Why We Shouldn't Worry About an Anti-Gay Marriage Backlash

Some commentators have raised concerns that if the SCOTUS issues a broad decision recognizing the right to same-sex marriage, it will provoke a cultural backlash against same-sex marriage and gay rights generally. Theses commentators usually cite the backlash against Roe, which has lead to decades of fights over abortion.

The problem with this comparison is that even though same-sex marriage and abortion are both "cultural issues", they are very different. The fight over abortion is largely about conflicting rights and priorities: the rights of the fetus vs. the right of a women to have autonomy over her own body. Pro-lifers prioritize the rights of the fetus, whereas pro-choicers prioritize the right of the women.

Same-sex marriage isn't really like that. Opponents of same-sex marriage usually base their opposition in history and tradition. The common complaint is that same-sex marriage will change a centuries old institution. The problem with this argument, is that once same-sex marriage becomes legal, it becomes a lot less compelling. The traditional definition of marriage will start to fade away and society will begin to perceive marriage as just a union between any two people, regardless of sex.

When conservatives talk about "traditional marriage", they usually don't actually mean traditional marriage--which was for life. What they mean is "the marriage that I grew up with". In the future, a larger portion of citizens will have grown up with the definition of marriage including same-sex marriage and so, because there is no compelling moral argument against it, any backlash against legalized same-sex marriage will fade over time.

Now, progress isn't a forward march, and backlashes do happen. But same-sex marriage is very different from abortion in this regard, so we shouldn't expect one.

The Banker's New Clothes

I am a big fan of the new book The Bankers New Clothes by Anat Admati and Martin Hellwig. Their basic argument is that large financial institutions in the United States are able to borrow at artificially low interest rates because their creditors expect to be bailed out by the government if anything goes wrong. As a result, banks disproportionately fund themselves through debt rather than equity. This creates a banking system that is excessively leveraged and fragile. In order to resolve this problem, Congress should require financial institutions that are "too big to fail" to get 20-30% of their funding from equity (many banks are currently at 3%). 

There is a lot of good discussion about this book on the blogosphere, but I wanted to respond to one argument made by Raghuram Rajan:

The critics’ arguments about the benefits of equity are equally unsatisfying. Of course, given a set of bank assets, more equity would reduce the risk of failure. But failure is not always a bad thing; a banker operating an all-equity bank, with no need ever to repay investors, would be likelier to take unwarranted risk. The need to repay or roll over debt imposes discipline, giving the banker a stronger incentive to manage risk carefully. 

The problem with this argument is that it doesn't explain why banks are different in this regard than other large corporations. Apple doesn't have any debt, yet presumably the managers of Apple still have incentives (reputational, they could be fired, etc.) to appropriately manage risk and create profit for their shareholders. This is how it is for a lot of companies in America, most of whom don't need to roll over a large amount of short term debt on a regular basis.

If anything, having to roll over debt on a regular basis skews bank managers towards investing in assets that have a liquid market and can be unloaded easily. This causes them to avoid acquiring illiquid assets, like long-term loans and investments, even if they would be more profitable for shareholders, safer and better for the bank in the long run.

Finally, at a certain level its just hard to really imagine that all of these bank managers would be opposing higher capital requirements, if the effect of these requirements was that they would be able to take far more risk. It seems more likely they would be forced to run safer, less profitable banks, because losses would accrue to shareholders, rather than the public.

Hard Money for the sake of it

Conrad Black has a confusing article that is allegedly about the economics of bubbles. In the piece he unwittingly undermines his own hard money ideas:

An examination of the writing of a British 18th Century author such as Dr. Johnson, and a writer from 100 years later, such as Charles Dickens, reveals that there was no increase in that time in the cost of a loaf of bread or the rental of a simple but respectable residential room in London. There were soaring economic bubbles and bone-cracking depressions, and prices followed supply and demand, but the essential currency value was constant. Unfortunately, that would change

Its nice that if a young British chap was strolling down Fleet Street in the 18th century with a few pence in his pocket and looking for a bite to eat and he accidentally walked into a time machine sending him forward 100 years he would still be able to afford the same items. But its hard to imagine that level of price stability is really worth the "bone-cracking depressions". Certainly a more sane public policy would aim to utilize control over the money supply to alleviate those depressions. Also, here are a list the countries he believes to be "hard currency" ones:

The remaining hard-currency countries are limited to Canada, Australia, Singapore, the bloc of German and Baltic countries, the Dutch, Poles and Czechs.

