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This is in the news today:

The attorneys general of Alabama, Louisiana, Florida and Mississippi settled “in principle” with the fallen oil giant British Petroleum on Thursday, agreeing to accept $18.7 billion in damages after the company was deemed “grossly negligent” in the costliest offshore environmental accident in U.S. history

I’m sure this will make a lot of people feel good. But read the article and look around the web for a bit – while you will see a lot of information about how reckless BP was and how clearly this was a huge disaster, what you will have trouble finding is how much actual damage was known that have come from the spill. Note that I am not saying that BP ought not pay huge fines, after all, there are obviously legal reasons to pay penalties beyond just for damages done, but you’d think that with so much ink spilled (pardon the pun) on this sort of disaster at least some enterprising journalist would take the time to find out how much real damage actually occurred.

Without getting into the weeds on the particulars, this episode brings to mind two things for me, related:

(1) This paper that I stumbled upon last year is highly relevant. Here is part of the abstract:

… I examine the introduction of an insurance mandate that reduced firms’ ability to avoid liability through bankruptcy. …Finally, environmental outcomes, including those related to groundwater contamination, also improved sharply. These results suggest that incomplete internalization of environmental and safety costs due to bankruptcy protection is an important determinant of industry structure and safety effort in hazardous industries, with significant welfare consequences.

Now there are important reasons to have bankruptcy protection in place, but I’ve long since believed that modern bankruptcy law exists as much to provide work for lawyers as it does economic protection.

(2) This result should provide some guidance on financial regulation, no? For all that has been done since the onset of the crisis, has ANYONE proposed ensuring that financial firms have more skin in the game? And when I say more skin in the game, I don’t just mean capital requirements, I mean changes to ownership liability structures? Maybe going back to the days of full-blown partnerships and double liability can never happen, but surely there were some advantages of that system.



To feel anger when looking at this:

It’s an Adelie Penguin from Antarctica.

This result was surprising, sure to get lots of news coverage:

It shows that despite a rise in measured capital-labor ratios, labor-augmenting technical change in the US has been sufficiently rapid that effective
capital-labor ratios have actually fallen in the sectors and industries that account for the largest portion of the declining labor share in income since 1980

Paper is here. This paper, interestingly, has implications for the debate over Chamley-Judd vs. Picketty-Saez and optimal capital gains taxation. I think.


Elsewhere, Amy Finkelstein and colleagues find that Medicaid does not quite deliver dollar-for-dollar value. I am going to make a bold prediction that I never thought would be possible in my lifetime – by the time I am 60 years old, the U.S. will have moved to a system of basic-income guarantees for a large portion of the population. Now, I wouldn’t bet that it would actually replace things like Medicaid, which it ought to, but the basic income I see as on the way.

Our baseline estimates of Medicaid’s welfare benefit to recipients per dollar of government spending range from
about $0.2 to $0.4, depending on the framework, with at least two-fifths – and as much as four-fifths – of the value of Medicaid
coming from a transfer component, as opposed to its ability to move resources across states of the world.  In addition, we estimate that
Medicaid generates a substantial transfer, of about $0.6 per dollar of government spending, to the providers of implicit insurance for
the low-income uninsured.


Our family visited the Kennedy Space Center on Friday. Were I more interested in blogging I would put together a series of posts on the space program, but I am lazy. A couple of things. First, we REALLY wanted to see the SpaceX launch, which was originally scheduled for Friday and then rescheduled as we were making the drive to the center. We were never told, and it was hard to find news releases, why the launch was rescheduled – the weather was good the day we were there. Second, go to the Space Center, despite any of your misgivings about governments and so on, the place is just awesome, the exhibits are well done, and there is a great mix of education and entertainment to be had, at least if you like this sort of thing. The Shuttle Atlantis display as well as the enormous Saturn V rocket display are pretty breathtaking. Third, the center does not do a great job telling visitors about the failures and risks of space travel (it pays a bit of attention to the latter, but not in a way that visitors really grasp – going to an exhibit makes it feel like space travel is routine). But I think something like 5% of all rocket launches explode or go of-track, it would be nice if people knew this.

