It’s been over a year since anyone last posted on this blog. I’m much more active on Twitter, so you could follow me there. One problem with creating content is that a lot of things one could post are either too “hard” (one doesn’t know enough about the subject and shouldn’t comment) or too “easy” (the point being made is too obvious to be worth making, and one would reduce the signal-to-noise ratio by posting it). There’s a lot of both types out there, and it’s not good to add to either pile.

There’s also the issue of where to post ideas. Posting them on Facebook or Twitter is sometimes just easier and makes them more likely to be read. (Although I suppose I could post things in both places.) Submitting better-developed posts to online publications or forums is another option which I haven’t really tried so far. I do have a handful of ideas for posts here for 2019, and I might come up with more. I’ll also throw in a plug for my friend Matt Gentzel’s blog The Consequentialist, which discusses various issues from an effective altruist perspective.

My views have changed a lot since I first started this blog alongside Michael Tontchev. Back then I was an anarcho-capitalist libertarian (for consequentialist reasons; I’m still a consequentialist). I now think that ideology is deeply flawed. I think its answers to the public goods problem are insufficient. Modern states are clearly suboptimal at providing public goods (as one would expect), but states do better than I think we would without them. There are various other market failures I think anarcho-capitalism deals with suboptimally, and some could arguably be grouped under the public goods problem in the sense that good governance is a public good. I also think that the case for governmental redistribution is stronger than I used to. It wasn’t that I used to think the poor were undeserving of aid (part of the reason I used to support open borders was that I believed it would reduce global poverty), but I thought that there were practical issues with redistribution which limited its effectiveness to the point where it didn’t make the existence of nation-states worthwhile. I now think the diminishing marginal utility case for redistribution (especially to the extremely poor) is stronger than I used to think it was, and that the distortionary effects of taxation (and “crowding out” effects on charitable giving) are more limited than I used to think they were.

I think large institutional changes come with risks, and I think trying to end the state and replace it with some sort of private polycentric order would be extraordinarily risky. I think increasing global catastrophic risk is immensely costly in terms of expected utility, because not only are you risking great harms to the current generation, you’re also jeopardizing the existence of all future generations. And if it’s possible for there to be large amounts of expected utility in the future (such as if sentient beings harness technology to substantially expand their numbers), this is quite a harm indeed. Some “X-risks” seem difficult to do anything useful about for now, but “don’t roll the dice on some massive institutional overhaul which could directly jeopardize efforts towards mitigating global catastrophic risks (and I think radical libertarianism does not handle climate change abatement, biohazard reduction, or natural disaster mitigation particularly well, among others)” seems reasonable.

These days, my views could perhaps be described as “market liberal”, or as “neoliberal” if you use Sam Bowman’s formulation of the term (although I’m less sure about the “we think the world is getting better” part, in part because of increased suffering in factory farming over the past few decades, but that issue is outside the scope of this post). I’m more skeptical of foreign military intervention than I think most people in the United States government are, but less so than I used to be. I’m not quite a full-on “futarchist“, but I think allowing people to bet on the likelihood of various events is a good idea (we already do this for inflation via TIPS bonds, and extending it into other areas would be useful also). In some ways, one could say I’ve moved to the left in that many of my views on individual policy issues are associated with the modern center-left, although I think I have a more conservative disposition than most leftists. Also, I am far more opposed to libertinism than I used to be, but this doesn’t usually interact with my views on actual policy so much, at least in a way that would cause many of them to skew rightwards. I think we shouldn’t have legal polygamous marriage and think there’s a pretty strong case for having civil penalties for adultery (applied regardless of gender).

I no longer support completely open immigration of noncriminals (as I used to). I think open immigration would create considerable institutional harms. Some are described by Garett Jones in the book Hive Mind relating to intelligence and institutional quality, but beyond that, I also just think throwing open the borders is incredibly radical and virtually guaranteed to spark massive backlash, to the point where it’s unworkable. In the context of the United States, I still support a substantial liberalization of immigration, particularly of high-skilled immigrants. Tripling our current levels of immigration would bring us about to the level of immigration (adjusted for population) found in Australia, and I think we could probably raise it by a factor of five if it were well-managed. This is still more pro-immigration than pretty much any proposal in Washington, to my knowledge.

