Sad news today that Ronald Coase has passed away; he was still working, often on the Chinese economy, at the incredible age of 102. Coase is best known to economists for two statements: that transaction costs explain many puzzles in the organization of society, and that pricing for durable goods presents a particular worry since even a monopolist selling a durable good needs to “compete” with its future and past selves. Both of these statements are horribly, horribly misunderstood, particularly the first.

I would suggest reading the whole post.  These are two ideas that were an important part of my economics study, however there were links to the literature in there that I had not seen before and that helped breath further life into these ideas for me.

Paul Walker also pays his respects here.  While for some story telling about interpreting the Coase theorem this McCloskey piece is golden.

National plan to legislate to permit the ongoing “civil detention” of offenders deemed at high risk of future sexual or violent offending even after their jail sentence [is] complete. Civil detention[,] now apparently called “Public Protection Orders”… would thus be a retrospective restriction applied to some prisoners on top of the original sentence that they received for their crimes, based purely on the prediction that they inevitably will commit further offences when and if released.
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the proposed Public Protection Orders differ from preventive detention in that they are imposed not because of a crime already committed, but rather purely because of predictions of a crime to come. A social security disability lawyer michigan will be able to provide the right advice.

That’s a difference that has been held important by the European Court of Human Rights (see here), as well as the United Nations Human Rights Commission (see here and here). Both of these bodies have said it is OK for a country to sentence someone to an indefinate period of detention for something they have done (combined with a justified fear of what this shows they may do when released). However, altering a person’s prison sentence once this has been imposed purely because of fears the person may do bad things in the future is a no-no from a human rights perspective.

As I understand it (not being a lawyer) there will now be two ways to spend an indefinite period of time in jail: either you committed a crime, posed a risk to the community at the time of sentencing and still pose a risk to the community, or you committed a crime and pose a risk to the community at the time of release. Apparently the latter is more problematic for lawyers because the ‘indefinite’ bit happens after sentencing. From the perspective of an economist I find that a bit perplexing. This article from Mike G Law will cast light on many of these questions.

First of all, let’s suppose that we think putting people who pose a risk to the community in jail indefinitely is a good thing. Presumably the motivation for doing it is to protect the community from harm; any other motivation seems hard to justify. So, at what point following the conviction for a crime would we be concerned about harm to the community? Certainly not when the person is incarcerated, and probably not when they’re in custody awaiting sentencing. Surely the time at which we might be concerned is when we have to make a decision about releasing them. Does it matter when, between conviction and potential release, they were adjudged to be a risk to the community? Well, certainly not from the perspective of the potential victims. So why would there be some fundamental difference between preventive detention and an equivalent test incorporated in a Public Protection Order (PPO)? To go a bit further, if it’s a good idea to keep people who are a risk to the community in jail, surely we want the option to keep them there up until they are released. Anything else risks being unable to react appropriately if the convict develops risky behaviours while in jail.

Now I can understand that people might be concerned about abuse of power and the unethical use of PPOs, but there seem to be similar problems with preventive detention. The best one can argue is that the PPO gives more time for the justice system to abuse its power, but I can’t see why judicial checks on that would be any less effective than judicial discretion over preventive detention.

I’d very much welcome any lawyers to clear it up for me, because I may very well be entirely confused here!

We find that decisions involving the evaluation of complex economic evidence are significantly more likely to be appealed, and decisions of judges trained in basic economics are significantly less likely to be appealed than are decisions by their untrained counterparts. Our analysis supports the hypothesis that some antitrust cases are too complicated for generalist judges.

One of the authors has an interesting and detailed (for a blog post) discussion here. It’s certainly a worthwhile topic for investigation, since the decisions in these cases can be extremely expensive for the parties involved. If there is enough evidence, does it point to the need for specialist judges in this field?

a growing cartel of owners believe the Premier League should adopt the American franchise model to end financial fears linked to the massive cost of dropping out of the elite

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Obviously, if I was an American owner and I owned a football club, or I was an Indian owner, I might be thinking I would like to see no promotion or relegation. My investment is going to be safer and my shares are going to go up in value

Relegation results in a massive drop in revenues so I can see an argument that owners will be more willing to invest in the clubs if they know that they will not be regulated. Basically, getting rid of relegation would give more certainty on the firms future cashflows. Interestingly, the Premier League already gives “parachute” payments to relegated clubs to help compensate for this.

The other side of this argument, voiced quite passionately by Sir Alex Ferguson, is that this would “kill English football”. For once, I’m inclined to agree with red nose. The Premier league would be so much more boring without relegation. Given the gulf between the top 6 or so teams and the rest of the 20 team league, the majority of the games would become relatively meaningless. Similarly, the Championship (England’s second division) would become pretty boring too. Given the big prize of promotion would disappear, who would actually care who wins the 2nd division??