I don't even really know how to go about evaluating that statement.

National Review's Mark Steyn is a horrible liar

Syndicated columnist, warmonger, and racist Mark Steyn has a new column defending his Iraq war support. He tries to claim some sort of bizarre vindication by selectively evaluating a series of predictions he made in 2003:

What of the rest of the country? Iraq, I suggested, would wind up “at a bare minimum, the least badly governed state in the Arab world, and, at best, pleasant, civilized and thriving.” I’ll stand by my worst-case scenario there.

Leaving aside his decision to stand by his worst-case scenario, its worth looking at how Steyn actually phrased this prediction when he originally made it in April 2003:

In a year's time, Iraq will be, at a bare minimum, the least badly governed state in the Arab world and, at best, pleasant, civilised and thriving. In short: not a bad three weeks' work. (emphasis mine)

I'm going to suggest that he actually got this completely wrong. Lets see what else:

Overcompensating somewhat for all the doom-mongering, I wrote in Britain’s Daily Telegraph that “a year from now Basra will have a lower crime rate than most London boroughs.” Close enough. Major General Andy Salmon, the British commander in southern Iraq, eventually declared of Basra that “on a per capita basis, if you look at the violence statistics, it is less dangerous than Manchester.”

"Eventually" is the crucial word here. General Salmon would make this statement in 2009, so Steyn was only 5 years off. In actuality, one year after Steyn's prediction a series of terrorist bombings took place in Basra killing over 65 people. This would kickstart a wave of violence in the region lasting until 2008. Here is how a report by the neo-conservative Institute for the Study of War described the situation from 2004-2006:

By late 2004, violence in Basra was steadily increasing. In the wake of the uprising by Sadr’s Jaysh al-Mahdi militia in Najaf and Karbala earlier that year, many of the fighters moved to Basra. The influx of Jaysh al-Mahdi militiamen fueled the increase in violence, as the fight between the Shi’a factions for control of the city’s lucrative resources intensified, particularly during the period surrounding the January 2005 elections. The Sadrist Trend, ISCI, and Fadhila all vied for control of the oil infrastructure and smuggling network; the security forces; and the provision of public services and state resources.

Targeted assassinations, kidnapping, sectarian violence, gunfights, and widespread criminality accompanied this struggle, which persisted throughout 2005 and 2006.

In 2007, 85% of Basra residents believed that British troops had a negative on the province. Even though Basra is more stable now than during the 2004-07 period, terrorist bombings continue. But sure, "close enough".

In a smart decision, he chooses to ignore some of his predictions that were so clearly wrong he couldn't salvage them through selective quoting and intellectual dishonesty:

"Weapons of Mass Destruction. Remember them? Not a single one has yet been found" (Bill Neely, ITV, April 10). MBITRW: Actually, I almost wish this one were true. Anything that turns up now will be assumed to have been planted. If I were Washington, I'd consider burying anything I found. After all, an America that feels no need to bother faking justifications for invasion would be far more alarming to most Europeans. Instead, horrible things will turn up, but will never be "conclusive" enough for the French, who've got all the receipts anyway.

Nope.

Do We Need More High Skilled Workers?

When we discuss expanding H1-B visas for high-skilled workers, we are usually envisioning individuals employed in various high-tech industries. Probably because, as Suzy Khimm writes, lots of CEOs of tech companies complain about the lack of high-skilled workers. Also, a lot of centrist TED-talky types like to discuss this problem and will often use it as jumping off point for arguments about the necessity of promoting STEM studies and engaging in broader education reform.

This is all well and good. But if we are going to to take a targeted immigration approach, we should really take a look at industries with high unit-labor costs, the obvious example being the health care industry. Now we don't usually get a lot of complaints from healthcare industry representatives about the need to bring in more doctors, but as Yglesias notes in this piece, doctors get paid a lot more in the United States than they do in other Western countries despite not providing superior care. Most of our future fiscal problems relate to healthcare costs, so bringing in more doctors should be a no-brainer.

