sustaining it symbolically, but exercising little genuine power over the management of the company.
[E]xecutive compensation in large publicly traded firms often is excessive because of the feeble incentives of boards of directors to police compensation. Directors are often CEOs of other companies and naturally think that CEOs should be well paid. And often they are picked by the CEO. Compensation consulting firms, which provide cover for generous compensation packages voted by boards of directors, have a conflict of interest because they are paid not only for their compensation advice but for other services to the firm—services for which they are hired by the officers whose compensation they advised on. Competition in product and capital markets can’t be counted on to solve the problem because the same structure of incentives operates on all large corporations and similar entities, including mutual funds.  
Mutual funds are a component of the financial services industry, where abuses have been rampant, as is more evident now than it was when Coates and Hubbard wrote their article. A business school professor at Northwestern University recently observed that “business connections can mitigate agency conflicts by facilitating efficient information transfers, but can also be channels for inefficient favoritism.” She found “evidence that connections among agents in [the mutual fund industry] foster favoritism, to the detriment of investors. Fund directors and advisory firms that manage the funds hire each other preferentially based on past interactions. When directors and the management are more connected, advisors capture more rents and are monitored by the board less intensely. These findings support recent calls for more disclosure regarding the negotiation of advisory contracts by fund boards.” The SEC’s Office of Economic Analysis (the principal adviser to the SEC on the economic aspects of regulatory issues) believes that mutual fund “boards with a greater proportion of independent directors are more likely to negotiate and approve lower fees, merge poorly performing funds more quickly or provide greater investor protection from late-trading and market timing,” although “broad cross-sectional analysis reveals little consistent evidence that board composition is related to lower fees and higher returns for fund shareholders.”
A particular concern in this case is the adviser’s charging its captive funds more than twice what it charges independent funds. According to the figures in the panel opinion, the captives are charged one percent of the first $2 billion in assets while the independents are charged roughly one-half of one percent for the first $500 million and roughly one-third of one percent for everything above. The panel opinion throws out some suggestions on why this difference may be justified, but the suggestions are offered purely as speculation, rather than anything having an evidentiary or empirical basis. And there is no doubt that the captive funds are indeed captive. The Oakmark-Harris relationship matches the arrangement described in the Senate Report accompanying § 36(b): a fund “organized by its investment adviser which provides it with almost all management services.” Financial managers from Harris founded the Oakmark family of funds in 1991, and each year since then the Oakmark Board of Trustees has reselected Harris as the fund’s adviser. Harris manages the entire Oakmark portfolio, which consists of seven funds. The Oakmark prospectus describes the relationship this way: “Subject to the overall authority of the board of trustees, [Harris Associates] furnishes continuous investment supervision and management to the Funds and also furnishes office space, equipment, and management personnel.” Recall Professor Kuhnen’s observation that “when directors and the management are more connected, advisors capture more rents and are monitored by the board less intensely.”
The panel opinion says that the fact “that mutual funds are ‘captives’ of investment advisers does not curtail this competition. An adviser can’t make money from its captive fund if high fees drive investors away.” 527 F.3d at 632. That’s true; but will high fees drive investors away? “[T]he chief reason for substantial advisory fee level differences between equity pension fund portfolio managers and equity mutual fund portfolio managers is that advisory fees in the pension field are subject to a marketplace where arm’s-length bargaining occurs. As a rule, [mutual] fund shareholders neither benefit from arm’s-length bargaining nor from prices that approximate those that arm’s-length bargaining would yield were it the norm.”
- Judge Posner's dissenting opinion in Jones v. Harris Associates, L.P., 527 F.3d 627 (7th Cir. May 19, 2008) in the United States Court of Appeals for the Seventh Circuit.  The decision was subsequently unanimously reversed by the United States Supreme Court at 130 S. Ct. 1418 (2010).

The Control Market Case For Lassiez-Faire Oversight

The leading criticism of the poor governance argument works better in the marketplace in which the equity shares of publicly held corporations are traded than it does in the context of mutual fund fee setting.  The critics argue that poorly managed companies become undervalued relative to their potential under better management, and that someone who knows how to manage a company better will be able to buy control of the company for a premium price while still making a profit in a tender offer with funds from investors who are willing to back up that person's bravado with money that they could lose if the share price of the acquired company does not improve with better management.

This approach to insuring competent management may be a far cry from optimal, and its methods may be crude and costly, but they provide some comfort that there is at least some check on the kind of mismanagement for which excessive compensation packages are a symptom.  A faster and cheaper system of procuring better managers could dramatically improve the health of the economy in a sustainable way.  But, one can hold some comfort in the notion that the current system at least vests decision making in people whose sincerity is insured by the huge sums of money that are at stake.

The practice of selling shares of poorly managed companies and thereby driving down the price of those shares, rather than using the corporate governance process to elect directors who would replace the current management team while continuing to hold shares in these companies, is called the "Wall Street Rule."

Resistance to the Wall Street Rule and a push for better corporate governance has been driven to a great extent by the reality that institutional investors own such a large share of the total capitalization of the U.S. equity markets that they have no choice but to buy some ill managed companies as part of their portfolios.

The Case That Good Hiring Mitigates The Harms Of Poor Director Control Of Incumbents

Another important criticism of the poor governance argument is that not just anybody gets hired to be the CEO of a large publicly held company.  The governance problems in the CEO hiring and compensation process are far less serious than those in the process of firing bad CEOs and controlling CEO compensation.

CEOs, who typically have large ongoing stakes in their former employers, have an interest in picking successors who seem like they will be competent.  A meaningful share of CEOs personally brought their companies to the point where they could go public or personally turned a minor public company into a dominant one - so they had an important role to play in creating the profits that their fat pay packets plunder.  In the rare situations where there is an open CEO seat due to untimely events that create a vacancy for a CEO who doesn't have a successor lined up, the Board of Directors generally makes a sincere effort to pick a competent successor from a pool of very qualified applicants.  Social norms make meaningful prior proven performance a prerequisite for anyone who will be seriously considered for the job.

Some CEOs do a dismal job, but few could have been clearly identified as poor managers by a well intentioned person evaluating them knowing only the information available at the time that the CEO was hired.  The CEO who is hired may not be the most qualified or the best value for the compensation package sought, but the CEO who is hired is rarely an applicant of below average competency either.

Unlike a system of hereditary inheritance of rulership of the kind practiced at some stages of the ancient Roman empire and in many European monarchies (and many modern small and medium sized businesses), idiot black sheep who have nothing to recommend them but their lineage do not get hired to be modern CEOs.  Some more than minimal merit evaluation is involved in these appointments.

Should The General Public Care About Excessive Compensation Per Se?

It is also worth remembering that while excessive CEO compensation for bad CEOs is a problem because it rewards people who are harming the overall economy, excessive CEO compensation for par for the course or reasonably good CEOs aren't really a matter of public concern.  Setting the compensation of decent or good CEOs basically involve distributive disputes between dumb money and the people whose management contributed greatly to their money generating profits.  If dumb money is swindled out of profits they have done little to contribute to personally (and often did little to earn in the first place, in the case of inherited money), the fact that decent management that is making an economic contribution gets a large piece of those profits isn't terribly troubling from a larger civic perspective.  These are fights between rich people on terms that the combatants have agreed to in advance that have little or no negative impact on the larger economy if management is competent.

Many criticisms of excessive executive compensation are directed at the way it creates a class of superrich people in the economy and leads to unequal income distributions.  But, in a world where pre-CEO compensation profits were the same, but investors received larger shares of profits relative to senior managers, there would still be vast inequalities of wealth in our economy, and the middle and working classes would not be much better off.  It would just be distributed among members of the American upper class somewhat differently.  Essentially, the divide between the merely rich, and the superrich senior managerial class (particularly in the financial sector) would be smoothed out somewhat.

