28 September 2011

The Benefits Of Growth Are Not Shared

[T]he richest 5 percent of households obtained roughly 82 percent of all the nation’s gains in wealth between 1983 and 2009. . . . The bottom 60 percent of households actually had less wealth in 2009 than in 1983.

From here.

The facts are the facts. The lurking issue, which is a mixed question of empirical reality and how one should appropriately determine who created value and thus deserves a share of those economic gains by any standard other than our current economic system, warts and all, is how it has come to be the case that the benefits of economic growth have been so concentrated.

One view, suggested by the choice of dates, is that the dwindling influence of organized labor driven mostly by policy choices of governments has unbalanced what is basically a political question about how profits created by a collective effort of high level and low level workers should be divided.

Another view is that this is a case of a relatively unregulated market economy doing what it does best, allowing people who create new wealth to keep it, while not sharing the benefit with people who are replaceable by others who can do the same thing even though they happen to be the ones using their replaceable skills for economically successful masters rather than economically inept ones. Put another way, this view suggests that Microeconomics 101 orthodoxy, that the rest of the Economics then busies itself finding exceptions to, that generally speaking a market economy operationally tends to match productivity and economic value to the market actors who cause that productivity and economic value at least in some rough justice, on average, big picture sense. The fact that pre-government transfer disparities in incomes have been similar across governments with very different economic policies in the developed world is suggestive of the idea that the growing inequality has fundamental roots that are largely natural products of the most efficient ways that our technologies afford to produce goods and servies and that government imposed redistribution of wealth, rather than changes to the black box free market economy that generates that wealth, is the appropriate place to create social class equity if one feels that this is the appropriate outcome as a matter of policy.

Both views, of course, are fundamentally uninformed. Neither claims actual knowledge at a nuts and bolts level of what it is in our economy as a descriptive matter that is different about the last quarter century that has caused our economy to produce increasingly stratified economic outcomes for households.

Certainly, no one doubts that the proximate cause is that those at the top have seen their real incomes increase while those in the middle and those at the bottom have not, and that taxes and social programs in the United States, at least, have not strongly redistributed unequal incomes. Those who look a little closer are able to refine the analysis a bit and conclude that the big business and investment income of the very well to do have increased much more than the merely wealthy of senior but not top management, distinguished profesionals and those involved in the top levels of medium sized businesses, who in turn have done better than merely ordinarily talented professionals and managers, who in turn are the last lawyer to have seen any progress at all.

Likewise, no one doubts that these incomes are largely the product of contractual and business arrangement negotiations, given force of law and honored most of the time (but perhaps not at some critical moments) that are voluntarily negotiated between the parties to those transactions on the basis of economic power in the context of large economic markets for similar transactions that are governed largely by principles of supply and demand.

But, if one goes further than that to look at why the current batch of affluent people have more economic power than they did thirty years ago relative to their peers in the community and you are likely to get either blank stares from economists who feel that they have left their jurisdiction, or popular but not very rigorous accounts to offer vague suggestions like the notion that we are now in an "information economy."

Some of the intermediate factors that seem to be particularly important, or at least seem as if they might be important, in no particular order include:

(1) the economic pressures on people in good producting industries and other offshorable work due to lower wages in developing countries resulting from international trade;
(2) the triumph of management over ownership in struggle to control big businesses;
(3) technologies and a legal environment that give rise to economies of scale (not always formally in a single legal entity firm) that make big businesses more competitive at a fundamental level than smaller businesses, and the "excess" or profit in times of economic growth inure to whoever happens to be at the top of the pyramids when it takes place - as the number of pyramids gets samller, a smaller group of people benefit from this excess that derives from the efforts of far more people than historically modest businesses did;
(4) increased productivity due mostly to technology, accompanied by a situation where the vast majority have their basic material needs largely satisfied in the status quo, that leaves an excess that those who want to claim the fruits of the increased productivity don't have to fight other participants in the economic activity particularly hard by historical standards to obtain (in other words, fewer people can make what the masses need so the powerful can claim the rest);
(5) the withering of a wide array of intermediate social institutions of all types economic and otherwise, for reasons that aren't entirely clear, have undermined the capacity of the rank and file of society to act collectively reducing their bargaining power in the political process and economy;
(6) increasing complexity in our society as technologies and economic arrangements have rapidly changed, grown more sophisticated, have reduced the proportion of people in society who have the capacity to understand what is going on well enough to engage this complex world successfully and their scarcity has made them more valuable;
(7) the increasing indirectness of production and reduced magnitude of prosperity has undermined the social bonds of human contact that previously caused market actors with economic power to refrain from utilizing the full extent of their economic power;
(8) vast differences in wealth between those with more economic ability and the less skilled are the norm to which market economies naturally trend and the period of post-war shared prosperity that preceeded the current trend were aberations driven by the vast comparative advantage the U.S. received when its allies economies were ravaged by war, by the diminshed workforce due to war deaths and the return of women to the home after the baby boom, pent up domestic demand and savings from a long Great Depression and World War II, distribution of the economic tracks people inherited due to the war, and a sense of societal unity lingering from the nation's need to unite for the war effort;
(9) the increased importance that wealth has taken relative to effort as a means of production in a technology dominated society; and
(10) stagnation in economic growth rates on a widespread basis in society as the path by which productivity can be improved grows less obvious and growth requires more exceptional innovations.

Securities Laws Turn 100

The first securities laws were passed at the state, rather than the federal level on March 10, 1911 in Kansas and formed a template for other state "Blue Sky laws" and the federal securities laws enacted in 1933 and 1934 as the stock market crash that led to the Great Depression were passed.

Tortious Interference With Contract History

Lumley v. Gye, the English case that first established interference with contractual relations, arose from a specifically gendered dispute: two men fighting over a woman. This type of male—male—female configuration creates an erotic triangle, a common archetype in Western culture.

The causes of action that served as the legal precedents for interference with contractual relations – enticement, seduction, and criminal conversation – are previous instances where the law regulated gendered triangular conflicts. Enticement prohibited a rival male from taking another man’s servant, seduction prohibited a rival male from taking another man’s daughter, and criminal conversation prohibited a rival male from taking another man’s wife.

In Lumley v. Gye, the court expanded these precedents and created a cause of action that allowed Lumley to bring an action against his male rival for essentially “taking” his contracted female employee. The gendered basis for the tort explains its most problematic aspects, including why it imposes obligations on non-contractual parties, ignores the role of the breaching promisor in causing the wrong, and treats her as the property of the original promisee.

From the abstract to Sarah Lynnda Swan, "A New Tortious Interference with Contractual Relations: Gender and Erotic Triangles in Lumley v. Gye."

The article goes on to suggest reforms to the tort based upon this analysis, although given the long forgotten roots of this tort, which now applies mostly in non-gendered business disputes, I'm not sure that the facscinating preface does much to support the ultimate conclusion.

Tax Strategy Patents Are No More

As of September 16, 2011, patent law no longer protects tax strategy patents. The provision was part of an overall bipartisan package of patent law reforms embodied in H.R. 1249 that was signed by President Obama. The tax bar and CPAs generally opposed them, although the intellectual property bar was mildly attached to them.

Doctrinally, this was accomplished by having Congress declare as a conclusive matter of law that there is nothing new under the sun when it comes to tax avoidance.

Existing tax strategy patents will still exist even if the legislation is passed, and could constitute a trap for the unwary. There are now more than 130 issued patents, with 150 awaiting approval. Many of them are variations of common transactions, such as a method for calculating the savings of converting an IRA to a Roth IRA; for analyzing college savings plans; or for investing long-term assets of tax-exempt charities.

Several lawsuits have been brought by patent holders, and at least one was settled for an undisclosed amount, so it behooves practitioners to be aware of the topics that have been patented.

The mechanism by which the law nullifies tax strategy patents is to deem any strategy for reducing, avoiding, or deferring tax liability “insufficient to differentiate a claimed invention from the prior art.” Under the patent rules, if an invention is “prior art,” it is not novel or obvious, and therefore is not patentable.

The legislation excludes computer programs, methods and systems used solely for preparing a tax return or filing, including one that “records, transmits, transfers, or organizes data related to such filing.” Thus, you needn’t worry about your preparation software provider.

Even without the legislation, growing hostility towards business methods patents from the U.S. Supreme Court, the U.S. Court of Appeals for the Federal Circuit, and the business community leaves many of these patents on thin ice.

Judge Kane Skewers Righthaven In Colorado Suits

Colorado, issued another stinging rebuke to Righthaven. This time it was Judge Kane in Colorado, and his decision will lead to the end of all of Righthaven's pending cases in Colorado over the "TSA Pat Down" photo from the Denver Post. I assume Righthaven will appeal this ruling to the Tenth Circuit, but until then, it seems like its Colorado operations will be on hold.

Like other judges before him, Judge Kane dismisses Righthaven's case for lack of standing due to an inadequate copyright assignment. Unexpectedly, Judge Kane doesn't simply rely on the Ninth Circuit Silvers case or the other Righthaven precedent. Instead, because the case is in the 10th Circuit and not bound by the Silvers case, the court does a scholarly analysis of the standing issue from scratch. . . .

The judge orders Righthaven to pay Wolf's attorneys' fees. As I've mentioned before, with every fee award against it, Righthaven's profit meter keeps running in reverse. It wouldn't surprise me if judges eventually award more fees against it than Righthaven took in through its settlements in total. However, none of the fee awards will matter if Righthaven is inadequately capitalized and thus continues to plead poverty. . . I expect that angry defendants with sizable fee awards are going to look for other parties who might pay the fees. MediaNews, you're probably going to hear from some defendants; I hope you built that contingency into your budget. Wouldn't it be ironic if defendants started sniffing around Steve Gibson's home looking for assets to satisfy their fee awards?

