Pur Autre Vie

I'm not wrong, I'm just an asshole

Friday, July 01, 2016

Affordability Doesn't Mean What You Think

Imagine you are an economically literate urbanist and you have been asked to testify as an expert on urban policy.  The situation is this:  the county includes a large and growing city as well as a much smaller town that is connected to the city by a road.  The town has some retail and other employment, but a significant number of its residents commute to jobs in the big city.  However, this has grown increasingly unpleasant as the result of congestion on the road that connects the town to the city.  Voters are complaining that the commute is terrible, and the county legislature is determined to take action.  In particular, the proposal is to add an extra lane of traffic on the road, increasing its capacity.

Here is how the testimony might go:

Commissioner LaGrande:  Will adding a lane to the road reduce congestion?
You:  No, it will do nothing of the sort.
[audience gasps]
LaGrande:  Explain yourself!  The problem is that too many people are trying to get from the town to the city every morning, and from the city to the town every evening.  Adding a lane will make the road less crowded and result in less congestion, won't it?
You:  Respectfully, commissioner, we need to consider the concept of "induced demand."  It's true that in the short term, congestion might decrease when an extra lane is added.  But things don't stop there.  Now that the commute is easier, it will be more attractive for workers to live in the town and drive to the city.  As workers move to the town, congestion will increase, and this process will continue until the congestion returns to roughly where it was to begin with.
LaGrande:  So you're telling me there's no long-term benefit and we shouldn't add the lane?
You:  That's not what I'm saying.  What I'm saying is that the benefits don't include a long-term reduction in congestion.  Instead, the potential benefits have to do with increasing the population of the town—with the added lane, more people can live there, and the city's workforce is also increased.  This could help the economy grow, benefiting both landowners in the town (who can convert farmland to higher-value residential developments) and businesses in the city (who have a larger pool of labor to draw on).  Of course, these benefits may or may not outweigh the costs—I can't tell you how to make the trade-off.  But I can tell you that an honest accounting of the benefits doesn't include a long-term reduction in congestion.  For that, you would need to turn it into a toll road or something like that.
This is very standard stuff.  Anyone who supports adding a lane in these circumstances shouldn't sell it as an anti-congestion measure.

Now the city council calls you to testify on a new land-use policy that will facilitate denser development.  By coincidence, LaGrande serves on both the county commission and the city council.

 Councilor LaGrande:  Will allowing more development reduce rents?
You:  Of course it will, it's basic supply and demand.  As supply increases, rents will fall.
[audience nods appreciatively] 
This is very standard stuff.  Anyone can understand that increasing supply reduces prices.  But you might feel a slight twinge of discomfort, a little bit of cognitive dissonance.  After all, earlier you told LaGrande that "induced demand" means that increased road capacity will translate into increased population, but not into reduced commute times.  Now you've implicitly told LaGrande that the concept of induced demand doesn't apply to rent.  A city can achieve a permanent reduction in market rents by allowing more development.  The reduced rent will not draw more people into the city, pushing rents back up to their equilibrium level.  Because...  [crickets chirping].

And this is why I think urbanism is being mis-sold.  It's absolutely true that in the short term an increase in the supply of housing should translate into rents that are lower than they would otherwise be.  But this will draw people into the city, and it's not clear that the long-term result is lower rents.  In fact, if the city is attractive primarily because of the social and economic opportunities that stem from living near so many other people, then the long-term effect of increased development is probably rents that are higher than they otherwise would have been.

That's why this Matt Yglesias tweet is (perhaps unintentionally) very revealing about what "affordability" means to him:

Got that?  Affordability shouldn't be understood in terms of the level of rent.  It should be understood in terms of the number of people who live in the city.  So when Yglesias proclaims that cities can increase their affordability by allowing more development, his readers should understand that "affordability" is a term of art and that he is not saying that rents will be lower than they otherwise would have been.  Low rents have nothing to do with affordability.  Affordability just is density, so allowing an increase in density by definition increases affordability, even if rents go up by a lot.  (This makes it odd that the title of his book arguing for more development is The Rent Is Too Damn High, which is why I feel his tweet's honesty may be unintentional.)

I want to emphasize that density does in fact have a lot of benefits (as does increased transportation capacity).  But just as increased commuting capacity shouldn't be sold to the public on the grounds that it will reduce commute times, increased development shouldn't be sold to the public on the grounds that it will reduce rents in the long term.  The long-run benefits have to do with giving more people access to the city's amenities, which may also increase the value of the city to its existing residents.  (After all, to repeat my earlier point, the big attraction of living in a city is that it puts you into easy contact with a lot of other people.)  But for some reason, advocates of density often choose to frame their arguments in a very misleading way, and I think this helps explain the backlash against dense development.  The urbanist promises are never kept.  This is a big problem for urbanism and it will continue to be a problem until we can be more honest about the effects of our preferred policies, something we learned to do a long time ago when it comes to congestion.