The assumption of critics of excessive executive compensation who believe that lower executive compensation would translate into higher compensation for other employees fundamentally misunderstand the nature of the problem.  The factors that cause non-executive employees to have the salaries that they receive are almost entirely separate and divorced from the factors that cause senior executives in big businesses to receive the salaries that they receive.  The process by which middle managers or rank and file employees negotiate salaries with their employers is predominantly a function of the workings of a highly segmented labor market and the alternatives available through self-employment, not a product of deeply flawed self-dealing between senior managers and the directors who are supposed to represent the interests of equity investors. 

Incompetent CEOs can depart from the labor market reality, but since they work in a world constrained by labor market realities, it is far easier for an incompetent CEO to overpay the company's employees than it is to underpay them - a result few reforms are worried about.  An incompetent CEO who doesn't offer high enough salaries will soon find that the company doesn't have enough workers who are able to carry out the company's business.  And, companies that started from a baseline of having bad compensation practices in the first place never get big enough to go public in the first place.

If one believes that workers are undercompensated, despite reasonable free and fair markets for labor, this belief reflects either (1) the systemic effects on the labor market of a lack of collective bargaining (generally by unions) leading workers to accept offers when isolated when the markets could afford to pay more for their collective services if they could organize themselves to get a fair price for them (since in most cases there is a gap between the minimum a worker would work for and the maximum that a firm would pay for that work and employers can capture most of this gap if workers are disorganized), or (2) a sense that workers (or at least some class of permanent important workers) should have both a contractual debt interest in the company's well being and a non-contractual equity interest in the company's performance reflected in some sort of profit sharing plan in the way that Japanese salarymen, or German unionized employees do.  Reforms of either type would require major, institutional changes that go far beyond calls for more democratic shareholder governance of the publicly held companies that they own.

Thus, while good CEOs who are overcompensated at the expense of investors are a concern for the investors themselves, the general public cares only that bad CEOs are fired promptly.  Even overcompensation of bad CEOs is bad mostly not because investors are cheated by management.  After all, if the abuse gets too great, investors will start to favor debt investments over equity so  they have a legally enforceable right to a fair return on their investment.  Overcompensation of bad CEOs itself is bad mostly because this is a symptom that the bad CEOs are unlikely to be fired when they should be fired, which does hurt the overall economy.

Venues Insurance Defense Lawyers Hate

Almost every U.S. state determines general jurisdiction trial court venue for civil litigation on a county by county basis.  There are a few more than three thousand counties in the United States.  There are also almost a hundred United States District Courts.  Every state has at least one, but some states have more than one with groups of counties allocated to each judicial district.

Some venues are hated by insurance defense lawyers, and loved by trial lawyers representing plaintiffs, because the laws applicable in that forum, the typical makeup of a jury pool in that forum, and/or the judges in that forum tend to favor plaintiffs over defendants.

An Overview of the Concerns Of Tort Reformers

First and foremost, tort reform advocates dislike class action and mass tort litigation of all kinds, and qui tam suits in which private plaintiff's lawyers are empowered to bring suits on behalf of the general public as a private attorney general in exchange for a contingent fee.

Second, they indiscriminately oppose liability for medical providers for almost any reason, and also believe that damage awards in those cases are too large.

Third, they oppose legal liabilty, in general, for businesses and government for almost any reason, but particularly in strict liability claims of any kind.

They also express concern about judicial and jury bias in liberal jurisdictions and in the case of California, the delays caused by an underfunded judiciary.

A More Neutral Assessment

I am certainly not someone who claims that the unique American system of tort liability focused on the determination of trial juries is perfect.

Class action lawsuits, particularly under the lenient standards of California, can be used to bring large dollar lawsuits for seemingly trivial violations that provide only slight benefit to the victims of improper practices, and have largely failed at the task of causing large numbers of similar claims to be efficiently adjudicated on the merits.  On the other hand, these suits do discourage the routine petty cheating of firms with concentrated interests in breaking the rules from benefitting from their wrongdoing.  Likewise, it is hard to feel much sympathy for qui tam defendants who are determined in a legal process to have violated laws and to owe fines.

Medical malpractice suits are both overinclusive and underinclusive.  Too many suits are brought in which there is a bad outcome but weak evidence of negligence, although low success rates in medical malpractice cases suggest that this strategy isn't very fruitful.  But, the usually blameless people who experience bad outcomes from medical procedures have almost no public or private safety net to address the uninsurable losses that they experience, and far too many cases where there is solid evidence of negligence are never brought or dismissed by a process that often fails to reach the merits of the concerns raised.  The profession is also far too protective of bad doctors who commit a greatly disproportionate share of these claims, and has yet to come to terms with the idea that liability is appropriate for mistakes made by a doctor that are simple mistakes and not just for the kind of gross negligence that a good doctor will never ever make in an entire career.  Another problem with the medical malpractice system is that it fails to acknowledge that medical mistakes are frequently due to having bad systems in place, rather than due to the blameworthiness of a physician in a particular instance that causes harm in the context of weak systems to prevent mistakes.  The claim that medical malpractice liability drives rising health care costs is also bogus.  The notion that large damage awards against genuinely negligent physicians is a big problem is likewise questionable.

Governmental liabilty (raised by the ATRF only in the case of New York City, the largest city in the nation which consolidates functions found in separate governments in most cities, which hence has more incidents that give rise to more suits) presents issues entirely different from those associated with private tort liability.  In general, governments are (arguably unfairly) insulated from liability that comparable private entities would face on lines similar to a tort reformer's utopia.  Civil rights liability, in general, has poor incentives for reforming bad systems and also focuses far too much on the intent of the defendant as opposed to the harm suffered by the plaintiff.  I have long argued for a strict liability takings jurisprudence and vicarious liability, that deemphasizes intentional wrongdoing to people who are harmed in ways that they don't deserve by government action.

The basic problem with the claim that "Judicial Hellholes" are bad for business is that many of them are hubs of big business activity.  Tort liability be damned, the people of Chicago, New York, and California have managed to become global centers of business activity, while defense counsel friendly forums have not.  These supposed anti-business jurisdictions also manage to hold onto the crown jewels of the American economy despite high state and local taxes.  When large commercial banks, commodities traders and tech companies start relocating en masse to the less regulated, lower tax jurisdictions that conservatives claim are business friendly, their arguments will sound much more plausible.

American judges do have vast discretion, as do American juries, and as human beings, sometimes their own personal biases color their judgments in ways that no appeal can remedy.  Judicial elections do a particularly poor job of avoiding the appearance and fact of judicial bias, and starkly political federal judicial appointments have a similar flaw. 

It is also absolutely true that many U.S. states dramatically underfund court resources for civil litigation causing hard to measure, but substantial costs for the private sector economy.

The argument that opportunities for forum shopping should be diminished is a legitimate one, although tort reformers fail to acknowledge that forum shopping by defendants (usually by choice of place of organization or by contractual agreements) can be every bit as egregious.