Related, as you probably know, the SpaceX launch yesterday was a disaster – with the rocket exploding before the first-stage had completed its separation about 20 miles in the air. I am not going to look around too hard, but I am SURE that this explosion, on top of the most recent other two, will bring out of the woodwork the folks who believe that this event “proves” that it is a mistake to trust space missions to commercial interests who are doing space travel at cut-rate pricing and gutting the American space program – or something along those lines.

Fourth, and related to the above, no mention anywhere is made of the extreme cost overruns and mismanagement at NASA. Look, I am a space romantic, and love it, and when I step foot on the grounds I quickly forget my instincts. But our space program is famously inefficient – with the cost of the Shuttle program escalating to something like FOUR times as much as initially planned (close to $200 billion) and the details of what was understood prior to each shuttle explosion not really being clearly and honestly presented to us outsiders.

Fifth, if you walk around the Space Center, I urge you to pay attention on each exhibit to who was responsible for building the various components of each rocket, capsule, arm, suit, etc. You will find that the projects were scattered across the country – with, for example, the external fuel tank for the shuttles (the bright orange thing in the niddle) being made in New Orleans, with the solid rocket boosters made in Utah, etc. Now, I am sure that there are different places with different expertise and we should take advantage of comparative advantage, blah blah blah, but it is pretty evident that NASA contracts sprinkle patronage (that’s not the right word) pretty much throughout the country – a smart way to build and maintain support in all 50 states.

But, I am not in the mood to be cranky, if I were, I’d blog about Pope Francis seeking the advice of Naomi Klein on how to move forward with our economy and the environment. I read the entire encyclical in my car ride from Florida and was struck by how little it discussed that the very things that the “Church” seems to be worry about have been ameliorated by the very forces it is condemning. The document lacked subtlety and nuance – I am sure there is an explanation. But man oh man, if anything is going to drive me out of the Catholic Church for good, that kind of a document might be it.

Have a nice week and 4th of July. We are still allowed to celebrate the 4th of July, right?


No doubt I’d have chosen biotechnology research. The field was not as developed when I was in college, plus I stupidly decided that a tiny liberal arts college was a perfect place to go to study physics.

I can’t think of many better fields that have the potential to help humanity in so many ways, to improve our soil, water, food, farms, families, health and way of life. Plus, it’s super interesting. If I accomplish anything as a social scientist it would be to fertilize the institutional and intellectual soils so that more people become interested in fields as such, that help consumers become more accepting of fields as such and to encourage entrepreneurship in fields as such. Enviropigs and peel-able pomegranates are barely surface scratchers.

Inconvenient Truths

One for each side of the aisle today. Note that truths is not really the right word, these are small steps towards coming to truths.

(1) For my friends on the Right: Welfare reform in the 1990s decreased incidence of single motherhood.

(2) For my friends on the Left: The housing crisis was an issue of prime borrowers defaulting with little to no to negative equity and not primarily an issue with subprime borrowers. And this, “Housing traits, race, initial income, and speculators did not play a meaningful role, and initial leverage only accounts for a small variation in outcomes of prime and subprime borrowers.”

Here is David Friedman on the state of science and debate, using examples from Climate:

I believe I have shown that John Cook, lead author of the article commonly cited for the claim that 97% of climate scientists support AGW, has lied in print about his own work. My argument assumed that Cook et. al. 2013 was itself honest, but other people have offeredgood evidence that it is not.
It is not surprising if there are some dishonest people on one side, or the other, or both of the climate controversy. A more interesting question is whether there are any honest people. Can anyone point at a prominent supporter of action to prevent warming who has publicly rejected Cook et. al. 2013 or its author?
The same question can be asked of the other side. Are there prominent articles criticizing the campaign to prevent warming that are clearly dishonest, clearly enough so that someone with no commitment to either side of the controversy would recognize them as such? If so, have they been publicly rejected by anyone on that side?
Believe it or not, I found this bit from Vox to be germane to the climate wars too (and to labor market regulation in general):
  • Reproductive rights activists oppose ASC requirements, arguing that abortion clinics are safe as is, and that the requirement places an unbearably expensive burden on clinics.