Wednesday, June 29, 2016

Ed West Just Straight Up Gets It

This Ed West column gets at something I've been hinting at in my writing about Britain's vote to exit from the EU.  The "leave" voters were, I believe, victims of a bait-and-switch.  What "leave" really means is that an off-the-rack, legally-mandated arrangement will be replaced with a bespoke, negotiated one.  And that, by itself, is not necessarily a bad thing, it just depends on what is negotiated.  You could theoretically reach an accommodation that is very close to the status quo.  Or you could negotiate something pretty different from the status quo, but still mutually satisfactory to Britain and the EU.  (By the way I keep saying "Britain" even though the U.K. also includes Northern Ireland and Gibraltar.  Sorry.)

So far so good.  But the "leave" campaign took advantage of the nebulous post-exit situation to make claims that will not actually be possible.  So for instance, it's perfectly possible that Britain will retain full access to the common market, in which case the economic consequences may indeed be tolerable (may even be negligible).  But that won't happen unless Britain retains labor mobility with the EU, which means the Polish workers that have so offended the "leave" voters are not going anywhere.  The "leave" campaign basically painted a picture by combining elements from various potential post-exit scenarios, each element being individually feasible, but uniting elements that are not feasible together.  As Ed West argues, an honest ballot would have involved some sort of nested decision-making, where a "leave" vote would have to be combined with preferences about the post-exit world.

Since that didn't happen, Britain may need to have another vote.  And note in this connection that when you do multi-step balloting, you can end up with different results depending on the order in which the options are selected.  Let's say Britain now votes whether to do a "full exit," seal its borders, and abandon access to the common market, or to accept labor mobility and retain economic access (à la Norway).  The result may well be the Norway option.  But then imagine that you reversed the order of the voting.  In that case, the Norway option might win the first round, and then (given the very limited upside for the "leave" voters at that point) "remain" might have won the second round.

Anyway I think this makes clear something I had been a little muddy about, which is how procedurally stupid the vote was in the first place, and how it facilitated rampant dishonesty on the part of the "leave" campaign by failing to clarify what was at stake.  A shitshow all around.

Displaced Voters

You are a regulator responsible for flight safety.  Your staff has proposed a rule that will reduce deaths per million miles traveled by air.  However, it will also impose costs on travelers, inducing some travelers to choose other methods of travel.  If those other methods of travel are less safe than air travel, then you have to weigh two effects of the proposed regulation:  (1) deaths from air travel will fall (both because fewer people will travel by air, and because air travel will be safer), and (2) deaths from non-air travel will increase (because more people will travel by non-air means).  If the net effect is to increase the number of deaths, then arguably the regulation is a bad idea.

David Frum has suggested that something like this goes on in politics.  If the enforcement of immigration laws is labeled "racist" and put off-limits for mainstream politicians, then this may have the effect of reducing immigration enforcement.  But it has another effect, which is to force people who believe in immigration laws to express their views through non-mainstream channels.  The net effect on politics may not be positive, even from the perspective of immigrants.

Of course regulators may have other reasons to impose rules beyond the considerations I've mentioned, and similarly politicians have motivations beyond the welfare of immigrants, so even if the math works out to be bad for immigrants, there might be other reasons to marginalize people who believe in immigration law.  Also, whereas airline regulations probably operate pretty smoothly, there are sharp discontinuities in politics (something like punctuated equilibrium).  Extremists can be marginalized for years or decades, and then can be swept into power in a paroxysm of anger.  But maybe the paroxysm never comes, or maybe it's one of those "when the paroxysm comes we'll have bigger things to worry about" kinds of calculations.

In any case, I share Frum's worry that what we have is an unstable situation ripe for an opportunistic nationalist campaign.  Luckily (?!?) Trump seems to be too inept to mount a successful campaign (though I urge you not to be complacent).  But the choice that the Democrats are increasingly embracing seems dangerous to me, and I think it would be prudent to pay attention to the forces that are building up as a result.

Tuesday, June 28, 2016

Discontinuities and Discourse

Blatant racism, like Donald Trump's long campaign to delegitimize President Obama by questioning his birthplace and his religion, has largely been squeezed out of mainstream U.S. politics.  (Maybe I should say "had" been squeezed out, since one of Trump's most notable achievements has been the re-introduction of vile racism into the mainstream of political discourse.)  Certainly you might engage the question, but only to dismiss it.  Whether Barack Obama was born in the United States is simply not a legitimate political debate.

