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Archive for April, 2011

Vagueness–Change You Can Believe In

After reading the final chapters assigned to us for this class I can only come to one conclusion, it is way easier to write a blog post when we only have one topic to write about. When I’m trying to think of how to attack these last blog posts by mashing everything together my mind finds a blank on where to begin. Law is a very tricky subject, especially when thinking about it in an economical way. I would like to say I have always tried to think about legislation and peoples rights as technically as possible and it wouldn’t scratch the surface of how hard it is to plan for different scenarios in developing law. When Epstien summarizes by asking the questions on private property when determining peoples rights that he talked about in chapter 6 is a great example of how vague legislation has to be. It seems to me that when dealing with peoples rights the rules have to be vague in order to force a case-by-case situation. Sure you have the original framework that holds everybody to a standard (i.e. The Constitution and Bill of Rights). But it is ridiculous to think that a government can just write any piece of legislation that will resolve any criteria of problems, especially in our quick changing day and age. But is our country down a road that is inevitable to reach an end? I have often times wondered this through out this class. It has always seemed to me that government is getting more outlandish with more chaos; that there is more bickering and talk of need for bi-partisanship. This was made more clearly to me to be bull*&^% when I was listening to the radio a couple days ago about this very subject. A political talk show that I listen to was talking about a speech done by former representative Bob Bennett about how we as a society need to ignore political gossip in the media and how stuff like that are making our government worse than it has ever been. A man called in and made the comment that this statement was false and maybe Mr. Bennett should consider the government during the civil war. He talked about how we as a nation have been going through things like this for decades and how political slander has been around for a long time; it is just more publicized now. This made me realize that our nation has been through similar situations for years and it is the vagueness in our law that has kept it consistent through changes in society. Sure we base laws off of past events and suits that have happened, but it is the vagueness with these standards that have kept up with change.

The Efficiency of Study Law and Economics

Reading the last chapter of Friedmans book has confirmed my belief the efficiency and law is in the eye of the beholder. The debate for and against efficiency answered no questions but only sparked more as to the efficiency of law. In the end, while I have learned a lot about the law and about economics in this class, my view of the subject is no more decided than when I started the class. Maybe it was Friedmans writing, or all the great points made by fellow classmates, but in the end, I really have no idea as to whether or not law is efficient or economically just. What I do know is that upon closer examination, while there are flaws in the legal system, they are essentially doing the best they can with the resources and information available. As Friedman and Posner mentioned, no judge, senator, or lawyer can have an omniscient view of the situation, and certain things can not be accounted for. All we can expect is that they try their best, and with my optimistic point of view, maybe that is the best we can do. And maybe it is all that is really necessary for any of us.

It depends

Reading this last chapter in Friedman’s book just drove home one of the most interesting rules in economics. Whenever an economist is asked a question, the correct answer he should use is, it depends. In economics everything depends on individual circumstances and preferences. There is no way to say that one answer is better than the other unless it involves a preto improvement. With the judiciary, I think that they try to find what is best for the greater whole, but it is not possible to be in a position where you have enough information to make decisions like that. There are just too many variables that have to be accounted for. But I do think that they can make an educated decision on what is best. They are in a position to be impartial and see both sides of the equation. They can try and gather as much information that they can, then make a decision solely on efficiency. With that though someone will always be worse off, and hence it will always depend on what is the correct choice.

Progress in Society

In his epilogue, Friedman breaks down the advancement of our society in ideology bit by bit, and describes how we have grown in efficiency through our rules and laws.  His brief history of economic thought reminded me of Atlas Shrugged (which I’ve heard is now a film).  In the book scholars (reminiscent of many of today’s liberals) state that our society should be advanced enough to get past competition, and gathering wealth, and develop more love, sharing, goodwill, and brotherhood.  They propose that to do so, each person should do a job they are assigned to do, and nothing else.  Something they can benefit everyone with.  That person should not expect to be paid more than they need to live, no matter the job.  That way we can evolve ideologically out of our caveman moneygrubbing stage.  In the book, the society fails because no one has the incentive to do good work.  No one lives comfortably or safely anymore because the options have been diminished by low supply and high demand.  They return to the stone age.

Ayn Rand’s depiction may be fictional, but I believe that it would be something like that.  The collective good is not to force everyone to do something and sharing the proceeds.  The collective good is allowing people to earn and create as much as they will.  Laws to protect the individual from the collective and other individuals are needed, not laws to force people to be a servant of the collective.  Friedman says,  “since the objective is important to almost everyone, it makes sense to think about what rules best achieve it.” The U.S., though not without its problems, is a place where the rules allow anyone who will to achieve.  Economics is not a conservative ploy to promote free markets, and open, fair institutions so the few can become rich.  It is a science that studies what promotes productivity and growth.  If we try to leave, in the name of goodwill, these proven principles behind for group primacy, we really will return to caveman ways.