As a final insult, Judge Kane makes it clear that Righthaven isn't going to win in his court, even if they can get a reversal of the standing issue on appeal (see, e.g., FN 2 of the opinion). While this opinion wasn't a flamboyant benchslap like Judge Hunt's opinion in the Democratic Underground case, it was a stern rebuke nonetheless. It's interesting how so many judges, effectively independently from each other, have each morally condemned Righthaven's campaign.

From here regarding a the linked ruling in 1:11-cv-00830-JLK (D. Colo. Sept. 27, 2011).

Footnote Two in Judge Kane's opinion states:

Although the institution of some third-party infringement suits may protect the interestof a copyright owner, not all infringement suits are meritorious or worthwhile. Divorcing the economically beneficial interest in copyright from the right to sue for infringement eliminates the exercise of “prosecutorial” discretion by the copyright owner. The party whose only interestis in the proceeds from an action for infringement has no incentive to refrain from filing suit. Furthermore, in light of the severe statutory damages for copyright infringement and the burdensome costs of litigation, a party sued for infringement, even a party with a meritorious defense, will often agree to settlement. Thus, a party with a bare right to sue may file numerous infringement actions of questionable merit with the intention of extorting settlement agreements from innocent users. This possibility becomes even more likely when the financial viability of the entity filing suit depends upon the proceeds from settlement agreements and infringement suits. Even though copyright law expressly provides for an award of costs and reasonable attorney fees to a party prevailing in its defense of a meritless infringement action, the economic realities of securing counsel and paying in advance the costs of litigation turns this remedy into a Potemkin Village. Both fundamentally and practically, the reality is at odds with the constitutional prioritization of public access to copyrighted works.

The footnote sounds a lot like the traditional tort reform analysis, but from a free speech orientation.

Few intellectual property business models have been so soundly condemned over a really rather modest failure to properly handle ownership issues related to the claims. This is in part because there is a deep underlying free speech values outrage at the enterprise of retail level petty copyright enforcement in arguably newsworth matters itself that Righthaven forced judges to aid and abet for a while that they are happy to distance themselves from and discredit.

The Ancient History Of Money

Did money evolve the way that economics textbooks say that it did? No.

Almost all non-monetary economies have "invisible" accounts of traded favors and gifts assigned intangible relative values long before any medium of exchange to reify those accountings was developed. Informal exchange rates between highly salient trade or ration goods in early bread and circus bureaucracies and international trade where there was no "double coincidence of wants" problem arose next. Spot barter is very rare in non-monetary societies and was largely unrelated to the development of money.

A related notion is that the legal concept of unjust enrichment whereby someone is obligated to another because he receives a benefit without having provided something in exchange when a "true gift" is not intended far precedes the legal concept of a contract as we conceive of one in private law today.

The GOP Presidential Nomination Race

A recent story I read in print stated that Romney, Perry and Paul are the only three candidates with significant campaign contribution war chests (in that order). The others are no where close. Enik Rising picks up a report that the race for endorsements from leading Republicans is dominated by Romney, with Perry in second place, Newt Gingrich, whose has no money and has staffers who have abandoned him en masse in third place, and Paul in a distant fourth. Cain and Huntsman have received a few promising straw poll and caucus reactions, but have very little in the way of campaign funds or endorsement support. Media coverage of the GOP nomination race increasingly reflects this reality.

Thirteen months from the election, a little more than two months from the start of the primary and caucus season, and about ten months from the end of the primary and caucus season, Romney is the clear front runner by conventional measures with Perry (who came into the race much later) posing the only real credible competition to him. New Jersey Governor Christie's announcement that he does not intend to run in 2012 made this week (probably wise given that he would have to start from a cold stop two weeks before the first votes are cast) further adds to the strength of the positions of Romney and Perry. Despite the half dozen or so other candidates who have been included in early GOP primary debates, the GOP nomination fight looks like a two candidate struggle at this point unless a game changing new candidate comes into the race.

Like most politically engaged Democrats, I see Romney as the greater challenge to President Obama's run for reelection because he is perceived as more moderate and isn't as intellectually challenged as Perry (who, however, clearly has the edge when it comes to the "Elvis" factor), although he clearly does not have the support of the Tea Party activists who are a new powerhouse in the party; they far prefer Perry, not least because Romney's healthcare plan for his state was the primary model for "Obamacare" the government program that Tea Party Republicans despise. Romney's backing comes from the establishment wing of the GOP and it remains to be seen if they have enough muscle in the post-2010 Tea Party surge world to get their man the nomination. There is a decent chance that whichever of the these two fails to get the top spot on the ticket will be the Vice Presidential nominee.

A weak economy and the continuing low grade war in Afghanistan weaken President Obama going into the 2012 election, and the lack of a meaningful Democratic primary opponent, while conserving his resources also deprives him of a way to activate his supporters early. But, Obama's approval ratings aren't particularly dismal for a mid-first term President (Reagan's hit far lower points in his first two years), the public seems far more dissatisfied with the quality of governance that the Republican controlled House of Representatives (with an 8% approval rating, an all time low and also very low re-elect one's own member of Congress ratings), and neither Romney nor Perry are particularly formidable opponents. Perhaps more attractive potential GOP candidates are bearish on their prospects and have chosen not to run for that reason.

Why Is Health Care So Expensive?

The U.S. has very expensive health care providers

Health insurance costs are up 9% this year. While insurance companies take a lot of the rap, as they deliver the bad news, and administration costs are much higher in the American system than the health care payment systems of most other countries, the bigger factor driving high health care costs in the United States are much higher provider costs pretty much across the board.

Of doctors, nurses, hospitals, medical equipment makers, and drug companies all charge far more for their comparable services than providers (sometimes for precisely the same products from the same factories) in other developed nations, even controlling for purchasing power parity and relative standards of living in different countries.

The Number of New M.D.'s has stagnated for at least 30 years

One particularly notable point is that despite a growing population and increasing parity of men and women in the medical profession, we are making the same number of new doctors per year (about 16,000) that we did in 1980. The number of new male doctors minted each year has actually declined from about 11,500 to about 8,000 (about 30%) from 1980 to 2010. The U.S. population has increased by 36% over that time period. Thus, roughly 48% of men who would have been admitted to medical school in 1980 wouldn't be admitted to medical school today (since racial diversity has increased due to decreased racial discrimination in higher education and thereby expanded the pool of medical applicants as well, this is probably an underestimate). The number of medical students could probably be doubled without dropping admissions standards for incoming medical students below what they were in 1980.

Only three U.S. medical schools that offer an M.D. outside of Puerto Rico and disclose that information have a median undergraduate GPA of less than 3.54 and some have median undergraduate GPAs as high as 3.89. All three with lower median undergraduate GPAs are Morehouse School of Medicine in Atlanta, (3.46), Howard University College of Medicine (3.37), and Meharry Medical College School of Medicine (3.25) (these three schools account for about 15% of all African-Americans who earn M.D.s in the U.S. in any given year). One one other school (Marshall University which as a median MCAT score of 26 and a median undergraduate GPA of 3.58) has a median MCAT scores which are on a 45 point scale range from 27 (about the 60th percentile of test takers) to 38 (98.5th percentile) at the institutions with a median 3.54 GPA or higher. Canadian medical schools are in the mid-range of U.S. medical schools in undergraduate GPAs and test scores. Acceptance rates to some medical school by combined MCAT and undergraduate GPA can be seen here. For example, a little more than half of medical school applicants with a 3.5 GPA and a MCAT score of 31 manage to get admitted to some medical school. About one in five applicants with a 3.7 undergraduate GPA and a MCAT score of 34 still don't manage to get admitted to any medical school. An MCAT score of 35 is roughly comparable to a Stanford-Binet IQ score of 132 (98th percentile of the general population).

Nationwide 18,665 students started medical school in 2010 and 42,742 people applied to medical school (the average applicant applied to 13.6 schools). At public medical schools, in state applicants were favored over out of state applicants by a more than 2-1 ratio on average, and at many public medical schools the ratio is more than 3-1. In 2010, 16,838 students graduated from medical school, about 90% of the number of students admitted in that year.

Thus, the circumstantial evidence is pretty strong that significantly more medical school applicants could be admitted without a serious impact on medical student quality and that a very large share of marginal students admitted would graduate.

While the medical profession needs minimum standards, there is little doubt that the people who made the cut a few decades ago and would not have made the cut now due to limited availability of medical school slots would be good enough.

Physicians are the highest paid single profession in the United States and have exceedingly low unemployment rates. They typically graduate with significant debt and work long stressful hours, but the 23,000 students who apply to medical school and fail to get in anywhere each year is proof that there is no shortage of people willing to accept those economics, the endemic long hours worked by physicians is a sign that there is no shortage of demand for their services, and the incomes earned by physicians in the U.S. which are roughly double those of physicians in other developed countries is an indication that they would not suffer unduly is an increased supply of physicians caused physician compensation rates, after many years of keeping up with inflation (M.D.s were one of the few educational groups not to see a decline in household income in the last decade) to stagnate or to decline somewhat.

More Medical Schools Would Be A Good Alternative For The Economy

The market has responded by creating layer upon layer of subordinate medical professions, like nurse practioners and physician assistants, to fill the gap caused by a shortage of physicians. But, simply having more doctors would make a world of difference in affordability and access to care.