At some point, though, you cross a line into legitimate political disagreement.  To go straight to the other end of the spectrum, in the debate between supporters of a carbon tax and the supporters of a cap-and-trade system, it is hard to see a racial angle, and that remains true even if, statistically speaking, the cap-and-traders are much more likely to hold racist views.  (I have no reason to believe that to be the case.)  So in other words, it would be completely inappropriate to label cap-and-traders as racists—in fact, it almost certainly wouldn't even occur to the carbon taxers to try that line of attack.  Instead, carbon taxers would more fruitfully talk about the substantive issues that separate the two camps.

There's obviously a huge middle ground between these extremes.  Opposing Puerto Rican statehood is a legitimate political position to hold, but there are certainly versions of that opinion that are racist.  Opposing affirmative action is the same way.  Often in these cases there is a legitimate, principled reason for a particular stance, but there is a strong suspicion that it is being used as window dressing for a much more vile, "real" motivation.  This can be tricky to adjudicate.  And indeed it would not be uncommon for someone afflicted by true economic anxiety to adopt simplistic or unfair views without appreciating it, and in this case it may be more productive to assume good faith and avoid name-calling.  (On the other hand, of course, "economic anxiety" has become the blanket excuse that conservatives often offer to justify the racist views of their co-partisans.  This is precisely the sort of line that is difficult to police.)

Anyway my point is that as you move into the middle ground from either end of the spectrum, you reach a sharp discontinuity.  On one side the correct response is outrage and dismissal rather than engagement.  On the other side the correct response is full engagement and the assumption of good faith.

And sharp discontinuities are hard to navigate.  This is especially true in the face of diversity.  I can have a productive discussion about affirmative action with a friend who shares many of my background assumptions.  It would be virtually impossible for me to have such a discussion with a stranger, particularly one who refuses to acknowledge the factual predicates that underlie the "pro" side of the argument.  But so, who is the audience?  What are the background assumptions?  These will help determine which side of the discontinuity we are on, but they are also fuzzy and subject to rapid change (the classic example being a Twitter conversation that "goes viral" and reaches a new audience).  And very slight variations push us onto one side or the other of the knife's edge.

Now maybe a more nuanced response is possible.  Maybe you can shade your approach gradually from full engagement to full dismissal...  but I don't quite see how.  I think the more realistic answer is to engage in the debate with "repeat players" who have demonstrated good faith in the past.  This is, in theory, the role played by the "elite" ideological media.  Except...  that doesn't actually seem to happen very much.  One possible explanation is that there is no way to separate the elites from the masses, and you can't have elite ideologues making concessions that their mass-market co-partisans will find repugnant.  The more likely explanation is that almost no-one cares to engage in deliberation in the first place.

Anyway the result is that almost all interesting political discussion happens within broad ideological categories and not across them.  Maybe that's as it should be, since the prospects for fruitful engagement are so much higher when people start relatively close to each other.  But on another level it is unfortunate because it means that basic channels of communication don't exist to allow liberals and conservatives to talk to each other when they really could engage productively.  And so I'll wrap up by noting that one unexpected result of the Trump candidacy is that anti-Trump conservatives are starting to interact productively with liberals to attack a common enemy.  It's inspiring in a way.

Monday, June 27, 2016

Rue Britannia!

A few quick observations on political leadership.

David Cameron will resign as Prime Minister later this year, apparently without having triggered the Article 50 process for exiting the European Union.  This probably means that it will be up to his successor to hammer out the contours of Britain's new relationship with Europe.  Meanwhile the Labour Party appears to be falling apart, with a massive wave of resignations and firings in Jeremy Corbyn's shadow cabinet.  The U.K. therefore appears to lack leadership at a time when it needs it most.

To help understand what is going on, I think it is worth looking at the last few weeks of the 2016 Republican presidential primary.  Ted Cruz was desperately trying to rally the party to reject Trump, something that was clearly desirable, if not necessary, from a big picture perspective.  And yet many of the party's elites propped Trump up while slamming Cruz.  This is like responding to an infection by attacking your own white blood cells.  What was going on?

Well, partly Cruz is simply an odious person who spent the last several years stirring up unproductive wars between the party's base and its leaders.  But more importantly, I think, Cruz spent most of the primary in a tacit alliance with Trump, convinced that his best chance was a one-on-one race against an obviously unqualified and unprincipled candidate.  (In this he was probably right.)  It is a little rich to help Trump kill off all of your competitors and then declare him a monster who must be attacked with the full weight of the Republican establishment.  That this was basically true didn't make it any more palatable to the people who watched Cruz maneuver himself into this position.  So in other words, the elites had good reason to stand by while Cruz was gored, even if we might debate about whether they truly had sufficient reason to accept a Trump nomination.

The British situation is similar.  Cameron campaigned hard for remaining in the European Union, and he faced a reckless and dishonest exit campaign that essentially poisoned the well for the exit negotiations.  It is impossible, I believe, to meet the expectations of the "leave" voters, because those expectations were inflated to unrealistic levels by politicians whose real target was Cameron and his occupancy of 10 Downing Street.  So Cameron is in a position similar to the GOP elites after Cruz had teamed up with Trump to destroy the establishment candidates:  he could take one for the team, but he understandably has no inclination to do so.  (No matter what he accomplished, even if he struck the best deal possible under the circumstances, he would likely be blamed for whatever downsides remain.)