In my experience, however, tort law is not a particularly problematic part of the American legal system.  Contigent fees provide a good system for screening claims for which legal involvement is merited for quality and seriousness to the average person without taxing the general public.  Casualty insurance provides counsel guided by an employer with an economic interest in a competent defense to accused tortfeasors, provides resources to compensate injured parties, and prevents people unlucky to be careless at the wrong time from being ruined by their unintentional mistakes.  The jury system mitigates the relevance of judicial bias in decision making on the merits in tort cases.  Discovery abuses are not a particularly serious problem in run of the mill negligence cases, which are rarely rich in documents and often have only a few witnesses with personal knowledge of the facts which usually arise out of quite temporally and geographically compact incidents.  It is also relatively hard to shut down a relatively routine negligence case with motion practice, a factor that also controls litigation costs.

The biggest flaws in the civil litigation process between strangers are instead in (1) in business and commercial disputes where motion practice and document discovery costs can grow very large relative to the stakes in the dispute when far less information is legitimately disputed, and (2) in small collection cases where pro se defendants who have legitimate defenses to evictions, foreclosures or contract suits or to specific collection techniques are not equipped to exercise their rights in a meaningful way to limit judgments to the amounts owed and to prevent harm to the defendant far in excess of the amounts not paid.

Tort Reformer's Specific Concerns

The American Tort Reform Foundation, a conservative special interest group that favors narrowing tort liability, calls these places "Judicial Hellholes" and makes an annual list of what it sees as the worst places to be a tort defendant.  This year's 2012-2013 report features two entire states (California and West Virginia), Madison County, Illinois, and the forums that include three U.S. cities: Albany, New York; New York City, New York; and Baltimore, Maryland.  

In California, their main grievances are laws and statutes that favor consumer class action lawsuits and insufficient judical branch budget resources, particularly in Los Angeles.

In West Virginia, concerns are cited about judicial bias against out of state business defendants, limited appellate rights, liberal personal injury liability, and outgoing Attorney General Darrell McGraw, Jr. whose collaborations with plaintiffs' lawyers in ways that the ATRF feels he has used for personal political advancement.  The ATRF similarly expresses lesser concerns about "the state attorney general’s aggressive use of contingent-fee lawyers to enforce state law" in Nevada who are "compensated based on the amount of the fines they impose on businesses," something that is called a qui tam lawsuit in formal legal language.

Madison County, Illinois has been home to many asbestos lawsuits (and other class action lawsuits) and the defense bar feels that local trial lawyers have captured the judiciary through the judicial election system and receive special treatment as a result.  They also state that "the election of a former head of the Illinois plaintiffs’ bar to the appellate bench overseeing its courts provides new reason for concern."

In the two New York State venues, they note large numbers of suits against the city for grounds from civil rights violations to medical malpractice to failure to maintain public works, "a unique state law that imposes liability on those who undertake construction projects, regardless of who is at fault," "more than its share of fraudulent claims," and strong support for trial lawyers in the legislature.

In Baltimore, Maryland, large awards to asbestos claimants and "a case before Maryland’s highest court, in which some plaintiffs’ lawyers – not elected state lawmakers – are seeking to end longstanding legal doctrine that bars recoveries by plaintiffs who are at fault for their own injuries," are cited as concerns.

It also cites lesser concerns.  The ATRF feels much better about Philadelphia, Pennsylvania in the wake a a plan "for mass tort cases handled by the Complex Litigation Center (CLC)" which is under new management. "A new state law now better aligns the liability of defendants with their share of responsibility."  They now urge "legislation that curbs forum shopping in personal injury cases, which allows so many lawsuits to flow to Philadelphia."

South Florida is a reduced concern for them because of "reform of the state’s no-fault auto insurance coverage law, which had led to an alliance between personal injury lawyers and fly-by-night clinics that milk the system and drive up Florida’s insurance rates."  But, they dislike Florida's liability regime for bad faith breaches of insurance contacts, and notes that there are "pending challenge to the state’s limit on noneconomic damages in medical malpractice cases."

The ATRF dislikes Cook County, Illinois (home of the City of Chicago), because "It remains the home of expansive liability and excessive verdicts," and because poorly rated judges have survived judicial retention elections. But, an absence of high profile cases kept it off the top of its lists.

The ATRF praised New Jersey for a "court decision that shields name-brand drug makers from unfair liability in claims involving generic drugs made by competitors, and with what may be a new trend toward fairness in other lawsuits against the state’s key pharmaceutical industry.  But, they claim that medical malpracitce cases are too common and that laywers "make outrageous claims against Little Leaguers, life-saving police officers and girlfriends who send their boyfriends text messages."

The ATRF faults Louisiana for "the state’s litigious environment, aggressive personal injury bar, excessive damage awards, and plaintiff-friendly judges. The state’s uniquely high monetary threshold for obtaining a jury trial ensures that plaintiff-friendly judges serve as juries, too, in many cases."  But, they praise legislative reform of “legacy lawsuits,” which they argue "have unfairly targeted the state’s oil and gas industry, costing thousands of jobs."

24 December 2012

A Story of the Season

Most terribly cold it was; it snowed, and was nearly quite dark, and evening-- the last evening of the year. In this cold and darkness there went along the street a poor little girl, bareheaded, and with naked feet. When she left home she had slippers on, it is true; but what was the good of that? They were very large slippers, which her mother had hitherto worn; so large were they; and the poor little thing lost them as she scuffled away across the street, because of two carriages that rolled by dreadfully fast.

One slipper was nowhere to be found; the other had been laid hold of by an urchin, and off he ran with it; he thought it would do capitally for a cradle when he some day or other should have children himself. So the little maiden walked on with her tiny naked feet, that were quite red and blue from cold. She carried a quantity of matches in an old apron, and she held a bundle of them in her hand. Nobody had bought anything of her the whole livelong day; no one had given her a single farthing.

She crept along trembling with cold and hunger--a very picture of sorrow, the poor little thing!

The flakes of snow covered her long fair hair, which fell in beautiful curls around her neck; but of that, of course, she never once now thought. From all the windows the candles were gleaming, and it smelt so deliciously of roast goose, for you know it was New Year's Eve; yes, of that she thought.

In a corner formed by two houses, of which one advanced more than the other, she seated herself down and cowered together. Her little feet she had drawn close up to her, but she grew colder and colder, and to go home she did not venture, for she had not sold any matches and could not bring a farthing of money: from her father she would certainly get blows, and at home it was cold too, for above her she had only the roof, through which the wind whistled, even though the largest cracks were stopped up with straw and rags.

Her little hands were almost numbed with cold. Oh! a match might afford her a world of comfort, if she only dared take a single one out of the bundle, draw it against the wall, and warm her fingers by it. She drew one out. "Rischt!" how it blazed, how it burnt! It was a warm, bright flame, like a candle, as she held her hands over it: it was a wonderful light. It seemed really to the little maiden as though she were sitting before a large iron stove, with burnished brass feet and a brass ornament at top. The fire burned with such blessed influence; it warmed so delightfully. The little girl had already stretched out her feet to warm them too; but--the small flame went out, the stove vanished: she had only the remains of the burnt-out match in her hand.

She rubbed another against the wall: it burned brightly, and where the light fell on the wall, there the wall became transparent like a veil, so that she could see into the room. On the table was spread a snow-white tablecloth; upon it was a splendid porcelain service, and the roast goose was steaming famously with its stuffing of apple and dried plums. And what was still more capital to behold was, the goose hopped down from the dish, reeled about on the floor with knife and fork in its breast, till it came up to the poor little girl; when--the match went out and nothing but the thick, cold, damp wall was left behind. She lighted another match. Now there she was sitting under the most magnificent Christmas tree: it was still larger, and more decorated than the one which she had seen through the glass door in the rich merchant's house.

Thousands of lights were burning on the green branches, and gaily-colored pictures, such as she had seen in the shop-windows, looked down upon her. The little maiden stretched out her hands towards them when--the match went out. The lights of the Christmas tree rose higher and higher, she saw them now as stars in heaven; one fell down and formed a long trail of fire.