When it comes to a no brainer plan for greating more good paying jobs that meet the nation's economic needs while also making health care more affordable and available, opening new medical schools has to be close to the top of that list.

Also, while there is real doubt about whether churning out more degrees adds economic value and capacity ot the nation, or simply leads to credential inflation, there is little serious doubt that what a person learns in medical school actually adds economic value relative to what that person knew and was able to contribute to the economy before going to medical school. The marginal medical student may be a smart and hard working person, but will rarely be able to have a career that has the same economic value in lifetime income terms as an identical student who is admitted to medical school and graduates.

And, new medical schools, while they would not address the shortage this quarter, or even this year, because they are at the end of the educational line, could be providing a significant increase in the supply of doctors who have completed their residencies as soon as a decade from now, long term for politicans, but no further in the future than, for example, than typical time frames for the realization of plans to make investments in transportation infrastructure like new light rail lines or major highway improvements. Moreover, whatever shortage of medical doctor capacity we have now, it will almost surely be greater in 2020, when a new medical school would start to impact the economy, first because the population of the United States will have increased, and second, because the percentage of Americans who are older will have increased and they have a greater demand for medical services than younger people.

There are also multiple ways that new medical schools could come to be. States could start them within their public university systems. The federal government could create them or provide grants to assist with start up costs. Or, private charities, such as those created by numerous sales of non-profit medical systems to private companies creating large foundations with the proceeds, could step up to meet this need.

Lost Book

The Smithsonian has a nice list. of ten books known to have existed that are lost to us now.

1. Margites, a comic epic poem, by Homer. Aristole loved it.

2. There are more than twenty books that the Bible mentions by name that have been lost including "the “Book of the Battles of Yahweh,” a “Book of the Chronicles of the Kings of Israel” a “Book of the Chronicles of the Kings of Judah" and the “Book in Seven Parts.” There are a number of other apopcyphal books of the New Testament (some preserved in complete or near complete form and others lost except their names) and some included in Catholic or Orthodox Bibles (often called deuterocanonical in that context). The canon development process is to my mind, one of the more fascinating episodes in intellectual history. Some books which were seriously considered for the New Testament canon but didn't make the cut include the Acts of Pontius Pilate, the Valentinians Gospel, the Shepherd of Hermas, Barnabas, Didache, I Clement, Revelation of Peter, the Gospel according to the Hebrews, the Gospel of the Egyptians, Preaching of Peter, Traditions of Matthias, and the Sibylline Oracles, Apocalypse of Peter (which is the source for much of the imagery of Hieronymus Bosch), and Acts of Peter. The Book of Revelation probably came closer than any of the other canonical books to missing the cut and was probably written by an author outside the religious community shared by the other New Testament writers, probably a late 1st century Jewish Christian.

3. Cardenio, a Shakespeare play performed in 1613, somehow related to the Don Quixiote story written a year after that was translated into English.

4. Inventio Fortunata, a (somewhat inaccurate) geography of the North Atlantic and Arctic written by an Oxford University scholar around 1360 CE.

5. The Isle of the Cross, a story of a lighthouse keeper's daughter who saves a sailor and falls in and out of love with him by Herman Melville was submitted to a publisher in 1853 but suppressed by the publisher, probably out of fear of libel suits from thinly veiled real people described in it.

6. Ernest Hemingway’s lost World War I novel from 1922. His wife put it in a suitcase when she came to visit him and lost the suitcase.

The Smithsonian also lists a famous first draft of a book that was rewritten, a first book of an author who later became famous, and some books left unfinished when their authors died, but those don't quite my imagination the same way.

27 September 2011

Is Economic Stability Overrated?

Some smart economists argue that trying to prevent little recessions increases the risk of serious economic harm when a recession too big to prevent by the usual means comes around.

Defense Updates

Stopping Domestic Air Terrorists

* An NYPD helicopter has air to air missiles. I can't say that I fault them for that, given what they've had to face.

* The Homeland Defense Interceptor concept, of giving the Air National Guard an air defense aircraft based on a training aircraft or foreign military light air fighter as a platform for a lower cost way to protect domestic airspace for terrorist and crazies than the F-15 and F-16 designed for "near peer" dogfights isn't dead yet. The AT-6 training aircraft is competing with Embraer’s Super Tucano light attack aircraft for the job. Earlier consideration given to a light jet fighter for the role that could completely replace the F-16 in this role were scrapped.

Air Force (ANG and Reserve) F-16s and F-15s have been flying Air Sovereignty Alert (ASA) patrols around major U.S. cities since 9/11. Less known is that the skies around DC are also patrolled by U.S. Coast Guard HH-65 Dolphin choppers tasked with intercepting small, slow targets like the Cessna intercepted by the AT-6. . . . the Dolphin’s primary mission with the Coasties is search-and-rescue.

Insiders think the program has a good chance of being cut despite the fact that it is far cheaper than the status quo or plausible replacement aircraft for the F-16 like the F-35 that is even more dear.

The upgraded AT-6 will get new avionics and communmications similar to the upgraded A-10 close air support fighter still in service since the Air Force has been reluctant to develop a replacement for the Vietnam era standby ground pounder. In its domestic air defense role, the AT-6 would carry .50 caliber machine guns and AIM-9X Sidewinder air-to-air missiles that will be tested in live fire exercises in 2012.

These inexpensive, nearly off the shelf light attack planes have also been discussed as partial replacements for existing aircraft like the A-10 in precision bombing and close air support roles in low threat environments like Iraq and Afghanistan where asymmetric forces lack advanced anti-aircraft defenses.

Defense contractors unfortunate enough not to have a contract to build the F-35, the only major fighter aircraft program in the works right now, are willing to support the program, despite the fact that it has a high risk of being cut by the fighter mafia in the Air Force, because the platform, if proven and adopted even at a low level by the U.S. Air Force would be an attractive product to sell to second and third world Air Forces that can't afford state of the art supersonic jet fighters who face ill equipped insurgencies or poor neighboring nations. The fact that that the planes themselves use yesterday's technology also makes it unlikely that they will be prevented from selling them to less reliable allies.

The Air Force brass are afraid of programs like these because they strengthen the case for making a smaller buy of the Air Force F-35A replacement for the F-16 that is behind schedule, dramatically over budget for what was supposed to be a low costs multipurpose fighter aircraft, since cheaper modified AT-6s could carry out some of its less technology demanding missions. One doesn't actually need stealth fighters to patrol Chicago. In their view, the more F-35As they can get, the better, in their view, as it increases their peak capacity against a near peer competitor. The concept is also a poor fit for the notion that specialized aircraft can suit the Air Force's needs than a one size fits all fighter and the Air Force and Army's reluctance to see the Air National Guard in a distinct domestic role of its own as opposed to merely serving as an understudy for the active duty force. The Air Force brass see the ASA mission more as a way to keep reservists and guardsmen trained for "real" war missions than as a mission that deserves to have resources committed to it in its own right.

Osprey Finally Working As Designed

The CV-22 Osprey hybrid plane-helicopter is being used for the long range, large number of individuals combat search and rescue missions for which it is ideal in Afghanistan. Software upgrades that improve the angles at which the rotors are titled during operations are also allowing it to go 20 knots faster and lift 1000 more pounds.

Bloodless Missiles

It has long been known that electromagnetic pulses can disable electronics without harming anyone else, except that the old school way of doing that was to set of a nuclear bomb which wasn't so benign. Now, the Air Force is testing a missile designed to do the same thing without the explosion - keeping airmen out of harm's ways while opposition electronics are disabled and preventing civilian casualties. It may also be cheaper to buy electronic warfare missiles than to refit late model manned fighters to do similar jobs as the U.S. military has traditionally. And, an inbound missile may trick opposition forces into activating radar systems that allow them to be targeted in a way that electronic warfare fighters may not.

The downside: Sooner of later someone else is going to figure out how to use one on us, and our military is highly dependent upon its electronics.

Air Force Still Not On Board With Cuts

Air Force Chief of Staff Gen. Norton Schwartz gave a speech September 20, 2011 that was classic obsfurcation.

Basically, tightening budgets mean that the service is going to be smaller and might not be able to perform numerous major operations at once. As for future weapons buys, the Air Force is going to have to be realistic about what it wants from it’s new weapons and list requirements that are based on operational needs and nothing more. It’s also going to have to scale back on certain mission areas that it doesn’t deem critical to its role in projecting U.S. air-power around the globe.

He then promptly set out to list everything that shouldn't be cut: New 767 based air tanker planes, a new long range bomber made with existing technology, and the F-35 program. Maybe he means to cut the Air Force marching band or something.

26 September 2011

The Committee That Runs The Global Economy

In 2007, 40% of the monetary value of 43,000 transnational companies (defined a companies with at least 10% of their holdings in more than one country), were controlled by just 147 companies. Diversification and indirect holding patterns made the effects less obvious, according to a July 28 preprint at arVix.org by Brandy Aven and James Glattfelder. The trend toward increasingly concentrated and transnational holdings is continuing to advance.

Moreover, business corporations tend to concentrate far more power in a CEO than comparable governmental organizations, so control by 147 companies pretty much implies that a group of people that can fit in a large college lecture hall control two-fifths of the globalized economy.

DRD2 Gene Linked To Parenting Style In Tough Times

[The] DRD2 gene variant . . . has previously been tied to a propensity for violence, alcoholism, attention-deficit/hyperactivity disorder and several other psychiatric conditions. . . other research questions whether any link exists between DRD2 and mental ailments.