What about Labour?  Well, I don't pretend to understand what is going on there, except that many Labour politicians strongly opposed leaving the EU, and Corbyn seems to have hindered the "remain" campaign.  (So far I've seen reports that he withheld crucial support, framed the "remain" argument poorly, and generally didn't show any enthusiasm for the fight.  I'm unaware that he actively sabotaged the campaign, but certainly you can argue that he bears a fair degree of responsibility for the outcome.)  In fact Corbyn's attitude may have been similar to what I outlined above:  Cameron called for a referendum for electoral advantage, and the result was a crushing defeat for Labour.  Why should Corbyn then bail him out?

But anyway you can see how Labour politicians would be reluctant to let Corbyn benefit from a costly shitstorm that was partly his own making and that will probably be disastrous for Labour's preferred policy outcomes.  As a quick side note, this is true even if subsequent developments prevent Britain from leaving the EU.  It was bad enough that the vote opened a new cleavage that is likely to be problematic for Labour—it also let the cat out of the bag about where public sentiment lies.  Labour politicians who prefer to remain in the EU now have to choose between their preferred policy and democratic legitimacy, a choice that was thrust on them by Cameron and (arguably) Corbyn.

So we have a situation where individuals are responding rationally (or at least understandably) to the machinations of their opponents, but where the collective result is chaos.

What Hath God Wrought

Conservatives in the U.S. are overjoyed at Britain's decision to leave the EU, and they are gleefully pointing to polls that seem to indicate that few Britons actually regret their vote, despite a few anecdotes to the contrary.  Conservatives are also enjoying their favorite game:  portraying liberals as out-of-touch elitists who look down on working-class people and call them bigots when they don't vote "the right way."

Let me suggest that it is a little premature to measure the level of regret, but that we will have more information soon enough.  If the "leave" campaigners are able to fulfill their promises—greatly reduced immigration, an extra £350,000,000 per week for the NHS, and so on—then liberals will indeed look silly for hyperventilating.  We might regret the curbs on immigration, but the "leave" voters could not be portrayed as rubes.  They simply made a choice, and not an irrational one.  They were not misled, and they didn't let bigotry override their self-interest.  And as I've argued, there are plenty of good reasons to regret the direction the European Union has taken.  Anyway, what could be more self-interested than spending £350,000,000 per week on domestic health care rather than sending it to Brussels?  

So, you know, we'll see.  I would call it a bad sign for the rational-self-interest thesis that the "leave" politicians are already backpedaling from the promises that they made during the campaign.  Nigel Farage, for instance, has somewhat belatedly discovered that the "£350,000,000 per week" figure may have been somewhat inflated.  More fundamentally, there is a contradiction at the heart of the "leave" campaign.  It is theoretically possible that the EU will permit Britain to retain full access to the common market, in which case its "exit" may not cause significant economic consequences.  But it is highly unlikely that the EU will accommodate Britain unless Britain allows full labor mobility—precisely the evil that the "leave" voters hoped to escape.

But there is no need for haste.  We will have ample time to assess the sobriety and good faith of the "exit" movement as events unfold.

Wednesday, June 15, 2016

Let's Dispel Once and for All

I think this upbeat blog post pretty much vindicates my "don't worry too much" attitude about the Thiel issue.  It also, I think, nicely captures the actual effect of a chapter 11 petition, which is not nearly so dire as people seemed to assume when Gawker filed.  There's a reason they call them "the chapter laws," folks:  they differ a lot from chapter to chapter!

Incidentally, just to show how weird the world is, Thiel is the guy who proposed floating libertarian paradises, an idea I despise.

Newsworthiness Is Not Enough

I like privacy law.  In another life, I would be a privacy lawyer.  I also believe in privacy law, which is to say, I believe there are circumstances in which people should be punished for publishing true facts about the world.  I admit this is rightly controversial given the First Amendment, but it's what I believe.

Anyway I've been thinking about it, and I've decided that newsworthiness should probably not be a justification for violating someone's privacy, even when that person is a public figure.  In other words, the newsworthiness defense should be limited to the newsworthy facts and not to the entire event.  I'll give a few examples to illustrate my point.

It is indisputably newsworthy when a public figure gives birth.  Let's imagine that a female politician has given birth, and the New York Times reports the date of birth and the sex of the baby.  I would not under any circumstances think that the politician should be able to sue the New York Times for invasion of privacy, even if the politician would prefer to keep the facts about the birth private.  (Maybe the birth was premature.  Maybe the politician is unmarried and her pregnancy had not been reported previously.  Whatever.  I can't imagine any set of facts that would make the birth non-newsworthy.  Arguably aspects of the birth, like the birth weight or whether the baby has Down syndrome, should be considered private at least for a time.)