I definitely have a great Juvenile Past

I’ll tell you this. I definitely have had my fair share of instances where I have noticed that some judges definitely think efficiently. I know this may seem that I am a little bit sketchy but allow me to go back a little bit. I’ll admit it. I was at one point kind of sketchy. So one day I decided to go to a store with some friends. The next second later I see my friends stealing some stuff and they run out of the store away from some security guards. Obviously I was a little bit confused as to what was going on and I was a little unsure what had happened. Seconds later I get tackled by a security guard who was alerted thankfully that I had entered in with them. What a good time. Now let me tell you the difference between what happened with that judge and what happened to me the first time I had gotten in trouble with the law for joy riding when I was like 15. When I was arrested for being an “accomplice” to a crime I had no idea was being committed I was sent to the first district judicial court. This place was pretty great. I came in shorts and a t-shirt, unbeknown to me it is custom for people to dress up for court. (It was my first time) The judge dismissed me to go and purchase clothes that I would look more appropriate in and I left. I thought this at the time to be quite a waste of my time and definitely a waste of court fees. After all they were just sitting there waiting. Not a very efficient way for them to spend their time. I came back and he decided that it would “do me good” to spend some time in a juvenile detention center. The crime? Having friends that stole stuff. There was video footage of me purchasing a cd on the other side of the store and yet I too was to be punished. For a week I would be in what we youth affectionately called “DT.” It soon came to my attention that this place must have cost some serious money to shack me up in for a week. 3 meals a day, one on one staff some parts of the day, different teachers for the separate grades and select other staff. All to teach me a lesson? Ya wanna teach me a lesson? Don’t send me to a place with my friends for a week and make us legends of the school on the tax-payers dime! Not efficient at all! Ya wanna know what fixed me from my joyriding life? The judge that I spoke with there sentenced me to a large find and lots of community service hours. Low-cost for the courts and makes money to pay restitution. And guess what else? It worked! I didn’t not want to work for free. I especially didn’t want to do it during my prime hanging out hours and I learned my lesson albeit the hard way. Just one instance of one juvenile delinquent that learned his lesson and he did it the efficient way. I hope that more judges will become this way as what was discussed in Friedman at the beginning of ch. 19 when he talks about Posner who said, “that the common law could best be understood as a set of rules designed to maximize what we have been calling economic efficiency.” The law in at least one of these cases helped me to understand the rules from an economically efficient angle. I definitely learned my lesson.

Back to Deterrence

While reading the book by Friedman for this week, I was struck most by one statement: “… deterrence can be made into a private good and even judgement-proof criminals are worth deterring” (p.305). About halfway down that page he continues to argue that in cases where the victims are anonymous, deterrence cannot be made into a private good. But either way, it’s still a good, right?

If someone prints libelous statements about me in the Statesman, I can receive damages to compensate for the harm done to my name, let’s say $5. Additionally, I can receive punitive damages, let’s say $2,000, in order to deter the author of the article from publishing falsities about anyone. This then makes the overall cost of libel $2,000, which acts as a deterrent against other journalists publishing false, damaging statements. This scenario provides a private good, and it also provides a public good. I benefit from the deterring punishment. Society benefits because the outcome deters journalists from printing false stories that could cause an uproar or damage the reputations of any number of people within society. I’m still trying to work this argument out, but so far I can’t think of a legal scenario where deterrence is a bad thing.

Bureaucrat’s Salaries, Qualifications, and Incentives

Reading about the Agency-Expansion Hypothesis on pg. 343 I ran across the passage that shows how bureaucrats are “budget maximizers (footnote)”. Not only do they consciously and/or subconciously compete for larger budgets and de facto create a larger government (I would argue that this fact is isdisputable) than the United States had at inception, or even a hundred years ago, but recently they have been seeking to increase their own pay.

Growing up I always understood government jobs, or federal bureaucratic positions in our case, as extremely secure, stable, and relatively easier than private sector counterparts yet less financially lucrative. The rationale seems to be that because your job is easier, more secure, and offers enormous benefits  just for showing up to work every day (or only for 4 days a week as Utah recently decided) you may not have to be as qualified and hence receive less pay. This old model seems fair and predicts why the bureaucracy is inefficient–unmotivated workers being paid less than their more efficient counterparts in the market. I can live with that.

Today that is not the case however. Federal bureaucrats, in particular, are making salaries much higher than they used to be (even though their is an automatic graduate pay scale for government) and many statistics show them making more on average than private sector workers, before, even, their immense benifits.

Here is a link to an insightful Cato Institute, albeit it is conservative, article about the problems with overpaid bureaucrats.I highly recommend reading it (particularly the idea that having the best workers in government is an opportunity cost on the economy).