The latest study (D. Lee et al. The effect of the Great Recession and dopamine receptor gene DRD2 on maternal harsh parenting. American Sociological Association meeting, Las Vegas, August 22, 2011) suggests it it also influences how mom's parenting styles change as a result of the stress of a recession.

Mothers who inherited either one or two copies of a particular form of the dopamine D2 receptor gene, dubbed DRD2, cited sharp rises in spanking, yelling and other aggressive parenting methods for six to seven months after the onset of the economic recession in December 2007. . . . Hard-line child-rearing approaches then declined for a few months and remained stable until a second drop to pre-recession levels started around June 2009. . . . Mothers who didn’t inherit the gene variant displayed no upsurge in aggressive parenting styles after the recession started[.]

DRD2 (citing 50 scholarly studies) is one of a dozen or so relatively common genes linked to mental health conditions (links e.g. here) that verge on extreme personality types that are associated with a range of antisocial or sometimes dysfunctional behavior (for example earning low GPAs in college relative to one's test scores) in modern society. DRD2 is independent of IQ.

Some of the other genes that attract attention are AVPR1a (the "bad husband gene"), DAT1 (a less powerful dopamine regulator), DRD4 (a dopamine regulator), DRD3 (a dopamine regulator), FOX2 (language), MCPH1 (brain development), HTR2B (impulsivity), LPHN3 (ADHD), 5-HTT (vulnerability to psychological trauma).

25 September 2011

The Difference A Border Makes

Mexico is in the midst of the worst wave of crime it has ever seen. The month one gang dumped thirty-five bodies of rival gang associates in a busy street during rush hour, seemingly with impunity.

Meanwhile, across the Rio Grande, the United States is experiencing a near record low in crime, nationwide.

Before jumping to ask why, it is worth first observing that national borders do matter, a lot, when it comes to crime rates. While it is premature simply to find some difference between the countries and say that it is the cause of the difference, there is a difference, and therefore, there is clearly some cause.

Nor is this cause precisely a regional one. At one point, Columbia was the epicenter of drug cartel violence. Now, it seems to be Mexico. There have been moments in time when the United States has had far higher levels of this kind of crime.

The U.S.-Mexico drug crime disparity is all the more odd because by almost all accounts, they are part of a single drug trade system. Drugs from Latin American are sold to users in the United States. The money and guns go to the South, the drugs go to the North. What keeps gang violence in Mexico from spilling over to the remainder of the distribution chain that seems to fuel it?

Recession Hit Middle Class Hardest

The last decade, mostly during the downturns following the tech bust in 2001 and the financial crisis in 2007, have further exacerbated the divided between the upper middle class and the middle class, while having a strongly negative but not as great impact on the working class.

In this time period, the 3.0% of people at the very top of the education scale, lawyers, doctors and people with PhDs and M.B.A.s managed to improve their median incomes slightly. But, roughly 63% of people with some college, college degrees, and master's degrees lost more of their income in percentage terms (and even more in absolute terms) than roughly 31% people with only high school diplomas. More people have high school diplomas and college degrees, but the benefit of these degrees relative to high school diplomas have waned. (The 12% without high school diplomas also took large percentage hits.)

The detailed analysis within these categories would also show winner take all tendencies. The divide in the bimodal distribution of lawyer incomes and the divide between specialist and generalist doctors has widened. The divide between financial industry executives and real economy execeutives also widened.

This is somewhat counterintuitive because the analysis often discusses hits to the construction and manufacturing industries which we think of as being high school education dominated jobs, and by people in high finance top jobs, but actually government as a sector has lost jobs relative to manufactring.

22 September 2011

Airmen For Robot Rights?

The U.S. Air Force says its unmanned spy planes, when targeted by enemy radar, have the same right to retaliate as manned airplanes, [Peter W. Singer, a senior fellow at the Brookings Institution] wrote. Conferring such self-defense rights to drones may lead to legal disputes and international crises, he wrote, “as well as a huge (and probably unintentional) first step for the cause of robots’ rights.”

From here.

20 September 2011

Against Finality

One of the things that members of the public understand least well about the criminal justice system is the extent to which the results of a criminal trial (or for that matter any trial, criminal or civil) are the final word and are extremely hard to undo, even when later developments cast great doubt on the original result. Once a jury makes a factual determination, even if it is on flimsy grounds, it is very hard to upset that finding.

While there is some merit in making it hard to overturn a criminal verdict, given the incentive of every single person convicted to do so (and indeed, the courts and professional disciplinary bodies are awash with prisoners petitions in every conceivable forum that are dismissed summarily 99.9% of the time), it is also the case that the innocent are systemmically the most likely to take cases to trial even when their defenses are objectively hard to prove, and what evidence we have of the accuracy of the jury trial system suggests that wrongful convictions aren't terribly unusual.

Alan Prendergast in his feature story in Westword, "Sexual abuse lies keep man in prison; courts refuse to hold new trial" (July 20, 2011) made that point particularly powerfully in the case of Charles Farrar, whose stepdaughter accuser recanted her testimony of sexual abuse shortly after his conviction in 2002 (preventing a trial of her mother on related charges), that left him with a 145 years to life sentence that prosecutors and the courts have refused to revisit so far.

An update to the story on August 2, 2011 notes:

Days after our cover story on the Farrar case attracted widespread attention, Arapahoe District Judge Valeria Spencer ruled on Farrar's motion for reconsideration of his sentence, which was filed in her court nearly two years ago. Spencer denied the request, stating that Sacha's 2003 recantation failed to meet the standard of "exceptional, unusual, and extenuating circumstances" that would warrant a reduction in the hundred-plus years Farrar is required to serve for his conviction on 22 counts of sexual abuse.

Farrar had previously sought to have his conviction overturned, based on the "new evidence" of the recantation. His attorneys argued that, since the prosecution's case consisted largely of Sacha's testimony -- there was no evidence to support her account of having endured years of sexual abuse by Farrar and her own mother, and little indication that investigators had even bothered to interview other potential witnesses -- her claims were invalidated when she later admitted to committing perjury and concocting the allegations in order to go live with her grandparents.

The trial judge, John Leopold, denied that motion shortly before his retirement; in 2009 the Colorado Supreme Court upheld Leopold's ruling 4-3. Farrar's attorneys then sought to have his sentence trimmed, based on the recantation and his exemplary prison record. But Judge Spencer followed Leopold's reasoning that state law requires courts to regard all recantations of sexual abuse claims with suspicion because of the presumed pressure on victims by other family members to "make things right."

Notably, his case is in the judicial district where Carol Chambers, the nationally notorious "tough on crime" District Attorney with a poor record for following the norms of that profession in the state, presides.

There are potentially two other outs for Farrar.

First, he could bring a collateral attack in a federal habeas corpus petition, but the substantive law there is extremely hostile to claims of actual innocence when there were no violations of constitutional rights that took place on the record in the courtroom itself (although there were indications of prosecutorial misconduct and recantation at the state level collateral attack that arguably were judges under the wrong standard by the Colorado courts). Few cases prevail in non-capital federal habeas petitions, however, since the applicable legal standard is so deferrential to state courts.

Alternately, Governor Hickenlooper (or any subsequent Governor of the State of Colorado) could grant him executive clemency, which is subject to no specific standards and very little formal process that binds the Governor, although the practice has become increasingly rare. This case is arguably an exceptionally appropriate choice to act since it is what the alleged victim herself has sought since very shortly after the conviction, since a detailed exposee has cast doubt on the accuracy of the result and the integrity of the process, since there is a grave injustice given the long sentence involved that will not become moot, and since Farrar's prison conduct has been exemplary.

Drug ODs Cause More Accidental Deaths Than Traffic Accidents

Drug overdoses, mostly from improper use of a handful of often abused prescription drugs, cause more accidental deaths in the United States than traffic accidents.

Teachers Union Makes School Board Endorsements

On August 31, 2011, I noted the candidates in the 2011 Denver Public Schools election.

In that post, I noted that Democrats for Education Reform and the political arm Stand for Children, a so called "reform" organization that favors innovations such as new charter school options for the Denver Public Schools endorsed Allegra "Happy" Haynes in the at large race, Jennifer Draper Carson in the District 1 race and Anne Bye Rowe in the District 5 race.

The Denver Classroom Teachers Association, meanwhile, has in turn endorsed Emily Lipp Sirota who is running against DER endorsed Anne Bye Row in District 1, and incumbent Arturo Jimenez, who is running against DER endorsed Jennifer Draper Carson in District 5. Jimenez was not endorsed by the DCTA when he ran in 2007. This round of DCTA endorsements are entirely expected.

The DCTA has not endorsed a candidate in the at large race in which DER and Mayor Hancock have endorsed Allegra "Happy" Haynes. If the DTCA wanted to endorse someone else in the at large race they could choose from: John Daniel (best known for backing a city level anti-immigration proposition that voters passed), Frank E. Deserino (himself a classroom teacher), Roger Kilgore (given honorable mention by DER) or Jacqueline Carole Shumway (who has focused on her commitment to physical education). It is not clear if the DCTA will endorse anyone in the mail in ballot race that closes on November 1 (ballots will be distributed in mid-October). Deserino and Shumway have each run highly unsuccessful school board races in recent prior elections.

I am a resident of District 1 and I am currently undecided.