So we've established that the birth of the baby is newsworthy.  But now imagine that a news organization has obtained a close-up video of the politician's genitals during the birth, including the emergence of the baby.  Remember, the birth is newsworthy, so at first glance you might think that there should be no problem publishing this video.  But I think this should be viewed as a violation of privacy (unless, of course, the politician has consented to the publication of the video—query whether the infant has any privacy interest in the video, but we regularly allow people to publish embarrassing baby pictures, so presumably the answer is "no").  In other words, yes, the birth is newsworthy, but this doesn't vitiate the politician's privacy interest in a video of the birth.

I would apply roughly the same analysis to almost any medical procedure.  Some medical procedures might be sufficiently non-revealing that I would be inclined to let it slide, e.g., a video of a politician getting a flu shot or taking a vitamin pill.  But even if it is newsworthy that, say, a senator has gotten a prostate exam, I am not sure it should be legal to publish a video of the doctor inserting his finger into the senator's anus.  (As always, there is no privacy violation if the individual consents to the publication.)

Now I realize First Amendment purists won't find much to like in this post.  Can we really trust judges and juries to decide whether a video of a woman giving birth intrudes on her privacy?  Anyway, if it's newsworthy, shouldn't it be flatly legal to publish a video of it?  Difficult questions!  Ultimately I don't think there's a way to avoid messy line-drawing exercises.  But my own feeling is that newsworthiness shouldn't be a blanket justification for publishing videos of private moments in people's lives.

The Ban on Blood Donations by Sexually Active Gays

I just want to give some context for the ban on donations of blood by sexually active homosexuals.  I don't have an informed view on whether the ban makes sense today, because I think that depends on medical facts that I'm not competent to assess.  But I think that such a ban could make sense, however bad it may make gay people feel.  The following account comes largely from And the Band Played On by Randy Shilts.

For many years, probably for most of human history, the leading cause of death for hemophiliacs was uncontrolled bleeding.  This is because hemophiliacs suffer from a condition in which their blood doesn't clot properly, so what would be a very minor injury for most people can be life-threatening for a hemophiliac.  This is tremendously limiting.  The most famous hemophiliacs in history were nobility, but obviously today the vast majority of hemophiliacs are working-class people.  But think of how difficult most jobs would be if even a minor cut or bruise were life-threatening.  And think how you would live your life if a simple stumble, or a fall off a bike, were basically a death sentence.

The response has been to develop treatments that involve injections of concentrated platelets (actually it's a little more complicated than that, but for our purposes it's close enough).  This requires a large amount of blood, meaning that a single dose must come from multiple donors.  So a hemophiliac who is receiving this treatment is getting blood from dozens of strangers.  (As I said, it's concentrated, so the recipient isn't getting gallons of blood, he or she is getting platelets from gallons of blood.)

Anyway for a period in the 1980s the leading cause of death for hemophiliacs wasn't uncontrolled bleeding.  It was AIDS.  Think about that for a minute.  The leading cause of death.  Obviously this is a result of the practices used to manufacture the clotting factor that hemophiliacs need.  In surgery you might get a few pints of blood, coming from a few donors.  A hemophiliac regularly, and for the entirety of his/her life, needs injections of platelets coming from dozens of people.  If you allow HIV-positive blood to be donated, then it's nearly inevitable that hemophiliacs will contract HIV.  Today HIV isn't a death sentence, but it's certainly not something that people want to get.

For a long time, the blood banks resisted any effort to screen blood for HIV or to restrict donations.  This is why hemophiliacs started getting AIDS in such high numbers.  The blood banks benefited from a law that Congress had passed that made it nearly impossible to sue them.  Their incentives were mostly in the direction of keeping their donors happy so that they could keep the blood coming in.  The hemophiliacs fought bitterly to get safe platelets, and for a long time they were rebuffed.  And as noted, they started dropping like flies.  It was deemed more important to be nondiscriminatory than to give hemophiliacs safe blood products.  Ultimately that changed, of course, and for a long time homosexuals couldn't give blood at all.  Recently homosexuals who aren't sexually active have been removed from the ban.

So anyway that's the context.  Today we presumably have better screening tools, and sexually active homosexuals aren't nearly the risk that they once were.  As a result, it may make sense to relax the prohibition (apparently this was done in Orlando in the wake of the mass shooting).  But the ban wasn't some hysterical overreaction to an imagined threat.  It was imposed so that hemophiliacs could receive their life-enhancing treatments without dying of AIDS.

Tuesday, June 14, 2016

Over the Line!