"Someone is just dead!" said the little girl; for her old grandmother, the only person who had loved her, and who was now no more, had told her, that when a star falls, a soul ascends to God.

She drew another match against the wall: it was again light, and in the lustre there stood the old grandmother, so bright and radiant, so mild, and with such an expression of love.

"Grandmother!" cried the little one. "Oh, take me with you! You go away when the match burns out; you vanish like the warm stove, like the delicious roast goose, and like the magnificent Christmas tree!" And she rubbed the whole bundle of matches quickly against the wall, for she wanted to be quite sure of keeping her grandmother near her. And the matches gave such a brilliant light that it was brighter than at noon-day: never formerly had the grandmother been so beautiful and so tall. She took the little maiden, on her arm, and both flew in brightness and in joy so high, so very high, and then above was neither cold, nor hunger, nor anxiety--they were with God.

But in the corner, at the cold hour of dawn, sat the poor girl, with rosy cheeks and with a smiling mouth, leaning against the wall--frozen to death on the last evening of the old year. Stiff and stark sat the child there with her matches, of which one bundle had been burnt. "She wanted to warm herself," people said. No one had the slightest suspicion of what beautiful things she had seen; no one even dreamed of the splendor in which, with her grandmother she had entered on the joys of a new year.

--  Hans Christian Anderson, "The Little Match Stick Girl" (December 1845) translated from the original short story in the Danish language.  Recalled out of its similarity to "The A Team" by Ed Sheeran (2010) (video here).

Gene Therapy v. Gene Modification Warfare

Many disorders, mental and physical, are known to have genetic causes (sometimes requiring further environmental input to trigger susceptibility created by a genetic trait).  Some of these genetic disorders have a cause in a single known gene or two in almost everyone who has the condition.  This makes these diseases good candidates for gene therapy.  In theory, one affixes the corrected DNA to a retrovirus, it infects the host and replaces the host's defective DNA with the corrected DNA of the virus, and the person is permanently cured of the condition.

But, many conditions, for example schizophrenia and bipolar disorders and autism, often (even if not always) have genetic causes.  But, those genetic causes are massively polygenetic.  A thousand different mutations cause symptoms that we understand to cause the disorder.  Sometimes it takes just one of many different disease risk increasing diseases to cause the disorder, sometimes it takes many. 

These conditions are much less susceptible to gene therapy because you have to figure out which particular genes cause the problem in each particular person and fix them all on an individual by individual basis.  You need a custom cure for every patient with the immense amount of work that goes into devising a cure to any genetic disease at all, in every single case.

Suppose, however, that you are an evil, bad person, who wants to hurt a large number of people, or you think that in the interests of neurodiversity that some condition that everyone else thinks of as a defect is really a superpower of sorts that everyone should benefit from themselves.  Then, the analysis is very different.

While there may be thousands of ways of causing a polygenetic condition, which makes it very difficult to treat with gene therapies, it takes a solution to only one of those thousands of ways to formula a gene therapeutic RNA virus to transfer the genes that impart susceptibility to condition to the person infected to infect millions upon millions of people in what could be self-sustaining if the virus gets out of control and starts to reproduce "in the wild."

Thus, it is much easier to make a polygenetic condition widespread than it is to make a cure for it.  This insight came to me watching the television series "Terra Nova" (Episode 4, 2011) on Netflix, but this science fiction observation is a serious one.  In the episode, a researcher seeking to cure a form of dementia with a simple genetic cause that he knows that he has due to genetic testing seeks to cure it with viral gene therapy, but rather than curing it, he mistakenly creates a gene therapy virus that changes the relevant gene in a way that produces the rapid onset of the condition rather than preventing it.  The virus soon infects many people until our intrepid heroes reverse engineer a cure with a bit of lucky serendipity.

But, while accidents of the kind depicted could probably be easily contained in the real world, and would go through layers of animal pre-testing first that would catch the error, the same assurances wouldn't be present in the case of someone who wanted to intentionally cause specific individuals or members of general public to develop a genetic condition, good, bad or indifferent.  Indeed, there are known "selective fitness neutral" retroviruses out there "in the wild" infecting people and changing their DNA makeup laterally right down to their germ lines today.  Creating a virus that carries a well characterized harmful gene whose workings in humans are already well understood might be easy compared to other forms of gene therapy.  Yet, it would also be a subtle attack which would be hard to distinguish from a natural lateral gene transfer without advanced scientific knowledge.

One could also imagine some subculture of people who intentionally tried to modify their own genomes with known genetic traits of others, where people are less careful than they should be about containing the virus of transmission of the genetic traits in a way that causes the genome changing virus to spread uncontrollably.

From an epidemiologist's point of view, particularly with a slow onset or subtle genetic condition imparted by a mild carrier virus with few other symptoms, the only real clue to the orgin of the threat would be the sudden appearance of a single genetically distinct subtype of what is usually a massively polygenetic condition marked by a distinct uptake in the rate of which the genetic condition appears.  But, since people who are diagnosed with massively polygenetic conditions are rarely genotyped in the course of treatment for that condition, it could evade detection for a very long time, at which point the perpetrator might be virtually impossible to trace.

What would you do if one day you woke up and noticed that 10% of the population of Chicago had adult onset severe autism that had manifested sometime in the last two years?  What if only people who went into the U.S. Capital building were infected but the rate was proportional to the time spent there and was nearly 80% for people who were there for two continuous years?  What if the virus caused only a local infection and was transmitted via the lubricant in a single brand of condoms with a national distribution, leading to genetic change in the children of people who used the brand later when they stopped using contraceptives but was invisible in a DNA test drawn from siliva or hair from the scalp, for example?  The potential for massive permanent harm is great indeed.

21 December 2012

World Hasn't Ended Yet

The ancient Mayan calendar ends today.  The world hasn't ended yet, although there are still some ominous brownish, greenish hazy clouds on the horizon to the Northeast from the office. 

If we are ravaged by zombies, I hear that it is useful to grab trash can lids to help defend yourself. 

Best of luck.

Policy Responses To The Newtown Massacre

Earlier this month, a man stole three guns from his mother's collection, killed his mother, broke into a locked entrary at an area elementary school in Newtown, Connecticut, where he killed twenty-five people (mostly five and six year old children, as well as several adult school employees), and then killed himself.  We still have almost no idea what his motives were or what warning signs, if any, may have been misssed.

The immediate question that has come up in the wake of this tragedy is what policies governments could take to prevent these kinds of incidents from happening in the future.  Discussions have mostly focused on mental health treatment and the perpetual hot button issue of "gun control."

Other Recent Incidents And "Near Misses"

Not long before that, there was a mass shooting at a Washington State mall.

Earlier this year, a former graduate student at the University of Colorado Health Sciences Center in Aurora, Colorado went to a late night showing of the latest Batman movie, opened fire on a movie theater full of people killing many of them, and then was promptly apprehended.  We know that he had received some psychiatric care prior to the incident and made threats that had caused him to be banned from campus in the wake of learning that he had been dropped from his PhD program in neuroscience because of his poor academic performance.

There have been other incidents in Colorado in recent memory as well. 

The most famous was the Columbine High School shooting in Littleton, Colorado in 1999 where many students and teachers were killed by two disaffected students with guns who died in the incident who has also unsuccessfully tried to set off propane bombs that could have killed even more people. 

A Colorado man killed a couple of fellow college students in metropolitan Denver and then tried to go on massacre people at a Colorado Springs megachurch when he was killed by a female congregation member who was on duty as a private security guard at the church. 