Minimum Action In Response To Protests and the Right To Free Speech

Generally speaking, to make an arrest, one must have probable cause to believe that a crime has been committed. When a protester disrupts some event, that arrest is made, to end the disruption and prevent the heckler from vetoing the event. Frequently, a prosecution for some minor criminal offense, like disrupting the peace follows, and if no effort is made to convict the individual of a crime, a civil rights action will frequently follow and the law enforcement officer defending the civil rights action, in a case within a case, will have to demonstrate that there was probable cause to conclude that the person arrested did commit a crime but that the law enforcement official and/or prosecutor exercised prosecutorial discretion to refrain to pressing charges to the benefit of the protester.

In general, once the arrest has been made the authorities are probably quite happy that this temporary solution has solve the temporary problem of an individual being disruptive and preventing others from carrying on their lawful business with relative peace. The prosecution that follows often has little value to the jurisdiction prosecuting it other than preventing later civil rights suits, and adds considerably to the cost of managing the situation for the authorities, who must file legal papers, book the suspect and detain that person for some period of time, arrange a hearing, summon witnesses, and face the potential embarrassment of mismanagement of those low priority prosecutions leading to acquittals due to poor litigation methods, or due to a weak case on the charge selected as the basis for the arrest, or due to jury nullification. The analysis of any punishment to be imposed and any crime for which a conviction must be entered in a protest case must undergo strict scrutiny to determine if free speech rights of the protesters have been violated.

The high risk of a potential personal lawsuit by someone with a lawyer who knows what they're talking about being brought against a law enforcement officers in a protest situation also can give the situation high stakes for the law enforcement officers that can engender insecurity and fear in the law enforcement officer that may come up in the form of the very kind of brutality by police that can give rise to civil liability.

Of course, an arrest record, minor criminal conviction, the hassle of participating in court proceedings that could lead to satellite legal problems like arrests for violations of bond conditions or failure to appear at a hearing, and so on, are no great gift to the protesters, and will inspire some to use the pending criminal proceedings as a soapbox to further spread their message.

Should there be a lower stakes option for all involved? What if law enforcement officers had the authority to temporarily detain someone for the duration of an event (up to six hours, perhaps) at which they were being disruptive and could then release that person without charge knowing that in that situation any exposure to civil liability would be minimal, even if the act taken didn't necessarily rise to the level of the kind of crime that is ordinarily prosecuted. A temporary detention of this kind would carry with it knowledge on the part of the person detained that it would not produce an arrest record, a criminal prosecution, a potential fine, court costs, or incarceration beyond the immediate detention, the need to high a lawyer to deal with the charges or their collateral effects, or the need to post a bond or appear later at a hearing. The low level of inconvenience and harm imposed on the protester and ephemeral nature of the action would prevent it from turning the protester into a martyr or providing an big soapbox of injustice to harangue against. It would be the governmental equivalent of being bounced from a bar or movie theater, for which the civil remedy is typically the foregone value of the cover charge or ticket to get in, and no more.

Indeed, perhaps it could simply be a codified version of bouncing someone using non-deadly force, with the sole justification required being that it was the desire of the person in control of the premises that the protester not be permitted to stay there any more (which could be presumed if there was no evidence of permission to be there and the person with the right to control the premises was not present), even if they had a revocable license to be lawfully present there.

One could imagine a "tort reform" style dollar cap on suits arising from a bouncing incident equal to say $1000 plus out of pocket lost access fee to the premises and damage to property unless serious bodily injury resulted, with attorneys' fees limited to no more than the award of damages in the case if the bounce was shown to fail to meet even the minimum standards required for one, and a rule giving individuals immunity from liability in those cases with only their employer having legal responsibility.

The point would be to take approaches that minimize the stakes rather than escalate the situation for all involved.  The protester might be bounced.  A lawsuit against the individual carrying out the bouncing generally wouldn't happen in the absence of serious bodily injury or an excessive period of detention.  The rowdy moment normally wouldn't have long term consequences for anyone, however, and protesters knowing that they could make a rowdy protest statement and even get arrested without long term consequences would have an incentive not to go further than that which is eroded if a protester who crosses the line knows that he or she will get a criminal record and have to be involved in the criminal justice process anyway.

Moderation Flows From Time In The Wilderness

The longer a political party has been out of power, the more likely it is to nominate a moderate Presidential candidate. Since the Republicans have been out of power only a single term, had a surge that gave them control of the House of Representatives in 2010, and have strongly favored extremist candidates so far in their Presidential nomination process that has become more Tea Party controlled than in the past, there is good reasons and historical precedents to suggest that the GOP nominee in 2012 will be a real conservative extremists.

This is good news for incumbent President Obama's re-election bid, as is the high level of public disgust with Congress, disproportionately places on Republican in opinion polls, as a result of the debt limit crisis this summer that resulted in a down grade of the credit rating of the United States.

Colorado General Assembly Districts Drawn

Yesterday, the bipartisan commission, made up of five Republicans, five Democrats, and one unaffiliated voter approved state house and state senate districts for the Colorado's General Assembly's 65 state house seats and 35 state senate seats, based on the 2010 Census that will take effect for the 2012-2020 elections. Three Republicans dissented from the House District map, two Republicans dissented from the Senate District map. The finally approved maps must be approved by the Colorado Supreme Court on October 14, 2011, but that is a mere formality in this case where the lines have been professional drawn to comply with the redistricting criteria, are more moderate than the proposals of either of the maps that the partisan members of the commission advocated, and each map received support from more than two-thirds of the commission members after a moderate amount of consideration of public commment on particular issues.

The maps adopted, drawn when the unaffiliated chair of the committee rejected both the Republican and Democratic maps, creates 22 state house districts and 11 state senate districts that are within 10 percentage points of partisan balance, by his measure, including a significant number that are within seven points. Thus, this map has more competitive districts than the respective partisan proposals.

Dan Willis has analyzed the maps and reached the following conlcusions:

There was and is a lot of debate over what is a "competitive" district. I will use my own yardstick in this regard and I differentiate between leaning D, leaning R, and very competitive. My process is use an average of the D & R votes for Treasurer and for CU Regent in 2010. If the result is +/- 5% of 50-50 that is leaning and if it is +/- 2% of 50-50, that is very competitive.

Using this standard the SD map has:
14 Safe R seats
3 Leaning R seats
9 Safe D seats
4 Leaning D Seats
5 Very Competitive

And the HD map has:
23 Safe R seats
4 Leaning R seats
15 Safe D seats
9 Leaning D seats
14 Very Competitive seats

Assuming that Safe and Lean R seats go to Republicans, and that Very Competitive Seats split 50-50, the "par for the course" outcome given this seat of districts is:

Colorado State Senate 19.5R-15.5D (current balance 20D-15R)
Colorado State House 34R-31D (current balance 33R-32D).

Put another way, if each party wins all of its safe and lean seats (or trade off losing equal numbers of each in each house) then the Democrats need to win:
* all five very competitive seats in the Colorado Senate (2.5 more than par for the course), and
* 9 out of 14 very competitive seats in the Colorado House (2 more than par for the course).

Actually, the Democrats have it somewhat better than that in the Colorado State Senate as they will have a built in edge from seats not up for election in 2012 and a little bit of an incumbency advantage in that year.

The situation is somewhat less bleak for Democrats than it seems for a number of reasons. First, the competitiveness of the districts is based on Republican candidate performance in 2010, a high water mark for Republicans in their Tea Party surge. Second, the 2010 election, as an off year election, always has lower voter turnout than Presidential election years like 2012 and the voters who vote in Presidential years but not in off year elections tend to be more liberal than voters who vote in every even yeared election. Put another way, Democratic voters tend to be less consistent voters than Republicans, voting only in bigger elections.

In reality, the partisan balance in 2012, when conditions are more favorable for Democrats than the 2010 elections that Dan Willis benchmarks used to handicap the maps above, will be almost exactly equal. Since the political makeup of Colorado has very even numbers of Democrats, Republicans and unaffiliated voters, the suggests that on average, neither party is benefitting significantly from gerrymandering. Colorado has a vibrant two party system the Colorado General Assembly redistricting maps reflect.

Thus, the outcome of the 2012 elections for the Colorado General Assembly will come down to the quality of the individual candidates and their campaigns to an extent really unparalleled anywhere else in the United States. The winner will be the one with the most effective political tactics. This starts in earnest today, and each party starts the process of lining up a slate of candidates to run in the new districts over the next three months or so. Some disticts will have obvious incumbents or will be State Senate seats that don't go before voters in 2012, but each party has something on the order of a dozen serious candidate recruitment decisions to make over the next three months that are absolutely critical to political control of Colorado starting in the 2013 legislative session.

Of course, Governor Hickenlooper (D), Secetary of State Gessler (R), Treasurer Stapleton (R) and Attorney General Suthers (R), will share the capital's offices with whoever ends up in Colorado's General Assembly.

A state trial judge in the Denver District Court is hearing arguments in litigation to draw the boundaries for Colorado's seven Congressional Districts for 2012, since the Colorado General Assembly failed to reach agreement on map in the 2011 legislative session. Realistically, the trial court's decision, like the state legislative redistricting commission's decision, is very likely to be upheld on appeal to the Colorado Supreme Court. Personally, I know that I am also certain to end up in some reincarnation of a safe Democratic Denver centered Congressional District with Diana DeGette as the secure incumbent candidate. But, the way that other seats in the state are drawn could greatly impact the makeup of Colorado's federal delegation in the House of Representative following the 2012 election.

As a practical matter, the new districts also mean a major shakeup in the internal organization of the Democratic and Republican political parties who need to have political party bodies for every house and senate district and need to look at which districts are in single counties or multiple counties to set an agenda for their meetings over the course of the next year's political season.

