Let's have a little chat about Republicans

Once upon a time, Republicans were conservatives, and followed to a significant extent the primary dictate of conservatism:

conservatism - a political or theological orientation advocating the preservation of the best in society and opposing radical changes.

It seems clear that with Republicans routinely promoting the elimination or dramatic restructuring of things like Medicare, Medicaid, and Social Security, that fundamental position has been abandoned.  But, I don't think it is right to say that modern Republicans are entirely unprincipled, or that they are merely advocating the interests of their wealthy donors (though they are certainly pursuing policies that primarily favor the wealthy).  Rather, I think the best way to view Republican ideology is through the lens of psychology.

Republicans understand the direction of human psychology, and the sorts of motivations that impact people's behavior.  It's true that higher marginal tax rates make people less excited about making more money; I've experienced that first hand.  Likewise, it's true that the leap from something for nothing to a-little-more-something for a-lot-more-work is significant.  If you stop your thinking there, then it is obvious that things like unemployment benefits and high marginal tax rates are ridiculous, silly, and probably counterproductive.

The trouble, of course, is that you can't stop there: you have to measure the size of the effect.  Basically everyone in Republican-land is assuming very-large, even dominating, effects from these psychological factors.  Thus things like "the confidence fairy", "regulatory uncertainty","bond market vigilantes", a preoccupation with "moral hazard" and the like.  Sadly, in most cases the empirical evidence seems to indicate that these psychological effects, though often real, are quite small.  The far side of the Laffer Curve--the hypothetical curve depicting the point at which increases in tax rate actually reduce tax revenues through disincentive effects--is estimated to be around a 70% tax rate.  Likewise, unemployment benefits increase unemployment rates much less than one might naively expect, especially in severe recessions like the one we are in.  As for the confidence fairy, bond market vigilantes, and regulatory uncertainty--they just don't seem to apply to our current situation.

Basically, Republicans show an interest in and a sense of human psychology which is intuitive, substantially correct, and praiseworthy.  Liberals are all too often guilty of ignoring the human, social, and psychological aspects of situations.  However, when it comes to accurately describing the way the world works, you'd be much better off dropping the psychological variables from your equations than the mechanical ones.  Or, best of all, keeping them all in and looking at what the econometrics data is actually telling you.  Doing that tends to show that optimal economic policy is much more closely aligned to Keynesian policies than Austrian ones.  Just goes to show that even if your intuitions are broadly right, it is still important to look at the data.

A little post-script:
It does seem that Republicans tend to forget their psychology when it comes to looking at regulating business.  Much, if not all, of the recent bank legislation is about avoiding the "moral hazard" created by federal guarantees on bank deposits, and for some reason that isn't subject to the same psychological rational as unemployment benefits.  Hard to see why, really, except for a sort of team "give the rich what they want" mentality.  That's a bit annoying.

Also, it's worth pointing out that a lot of people think that the financial collapse was brought on by Republican banking deregulation, and the conservatism as defined earlier would have been the exact impulse--that the rules of the past were laid down with wisdom and shouldn't be so easily cast aside--that protected us from that silliness.  In a proper conservative-liberal dichotomy, the liberals should have been pushing for the deregulation, and the conservatives should have been saying "hey man, we made those rules for a reason".

In my mind, both of these failures of Republicans to follow either their "human nature" or "conservative" ideologies is strong evidence of regulatory capture; the business interests have at least partially conquered the Republican party and put them to use on the behalf of banking against the best interests of society.

Optimal intellectual property protection (part 1)

You often see stuff from the MPAA and RIAA about how piracy is destroying all artists' livelihoods always forever.  The natural solution to this problem is to somehow end piracy through legislative penalties.  So what does that look like?  Let's look at some horribly skewed and biased numbers!