I am in favor of immigration reform that is more liberalized generally and brings in workers of all types. But if we are taking the targeted approach, we ought to look for professions where there is a large unit-labor cost differential between the U.S. and other Western countries and exploit that arbitrage opportunity through immigration reform.

A Simple Explanation of the Eurozone Crisis

One of the main purposes of government rules and regulations is to establish who in society takes a loss when things go wrong. Tort rules determine who pays for the damages, contract rules establish who pays after a contract is breached, and Bankruptcy rules establish who gets paid and who ends up holding the bag once a company goes south.

An acceptable rule will have a procedure in place enabling someone to determine who will take the loss. A good rule will make it clear ahead of time who will take the loss. An even better rule will assign the loss to a party who can sufficiently bear the risk of loss. A great rule will also assign the loss to the party who is in the better position to prevent the precipitating event that creates the loss. The best rule will do the above and also be perceived as generating an equitable and acceptable resolution by those governed by the rule.

With the exception of Lehman Brothers, the 2008 financial crisis made clear that in the United States the tax payers would bear the loss generated by a failure of one of the major financial institutions. The tax payers were able to sufficiently bear the risk of loss, but were not in a great position to prevent the precipitating event that created the loss. As a result, we were able to resolve the banking crisis, but our system was clearly tainted by moral hazard. Dodd-Frank was meant to deal with that moral hazard but it probably doesn't.

Europe's crisis has lasted a lot longer because they have no rule to establish who takes the loss. Beyond that, they don't even have a political process that can adequately assign the loss on an ad hoc basis. This is why the Eurozone, with a GDP of 9.5 trillion, is being held up by the fact that they can't find the extra 7 billion to bail out Cyprus' banks. None of the parties involved (the German tax payers, The Cypriot depositors, the Russian depositors) are willing to take the loss, and their is no clear way to determine who should take the loss.

Europe's economy isn't perfect. But it's current problems aren't economic, they reflect political institutions unable to effectively assign loss.

In Support of Commentary

Pew Research has a new study entitled the State of the News Media 2013. Everyone is excited about this:

Opinion filled 85 percent of the content on MSNBC, according to the Pew Research Center’s 2013 State of the News Media report. On Fox News, commentary made up 55 percent of its coverage, while CNN was the only of the big three cable news channels to produce more straight reporting than opinion.
...
Overall, the cable news landscape has undergone a major shift as “daytime programming now resembles primetime, with interviews and opinion replacing coverage of live events and breaking news,” the report stated. Interview segments are up 31 percent from 2007 to 2012, while live event coverage dropped 30 percent.

Having fewer journalists out in the field reporting news is a bad thing. Without reporters, our sense of what is going on in the world would probably be a lot fuzzier. And since reporting is more expensive than commentary, we should concerned that a lot of news outlets will provide too little reporting.

But devoting air-time to reporters and to "straight reporting" isn't necessarily that desirable. First, it obviously depends on what you are reporting on, a frivolous story is not worth reporting on. But more importantly, broadcasting a reporter live from an event is a pretty big waste of time and money. When a reporter is on camera they are by definition not trying to find out new things to report. Similarly, the money spent flying out camera crews and equipment would be more usefully spent on additional reporters in the field. These reporters could spend the time figuring out what is going on, and then call the station with the news, which the host could then relay to the audience at home. Spending airtime putting the actual reporter on camera is usually not necessary to supply the news.

Now sometimes a picture is worth a thousand words and getting footage from an important event can help give viewers substance. But we live in an era where the best footage is almost always captured by cell phones and put directly on the internet. Networks frequently use this footage anyway, so spending money capturing live footage is not always the best choice.

At the same time, commentary can be really valuable. It was great seeing news footage of Tahrir Square during the protests, but the time spent interviewing experts on Egypt was probably better, as it helped viewers put the events in their proper context. Commentary is also a more engaging way to present the news. When commentators are providing their opinion on an event, the viewer is almost always given the details of the event itself. This is done so they can follow along. Good commentary gives a fullness to the event being covered, and does so in a way that viewers usually find more entertaining than just straight news.

Commentary can be bad too, it can distort the events. But that is a problem with a particular commentator, not commentary in general.

Its not clear what the correct ratio is, and I think we should be concerned about the economic dynamics that lead to their being less reporters in general. But commentary isn't a bad thing.