I personally will be in Senate District 32, which are safe Democratic District, and inn House District 2, which will also be a safe Democratic District. So, I will have some freedom to focus my own efforts on more competitive races, on any ballot issue campaigns going on in 2012, and on the Presidential race in 2012.

19 September 2011

Poverty Rate At 45 Year High

U.S. poverty rates haven't been higher than they are right now since the early 1960s.

Algebra, IRS Style

Check out the IRS style solution to the quadradic forumula.

CEO Pay Trends

CEO and top executive compensation for firms with $500,000 or more of revenue fell in 2007 and 2008 from the prior years in absolute terms, but rose as a percentge of corporate profits to almost 50% as the performance of their firms fell faster than their pay did.

Measured in 2008 dollars, the 990,077 corporate officers whose compensation was reported on tax returns made $466.8 billion in 2008, down slightly from $471.4 billion in 1998.

In 2008 their average compensation was $471,500, down about 13.5% from an estimated $545,100 in 1994.

The IRS measure doesn't include stock option earnings and non-qualified deferred compensation until it is realized in most cases, despite the immense role that this form of compensation plays in the total pay package fo top executives.

The IRS data also don't segregate closely held companies, where there is near identity between the top executive group and the owners, making compensation of even 100% of profits reasonable, and those where there is not identity between ownership and management, where investors expect some return on their investment.

11th Circuit Says Jose Padilla's 17 Year Sentence Too low.

Jose Padilla, a U.S. citizen who was detained as an "enemy combatant" and then transferred to the criminal justice system once a bad legal precedent was established, convicted in 2007, and sentenced to 17 years in prison for his associations with terrorist groups, in a criminal trial. A split decision of the 11th Circuit Court of Appeal just reversed that sentence on appeal as too lenient.

Crime Rates Fall For Fourth Year In A Row

Both violent and property crime rates are down again, despite the worst since the Great Depression economic slump.

*The estimated volumes of violent and property crimes declined 6.0 percent and 2.7 percent, respectively, when compared with the 2009 estimates.
*Compared to 2009 estimates, each of the four violent crime offenses declined, with the largest decrease in Robbery (a drop of 10.0 percent). Forcible rape fell by 5.0 percent; murder and nonnegligent manslaughter by 4.2 percent; and aggravated assault by 4.1 percent.
* Nationwide there were an estimated 9,082,887 property crimes last year.
* Each category of property crime decreased in 2010 compared to 2009: Motor vehicle thefts fell by 7.4 percent, burglaries by 2.0 percent, and larceny-thefts by 2.4 percent.
* Arson offenses decreased 7.6 percent in 2010, although differences in reporting among agencies means arson offenses are excluded from total property crime figures.
* Collectively, property crimes (excluding arson) cost victims an estimated $15.7 billion in 2010.

The GDP of the U.S. in 2010 was about $14.7 trillion. So, property crimes, excluding incomes, cost victims roughly 0.1% of GDP. We spend more than $68 billion a year (about 0.4% of GDP) on incarcerating criminals.

The cumulative effect has been huge.

During the 10-year period from 2001 to 2010, the overall violent victimization rate decreased by 40 percent and the property victimization rate fell by 28 percent.

These declines in violent and property victimizations continued a larger trend of decreasing criminal victimization in the United States. In 2010, violent and property victimization rates fell to their lowest levels since the early 1990s. From 1993 to 2010, the violent crime victimization rate decreased 70 percent, dropping steadily from about 50 victimizations per 1,000 persons age 12 or older in 1993 to about 15 per 1,000 in 2010. The property crime victimization rate fell 62 percent, from about 319 victimizations per 1,000 households in 1993 to 120 per 1,000 in 2010.

The Sunday Denver Post also compared crime in the city and suburbs from 1990 and recently. Crime rates have fallen in both the city and suburbs for both violent and property crimes, but the decline has been steeper in the city than the suburbs. In 1990, the city was much more crime ridden than the suburbs, now it has only slightly more crime and the crime rates in the city now and much lower than suburban crime rates were in 1990.

The Absence of Dynasties In The American Economy

From Pakistan to Japan, a common cultural theme, indeed a trope, is the importance of business dynasties to the culture, not just dynasties of wealth passed on to the next generation, but the neopotistic tradition of passing on management of family businesses to the next generation. You see it in fiction, but also in exchange students from these places under pressure to step into these roles. I have less of a finger on the pulse of this kind of tendency outside Asia, although there have certainly been eras in modern Europe where you saw similar trends.

There have been times when this was also a consideration in the American business landscape. But that time seems to have passed, or at least, receded in importance since the 1960s. Perhaps it is a manifestation of the fact that the United States economy has a thriving market in business interests that makes it possible to transfer wealth divorced from management of that wealth. Perhaps it reflects the fact that big business is dominant in the American economy to such an extent that no one family dynasty is wealthy enough to own the predominant interest in many businesses of any economic importance (the S&P 500 accounts for 75 percent of the market capitalization of 20,000 or so publicly traded companies in the U.S., and publicly traded companies account for a very large share of the U.S. economy by almost every measure (5/6ths give or take by most measures), and even more when franchises are considered as single businesses). Perhaps it reflects a cultural preference for at least the appearance of meritocracy and for individual autonomy for the children of business chiefs.

Honestly, in the course of doing estate planning and business succession work, it seems as common for the older generation to doubt the younger generation's ability to carry on the business as it is to trust it. Even when some children are continuing to manage a business, others don't. And, while it is possible under current law to create very long lived dynasty trusts that pass wealth many generations into the future, even among the wealthiest individuals, I see little passion for providing financial benefit to generations anything more remote than grandchildren. The donative instinct, it seems, tends only to extend to people whom the donors have actually met. The wealthiest individuals, indeed, are often skeptical of even leaving their whole fortunes to their descendants, fearing that they would be too deeply spoiled in the process. The want their children and grandchildren to have good educations and a good start in life, but are less concerned about providing them with a financial boost once they move beyond young adulthood.

We surely still have a sentimental attachment to businesses managed by successive generations of the same family that appears in the form of opposition to the estate tax (despite the limited relevance of the estate tax to these situations), and in advertising campaigns from dynastic family businesses, and I've represented families that do carry out such plans. But, they are rare and tend to be small to medium sized businesses rather than the big businesses at the heart of the economy. As often as not, the bigger family businesses that I've encountered in my own practice are businesses where the first generation of business founders included multiple members of the same business, rather than businesses inherited by siblings from a single founder in an older generation.

The prototypical scion of the American scene is the self-indulgent trust funder who cares little for the values that brought his or her parents wealth, not the neoptistically favored junior manager of a large and successful enterprise with considerable personal power within the business. I've seen at least as many failed attempts to get children to take the reins as I've seen successes.

Is it a case of American exceptionalism, or is it simply a stage of economic development?

15 September 2011

People Trust The Military More Than Politicians

The conventional wisdom (for good reason) in political science circles is that military regimes are bad and regimes run by elected civilian politicians are good. Yet, in the United States, widely viewed as one of the most mature, stable democracies in the world, the percentage of people who trust the military is 46 percentage points greater than the percentage who distrust the military, while the percentage who distrust Congress is 49 percentage points greater than the percentage who trust Congress.

Congress is trusted by 8% and distrusted by 57%, the military is trusted by 54% and distrusted by 8%. The percentage who trust and distrust the courts is about equal with state courts distrusted by a net two percentage points, while the Supreme Court is trusted by a net three percentage points. Net distrust of local government (14 percentage points) is less than net distrust of state government (20 percentage points) which in turn is less than net distrust of the federal government (37 points). Americans have equal net distrust of religious institutions and public schools (16 points). People say they distrust banks just as much as they distrust the federal government.

There are few social institutions other than the military and the Supreme Court that Americans have net trust for, they are (from most to least trusted, all between the Supreme Court and the military): Small and local companies, the scientific community, and charitable institutions.

The big changes since last year’s poll were a 16% increase in the spread for the military, a 12% increase in the spread (meaning greater confidence) for big business and the Supreme Court, a 9% increase in the spread for banks and charities, and a 7% decrease in the spread (meaning lesser confidence) for Congress.

At what point do people decide that they simply trust the military more than politicians and cede democracy? Or, is it actually the job that the various institutions do rather than who they are, that matters?

In the age of posse comitatus and no draft, the military is pretty harmless to the average person and doesn't make discretionary decisions that matter to us (it doesn't even decide whether or not to fight which wars for how long), even though it reports to the unpopular Congress and unpopular President that have the unpopular jobs of imposing and collecting taxes (respectively) to support it, and despite the fact that it is by far the largest part of the unpopular federal government (the Department of Defense and Veteran's Administration employ more civilians than the rest of the federal government put together in addition to the soldiers it employs). Congress, in contrast, has vast discretionary power, and hence is to be feared.

Maybe it is nuts, but shouldn't popularly elected political institutions be at least a little more popular in a democracy which is seemingly an institution that selected politicians on popularity more than any other?

British Rioters No Angels

The people arrested in riots in Britain usually had far from clean criminal records:

73% of those put before the courts having previous criminal convictions – and one third of that number having served a prison sentence before. Those with criminal records have an average of 15 offences each. Overall, 26% had served time in prison previously.

From here, replying of British government statistics.

The "draconian" criminal sentences imposed on those convicted were also still pretty mild by American standards. A 57% of those convicted of riot related crimes were jailed at all and the average sentence for those sent to jail was less than a year.