Apparently, there's a man named Stephen Siwek who is happy to produce research showing the devastating effects of copyright infringement.  He isn't very creative about names though; one might even think he plagiarized himself.  But don't take my word for it, look at the names of his two "studies":

For the RIAA:   The True Cost of Sound Recording Piracy to the U.S. Economy
For the MPAA:  The True Cost of Copyright Industry Piracy to the U.S. Economy

It's a little tricky, because the Sound Recording Industry is a subset of the Copyright industry, and, actually, so is the Software Industry, which I won't discuss here.  Both these studies have some important characteristics though.

• They assume substantial full price substitution rates.   In fairness, I read through the "Sound Recording" report, and found that its estimated substitution rate is 60.7% for physical piracy and 20% for digital piracy.  The 60.7% is absurdly high based on my brief survey of the literature, but the digital piracy number is actually on the low end.  The most recent research (admittedly using a sample of U. Penn undergrads... not exactly a representative demographic in any way) puts it (and physical piracy, incidentally) at between 15% and 30%.  Of course, some researchers show no effect on physical sales and slight positive effects for online and concert sales (that's on an international sample, but its methods are a little harder to follow and its credentials aren't as towering).  The "Copyright Industry" report only says "less than one", a value it claims is "conservative" on the grounds that some internal industry "estimates" claim that it is exactly one.  Furthermore, each lost purchase is imagined to have replaced one at full price and new.  
• They calculate losses in the global market. So piracy in China is lumped right in and used to justify stronger copyright enforcement in the U.S.  I mean, maybe fair enough for treaties, but in general? 
• They show "total economic output lost".  This goes beyond lost sales to include the hypothetical economic impacts up and down the supply chain of the copyright industry. 
• They neglect the obvious economic benefits to consumers of receiving goods for free. This seems particularly relevant given their lost sales model of substantial purchase substitution, and their insistence on evaluating macroeconomic effects.  Every dollar not spent on frivolous entertainment is available to be spent elsewhere, in some other industry (or in the same one, for that matter).  Effectively, they are assuming that people choose between purchasing music and "pirating while putting the money they save under a rock".
• They rely substantially on confidential and industry provided data.  Well of course they do; how else could you produce credible looking studies without any means of verification?  Well, I guess they aren't that credible looking.
• They include both physical and digital piracy.  Bootlegs, bit-torrent, mix-tape? All the same.

Anyway, the number Siwek comes up with for the cost of worldwide, savings-burying, any format, substantial pirated-copy-to-lost-new-sale substitution, all-copyright-industry piracy is:  

58 billion dollars.

So, that's a lot of money, I guess.  By contrast, if a naive but mathematically capable person tried to estimate the cost of pre-screening all copyrighted content on youtube alone through manual human curation they'd come up with something between $441,029,692 and $36,829,468,840 per year. Ahem:

37 billion dollars.

And that's just youtube! Imagine all the streaming sites and content lockers...  Plus, the comparison is unfair because youtube doesn't host software or videogames--both major contributors to that headline number.  If you chop out Software and Videogames from the 58 billion total estimate you are left with 19.256 billion dollars of loss per year (approximately, since they don't actually break this out by industry I have to do some funny stuff--basically I multiply the total loss by the percentage of direct loss in the music and media industries: 33.2%)

Now, those numbers are quite silly.  Also, they naively ignore the existence of Google's Content ID system, which basically does this automatically in software.  One might imagine it is substantially cheaper than any of the estimates of human manual labor curation.  The point (for tonight) is merely that anyone with a bit of time and some trumped up numbers can make pseudo-reasonable apocalyptic claims about the cost of enforcing or not enforcing copyright.  Next post, a closer look at the genuine economics and law of the situation.

Delightfully Wonky

I thought I was going to have to do it myself, but this slide-deck from the White House puts together the graphical evidence about economic performance under Obama quite nicely.  Highly recommended for people who want to get a sense of context for the economy.

http://www.treasury.gov/resource-center/data-chart-center/Documents/20120502_EconomicGrowth.pdf

HHS contraceptive mandate debate: summarized

I just got asked for a summary of the HHS contraceptive mandate debate.  I've written quite a bit on the topic previously, but since the situation (and my understanding of it) evolved over time, I thought it would be worthwhile to pull together my previous posts and some final commentary.  It's worth noting that while the Obama Administration and USCCB seem committed to their final stances, the rules are open for public comment through June, and will only be finalized in August.