While I’ll let you look into the actual data yourself, I’d like to look at the effects and outline the benifits Federal employees receive, and i’ll conclude by analyzing how the incentives here are misaligned.

Federal Employees maintain the following: Comprehensive Health Care Coverage, 30+ combined paid sick, leave, and vacation days, huge retirement benefits, and a firing rate of only 1 in 5,000 non-defense workers(see Cato article).

With our status quo then wouldn’t it seem reasonable for the bureaucracies to actually be efficient? The combination of being paid better onaverage than any other sector, huge benefits, and incredible job security should be bringing the best, most skilled workers to government (if they are rational individuals). It appears  the bureaucracy is now occupying the worst of both worlds (unless of course you are a federal bureaucrat)–it is inefficient and expensively growing. The current incentives will facilitate faster expansion of government, less “real value” being added to the economy from private sector jobs lost to federal work as an unseen opportunity cost, and undeserving higher paid bureaucrats adding to the deficit. While I do believe the bureaucracy has a purpose (see my last post) something needs to be changed here.

Bureacracies are inefficient, but its government trying to make human nature more efficient.

In the case of the EPA, findings were delivered to that particular agency showing a correlation between carbon dioxide and the rising global temperatures. The state of Massachusetts and some other states then sue the EPA for not asserting jurisdiction. The EPA refused to regulate the emission of carbon dioxide, because of the vastness of the undertaking. Regulation of not just automobiles, but “… apartment buildings, large homes, schools, and hospitals…”. Maybe the EPA was hoping that a newer agency would be formed to handle that kind of work load, or out of the professional opinion of Administrator it just wasn’t something that could be budgeted right away.

Now, the agencies inefficiency comes from a lack of knowledge. If the EPA had known that carbon dioxide was going to be an issue maybe it could have started regulating from the agencies inception. Unfortunately, that information wasn’t available. Inefficeincy is a cost that comes from a lack of information. As humans we don’t have understand all of the consequences of our actions, and sometimes we are inefficient because of it. The real inefficiency happens when we are in flexible and try not to fix the problems with our mistakes. That’s why the EPA was in trouble. To the outsider, with his limited understanding of what was happening in the EPA’s minds, being the government of Massachusetts and others. Government is an organized effort to make collective action more efficient. As long as there is continued flexibility in changing in the government efficiency will follow.

Bureaucratic Incentives

Bureaucrats seem to be a source of inefficiency based on the reading and also our class discussion. After studying about incentives and rationality I really can’t understand why these positions exist in the way that they do. I understand that there needs to be delegation by congress in order for it to function in a proper manner; however, I really don’t understand why these positions aren’t opened up to the general public more often. Efficiency would demand this in certain circumstances but in others economies of scale would kick in to minimize costs for government agencies.

Last semester I had the privilege of writing a paper on the privatization of fleet services in Utah. It was interesting to see how certain agencies across the country actually applied competitive bidding in order to give bureaucrats incentives to reduce costs for fear of losing their jobs. In one example the mayor actually gave the bureaucratic agency a time horizon to become more efficient before he opened up the positions to the private sector. This incentive led the bureaucrats to cut back on “management costs” to the point that they underbid several private agencies.

If more pressure was applied by threat of privatization, I believe the bureaucrats would have the needed incentive to be more efficient. Another tactic that I read about that worked was profit sharing by bureaucratic agencies. One particular mayor proposed giving the workers and managers a certain percentage of saving back in the form of an annual bonus. This incentive increased efficiency drastically.

I know that the situations are a lot more complicated that this, but if the politicians really wanted to increase efficiency it could be done.

Read with a Grain of Salt, or whatever.

In class on Tuesday, our substitute said that the information he presented about the executive branch and the agencies was mostly explanatory and predictive.  More than knowing how we can fix anything, we can know how government currently operates, in practice not theory.  And yet hardly anyone argues that we can be basically satisfied with our government.

Stearns and Zywicki quote Anthony Downs that bureaucrats’ “views are based upon a ‘biased’ or exaggerated view of the importance of their own positions ‘in the cosmic scheme of things’” (363).  “In some settings, bureaucratic tunnel vision might create or exacerbate risks in one sector while seeking to eliminate or to reduce it in another.”  This is the same criticism often made of Congress–that representatives are tied so tightly to our interests that they sacrifice the national interest.  One suggested solution, though, to that problem is to extend the terms of Congress, or by some other means, render the Congress more insulated from us, the constituents.  But this describes the bureaucracy–insulated from the constituents.  So either way narrow interests are being pursued, sacrificing the greater public good.

It’s not a problem with bureaucrats, and it’s not a problem with our representatives that their ‘views are based upon a biased or exaggerated view of the importance of their own positions.’  That’s true of all people.  So maybe we can just be satisfied that government is representing us well–fickle, petty, and self-interested.  And benevolent–take Obama Care, for instance.