[T]he 176 people so far jailed over the riots have been sentenced to an average of 11.1 months. The detailed figures show that those convicted of burglary during the riots – generally looting – have been jailed for 14.1 months, compared with the normal rate of 8.8 months, a sentence some 60% longer than normal.

Those convicted of violent disorder are being jailed for 10.4 months compared with 5.3 months normally, and those convicted of theft are getting sentences three times as long: 7.1 months compared with a normal rate of 2.4 months.

The figures also show a much more hardline approach to using prison sentences, with 43% of those sentenced so far by magistrates being sent to jail compared with a normal custody rate of 12%.

Constitutional Right To Bear Arms Rare And Irrelevant

[One constitutional right] is now so rare that it has become practically sui generis–namely, the right to bear arms. The only other constitutions in the world today that still feature such a right are those of Guatemala and Mexico, while the Argentinean constitution contains a somewhat different duty to bear arms in defense of the fatherland.

From David S. Law and Mila Versteeg, "The Declining Influence of the United States Constitution" (September 10, 2011) at page 34.

The percentage was about 10% of all constitutions shortly after World War II and has steadily declined, due to both repeals of existing rights and the formation of new countries with constitutions that omit these rights.

Of course, the text of constitutional provisions and the reality of gun control in a particular country differ greatly. Mexico, in practice, has a highly restrictive gun control regime despite having a constitutional right to bear arms. Switzerland and Israel have routine private ownership of automatic weapons, as a consequence of extremely inclusive militias in their nation defense strategies, but neither has a constitutional right to bear arms.

In the United States, while the constitutional right to bear arms that has recently been intepreted to create an individual right to bear arms applicable to both the states and the federal government, the scope of the right has been interpreted quite narrowly, so only one District of Columbia municipal ordinance at the federal level, and a handful of local ordinances at the state and local level, have been determined to abridge the right.

14 September 2011

Righthaven On Verge Of Bankruptcy

Righthaven has come to the end of the line.

The Las Vegas copyright-trolling firm Righthaven told a Nevada federal judge Friday it might file for bankruptcy protection, or cease operations altogether.

To prevent that, Righthaven is asking U.S. District Judge Philip Pro to stay his decision requiring Righthaven pay $34,000 in legal fees to an online commenter it wrongly sued for infringement.

Judge Pro ruled in June that a Vietnam Veteran’s posting of an entire Las Vegas Review-Journal article was fair use, and ordered opposing legal fees. Righthaven is appealing the order, which it says would leave it insolvent.

Last time I checked, inability to pay wasn't a reason for a court to refrain from imposing a judgment on you. Moreover, a firm with less than $34,000 of assets is going to go under sooner or later.

The demise couldn't happen to a more deserving company.

13 September 2011

Do We Need A Right To Short Sell?

In the majority of states where there are recourse mortgages, if you sell a house for fewer net proceeds than are necessary to pay the mortgage, you are liable for the unpaid balance of the mortgage and immediately in default, with the full amount owed due and payable at the moment that the transaction closes. A bank can agree to waive the unpaid balance or reach another agreement with the borrower, but particularly in markets experiencing mass housing depreciation, where resources are strained, the transaction costs can be immense.

Just as pre-payment penalties are disallowed in many consumer oriented agency mortgage programs, perhaps there should be a right to short sell and pay the remaining balance according to the terms reduced by the proportion of the loan balance that has been paid.

For example, suppose that you have a 30 year mortgage with 25 years of payments remaining remaining and a current balance of $200,000 upon which you must pay $800 a month of interest and principal and $200 a month of escrow payments for property taxes and insurance, but are only able to sell the house for $180,000 net of costs of sale. This would leave a balance due on the mortgage of $20,000, which would be due and payable immediately under a standard residential mortgage in the absence of an agreement, and even if a short sale could be negotiated, you might have discharge of indebtedness income unless you could prove to the I.R.S. that you were insolvent and would hurt your credit record.

But, if there were a right to short sell, that $1,000 a month combined payment could be reduced to a payment of $80 a month for the next 25 years at the same interest rate on the remaining balance and as long as you made those payments, you would not be in default.

Many mortgage debtors would jump at the chance to make those reduced payments for a prolonged period rather than default and harm their credit records, but are unable to refinance the balance of the amount owed to the bank, for example, due to the loss of a job or deteriorated credit rating, and are certainly unable to do so at a mortgage loan interest rate. And, more payments mean more money for the bank without having to hire collection agencts and lawyers to collect those payments.

What complaint would the bank have in that situation?

You would have the same dollar amount of personal liability that you would under current law, following closing, so you wouldn't have much of an incentive an incentive to engage in a below market value sale. Indeed, such a sale would, on average, likely produce more net proceeds than a foreclosure with fewer transaction costs in the long run. Unlike cram downs in a bankruptcy (were they permittted for residential mortgages), the price would be determined by the market rather than an appraiser and would leave the selling debtor with no room for a winfall if the price turned out to be too low.

You would be paying the same interest rate you bargained for on the outstanding balance, and the bank had already agreed to accept prepayments and hence have the potential to lose the benefit of an existing above market rate interest rate on its loan. The bank would not be exposed to any credit risks that it hadn't already bargained for in the original transaction and also bargained for the possibility the housing values would fall, reducing the value of the collateral.

The would receive payment in full no later than the date that it had originally bargained for, and indeed, it would receive a large share of the funds it was entitled to under the note sooner than it was entitled to demand. It would incur fewer transaction costs that it would in a negotiated short sale or a foreclosure. The bank would be permitted to treat the loan as one that is not in default, helping the quality of its mortgage portfolio and clarifying how the debt should be valued without the complication of collateral.

From the customer's perspective, it would make it possible for a homeowner who is upside down in a declining market to swiftly cut their losses without negotiations that take time and expertise and cooperation from a bank that has the right to be unreasonable, it would make it possible for a homeowner to extricate himself or herself from a property to relocate to another job without the complication and expense of leasing the property to someone else (possibly at a loss) in the meantime, and it would allow the homeowner to have greater certainty upon which a plan for dealing for a burdensome debt could be formulated.

In big dollar transactions, with prepayment penalties, one sets aside treasury bonds sufficient to cover the remaining payments and negotiates a substitution of collateral, but why not dispense with the elaborate artifice to get the same effect in a consumer transaction.

The reduced number of foreclosures, of course, would also help the real estate market in general by creating a sense of normalacy instead of a pent up demand to sell property at prices that can't be offered without bank cooperation, thereby reducing foreclosure and REO expenses and helping the bank's overall portfolio in a market.

Economics bleak for average guy

"Since 2007, real median household income has declined 6.4% and is 7.1 % below the median household income peak prior to the 2001 recession."

From here.

The Census reported today that poverty is at its highest point since 1993, 15%, while record low numbers of people have employer provided health insurance (55%).

Today, Country singer Ronnie Dunn, captures the mood of the country (song performed here).

Nevada Real Estate In Crisis

About 60% of homes in Nevada with mortgages have negative equity, moreover, the percentage of homes with mortgages in Nevada is probably above average because it has grown so rapidly had has fewer long time home owners. Nationally, about one in three homes is owned free and clear, while in the Western region of the United States, it is about one in four. Add homes with "near negative equity" that can't be sold without sales costs, etc. eating up equity and you are at two-thirds of Nevada mortgages effectively being upside down and hence unmarketable.

11 September 2011

Meet Anna Tsuchiya

If Amy Lee of Evanescence, or Tori Amos, had been born in Japan, she might have ended up becoming a singer like Anna Tsuchiya instead. Sample her singing here and here.

Post Publisher's New CEO Disavows Righthaven

Dean Singleton has finally been replaced at the helm of MediaNews Group, the publisher of the Denver Post and many other Colorado newpapers, and the new CEO has disavowed its overzealous copyright infringement campaign against blogs through the discredited Righthaven organization as a dumb idea. Lets hope that the new guy improves upon the doctrine of higher prices for a lower quality product with fringe benefits of union busting and blog suing that Singleton championed as publisher.

Colorado SOS Gessler Still Bad

Our Republican Scott Gessler continues to do a miserable job as Colorado's Secretary of State, most recently taking a leading role in raising contributions to pay a fine his office imposed on the Larimer County Republican's for gross violations of campaign finance laws that he already reduced by $34,000 with a stroke of his pen. More outrage at Square State.

Throw The Bums Out Natural But Irrelevant To Policy

Democracies invariably throw the bums out when bad news happens on the ruling party's watch. But, history tell us that the recovery that inevitably follows usually has almost nothing to do with the policies of those who are elected to replace the bums.

In hindsight, what did 9-11 mean?

Ten years later what are the enduring legacies of 9-11?

The heroism of the crew of Flight 93 and the first responders who rushed into a burning skyscraper. The Afghan War that is still with us, and for twisted reasons particular to the misguided mindset of George W. Bush, the Iraq War. The marginalization of the Taliban, the death of Osama bin Laden (followed just weeks later by the only dimly related deaths of many members of the unit that killed him, shot down from a helicopter over Afghanistan), the deaths of at least half a dozen people claimed to be al-Queda number twos. New skyscsrapers are under construction to replace the old ones at ground zero.

The intelligence community budget has soared to $80 billion a year and probably hundreds of thousands of people working in it. We have the Department of Homeland Security, the Patriot Act (which doesn't actually say what popular culture believes it does, the more controversial parts of the war on terror go far beyond the Patriot Act), a chilling and dubious extraordinary rendition and enemy combatant doctrine and the thin lingering doctrinal commitment to those doctrines carried over by President Obama in the absence of Congressional support at Guantanmo Bay, dark plots of torture and abuse in secret cells where waterboarding was conducted and prisoners died from abuse and in the humiliation of Abu Grahib prison in Iraq - although the secret terror prison network and regime of torture was far smaller when real information came out that most on both sides had assumed. We have the continue legal black hole that is Baghram Airforce Base in Afganistan. We have an evolving military concept of targeted killings by drones that General Petraeus has been appointed as head of the CIA to manage.