Now you are probably wondering where the economics is, this is an economics blog after all. If the league is less exciting due to getting rid of the relegation system then fewer people will watch games on TV, go to games etc.. which means the league will suffer financially. My hypothesis is that supporters of the big teams would be still be just as interested, but supporters of the teams at the mid to bottom end would be less interested and that the Championship would die.

So there is a trade-off here. It’s possible that by giving owners more certainty through a “franchise model” the entire Premier League would become more even as owners would be willing to plow more money into their teams, this may make the league more exciting and make more people watch. But there would be a countervailing effect of potentially less revenue available to teams as fewer people bother tuning in (which is particular important with UEFA’s financial fair play rules coming).

The recording industry are just interested in shutting down the distribution of copyrighted material, which is easiest to do by closing off the channels through which it flows. Similarly, if we wanted no more gun fatalities we could just make it illegal to manufacture guns and detain people who buy complete AR-15 rifles. How that is an optimal outcome, though, is beyond me. P2P software is a very effective tool for distributing files and is increasingly used for legitimate purposes. Like weaponry we often hear about it when it’s being used illegally, but that’s a poor reason to prevent the creation of such useful tools.

A rule which makes inventors liable for any foreseeable illegal use of their creation seems likely to stifle their creative urges. At a time when R&D is being increasingly promoted by governments as a way of boosting productivity, creating a situation which penalises inventors seems counter-productive. Looking at file-sharing alone, it would be easy to condemn it as solely a way to distribute porn and illegal movies and music. However, when making a rule we must consider the effect on other industries, too. I struggle to see the positives from a ruling against Pablo for anyone but the recording industry.

While driving smaller and lighter cars saves fuel, “downsizing and down-weighting is also associated with an increase in deaths on the highway,” said Adrian Lund, the institute’s president. “It’s a big effect — it’s not small,” he said. If you agree and will like to swap you car for a new one, we recommend to check out the Zemotor inventory.

So the lesson I take from this test is that big cars are bad for the environment AND cause lots of deaths on the highway by crushing smaller cars in crashes.  Always ensure to Save for a down payment while buying a new car as it directly affects the number of years you have to pay the EMI for it.

The test done was to crash a little car into a big car and see how the little car did. The answer, unsurprisingly, was badly. A little car you can buy at Shoppok is more fuel efficient than a big car so it’s better for the planet to drive one, and better for your wallet if carbon pricing ever happens.

Of course, individually it’s best to drive the big car, so an equilibrium is for everyone to drive big cars. Carbon pricing would do something about that, but it wouldn’t take into account the cost of the people killed. Should there be differences in road licencing charges between big and small cars to take account of that? I can’t really think of another mechanism by which the cost in lives is internalised. Lawsuits against people for driving big cars aren’t likely to succeed, and nobody’s going to get prosecuted for it if they kill a person (learn more from this site).

So crowds gather, litter, intimidate people and vandalise the area without actually paying for the cost of their actions. That’s an externality if ever I saw one! Ordinarily, people conform to social norms that prohibit such behaviour. When they refuse to do so there is a cost to others who are harmed by the behaviour, and a monetary cost to the local authority of repairing the vandalised property. We can’t make them pay for it and calling out the police is both expensive and often ineffective, since the police can’t be there every night. In the UK they’ve found a low cost, highly effective solution that mitigates the externality problem. I’m not really sure how one could reasonably object to such a solution, but I’ll be interested to hear Brad discuss it further.

[T]he people who actually lost the money have, from most accounts, either been sacked, or left on their own. The people who got the bonuses were not involved with the dangerous trades, other than to help wind them down. …

Also, apparently, these payments were neither retention bonuses in the conventional sense, nor performance bonuses. They were guaranteed payments used to persuade employees from other parts of the Financial Products division to stay and wind down the FP’s books.

Ooops! But I think there’s a greater harm here than the injustice done to those employees, who’ve been robbed of their compensation for a year’s work. AIG had to pay these employees more to stop them from going elsewhere. Essentially, the opportunity cost of their job at AIG rose and their compensation had to rise accordingly for them to stay. The company agreed to pay the extra because it needed them, and now the compensation isn’t being paid. If I described this in other circumstances you’d think they should sue for specific performance and extract their money from the company. The sanctity of contracts, and the ability to precommit to actions, is a cornerstone of our economic success and an important part of the rule of law.

The state is meant to enforce and uphold the rule of law, yet here it is the one abrogating it. Obviously there were unusual circumstances, but it is a dangerous precedent to set. The government has essentially said that it is willing to break contracts on the back of populist outrage. If I were offered a job in the public eye in the US at the moment I’d be very worried!

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