The mandate

As part of the Affordable Care Act, all health insurance plans are required to cover preventative care without co-pay, but the definition of such care was left to the executive branch.  On the recommendation of the National Academy of Sciences, the Obama Administration included birth control--in particular female birth control, like the pill--in preventative care.  This means that all insurers must cover contraceptives without co-pay. The full text of the most up-to-date proposal for the mandate can be found here: https://www.federalregister.gov/articles/2012/03/21/2012-6689/certain-preventive-services-under-the-affordable-care-act

The objection

Catholic institutions objected on the grounds that contraception is against the teachings of the Catholic Church.  They felt it a breach of religious freedom that they were required to pay for products the primary use of which they considered to be immoral.  As the Obama Administration has responded to this objection the complaints have changed.  The most recent statements by the USCCB can be found here: http://www.usccb.org/issues-and-action/religious-liberty/conscience-protection/

The response

The administration, gradually, made the following adjustments/clarifications to address the conscientious objections:

1. The mandate only applies to non-Church organizations, such as Hospitals, Charities, and Schools.  Parishes and other institutions who primarily hire and serve Catholics (or people of other objecting faiths) are exempt.
2. Insurance organizations must not charge the insuring institution for additional contraceptive coverage.
3. For self-insured institutions (most large catholic organizations), the cost of the contraceptive coverage would be born in full by an external entity, rather than by the institution itself.
4. (A clarification) The cost of insurance plans with full contraceptive coverage is actually lower than the cost of insurance plans without full contraceptive coverage.

Some links to articles on the subject

The status of similar mandates already imposed by individual states.

A pretty up-to-date summary of the issues by a news source.

And another article

And some more coverage

Statement by the USCCB (Catholic Bishops)

The most up to date formal proposal (a difficult read)

My thoughts

Since no Catholic institution will have to pay for contraceptive coverage (free from insurers, and free from insurance managers for self-insured institutions), there is no violation of conscience.  Since US law recognizes rights of reproductive freedom and privacy, allowing institutions to inspect employees' sexual practices in the provisioning of healthcare (for instance to cover the pill for ovarian cyst treatment but not contraception) is arguably a violation of employee rights.  And since I conceive religious freedom as essentially individual rather than institutional and no individual is coerced by this law, I can find no valid religious-freedom argument against it.  The case is further undermined by the governments subsidy of health insurance: taking the government's subsidy means taking the strings attached too.  I do think that it might be reasonable to fine non-compliant institutions the exact amount of government subsidy as another means of exemption, but even that butts up against employee rights in an uncomfortable way.

My previous thoughts (in chronological order)

These kind of shift around as the situation and my view of it shifts, but the in series they follow all the important points of argument, and the comments often include useful insights or counter-arguments.

1. My initial take

2. Clarifications and a look at some more nuanced objections

3. Some commentary from a philosophy of government/legal perspective

4. A little summary of how things looked after the Obama administration made response 3 

deregulation, tax reform, capital gains cuts, and corporate tax cuts

For those of you just joining American Politics, the title describes the "conservative" "solution" to the economy (not just our current economic problems, but all economic problems at all times).  Now, I have varying feelings about the items in this list.  I basically think that capital gains should be treated as regular income, which couldn't be farther from the conservative position.  By way of contrast, I think that certain kinds of tax reform (mostly in terms of loophole removal) would be awesome for both corporations and people, and I think that the government could do a lot of good by removing regulations created to protect incumbent businesses from entrepreneurial competition.  But! I think it is crystal clear that none of these things are solutions to the current economic crisis.  In case you disagree with me, I did a little research and made some charts.