A former student opened fire outside another suburban Denver public school, but was stopped by brave, unarmed faculty members at the school.

A man who had lost access to mental health prescriptions that had helped him manage his condition, opened fire and killed his ex-girlfriend at her place of work at a metropolitan Denver strip mall.

A mentally ill man attempted to assassinate Colorado Governor Ritter and would have killed others had a state trooper on his security detail not killed him.

A Douglas County woman who had a restraining order against her husband called law enforcement officials to let them know that he was armed and had taken their children and was likely to kill them, but Douglas County law enforcement officers ignored her pleas and he killed the children and himself before there was a law enforcement response.

Going Amok

The Indonesian language has a work for this kind of incident which English has borrowed as a loan work.  It is called "going amok".  These incidents have taken place at least once in all but three of the last thirty years in the United States, but are nevertheless very rare events.  There have been sixty-two such events over thirty years.  Frequently

The FBI statistics of multiple homicide incidents includes incidents like gang violence that don't fit this profile.  But, the incidents are much more similar to the more common incidents where someone kills a spouse and the family's children, and sometimes other family members or other people who happen to be present.  Another common fact pattern involves an attack at a workplace or former workplace of the perpetrator, or a school or former school that the perpetrator attended. 

Usually, far fewer people are killed in these incidents and usually few of the victims are total strangers.  But, a minority of these incidents, like the Newtown Massacre, do involve people who are predominantly total strangers to the perpetrator. 

The vast majority of the incidents in which large numbers of people are killed involve firearms, although not all of them do.  Many years ago, there was an elementary school massacre in the United Kingdom (where guns are almost completely banned) that was carried out with a sword, and in Japan (where guns are likewise almost completely banned) there was an incident in which a group tried to conduct a mass killing with poison gas.  Mass killings with machetes or other bladed weapons have been carried out with some frequency in Africa, although most of those incidents are more akin to insurgencies or tribal warfare than to "going amok" incidents.

Fewer than 80 people died in going amok massacres this year, and this year has been the worst such incident in (at least) the past thirty years.  More than 40 people died in the years that included the 2007 massacre at Virginia Tech and in the year that included the 1999 massacre at Columbine High School in Littleton, Colorado.  The average number of deaths per year over the last thrity years from this kind of incident has been less than twenty, and in additional there have been on average six or seven injuries from these events.  (Due to excellent work by first responders and Denver area hospitals, the Aurora theater massacre this year stands out as the incident with the highest percentage of victims who were shot but survived their injuries.)

There does seem to be an upward trend in the number of deaths from these incidents in the last few years, but the absolute numbers are very small and it is very hard to distinguish between random flukes and genuine trends in incidents that are so uncommon.

These incidents have never caused even 1% of all firearm homicides in the United States in a single year.  On average, over the last thirty years, they have accounted for about 0.2% of U.S. gun homicides.

Only two mass killings in the United States in recent memory, the 9-11 attack and the Oklahoma City bombing, were terrorist incidents rather cases of a homicidal and suicidal breakdown of a troubled individual whose problems were more personal than political.  (The shooting of Congresswoman Giffords and several people with her was arguably a third.)

Law Enforcement Responses During The Incident

The law enforcement response to the Columbine Shooting in 1999 was faulted for being too timid.  While first responders arrived on the scene very quickly, rather than pro-actively rushing while the shooting was in progress, they waited for backup or more highly trained SWAT officers arrived.  By then, the perpetrators had killed themselves and the incident was over.  Since then, law enforcement agencies nationwide have made it a matter of standard operating procedure to rush in immediately with whatever deadly force is available during "active shooting incidents."

Law enforcement officers have followed that policy in all subsequent massacres of this type in the United States, and have no doubt saved lives as a result.  The lives of scores of children in Newtown, Connecticut were saved earlier this month by this law enforcement response; the shooter killed himself when he heard police moving in to stop him.

Post-Incident Consequences

A very large share of people who commit these acts commit suicide or are killed in the course of the incident itself, and often set out in the first place to kill as many people as possible during the course of what is basically a suicide attempt.  Perpetrators who don't die while committing these incidents are invarabily captured within hours, charged with first degree murder, and either sentenced to death, sentenced to a prison term that extends for the rest of that person's life (or very nearly so), or found to be innocent by reason of insanity and involuntarily confined to a mental institution from which the perpetrator is almost never released (or at least, is not released from many decades).

This was true not only in the "going amok" incidents, but also in all three of the case of the people who actually carried out incidents which had political dimensions. 

There were perhaps as many as a dozen or two non-participant organizers of the 9-11 attack who were not immediately incarcerated or killed after that incident.  But, military action authorized by Congress in the wake of that event, carried out by Presidents George W. Bush and Obama, has resulted in the death of mastermind Osama bin Laden and many of his key subordinates and succcessors and their associated.  This military action led to the exile of the Afghanistan branch that planned the 9-11 attack to the frontier provinces of neighboring Pakistan.  The U.S. has captured and militarily detained many other individuals involved sometimes tangentially and sometimes influentially in the organization that planned and carried out the 9-11 attacks.  All together, more people have died at the hands of the U.S. and its allies in military actions seeking retribution for the 9-11 attackes (even excluding entirely the Iraq War which Dick Cheney claimed counterfactually was justified in some way by the 9-11 attacks that Iraq had absolutely no involvement in), than were killed in the attacks themselves; far more than had any meaningful or even tangential involvement in the 9-11 attack itself.

In short, existing criminal laws have a perfect record of holding people who personally carry out these incidents accountable in a way that makes repeat incidents by the same person or an ordinary post-incident life for that person, impossible.  And, in the only incident with substantial non-participant organization that was a terrorist act by a significant group of individuals, rather than a "going amok" act or plot of just a couple of individuals (and incidentally, an incident that did not involve firearms or explosives), vengence has still be very complete and effective.

There is essentially no room for improvement in the criminal justice response to these incidents.

Preventing Future Massacres

Deterring the people who carry out these incidents with the threat of extreme, swift and certain consequences for their acts is futile.  These consequences are already in place and haven't prevented these incidents from taking place at a very low level.  Criminal justice consequences don't matter to someone who is planning on dying in the course of their killing spree anyway.

Improved Mental Health Treatment

One approach which has been proposed has been to do a better job of identifying people whose mental health problems and pre-incident behavior marks them as a threat to others and themselves, and to be more effective in treating them and denying them access to weapons. 

The Mental Health System Is Fundamentally Broken

The mental health treatment system in almost all parts of the United States is deeply flawed.  It has never recovered from the blow is suffered when the mentally ill were deinstitutionalized; it has been reconstructed in only a piecemeal and inadequate way.

It is underfunded.  It is not very proactive.  It does not communicate names of people who should be prohibited from purchasing guns to gun purchase background check agencies reliably as U.S. law ineffectively mandates.  It is conflicted by tensions between a core principle of client confidentiality and the exceptions to those principles in situations where someone poses a threat to others or himself.  There are far more mentally ill people who are incarcerated, often for misdemeanors or quite minor felonies, and receive no treatment while incarcerated, than there are inpatient mental health patients - when these inmates terms of incarceration expire, they are at high risk of reoffending, perhaps in more serious ways.

But, even a much improved mental health system might not have much of an impact.  While there are just a couple of going amok massacre incidents in any given year, the profile of people at risk of committing them is sufficiently vague that the number of people who pose a greatly elevated risk of committing them at any one time is not less than 200,000 and could easily be 2,000,000 or more.  The likelihood that someone who after the fact would seem to have had all of the warning signs that he was about to carry out a massacre would, before the fact, have presented only a 1 in 100,000 or a one in a million chance of doing so.

