Monthly Archive for June, 2007

Common Sense?

Supreme Court Chief Justice John Roberts, in his majority opinion ruling that race cannot be a factor in the assignment of children to public schools, wrote,

“The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.”

Clarence Thomas, the only black Supreme Court justice, in his concurring opinion wrote,

“ Every time the government uses racial criteria to ‘bring the races together,’ someone gets excluded, and the person excluded suffers an injury solely because of his or her race.”

and…

“It is the height of arrogance for Members of this Court to assert blindly that their motives are better than others.”

and…

“The Constitution enshrines principles independent of social theories.”

“Indeed, if our history has taught us anything, it has taught us to beware of elites bearing racial theories.”

For more on todays ruling go here, here, and here.

Fed Chair On Free Trade and Globalization

Ben Bernanke gives his thoughts on Globalization:

Trade benefits advanced countries like the United States, but open trade is, if anything, even more important for developing nations. Trade and globalization are lifting hundreds of millions of people out of poverty, especially in Asia, but also in parts of Africa and Latin America. As a source of economic growth and development in poor countries, trade is proving far more effective than traditional development aid.

To sum up, international trade in goods, services, and assets, like other forms of market-based exchange, allows us to transform what we have into what we need or want under increasingly beneficial terms. Trade allows us to enjoy both a more productive economy and higher living standards.

With our strong institutions, deep capital markets, flexible labor markets, technological leadership, and penchant for entrepreneurship and innovation, no country is better placed than the United States to benefit from increased participation in the global economy. If we resist protectionism and isolationism while working to increase the skills and adaptability of our labor force, the forces of globalization and trade will continue to make our economy stronger and our citizens more prosperous.

His full remarks can be found here.

Quote Of The Day

“Is your employer poorer by the amount of money he pays you? Probably not, or you would never have been hired. Why then should we assume that a corporation or its customers are poorer by the amount paid to its chief executive officer?” — Thomas Sowell

The Poor Are Getting Richer

From the Wall Street Journal:

A new study by the Congressional Budget Office says the poor have been getting less poor. On average, CBO found that low-wage households with children had incomes after inflation that were more than one-third higher in 2005 than in 1991.

The CBO results don’t fit the prevailing media stereotype of the U.S. economy as a richer take all affair — which may explain why you haven’t read about them. Among all families with children, the poorest fifth had the fastest overall earnings growth over the 15 years measured. (See the nearby chart.) The poorest even had higher earnings growth than the richest 20%. The earnings of these poor households are about 80% higher today than in the early 1990s.

What happened? CBO says the main causes of this low-income earnings surge have been a combination of welfare reform, expansion of the earned income tax credit and wage gains from a tight labor market, especially in the late stages of the 1990s expansion. Though cash welfare fell as a share of overall income (which includes government benefits), earnings from work climbed sharply as the 1996 welfare reform pushed at least one family breadwinner into the job market.

Earnings growth tapered off as the economy slowed in the early part of this decade, but earnings for low-income families have still nearly doubled in the years since welfare reform became law. Some two million welfare mothers have left the dole for jobs since the mid-1990s. Far from being a disaster for the poor, as most on the left claimed when it was debated, welfare reform has proven to be a boon.

The report also rebuts the claim, fashionable in some precincts on CNN, that the middle class is losing ground. The median family with children saw an 18% rise in earnings from the early 1990s through 2005. That’s $8,500 more purchasing power after inflation. The wealthiest fifth made a 55% gain in earnings, but the key point is that every class saw significant gains in income.

There’s a lot of income mobility in America, so comparing poor families today with the poor families of 10 years ago can be misleading because they’re not the same families. Every year hundreds of thousands of new immigrants and the young enter the workforce at “poor” income levels. But the CBO study found that, with the exception of chronically poor families who have no breadwinner, low-income job holders are climbing the income ladder.

When CBO examined surveys of the same poor families over a two year period, 2001-2003, it found that “the average income for those households increased by nearly 45%.” That’s especially impressive considering that those were two of the weakest years for economic growth across the 15 years of the larger study.

One argument was whether welfare reform would help or hurt households headed by women. Well, CBO finds that female-headed poor households saw their incomes double from 1991 to 2005, and the percentage of that income coming from a paycheck rose to more than a half from one-third. The percentage coming from traditional cash welfare fell to 7% from 42%. Poor households get more money from the earned income tax credit, but the advantage of that income-supplement program is that recipients have to work to get the benefit.