A little followup on my rambling, incoherent post on the Gawker/Thiel conflict.  Sarang commented in part:

A publication like Gawker routinely walks right up to the line, and oversteps it from time to time as an occupational hazard. If you think there is value to speech that's near but not over the line, I think you have to tolerate this occasional overstepping or penalize it modestly (or rarely). If the line is rigorously and consistently enforced with large penalties, the only safe course of action for a publication is to stay deep inside the allowed zone.
I guess I don't think this particular line is that hazy.  As I joked a little while ago, it would be difficult to fund a lawsuit against the New York Times for publishing a sex tape because the New York Times seldom publishes sex tapes.

Maybe a better way to put it is that publishing a sex tape is a provocative act that you don't do by accident.  So even if it is "close to the line" in a legal sense (it's probably okay to publish the fact of a sex tape that features a public figure, as opposed to the sex tape itself, and it might even be okay to publish blurred-out still frames), it's not "close to the line" in the sense that you might accidentally do it in the course of legitimate reporting.  You only do it if you already have lawyers on retainer and are basically itching for a fight.

Compare this fact pattern:  someone sends in a homemade video that yields valuable insight into a newsworthy event.  You want to release the video to the public on your website or television network.  But in the background is a popular song that happened to be playing on the radio at the time of the event.  Can you air the video without obtaining the consent of the owner of the copyright to that song?

I would be extremely loath to find in favor of the copyright holder here, basically for reasons that Sarang lays out.  People need to be able to report the news!  It's important to keep it as safe as possible, from a legal perspective, for the press to do its job.  A network can't, like, arrange for the copyrighted song to be playing when they shoot a video, but anything short of that should almost certainly be considered fair use.

But as I said, I don't think the same logic applies when you basically "opt in" to the legal fight.  The National Enquirer knows it's going to get sued.  That's its business model.  Gawker, at least in its sex-tape-publishing manifestation, is in that business too.  The First Amendment is very robust in this country and while there are more than enough ways for publications to get into legal trouble, it almost never happens when the journalists get the facts right.  I am unimpressed by claims that legitimate journalists are going to have trouble doing their jobs in the shadow of the Gawker case.  They should just, you know, not publish sex tapes.

Stasis

When you read monetary history you get a sense of just how unstable the world used to be.  Of course monetary history is the least of it—the 19th and 20th centuries were marked by cataclysmic wars, genocides, and communist revolutions involving mass confiscation of private property.  There were also large technological shifts that left entire industries to rot while generating mad, chaotic growth in others.

Some of that is ongoing, but one of the signal accomplishments of the 20th century was that it developed the institutions and forged the compromises necessary to stave off mass violence among its most powerful nations.  You can take a cynical view of this—plenty of violence and suffering were tolerated/created in poorer countries—but the result for North America, Europe, and the antipodes has been decades of uninterrupted peace.  Meanwhile our economic arrangements became more stable and predictable.  Even inflation settled into a narrow range, at least for the major currencies.  We built this baseline stability into our expectations and focused on small-scale tinkering.  Metaphorically speaking, the climate stabilized and our attention turned to the weather.

Now I don't want to portray this as a bad thing!  Even if we focus exclusively on the economy, stability fosters all kinds of positive developments.  It facilitates long-term investment and "capital deepening."  It gives people more control over their lives.  Probably most importantly, it helps avoid the extreme suffering that so often accompanies massive dislocations.

On the other hand, there are major downsides that might generally be described by the term "ossification."  When things are predictable, the incumbent elites find it easy to perpetuate their wealth.  They obtain control of the key institutions and use them to enrich and protect themselves.  The channels of upward mobility are choked off and restricted to system-embracing company men.  The class system hardens.

On the third hand, "stable" is not the word I'd use to describe the world over the last 10-15 years.  The slow-moving train wreck of the European economy, the rise of the tech sector, massive swings in energy prices, massively disruptive political developments... and of course the tremendous amount of war and terror that has been unleashed on large areas of the world.  Meanwhile you can argue that secular changes over the last 50-60 years mean that our long stability should really be seen as a period of stable but inexorable monotonic decline for many areas, which is not quite the same thing as stasis.

Anyway it is interesting to ask which of our economic problems stem from instability (as in the decline of the Midwest and the rise of tech/finance in coastal cities, or the travails of Puerto Rico) and which of our economic problems stem from stability (as in the "efficient" pricing of housing so that it is cripplingly expensive to live near good jobs).  Of course the answer is almost certainly "some combination of both" for almost any problem you can identify.  So in a way these thoughts are too abstract and unfocused to yield much insight.  Sad!  I'll write a post later about the interactions among our housing markets, land-use policies, legacy mass transit systems, federal system of taxation, and shift from blue-collar to white-collar jobs.