On the other hand, an across the board improvement in basic mental health care systems, not directed primarily at preventing incidents like the Newtown Massacre certainly would be a good thing for all sorts of reasons not closely related to public safety, and might prevent some of these incidents as well, without anyone ever knowing it.

Moreover, the people who are in the best position to gain advanced knowledge of some sort of planning to commit a massacre (which is often fragmentary or entirely undocumented, as perpetrators often act alone and are private loners in their everyday lives), are often not part of the corps of professionals who can be feasibly taught to recognize the kind of conduct that is a warning sign for conduct that could cause deadly harm to others.

An overly pro-active response could produce vast numbers of false positive warnings on the basis of non-specific and non-definitive warning signs with consequences that could be as harmful as they are helpful and could simply cause people at risk of avoiding voluntary treatment for their mental health issues entirely.

Intermediate Responses To Mental Health Risks

One possibility to encourage precautions in gray areas would be to have options for concerned informants that are intermediate between calling 9-1-1 or seeking a short or long term mental health commitment, and doing nothing.  This could prevent incidents in the common cases where a threat is less than clear.

One would be the possibility of allowing concerned individuals to put a "yellow card" in a gun purchase background check database, based upon a reasonable suspicion, rather than probable cause or some higher standard of certainty, that there are concerns about someone's fitness to purchase a gun.  This "yellow card" might expire after some set period of time, but while in effect would trigger more of an investigation by authorities than a bare record check before granting permission to purchase a firearm.  The yellow card concerns would be made known to the person who would have an opportunity to rebut them, but there would be genuine investigations rather than mere record checks in cases where someone had flagged a concern.

Another would be to have a category of mental health determination below that for which a civil commitment was authorized, in which the individual adjudicated to be subject to it would remain in the community, but would be subject to search and check ins with officials similar to those for people on probation.  These kind of determination might require the same kind of probable cause needed for an ordinary search warrant (in this case, probable cause to believe that individual is a threat to himself or others), might be limited in duration, might come with a temporary gun ban while it is in force, and like a temporary restraining order might be capable of being undone in a hearing scheduled promptly after it is imposed.

Juvenile and Educational Disicpline Privacy

The sealing of juvenile deliquency records and secrecy surrounding juvenile delinquency proceeding and education insitution disciplinary records can deprive communities that include people who were involved in these incidents of the capacity to connect dots from prior behavior to current risks and from recognizing risks when they are present. 

Details of a juvenile delinquency and educational institution disciplinary record are frequently excellent predictors of future anti-social activity, and in the case of fairly young offenders who have recently had their records sealed, are far more probative of the risk that they pose to the public than their adult criminal records which are matters of public record.

On the other hand, the desire to give youthful offenders a fresh start is a major commitment of the current juvenile deliquency and educational discipline system that is deeply embedded in the current system both as a matter of state and federal law, and as a matter of the institutional culture of the organizations that administer these laws.

Gun Control

Gun control can dramatically reduce going amok massacres, murders, gun based violent crimes, and suicides.  But, it is only more than slightly effective if it involves, at least, a comprehensive ban in an entire border controlled country.  However, increased efforts to crack down on failures to secure guns from theft and on gray and black market gun transfers, and to improve background databases for gun purchasers might help somewhat.

American Exceptionalism

The United States in almost the only country in the world that has meaningful constitutional protection of the right to bear arms, and has levels of gun ownership which are stunningly high compared to most developed countries (the most notable counterexamples would be countries like Israel and Switzerland where there is mass gun ownership as a result of very comprehensive citizen militia membership as a matter of national security).  The United States is especially unrestrictive when it comes to the ability of private individuals to own handguns and to possess concealed weapons.

It is also clear that most of these massacres would have no have occurred at all, or would have been far less deadly, if the perpetrators had not had access to guns (in 54 of 62 cases, in particular, to handguns). 

Gun Control That Actually Works Is Mostly An All Or Nothing Affair

But, as the Newtown incident where the perpetrator stole the guns from his mother who was legally in possession of them, and the NRA slogan that if guns are illegal only criminal will have guns, illustrate, gun control measures can be only slightly and incrementally effective in the context of a nation where there are no internal border controls and there is widespread gun ownership. 

For example, a large share of the guns used in crime in both the Northeastern U.S., where the entire region long had strict gun control laws, were purchased in the South where gun control laws were more liberal and brought across unpatrolled borders to that region. 

Similarly, while Mexico has strict gun control law, enforcing those laws is difficult because internal policing efforts are deeply corrupted and rendered ineffectual by the illegal drug trade there (which is mostly financed by U.S. based consumers of illegal drugs).  And, while border crossing trips out of Mexico into the U.S. are highly regulated, trips from the U.S. to Mexico are not.  As a result, criminals have widespread access to guns in Mexico, most of which are purchased in the U.S. in states with weak gun control laws and then illegally exported to Mexico. 

In any situation where there are many people who can potentially have their guns stolen from them, or illegally sell their guns to people not allowed to own them, formal legal prohibitions on gun control will not be very effective in stopping the potential perpetrators who pose the greatest threat to public safety.

Gun control is close to useless if it is not comprehensive within an entire border controlled region in which law enforcement is otherwise generally able to maintain the kind of civilized, orderly societies where legal prohibitions are capable of having real meaning.

The only kind of gun control that has been proven to be effective, in places like Canada, the United Kingdom, Australia and Japan, is a nearly comprehensive ban on private handgun ownership.  Even in countries like Israel and Switzerland, where gun ownership is nearly universal as a result of large citizen militias, handgun ownership and possession are quite rare.  Comprehensive handgun ownership bans reduce the number of gun related homicides by 98% of more, and also materially reduce gun related suicides (the number of accidental deaths from guns would also be reduced, but is very modest relative to the number of gun related homicides and suicides).  A nearly comprehensive ban on handgun ownership might not reduce going amok massacres by the same percentage as these individuals might be more likely than most to use long guns if handguns weren't available, but it would surely reduce the number of people killed in going amok incidents materially as well.

This point was made nicely (via a Volokh Conspiracy post) by "Charles Krauthammer — a conservative, but one who is distinctly anti-gun — writing in the Washington Post in 1996:
The claim of the advocates that banning these 19 types of “assault weapons” will reduce the crime rate is laughable.... Dozens of other weapons, the functional equivalent of these “assault weapons,” were left off the list and are perfect substitutes for anyone bent on mayhem....

In fact, the assault weapons ban will have no significant effect either on the crime rate or on personal security. Nonetheless, it is a good idea, though for reasons its proponents dare not enunciate. I am not up for reelection. So let me elaborate the real logic of the ban:

It is simply crazy for a country as modern, industrial, advanced and now crowded as the United States to carry on its frontier infatuation with guns. Yes, we are a young country, but the frontier has been closed for 100 years. In 1992, there were 13,220 handgun murders in the United States. Canada (an equally young country, one might note) had 128; Britain, 33.

Ultimately, a civilized society must disarm its citizenry if it is to have a modicum of domestic tranquillity of the kind enjoyed in sister democracies like Canada and Britain. Given the frontier history and individualist ideology of the United States, however, this will not come easily. It certainly cannot be done radically. It will probably take one, maybe two generations. It might be 50 years before the United States gets to where Britain is today.

Passing a law like the assault weapons ban is a symbolic — purely symbolic — move in that direction. Its only real justification is not to reduce crime but to desensitize the public to the regulation of weapons in preparation for their ultimate confiscation. Its purpose is to spark debate, highlight the issue, make the case that the arms race between criminals and citizens is as dangerous as it is pointless.

