Thursday, September 26, 2013

Reverse Causality

The headline "Does the value of driving differ across states?" seems to imply that driving more causes higher incomes. Couldn't it very well be the opposite? Higher GDPs per capita lead to higher population densities, higher congestion, higher property values where jobs are, and hence more total miles driven?

Friday, August 23, 2013

Distortions, Taxes, Absurdity, and What they can Teach Us about Tyler Cowen

Recently, Professor Cowen made the post, "I am sorry but this is absurd" in response to an article by Charles Manski, summarized on VOXEU. The crux of the paper, and of the summary, is that too much analysis of taxation focuses on the various distortions they create, and too little of the analysis goes towards what the tax revenues are used for (infrastructure, in the complete version of the research). How I feel about this issue is not the topic of my post. Instead I choose to focus on Professor Cowen's response to it, and what it really teaches us.
1. I do not believe that Professor Cowen is truly sorry for saying Professor Manski's article (and post in VOXEU) is absurd. I think that at best Professor Cowen has what he might call "meta-preference" for feeling sorry, because he thinks that he "should" feel sorry for posting such an unprofessional and unthoughtful headline to his response to Manski, but I don't think he is in fact sorry. The reason is that if you read Cowen's post, it is quite long, and in fact contains some intelligent and well thought-out points, which to me shows that he has carefully thought about how he feels about the issue.
2. I think the statement "this is absurd" tells us more about Cowen than it does about the piece by Manski. I do not mean this to be turning the term "absurd" on Cowen's view, because I think the details of his post have some merit. Rather I think his use of "absurd" mostly tells us that Cowen feels very strongly that taxes are distortionary and that this should be a topic of focus when economists discuss them. This view has some merit, but it fails to recognize that the alternative to a market "distorted" by government and taxes is seldom a free and well-functioning market in the neoclassical sense. Focusing on the distortions of taxes and government do a poor job of recognizing the ways in which a well functioning (even if also very large) government can help to make property rights more secure and reduce the transactions costs and risks associated with impersonal market exchange. Higher taxes can introduce some distortions, but they may be better than the distortions introduced under the next-best (institutional) alternative.

Tuesday, July 16, 2013

A Property Rights Analysis of Gun Rights, Stand Your Ground Laws, and "The Verdict"

I've tried not to comment too directly on the verdict in the George Zimmerman trial. I wanted to take some time to think about the situation more clearly, and whether the verdict itself reveals anything useful that can help us think better about policy. What limited comment I have made about the George Zimmerman verdict is that it should present an opportunity to rethink the wisdom of "Stand Your Ground" and other laws that seem to embolden armed citizens into doing stupid (but perhaps not criminally stupid) things. For one thing, such laws have been linked to increases in the homicide rate.
But I felt the need to ground my thinking with some theoretical foundations. Here's what I came up with: We need more laws to extend full "rights" to gun owners. Before anyone's head explodes, let me clarify what I mean by "rights." In economics, "property rights" can be thought of as a "bundle of sticks." A narrow interpretation of property rights over a good or an asset is your "ability, in expected terms, to consume the good (or the services of the asset) directly or to consume it indirectly through exchange" (Barzel 1989, emphasis in original). Basically, this means that you have the right to use your property how you want, the right to sell it, and the right to dispose of it in whatever way maximizes your own utility. Barzel also notes:
The distinction sometimes made between property rights and human rights is spurious. Human rights are simply part of a person's property rights. Human rights may be difficult to protect or exchange, but so are rights to many other assets. 
Thus, we can include civil liberties (such as free speech), other constitutionally-granted rights (such as the right to bear arms), and the right to live to be, in a way, property rights.
But, there's a flip side of the coin. Property rights also entail certain responsibilities. One such responsibility is the responsibility of protecting your property from capture by others. Another is the responsibility for how you use that property should that use infringe upon the property rights of others.
So what does this have to do with the George Zimmerman/Trayvon Martin case? As we all know, the night Trayvon Martin was killed, George Zimmerman was exercising his second amendment right to bear arms, and his right, under Florida law, to carry a concealed weapon. The same night, at the same time, in the same neighborhood, Trayvon Martin was exercising his own right to use the public streets. Mr. Zimmerman felt suspicious that Mr. Martin might have been up to some criminal activities, but that appears not to be the case. Regardless, Mr. Zimmerman felt, for whatever reason, that Mr. Martin did not belong in that neighborhood at that time of night. He felt that Mr. Martin was infringing (or intended to infringe) on his or his neighbors' property.
So, Mr. Zimmerman pursued Mr. Martin, first in his car and then on foot. The result was an altercation in which Mr. Zimmerman shot and killed Trayvon Martin. What was said or done between Zimmerman leaving his car and Martin's death is unclear.
Before getting into the legal dimension let me first say that I realize that Zimmerman did not invoke the "stand your ground" protections of Florida law during his defense, although it seems he may intend to do so in the event of a civil trial. My concern is not to re-litigate Mr. Zimmerman's case, but rather to focus on how policy could be reshaped to prevent the next tragedy of this kind.
I am no fan of guns. I am no fan of the second amendment. But they are embedded in our constitution, and we need to shape our laws around them. For this reason, I oppose strict regulations and bans on the types of weapons individuals can purchase. I prefer a registration process, as well as taxes and fees with the goal of reducing the overall number of guns, mostly because there are more than 16,000 gun-related suicide deaths that get far too little attention in the gun control debate.
With my views on guns in the open, let's return to Florida law. Broadly speaking, stand your ground statutes broaden the scope of "self defense" and also provide immunity from both criminal charges and civil litigation in the event that one person kills another when there is reasonable belief that her or his life is in danger. In economic terms, it reduces the level of responsibility assigned to an individual who uses deadly force (often with a firearm), and thus it actually weakens gun ownership rights (thinking of rights in economic terms as a vector of rights and responsibilities). Repealing stand your ground laws, and even replacing them with strong laws outlining strict consequences for individuals who behave recklessly while exercising their second amendment rights will help greatly in preventing the sort of tragedy that happened on February 26 2012 in Sanford, Florida from happening elsewhere.

Friday, March 15, 2013

Thoughts on Tenure

A colleague of mine recently posted the following on tenure:
Consider what tenure does. It is part of a compensation package designed to reduce mobility. It is a barrier to exit in the college professor employment market. Thus it reduces bargaining power for the professoriate effectively by reducing any holdup costs. Professors cannot make a very credible threat to leave if they feel their working conditions are bad or wages are too low.
I'm not sure this captures everything that tenure does. In fact, many professors seek (and successfully find) better jobs. Continuing,
In other words, removing tenure, like the end of serfdom, should increase the likelihood that the professoriate will innovate to keep themselves competitive and increase their wages.
I'm not as sure about this. Innovation is very risky when one's employment is tenuous and one's continued employment is determined by the noisy signal of student perceptions of teaching quality. I could see a valid transactions costs argument that would predict less innovation, lower overall teaching quality, and poorer administration of higher education as a result of ending tenure. Tenure exists to encourage professors to make institution-specific investments, including serving on administrative committees, advising students and student organizations, maintaining academic standards, and agreeing to meet help teach courses that match the needs of the students in the department or college. Otherwise, rational faculty members will have a greater incentive to spend their energy focusing on research and gaming their teaching evaluations. There are many things broken about higher education. I am not sure that tenure is highest on the list of problems.