    [Center for Reproductive Rights]

Of Interest

1. “Forest carbon sequestration associated with increased harvests for bioenergy would be offset by new forest growth given sufficient time.” In other words, the amount of carbon dioxide in the atmosphere that matters for climate change is cumulative, so it doesn’t matter whether we sequester (or cut) carbon today versus out in the future. This point is rarely made. That article was from Resources for the Future.

2. The President of the Federal Reserve Bank of Minneapolis is joining our department. He is probably a wee-better candidate to teach our Banking course than yours truly.

Of the 37 solar panel producers rated by this index, a Chinese manufacturer rated the cleanest. 

By the way, I am looking forward to the day when labeling activists demand that solar panels have their carbon emissions, energy and water footprints labeled on them.

I read a scientist who indicated that coffee was a natural source of endocrine disrupting chemicals. I look forward to warning labels on coffee. Perhaps more disconcerting, I am trying to find lists of natural sources of these chemicals, and I cannot find them. Why?

By the way, organic pesticides are not a synonym for “non-toxic” pesticides.

Have a lovely weekend.

Freedom of Contract

Sounds like a radical-contractarian to me!

“With ______ , a business owner and the employees negotiate an

agreement that works for them both. The agreement allows each party to prioritize what is

important to them,” Hicks said in a statement. “This provision gives the parties the option, the

freedom, to negotiate that agreement. And that is a good thing.

I couldn’t have said it better myself. Oh, that was from the Los Angeles County Federation of Labor, the organization behind the Raise the Wage coalition.

I’ll withhold emotional commentary for now since it is not going to be charitable. The wonderful Coyote shares this with us, and I think my former student Nick F.’s insights on the race wars apply here too:

The brief time I led the Equal Marriage Arizona efforts to amend the Constitution to allow gay marriage was a real eye-opener for me.  I expected that since I was not a member of the largest gay activist groups, I might have to work to build up trust.  But it turned out, trust was not an issue.  I seldom had anyone question my sincerity.  However, I quickly found all the major gay rights groups (excepting the ACLU, bless their hearts) not just neutral or skeptical but actively opposing our effort.  Several people in these organizations dragged me in the figurative back room and explained that the leadership of their group would never accept a non-Democrat getting credit for such a success.  And one member of prominent organization (hint:  has same initials as Hillary Rodham Clinton) told me that their internal position was that they did not want gay marriage to come to Arizona untilafter 2016 because they wanted Hillary to be able to run on the issue and hoped to flip AZ blue in 2016.

So, a couple of years ago I would never have believed this story, but now it seems all too familiar

Just this week, legislators introduced a bill that would encourage drug companies to apply to sell contraceptives without a prescription.

But if Republican Sens. Cory Gardner of Colorado and Kelly Ayotte of New Hampshire, along with four other GOP senators, were expecting flowers from Planned Parenthood and others for their bill, the Allowing Greater Access to Safe and Effective Contraception Act, they should brace for disappointment. Suddenly, the idea doesn’t sound so great, and the former supporters aren’t mincing words.

Planned Parenthood president Cecile Richards said the bill is a “sham and an insult to women.”

Karen Middleton of NARAL Pro-Choice Colorado even got personal, saying, “Cory Gardner can’t be trusted when it comes to Colorado women and their health care.”…

Beneath the fear-mongering lies the more likely reason for the change of heart on the left. The bill was simply introduced by the wrong party.


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