De-escalation begins with a change in mentality. And that change in mentality starts with the symbolic yielding of certain types of weapons. The real steps, like the banning of handguns, will never occur unless this one is taken first, and even then not for decades....
As Krauthammer notes, in the short run, the only kind of gun control that could really work well is politically impossible.  Indeed, recent U.S. Supreme Court interpretations of the Second Amendment would very likely be held unconstitutional now as well, something that makes the prospect of meaningfully effective gun control seem even more distant now than it was in 1996 when he wrote his article.

Regulating Illegal Gun Transfers And Failure To Safeguard Guns

Still, cracking down through civil liabilty or criminal penalties, on people who transfer guns to people who are not allowed to have them and use them in crimes, or fail to secure guns that are as result fall into the wrong hands and are used in crimes, may be one of the most fruitful ways, short of outright gun prohibition, to prevent gun crime.  In particular, it is the most viable gun control approach to preventing some future going amok massacres like the one in Newtown, Connecticut.

This would be particularly the case if a crack down on sources of illegal guns was accompanied by more effective incorporation of mental health and juvenile delinquency and educational disciplinary information in databased that must be checked for someone to be eligible to legally purchase a gun.

While mentally deranged massacre perpetrators and violent criminals may not be deterred or influenced in their actions by laws further criminalizing those acts, legal gun owners or minor criminals who contemplate getting involved in the black market or gray market gun trade might be very persuaded to secure their own guns more effectively and to refrain from making technically illegal gun transfers, by threats of serious civil and criminal liability for doing so.

The community might also consider the acts of people who make it possible for perpetrators to gain access to guns might also be more strongly condemned morally, if the law clearly and specifically made their conduct illegal.  A shift in community moral norms about transferring guns to people in the gray market or black market, and about failing to secure guns from theft adequately, could bring about widespread voluntary compliance and reporting of third parties who fail to honor these widely accepted moral obligations to law enforcement.  Yet, this kind of reform might be moderate enough in its impact on lawful gun owners to potentially overcome resistance of the vast majority of people who legally own guns in time.  Legal gun owners right now often proudly talk about the importance that they place on training and safety precautions.  Moral disapproval of gray and black market gun transfers and inadequate gun safeguards could be incorporated into that ethos.

For example, in the Newtown case, the perpetrator's mother might have more effectively secured her guns if these kinds of laws were on the books and has made their way into the ethos of lawful gun owners.  It might very well not have done that, but the chance of that happening would have been greater if these laws were on the books at the time.

20 December 2012

Tax Break For Muni Bonds On Table

A proposal to limit the amount of municipal bond interest that can be excluded from income is being seriously considered in "fiscal cliff" talks involving Congress and the President.  Currently, all interest from ordinary municipal bonds is excluded from income for income tax purposes, even if millions of dollars of municipal bond interest are received by a taxpayer in a given year.  This is the number one reason that some very high income taxpayers pay no federal income taxes.
The tax exemption is thought to help states and local governments market their bonds, lowering their borrowing costs. But some fiscal analysts say that an undue share of the exemption’s value goes not to local governments, but to the wealthiest bond buyers instead.
While the exclusion was motivated by constitutional federalism concerns, the courts have held that there is no constitutional right to tax free municipal bond interest.  At least to the extent that interest from state and local government debt is taxed no more heavily than interest from ordinary debts, this conclusion, as a constitutional matter, seems sound.

For what it is worth, I favor ending the exclusion for municipal bond interest entirely.  There is no compelling policy reason for the federal government to have an unlimited and indiscriminate subsidy for either the interest income of predominantly high income, wealthy taxpayer, or of state and local debt without regard to the purposes for which it is incurred.

For Democrats, ending this tax break ends a benefit that allows the rich to pay no taxes on their income.  For Republicans, ending this tax break encourages smaller and more fiscally responsible government.  Ending this tax break would be a win-win proposition politically.

The Plight Of Unemployed J.D.'s In A Nutshell

Not everybody has the skills to start their own business, and it’s not like law school spends a lot of time — or any time whatsoever — teaching and training people in the art of making money with a J.D. Heck, there are hard-working, incredibly intelligent partners at law firms who have no freaking clue how to market themselves or their legal expertise. We call them “service partners,” and they’d probably be working for the hourly rates of an SAT tutor if it weren’t for “rainmakers” with business savvy who know how best to turn talent into money.
Scraping clients together is hard, not everybody knows how to do it, and law schools aren’t teaching people. 
From Above the Law.

Does IQ Have Irreducible Components?

A Brief History Of The IQ Concept

The concept of IQ was invented when psychologists noted that across a wide variety of tests, a single common statistical factor, "g", explained a large share of the outcome of all of them.

Early tests designed to measure the "g" component which was distinct from the variance in test results particular to each test instrument were called "intelligence quotient" tests, because the final scaled score on the test when administered to children was expressed as one hundred times a ratio of the average age of someone performing as the test taker did to that person's actual age.

Eventually, the way that IQ tests are scaled was changed. Instead, the results from a sample used to validate the testing instrument were fit to a normal distribution with an arbitrarily chosen mean of 100 and a standard deviation of 15 points (or sometimes 16 points), as that scaling provided approximate back compatability with the age ratio system.

Twin studies, adoption studies, and other psychological approaches have determined that IQ as measured by traditional IQ tests has a strong hereditary component (which is particularly strong in middle class and more affluent people), is relatively stable over time, and is a reliable predictor of success in a wide variety of endeavors including involvement in criminal activity, educational attainment, vocabulary and lifetime earnings.

A synthesis of this data that explains the differences in the extent to which IQ is hereditary by social class, describes the underlying significantly inherited mental abilities that IQ tests seem to measure as basically potential academic ability in the absence of negative environmental factors.

It is also widely acknowledged that high IQ does not appear to be derived from a small number of common genetic variants. While there are some well know and not uncommon genetic variants that are associated with particular types of mental retardation, there is no short list of particular genes that make you smart.

In the case of IQ, the "missing heredity gap" between the strong hereditary component of IQ and the lack of identified "IQ genes" is usually taken as a sign of support for the working hypothesis that the IQ is the product of a massive number of genes, each of which makes a tiny contribution to overall IQ, and that the genetic variants that are associated with high IQ are often rare ones.

To simplify the current hypothesis to toy model form, there might be 100,000 genes that each play roughly equal roles in determining IQ, and high IQ people might have several thousand variants of some of those genes that are not present in average people. But, the thousands of particular rare variants of those genes present in one high IQ individual are likely to differ greatly from the thousand of particular rare varients of those genes present in another high IQ individual.

In this model, the difference between someone with moderately below average intelligence, someone with average intelligence, someone with above average intelligence and phenomenal geniuses are all basically differences in degree, rather than differences in kind. In contrast, the vast majority of people who have greatly below average intelligence have a specific developmental disability, often genetic in origin (although certainly not always) that is different in kind from the hereditary factors that play an important role in distinguishing a "C" student from an "A" student.

A New Study Identifies Three Irreduciable Components To Traits Measured By IQ Tests

A new study, analyzing the results from having 100,000 self-selected volunteers from around the world, who formed a diverse but not random sample, who took a battery of 12 psychometric tests on the Internet that mirror traditional IQ test materials.