We have the surprising fact that the last decade has not been riddled with terrorist acts related to 9-11 in the United States. We have new air travel security (we've just shed a decade of useless security level color codes) of dubious value and the TSA - the largest expansion of the federal government civilian workforce in recent memory. We have a variety of federal grant purchased law enforcement resources that were ill accounted for, are all over the United States and have negligable relationships to real terrorism. We have a lot of good scholarship that shows that neither military tribunals or torture are effective in dealing with terrorism and a lot of bad politics that is ignoring that scholarship.

Ten years later, the ominous threat of "Islamo-Fasicism" has been undermined by a wave of democratic reform across most of the Islamic world. It is not complete, but it is there. Ten years later, we still haven't come to terms with the fact that Saudi Arabia has very little to recommend it as an ally and is at the heart of the violent extremism that threatens global human rights and peace. Ten years later we still don't collective understood what experts have been saying all alone - that opposition to Americans and the West in the Islamic world has as much to do with our support with authoritarian Islamic regimes as it does to do with American support for Israel. We have forgotten the soft power that comes from support for democracy, liberty and justice for all.

We mourn the 9-11 dead and the roughly equal number who have died in military adventuries seen by those who advanced them as avenging it. The litigation arising out of 9-11 itself is pretty much concluded and left little more than a ripple of impact. The Pentagon building has been restored to almost its prior incarnation. Tom Clancy, who wrote books predicting terrorist attacks similar in targets, methods and national consciousness impact to 9-11 managed to escape any finger pointing. The military itself has had to refocus from Cold War style conflicts to asymmetric threats, a task that it has not taken to gracefully, exacting an immense toll in treasure with its strategic indecision.

The Iraq War has come and it has also gone. Support for continued involvement at current levels in Afghanistan is waning. Early decisive victories in both wars quickly evolved into prolonged counterinsurgencies.

The world changed, but not as much as we might have expected.

09 September 2011

Colorado State Legislative Redistricting Almost Done

Two final plans for the Colorado General Assembly's House and two final plans for its Senate will be considered by the blue ribbon redistricting commission that draws state legislative boundaries on Monday, with a final vote to come a week from Monday. Realistically, any plan adopted is almost sure to survive a court challenge.

One of the main impacts of either plan in metro Denver is to have what is now my House District 3, current held by Daniel Kagan, shift to the south, changing it from a fairly safe Democratic district to one of the most competitive districts in the state. The maps are a bit hard to read but Wash Park and West Wash Park looks like they will probably be ending up in House District 6 (as it was under the 1980 redistricting map), although there aren't enough landmarks on the map that I looked at to discern if some of the neighborhood may end up in House District 2, along with SW Denver.

Metro Denver Democrats had strongly objected to the redistricting plan for the area when it was first proposed and testified against it, but it is hard for someone who hasn't been following the details very closely, like myself, to see if there have been any subsequent modifications to the provisions of the plan that Democrats had found to be objectionable.

Colorado's Congressional redistricting was not accomplished in the 2011 legislative session, so that decision is being made in the District Court in and for the City and County of Denver in litigation that is currently pending. This state trial court will take a bit longer to make a ruling, but is also almost sure to adopt a plan that will survive a court challenge, which would be directly to the Colorado Supreme Court, since it involved election law.

I'm not paying attention, in part, because I lack the time and resources to really give sufficient attention to the details to really make sense of it. Analyzing a single state redistricting plan takes an hour or two and a fair amount of practical political knowledge off the details that won't show up on any map, as well as a few hours in advance trying to draw your own districts in an effort to make sense of what is even possible given shifts in Colorado's population from the 2000 Census to the 2010 Census. Analyzing the Congressional District proposals being floated in the redistricting court case isn't quite as taxing in terms of time and political knowledge (and I've already done the work of tinkering with the new census data to see what is possible), but there is even less room for public participation in that process than there is in the state legislative redistricting process.

For what it's worth, while the redistricting process is inherently political, the process used to draw state boundaries which dampens the impact of partisanship, involves group decision making by a group chosen for political balance, is not reliant entirely on the expertise of experts chosen expressly for their partisanship, and is basically deadlock proof is a superior one to the process envisioned by the U.S. Constitution that requires Colorado's bicameral state legislators to adopt a map, which is almost always followed by litigation, whether or not a map is adopted, either claiming gerrymandering or to have a map drawn because the legislature failed to do so. In times of divided government, this leads to an insular process with district lines drawn by a judge in the course of litigation without sufficient public input and in house expertise. In times of undivided government, this process almost insures a gerrymander in favor of the party in power that despite almost inevitable litigation is highly unlikely to be reversed by the courts, reducing the effectiveness of democratic checks on the party in power.

The only arguments to recommend the current system at the federal level is that the decentralization of the redistricting process allows states where Democrats gerrymander in their own favor to counterbalance states where Republicans gerrymander in their own favor, while leaving states with divided government with either a negotiated result or a result drawn by a judge which on average is likely to be less partisan than a map drawn by either party acting alone.

An important unresolved question in political theory, which I've explored but never had sufficient time to address with any real mathematical rigor, is how much of a difference in political result can be produced by redistricting under what circumstances. This depends upon (1) how many districts are drawn out of a state; a single district for the entire state, or a very large number of districts that must be equal in population, contiguous and compact to some extent greatly reduce the impact of redistricting, while a fairly small number of districts increase the impact of redistricting, (2) the extent to which contiguous areas are political homogeneous, (3) the proportion of the electorate that is effectively up for grabs in partisan elections and their geographic distribution, with formally unaffiliated voters in one place often having political leanings similar to the strongest political party in their neighborhood, (4) the extent to which someone drawing districts favors a "conservative" strategy of drawing many safe seats and few competitive ones, or a "high risk, high return" strategy of maximizing the number of competitive seats, (5) the extent to which redistricting reduces the incumbency advantages of the individuals who currently hold office, (6) the extent to which shifting district composition changes the optimal political strategy for members elected from that office to take to be elected and once in office, and (7) the extent to which redistricting shifts the balance of power of factions within political parties even to the extent that the partisan balance is unchanged.

Even quantifying the impact of redistricting is hard. One of the better yardsticks is to compare the overall porportion of legislative votes at that level cast for Democrats and Republicans respectively in some race where there are top of the ticket races the pull people to the polls even when the legislative race itself is uncompetitive, and to compare that to the outcome expected under a map by some method that assigns each party's candidate a probably of success based upon the political make up of the distict with an empirically validated formula (the result is non-linear - a 60-40 district is almost surely safe, a 50-50 district is in principle one with even odds, and a 55-45 district, while not entirely unwinnable,is a major challenge for even a moderate candidate from the minority party to win) and then looks at the range of outcomes that could result in a Monte Carlo analysis relative to the benchmark of proportional representation. You could then assign gerrymandering ranks to different possible maps.

You'd also probably want to use a large number of examples of real, rather than manufactured data, to evaluate the role of redistricting options, because the practical ability of a map to influence results is heavily dependent upon the underlying geographical spread of political leanings in a state there are correlations in relationships of space and political leanings that exist in the real world but aren't well understood analytically with sufficient accuracy. For example, an important factor in almost all redistricting battles is the fact that the higher a place's population density the more liberal it is likely to be, but subtle differences in how that is estimated in "fake" data could have a big impact on the results.

One of the reasons that it is politically acceptable to let a commission draw state senate and state house lines, but not Congressional districts, is that any map of 35 state senate districts or 65 state house districts that must all be roughly equal in population, contiguous and reasonably compact, with some guidelines regarding how compactness rules are implemented, is that it is much harder to be really effective at having a political impact through gerrymandering subject to those constraints, than it is when drawing a map with just 7 Congressional districts, without making a really concerted effort to draw a really tortured map that a commission with a healthy dose of partisan balance and moderation is unlikely to adopt.

In a state with three or four members of Congress and a highly unhomogeneous political landscape, redistricting can easily de facto decide the mix of the Congressional delegation come election time, in a way that is grossly at odds with the overall partisan vote for legislators at that level.

The more seats there are in a map, the more marginal an impact the redistricting process has on the ultimate electoral results, all other things being equal. The larger number of seats also makes it harder to demonstrate partisan biases in the outcome and to have enough knowledge to evaluate the impact of the map on the likely results. Shifts in partisan balance as a result of redistricting is much more obvious in a map with seven maps.

Of course, once the lines are drawn, it will be time to roll up my sleeves, as everyone involved in electoral politics does, to figure out what strategies make sense in the 2012 election campaigns for legislative offices. Districts that look competitive on paper, like Congressional District 7 in Colorado after the 2000 Census redistricting, can become far less competitive once someone has succeeded in winning the seat and getting relected once - incumbency advantages start to mount and recruiting highly qualified challengers becomes harder.

Redistricting is particularly a big deal in Congressional races. Term limits for state offices mean that open seats crop up with regularity in state legislative races, but in Congressional races it isn't uncommon for the advantages of incumbency to allow a particular member of the House of Representatives to hold the same seat for decades and the shift in their constituency that comes from redistricting may be the next best thing to the level playing field of an open seat that is available to someone challenging an incumbent.