As for old posts:

• I no longer support the abolition of concealed carry license fees. I no longer have a positive view of John Lott’s work on the subject, or frankly on many other subjects for that matter (see this on a flawed study he did on immigrant criminality, for instance, and see also the Mary Rosh incident and various others you can find by searching his name). I’m not sure what the effects of right-to-carry laws are on crime rates; if I had to guess, I’d say about zero. Meanwhile, there is other evidence of higher gun ownership rates raising suicide rates and crime (especially with handguns) after controlling for other factors, so I think a Pigovian tax on guns would be reasonable.
• On “A Bad Argument Against Secession“: I still think the argument I was critiquing is bad, but I now think that banning secession except in cases where the national government in question agrees to allow it (and there’s a supermajority in the affected region for allowing it) or in cases where it’s necessary to prevent human rights abuses is probably a good idea, because it preserves geopolitical stability. There are reasonable exceptions, like in colonial independence movements in the past (particularly since there seems to be an economic benefit from colonial independence), although fortunately many of the later colonial independence movements ended up succeeding without wars. (Although I think I wouldn’t have supported the American Revolution, actually, for reasons beyond the scope of this post.) I could perhaps be convinced of a more permissive attitude towards secession if I were more convinced of the value of political exit (and there are benefits of jurisdictional competition), but my instincts are against it. This more or less answers the question posed in “A Question on Human Rights Abuses and Secession“, in which I wondered whether a region might be morally obliged to not secede in order to prevent the nation-state it is part of from committing human rights abuses (using the example of Northern states in the antebellum United States).
• “Immigration and the Zero Lower Bound: A Twist on the ‘Alien Invasion’ Metaphor” was mostly a fun little post that describes a theoretical result that I doubt has much practical relevance, especially since (as noted in the post), negative supply shocks at the zero lower bound may not be expansionary anyway.
• “ ‘Money is Not Speech’ Misses the Point“: I pretty much stand by this one, although I’m more supportive of campaign finance laws (for disclosure) than I used to be. I still think Citizens United was correctly decided and that banning corporations from spending money on political speech could allow other forms of censorship to occur (for instance, the publication of political books by any publisher which chose to incorporate). I do actually think I might support more public financing options for campaigns, although mostly just to head off anti-Citizens United activism. (The monarchist in me tells me to ignore the rabble and their demands and lay down the law with an iron fist.)
• “The Problem with Divestment: Helping Wealthy Investors Instead of Victims“: Not sure I agree with this one anymore. Divestment means that the institution which divests from a certain industry will no longer face conflicts of interest when taking actions which would harm that industry (although in fairness, for most institutions thinking of divesting, this effect is minuscule). To be honest, part of the reason to divest is simply that saying, “yes, we’re profiting from something that has social costs (or is just bad), but divestment would do virtually nothing and instead we prefer to donate to effective charities” is impractical for some organizations to maintain public approval. Although I think it’s valuable for at least some organizations to pretty much say what I just put in quotation marks, because promoting uncomfortable conclusions from economics (if they’re correct) has some value.
• On my co-blogger Michael Tontchev’s post “Elizabeth Stoker Bruenig Demolished Libertarians. And It Was Beautiful“: Not my post, but I felt the need to reply to a few things. The use of “2.5 times more than” when it should be “2.5 times as much as” in points #2 and #4 in that post makes me cringe a bit (I don’t mean to be too harsh towards my friend Michael, of course). The style of writing is a little goofy and over-the-top by my standards, but that’s all right as well. Point #3 was good because come on, a 1 percentage point difference in some poll is obviously not significant. That being said, Bruenig could still have made a decent case from the available data that a lot of self-described libertarians don’t understand libertarianism, since one should expect that they, as a group, would be considerably more libertarian than the general public (more so than they actually are) on pretty much all public policy issues.
• “Could Zoning Laws Affect Political Outcomes and Marriage Rates?“: It’s still an interesting paper and I think the liberalization of land use could raise marriage and fertility rates by reducing housing costs, but I think it probably wouldn’t help Republicans on net. Liberalization would probably lead more people to live in cities, which I suspect would have a causal negative effect on their inclination to vote for right-leaning politicians. Also, by raising the populations of states with large cities (so, mostly blue states), it could give Democrats some help in the Electoral College. Finally, to the extent that liberalization had an effect on fertility, it would probably do more to increase the fertility of left-leaning voters (who are more likely to live in high-cost areas), thereby increasing their numbers over the long term. But I suspect it might also make said left-leaning voters more moderate since they’d be tied down to their families and less interested in cosmopolitan libertinism.
• “Some thoughts on market expectations from Trump“: I still pretty much stand by this post, although the Republicans did end up passing a tax reform bill of course. The CBO at the time I had written the post predicted GDP growth for 2017 of 2.1%; it ended up being 2.3%. I doubt growth numbers over the next few years will be anything spectacular. (On a side note, I don’t entirely know what to make of the flattening yield curve since I haven’t read enough on the subject, but I am worried about the prospect of a recession happening in the next few years, particularly if Trump decided to double down on tariffs. It really depends on whether the Federal Reserve decides to reverse course and move towards a more expansionary policy.) I’m not sure we’ll ever get a good explanation of why stocks went up after the release of the Access Hollywood tape but also went up after the election. I have a hunch that Mnuchin or Cohn (or someone) called up the smart money in the early morning on November 9th and assured them that Trump would focus on tax cuts.