The study argues that the psychologists who invented the concept of "g" made too much of a leap in boiling the statistical factor "g" (for the "general" factor applicable to all tests) down to a single number (when in fact it takes more than one factor to meaningfully capture what they tried to capture with the concept of "g") and that they also overreached in then supposing that there is some single meaningful real world mental trait that provides a source for the statistical correlations that were captured by the "g" factor in the tests used to devise and validate the IQ concept.

[T]he researchers asked respondents to complete 12 cognitive tests tapping memory, reasoning, attention and planning abilities, as well as a survey about their background and lifestyle habits. . . .
The results showed that when a wide range of cognitive abilities are explored, the observed variations in performance can only be explained with at least three distinct components: short-term memory, reasoning and a verbal component.
No one component, or IQ, explained everything. Furthermore, the scientists used a brain scanning technique known as functional magnetic resonance imaging (fMRI), to show that these differences in cognitive ability map onto distinct circuits in the brain.
The press release version of the study quoted above from Science Daily doesn't engage with how the researchers addressed the problem of having a self-selected sample made up only of people with Internet access (which is not to say that there aren't methodologically valid ways of using a large convenience sample of that kind to make certain kinds of statistically valid conclusions), or the magnitude or statistical signficance levels of the conclusions that were reached.

For example, while the researchers conclude that no one component explained the entire range of performance on the twelve cognitive tests, the story does not make clear how much, if any, correlation there was between those three factors, or which, if any, of the cognitive tests which most heavily influenced by which of the three components.

Of course, the survey test, like all survey based tests, also suffers from a lack of validation against other means of evaluating the individuals tested with different kinds of instruments. For example, there is no way to compare these survey scores against verified standardized test scores, or to be certain that information on the questionaires that was reported was accurate.

The University of Western Ontario study is Adam Hampshire, Roger R. Highfield, Beth L. Parkin, Adrian M. Owen. Fractionating Human Intelligence. Neuron, 2012; 76 (6): 1225 DOI: 10.1016/j.neuron.2012.06.022 The abstract of their study states:
    ► We propose that human intelligence is composed of multiple independent components ► Each behavioral component is associated with a distinct functional brain network ► The higher-order g factor is an artifact of tasks recruiting multiple networks ► The components of intelligence dissociate when correlated with demographic variables
What makes one person more intellectually able than another? Can the entire distribution of human intelligence be accounted for by just one general factor? Is intelligence supported by a single neural system? Here, we provide a perspective on human intelligence that takes into account how general abilities or factors reflect the functional organization of the brain. By comparing factor models of individual differences in performance with factor models of brain functional organization, we demonstrate that different components of intelligence have their analogs in distinct brain networks. Using simulations based on neuroimaging data, we show that the higher-order factor g is accounted for by cognitive tasks corecruiting multiple networks. Finally, we confirm the independence of these components of intelligence by dissociating them using questionnaire variables. We propose that intelligence is an emergent property of anatomically distinct cognitive systems, each of which has its own capacity.
Serious Researchers Have Never Claimed That IQ Is The Only Mental Trait

The headline and lede conclusion the researchers make "that the notion of measuring one's intelligence quotient or IQ by a singular, standardized test is highly misleading," takes down a straw man argument.

Psychologists Have Never Claimed That A Single Standardized Test Perfectly Captures "g"

Psychologists have since the very begnning recognized that any particular standardized test will be an imperfect measure of the theoretical concept "g" that is what is usually meant when someone uses the term "IQ". Indeed, the entire concept of "g" evolved from the recognition that different standardized tests were measuring underlying traits that were similar but not identical and defining the similarity statistically.

Also, esssentially every widely accepted IQ test already produces a composite result from subscores involving test items that test different domains of mental ability that are believed to be influenced by "g" to a greater or lesser extent.

Standardized IQ tests are designed to strike a balance between having test results that are usually very similar to an estimate of "g" for the test taker based on a wide variety of tests, not requiring undue time or expense to conduct, being comparable when individuals taking IQ tests on a variety of instruments are compared, and being culturally neutral - so that knowledge that only people with certain cultural experiences would have doesn't make someone smart who hasn't been exposed to that culture look dumb.

There Are Widely Accepted, Well Defined Mental Traits Other Than IQ That Matter In Life

There are many mental traits, including all of the "Big Five" personality traits, whose outcomes appear to be unrelated to IQ. For example, in the famous Tremain IQ study, the distribution of personality traits of the people in the sample limited to high IQ individuals were not significantly different from the distribution of personality traits in the general population, even though personality traits were shown by the same study to have a non-neutral impact on lifetime economic success.

There have also been popular and serious academic efforts to identify other stable mental traits that are independent of IQ. Some of the traits that have been explored in this effort, other than the Big Five personality traits, include structural visualization, creativity, "emotional intelligence", and musical ability. A number of congenital mental traits sometimes classified as "disorders" or as forms of "neurodiversity" including sexual orientation, schizophrenia, bipolar disorder, phobias and anxiety disorders, and ADHD, are likewise usually conceptualized as unrelated to IQ. Many of these traits also have strong hereditary components, sometimes at least as strong or stronger than IQ.

Finally, some mental traits of adults, while quite stable, are widely acknowledged to be completely or predominantly learned traits, rather than traits that are hereditary or at least congenital. Examples include birth order effects on personality, the language and dialect of that language that you speak as a native speaker, your religious affiliation, and the cultural preferences associated with one's social class.

The Limits Of fMRI Data

While certain kinds of thinking, like short-term memory, reasoning and verbal ability are localized in particular areas of the brain that can be identified using functional MRI imaging studies, the conclusion that the factors that distinguish high IQ individuals from low IQ indviduals are localized in these parts of the brain is not a consensus view of researchers looking at the neuroscience of IQ.

The conclusion the high IQ represents high performance of several independent and localized types of brain function is one legitimate hypothesis about where IQ comes from, but it isn't the only one.

An alternative view, which ties into the notion of a general factor in IQ, is that IQ is mostly a function of brain features like connectivity and neuron activity rates or processing rates across the brain, and that it just so happens that these general and distributed features of brain organization most visibly manifest themselves on certain kinds of tasks like short-term memory tasks, reasoning tasks and verbal tasks that localize themselves in particular areas of the brain. In this view, the neurological factors that are involved in high IQ are distributed but psychologists simply haven't been as good at devising good ways to test it for brain functions localized in other parts of the brain.

Other Observations Made By The Study

The large online survey that the researcher conducted also made other notable observation:
Regular brain training didn't help people's cognitive performance at all yet aging had a profound negative effect on both memory and reasoning abilities. Intriguingly, people who regularly played computer games did perform significantly better in terms of both reasoning and short-term memory. And smokers performed poorly on the short-term memory and the verbal factors, while people who frequently suffer from anxiety performed badly on the short-term memory factor in particular.
A decline in memory with age is normally conceptualized as having roots in one or more of a variety of specific chronic disorders associated with the aging process that differ in kind from the source of a person's IQ.

The factors associated with computer games could be a product of self-selection, with the fact that the test instrument was computer based and that gamers were more comfortable with that means of interacting, or social class (since this was not a random sample).

The link between smoking and some of these factors could be a consequence of smoking or could be a proxy for social class effects since smokers have a lower socio-economic class on average than non-smokers and social class is associated (causally) with IQ.

The link between anxiety and short-term memory is perhaps the most interesting of the connections mentioned above. Some of the leading theories about the neurology of anxiety disorders associate them with defects in the amygdala, a part of the limbic system that isn't particular important for short-term memory. Another leading theory about the neurology of anxiety disorders related to individual variation in the way that individual brains produce and reuptake neurotransmitters such as seretonin, out of the brain. I am not aware of any studies previously linking anxiety disorders to either IQ or to short-term memory.