Brexit, Pursued By a Bear

On Brexit, I am more conflicted than I expected.  The EU occupies a hellish middle ground between national autonomy and political unification.  The euro, while it doesn't directly affect British monetary policy, encapsulates the hubris of the European project.  It was imposed on a reluctant populace in the hopes that it would force further unification, and instead it imposed bad policy on everyone and destroyed sympathy among its participants.  The Danes are never going to feel about the Greeks the way New Yorkers feel about Florida, and with good reason.  Policy harmonization makes sense, but the European project is far more ambitious, ruthless, prescriptive, and inflexible than necessary or desirable.  It is a system designed by and for technocrats, giving them vast power with little or no accountability.  They reflexively hate democracy and have nothing but disdain for ordinary politics.  Meanwhile the EU uses its crippled but still mammoth economy to bludgeon its members into submission, not to mention what it does when it has even more powerful levers to pull.  Look what it did to Italy, much less Greece.  The fact that the only way for British voters to exert any influence on the course of events is to engage in brinkmanship should be seen as an indictment of the whole structure.

But of course brinkmanship is exactly what the "leave" vote is, and inevitably the movement is characterized by reality-denial and irresponsible sloganeering, the triumph of hope over experience.  I suppose that I would be a reluctant "remain" voter if Great Britain were foolhardy enough to give me a vote.  What a shitty situation.

Saturday, June 11, 2016

Peter Thiel, Internet Villain

In 2007, Gawker published a story revealing that Peter Thiel is a homosexual.  (The site has made a practice of outing homosexuals, some of whom were not at all prominent before being outed.  My bias in this area is that I think it is pointlessly cruel to expose private individuals to this sort of pain.  It is a different matter when the individual is a politician, particularly one who uses his/her public office to make homosexuals' lives worse.)  In 2012, the website posted a video of Hulk Hogan having sex with his friend's wife.  (I use the term "friend" loosely.  Apparently the "friend" had arranged the encounter in order to tape it surreptitiously in the hopes of making money.  It also appears that Hulk Hogan had received his friend's assent before initiating sex.  Hogan was not aware that the liaison would be taped.  Hulk Hogan's real name is Terry Bollea but I will use his better-known pseudonym throughout this post.)  Hogan demanded that Gawker remove the video, and when it refused, he brought a lawsuit.  The lawsuit resulted in a $140 million jury award, forcing Gawker into bankruptcy.  It has emerged that Peter Thiel, who was uninvolved in the events surrounding the sex tape, financed Hogan's lawsuit.

It is worth mentioning that in 2015 Gawker separately published a tape of Hogan expressing dismay that his daughter was dating a black man, whom Hogan referred to as a "nigger."  This incident, which was far more damaging to Hogan's career than the sex tape, may have increased Hogan's animus against Gawker.  However, by the time the "nigger" tape was published, Hogan's lawsuit was well underway, so it does not appear to have been his initial motivation.  As far as I know, Hogan has not claimed that the publication of the second tape was wrongful.

The first thing I think people should remember is that becoming a debtor under chapter 11 of the Bankruptcy Code is not a death sentence—if it were, there would be like 2 airlines at this point, and you couldn't buy a Chevy anymore.  Chapter 11 will allow Gawker to continue to operate while it appeals the jury award.  The website might also be sold as a going concern.  I don't know anything about Florida law, but the jury award seems to me to be about 100 times the appropriate amount, so I hold out some hope that it will be dramatically reduced on appeal.  (A successful wrongful death lawsuit typically results in damages in the neighborhood of $5 million.)  The bankruptcy is probably bad for Nick Denton's finances, but it is not necessarily devastating for Gawker as an institution.

The second thing to bear in mind is that it's generally a good thing when wrongdoers are held responsible for their actions.  In fact, this is the whole point of the tort system ("torts" are harms that can result in legal liability and monetary damages).  It is absolutely true that the fear of legal liability exerts a chilling effect on business activities, and you can choose to regard this as a negative feature of our legal system.  But many people, including me, view this chilling effect as a good thing.  Imagine a company that makes $1 billion in revenue a year with costs of $800,000,000.  The company also causes $x worth of damage to third parties every year (pollution, injuries, whatever).  The point of the tort system is to force the company to bear those costs—the injured parties can sue and recover money to compensate them for the damages they have suffered.  If x is less than $200,000,000, then the company will be able to compensate the people it injures and still make a profit.  If x is greater than $200,000,000, the company will not be profitable and will probably be shut down.  Isn't that the right outcome?  Do we want a business to continue to exist if it imposes social costs that are greater than the private profits that it generates?  I think it's great when this company is driven out of business by lawsuits.  That means the system is working properly.  I'm also happy that people who are injured can obtain some recompense for the harm they have suffered.