Thanks to everyone who read this, and have a happy new year!

It’s been well over a year since anything’s been published on this blog. Good to be back!

Justin Wolfers, professor of economics at the University of Michigan, has recently argued that the stock markets react negatively to the possibility of Trump being elected President. And indeed, when the FBI announced today that they were looking into some of Hillary Clinton’s email messages again, stocks fell and volatility measures increased.

It’s worth remembering what the S&P 500 index is to see what the market is actually expecting from Trump:

S&P 500 index value = (1/the divisor)*(the price-to-earnings ratio for the whole S&P 500)*(S&P 500 earnings as a percentage of GDP)*(nominal GDP)

What would Trump supporters argue here? They could argue that the market is wrong about its expectations, and that it would initially fall but eventually rise if Trump is elected. In that case, they should bet accordingly by buying in the short-term period after Trump is elected (if he is elected). They could do the opposite if he isn’t elected (namely, once the market rises in the short run, start betting against it).

Or they could argue that the market expects nominal GDP to rise relative to trend but S&P 500 earnings as a a percentage of GDP (we’ll call this E/Y) to fall relative to trend. If there were no change in the divisor or in the P/E ratio, then E/Y would have to fall far enough that E would actually fall (relative to what the market would otherwise expect). What would the reasoning here be? They could argue that S&P 500 companies would lose business, but that smaller firms and/or workers would benefit by a greater amount. Perhaps if Trump encouraged better antitrust enforcement, this could happen. It could also happen if he reduced immigration to the point where labor share of GDP increased, but this would probably reduce nominal GDP, so it would become harder for them to argue that nominal GDP would rise relative to trend. (Also, in most models, immigration doesn’t affect labor’s share of GDP in the long run because the capital-to-labor ratio can readjust.)

They could also argue that Trump being elected would reduce the price-to-earnings ratio (we’ll call it P/E). Trump’s proposed tax cuts might be expected to raise P/E by increasing people’s willingness to invest at current stock prices. But if he is expected to run large deficits, the market might expect the deficits to raise interest rates and crowd out private investment, which would presumably lower P/E. Trump could also create policy uncertainty that would discourage investors and reduce P/E, although this doesn’t seem like an argument that Trump supporters would want to use.

They could argue that Trump would somehow increase the divisor I mentioned earlier. Perhaps more S&P firms will issue new shares and dilute their existing ones, although this doesn’t always actually reduce the share prices (since the firms now have more cash). A potential pathway here is that Trump could cut corporate income taxes, making equity financing more favorable compared to debt financing and thereby encouraging companies to sell shares and pay off debt. (Here is one paper arguing that the current tax system encourages debt financing). However, this could also end up raising the P/E ratio, since investors are willing to pay some amount for an increased book value for the firm. So it’s not clear how Trump’s expected policy proposals would affect anything here.

Lastly: Trump supporters could just admit that Trump would reduce expected nominal GDP compared to what it would be under Clinton. This doesn’t destroy their argument for him. They could still claim that Trump would increase American life satisfaction. Or they could argue that electing him would help foreigners. Or they could argue that Trump would raise real GDP compared to trend but reduce nominal GDP compared to trend, although they would have to then admit that this would make managing the federal debt more difficult. This also seems unlikely, because then market expectations of inflation would fall, but they actually just rose slightly (from a 10-year TIPS breakeven rate of 1.71% yesterday to 1.72% today). So Trump supporters who argue this position would have to say that the market expectations are wrong.