Does any of this analysis change if the lawsuits are motivated by parties seeking revenge?  I don't think so.  If a defendant can prove that a plaintiff (who, let's say, lost a leg because of the defendant's negligence) really doesn't need the money, but is only suing because he hates the plaintiff (whom he blames, rightly, for the loss of his leg), should the judge throw the lawsuit out?  To put it another way, should we allow the courts to be used as a forum for revenge-seeking?  Personally, I have no problem with it!  If someone has harmed you, and the law entitles you to damages for that harm, then I think you should be able to bring a lawsuit even if you are suing to get revenge, and not to make money or to vindicate abstract principles of justice.  If all plaintiffs had to have pure motives, then there would be very few lawsuits.

Now admittedly the Thiel situation takes us a step further, because Thiel presumably doesn't care about the wrong that was done to Hogan.  He cares that he was outed in 2007, long before Gawker published the Hogan sex tape.  Thiel's problem is that it's not clear that outing someone is a tort (I think it might be a tort if you did it with the goal of, say, getting the person lynched in Uganda or something—but that wasn't the case with Thiel).  So Thiel waited for Gawker to commit a tort, and then made sure that Gawker paid the price.

I think your view of this probably depends on your view of the legal system.  Imagine a legal system that is 100% accurate:  it correctly determines whether a tort has been committed and it imposes appropriate damages.  In this system, would any problem be created by lawsuits that are funded by third parties seeking revenge?  It's hard for me to see anything to fear.  It's like our example above regarding the "chilling effect" of the tort system.  What exactly is the problem if wrongdoers are held accountable for the harm that they cause in the world?

But of course the legal system isn't perfect.  If you introduce an error rate (either in the determination of liability or the calculation of damages), then a thumb on the scale in favor of more lawsuits can impose excessive costs on the target defendant.  With a low enough error rate, I think we could ignore this problem.  But then again, I don't think we have a particularly low error rate—as noted above, I think the damages were off by a factor of about 100!  In these circumstances, you can see how a rich zealot could destroy a publication even when it has done nothing wrong, or has (as I believe) committed a tort that inflicted only modest harm on its victim.

But note a few things.  First, the initial award of damages will be appealed, and there is a long history of overturning excessive jury awards.  (It's not uncommon for some jury to award hundreds of millions in damages and then to see the award knocked down to a few hundred thousand.  I don't think it will go that low in this case, but a dramatic reduction is not at all unlikely.)  A temporary error like this might force some defendants to capitulate, and that's a problem, but chapter 11 gives a defendant time to seek redress, as I noted above.

Second, it's a bit odd to focus on the outside funding of lawsuits and not on the unacceptably high error rate!  I don't think it would be possible in our society to prevent someone like Thiel from providing resources to bring lawsuits (although it may be possible to force him to reveal his role up front).  Even if he can't pay legal fees, he can always provide other kinds of support.  Imagine an activist group that spends money to collect and publish the facts about a huge toxic spill, which then facilitates a bunch of lawsuits by the injured parties, who depend heavily on the facts that they couldn't have afforded to document on their own.  Personally I wouldn't object to this sort of thing, even if the activist group is targeting the polluter in an effort to shut down its business activities.

But if it is impossible to prevent people from supporting lawsuits, directly or indirectly, it certainly would be possible to exert more control on these insane jury awards!  They seem like a much bigger threat than revenge-funded lawsuits.  If Thiel had financed 10 lawsuits identical to Hogan's, and each had resulted in a $1 million judgment against Gawker, I imagine Gawker would be fine.  (If not, then it should go out of business, along the lines of my example above.  You shouldn't be able to stay in business if you are imposing costs on the world in excess of your revenues.)

All of that said, it's a complicated world, and I certainly don't admire Thiel for what he has done.  And it may be that the legal system is too error-prone for it to withstand this sort of manipulation.  (I'll write another post exploring this issue.)  Definitely you can imagine outside money resulting in a much more punitive, expensive mode of litigation, and it's easy to see why that would be objectionable.  I happen to think that was unlikely to be a big factor in this case, but that doesn't mean it can be ignored in general.

But while I think Thiel is a bad guy, I think the reaction on much of the internet is hugely overblown.  I'll sign off with this thought experiment:  imagine that a billionaire is fed up with the way he is portrayed in the media, so he hires a law firm to draft a thorough, easy-to-read explanation of sexual harassment law in all 50 states.  The billionaire then publishes the report as a smartphone app and makes it free to download for any employee of a media company.  The new awareness of the law (which was very expensive to achieve, and which was motivated solely by revenge) generates hundreds of successful lawsuits and generally makes the news industry far less profitable, at least until the industry cleans up its act and dramatically reduces sexual harassment.  Does this example make you burn with outrage against the billionaire?  If not, then would you be angry if the billionaire also offered free initial consultations with lawyers for women who felt they had been harassed?  What if the sexual harassment took the form of publishing illicitly obtained nude photos of the women on company bulletin boards?  And so on.