So it seems like the following holds:

1. The market probably expects that nominal GDP will fall relative to trend if Trump is elected
2. Trump supporters could either agree that this will happen and still defend Trump, or they could argue that the market is wrong and bet against it.

Which will it be?

EDIT: To add some more data to this, the S&P 500 fell from a high of 2140.61 just before the news came out to 2126.41 right now (trading has closed). That’s a 0.66% fall in the S&P 500. On BetFair, there was a 5.6 percentage point decline in Clinton’s odds.:

Professor Wolfers had found an increase of 0.71% in the S&P associated with a 6-point gain for Clinton. So with that ratio, we would expect a 0.66% fall in the S&P 500, which is exactly what we saw.

SECOND EDIT: My co-blogger tells me that it’s worth mentioning arguments against this hypothesis. Prof. Tyler Cowen has a post citing evidence that Trump’s odds aren’t significantly correlated with stock returns.

My view is that betting markets, including conditional ones that can provide information on how markets expect one event to affect the likelihood of another, should be liberalized (and can even provide policymakers with valuable information). I still think that with available data, Trump supporters must face the choice I described in this post.

It is a fairly common belief that secession is legitimate in cases where it is necessary to stop human rights abuses. There is a somewhat less common view that secession is legitimate if it is supported by a majority or supermajority of people in the seceding region, as long as it does not create human rights abuses in that area. (See, for instance, Christopher Wellman on the matter, and Ilya Somin’s discussion relating to Crimea.)

However, what about the possibility of secession creating human rights abuses in the country which a region is seceding from?

Here’s an example: suppose some of the more anti-slavery Northern states in the U.S. had seceded in the decades before the Civil War. (There was some support for this, since many Northerners viewed the Fugitive Slave Act and wars fought for the expansion of slavery as unjust.) Suppose then that it had swung the remainder of the U.S. in a pro-slavery direction. Perhaps some results could be the expansion of slavery into the West, or more strictly enforcing the Fugitive Slave Act in non-seceding free states.

Could one then argue that the seceding states have an obligation to stay in the Union and keep pro-slavery policies from taking hold?

My current thought is that, since it can be very difficult to predict the outcomes of any given secession, a seceding region should not be blamed for these kinds of issues occurring.

In the previous example, it’s also quite possible that the remaining U.S. would have difficulty expanding slavery into the West without Northern military support. It’s possible that the Fugitive Slave Act would be weaker, since escaping slaves would be closer to permanent safety. (Getting to, say, Wisconsin, is easier than going all the way to Canada.)

Nonetheless, it does seem like this question could pose some issues for deciding when secession is appropriate, both in mainstream and less-mainstream theories. Feel free to post your ideas in the comments.

The news of the U.S. Senate Judiciary committee approving a constitutional amendment allowing Congress and the States greater power to restrict political spending may bring attention to the issue of campaign finance. A fairly popular phrase in populist circles (especially on the left) used in favor of campaign finance restrictions is “money is not speech“.

Notably, former Supreme Court Justice John Paul Stevens used the phrase when describing his opposition to the Citizens United decision, which allowed corporations and other associations to make independent expenditures on political campaigns. Maryland State Senator Jamie Raskin even claimed that treating the spending of money as free speech would require that prostitution be protected as a form of free speech.

Frankly, the “money is speech” characterization is disingenuous. The point is not that spending money on things generally is a sign of one’s preferences and thereby a form of “free speech”. The point is that spending money on resources and labor directly used in the act of communication is protected.

For instance, most publishing companies are corporations. If a publishing company spends money from its general treasury to publish a book containing political advocacy, should that act be protected under the First Amendment? I would say so. In this case, the free speech rights of the authors would be at stake.

And yet this not was the view of the government in Citizens United (see this link, pp. 26-29). The case was later re-argued, and the government decided that there might be other reasons justifying a challenge to restrictions on book publishing (see this link, pp. 64-65), but the same basic argument still applies to broadcast media, which was the issue in Citizens United. Should a TV broadcaster be allowed to spend its general treasury funds on producing and distributing political content?

When the issue is phrased in terms of spending money on speech, rather than just spending money, it becomes clear that restricting political spending is, in fact, a form of censorship.