The poor took an earnings dip when the economy went into recession at the end of the Clinton era, but data from other government reports indicate that incomes are again starting to rise faster than inflation as labor markets tighten and the current economic expansion rolls forward.

It’s probably asking way too much for this dose of economic reality to slow down the class envy lobby in Washington. But it’s worth a try.

The full article can be found here.

Quote Of The Day

“The principal way rich countries disadvantage the poor world is not through unfair trade, or through intrusive and ineffective aid, or by forcing repayments of debts. The primary policy pursued by every rich country is to prevent unskilled labor from moving into their countries. And because unskilled labor is the primary asset of the poor world, it is hard to even imagine a policy more directly inimical to a poverty reduction agenda or to “pro-poor growth” than one limiting the demand for unskilled labor (and inducing labor-saving innovations).” — Lant Pritchett, writing in EconLog with commentary by Arnold Kling here

Studies Say Death Penalty Deters Crime

Yahoo News Reports what common sense already tells us:

Studies say death penalty deters crime

By ROBERT TANNER, AP National Writer Sun Jun 10, 2:01 PM ET

Anti-death penalty forces have gained momentum in the past few years, with a moratorium in Illinois, court disputes over lethal injection in more than a half-dozen states and progress toward outright abolishment in New Jersey.The steady drumbeat of DNA exonerations — pointing out flaws in the justice system — has weighed against capital punishment. The moral opposition is loud, too, echoed in Europe and the rest of the industrialized world, where all but a few countries banned executions years ago.

What gets little notice, however, is a series of academic studies over the last half-dozen years that claim to settle a once hotly debated argument — whether the death penalty acts as a deterrent to murder. The analyses say yes. They count between three and 18 lives that would be saved by the execution of each convicted killer.

The reports have horrified death penalty opponents and several scientists, who vigorously question the data and its implications.

So far, the studies have had little impact on public policy. New Jersey’s commission on the death penalty this year dismissed the body of knowledge on deterrence as “inconclusive.”

But the ferocious argument in academic circles could eventually spread to a wider audience, as it has in the past.

“Science does really draw a conclusion. It did. There is no question about it,” said Naci Mocan, an economics professor at the University of Colorado at Denver. “The conclusion is there is a deterrent effect.”

A 2003 study he co-authored, and a 2006 study that re-examined the data, found that each execution results in five fewer homicides, and commuting a death sentence means five more homicides. “The results are robust, they don’t really go away,” he said. “I oppose the death penalty. But my results show that the death penalty (deters) — what am I going to do, hide them?”

Statistical studies like his are among a dozen papers since 2001 that capital punishment has deterrent effects. They all explore the same basic theory — if the cost of something (be it the purchase of an apple or the act of killing someone) becomes too high, people will change their behavior (forego apples or shy from murder).

To explore the question, they look at executions and homicides, by year and by state or county, trying to tease out the impact of the death penalty on homicides by accounting for other factors, such as unemployment data and per capita income, the probabilities of arrest and conviction, and more.

Among the conclusions:

• Each execution deters an average of 18 murders, according to a 2003 nationwide study by professors at Emory University. (Other studies have estimated the deterred murders per execution at three, five and 14).

• The Illinois moratorium on executions in 2000 led to 150 additional homicides over four years following, according to a 2006 study by professors at the University of Houston.

• Speeding up executions would strengthen the deterrent effect. For every 2.75 years cut from time spent on death row, one murder would be prevented, according to a 2004 study by an Emory University professor.

In 2005, there were 16,692 cases of murder and nonnegligent manslaughter nationally. There were 60 executions.

The studies’ conclusions drew a philosophical response from a well-known liberal law professor, University of Chicago’s Cass Sunstein. A critic of the death penalty, in 2005 he co-authored a paper titled “Is capital punishment morally required?”

“If it’s the case that executing murderers prevents the execution of innocents by murderers, then the moral evaluation is not simple,” he told The Associated Press. “Abolitionists or others, like me, who are skeptical about the death penalty haven’t given adequate consideration to the possibility that innocent life is saved by the death penalty.”

Sunstein said that moral questions aside, the data needs more study.

Critics of the findings have been vociferous.

Some claim that the pro-deterrent studies made profound mistakes in their methodology, so their results are untrustworthy. Another critic argues that the studies wrongly count all homicides, rather than just those homicides where a conviction could bring the death penalty. And several argue that there are simply too few executions each year in the United States to make a judgment.

“We just don’t have enough data to say anything,” said Justin Wolfers, an economist at the Wharton School of Business who last year co-authored a sweeping critique of several studies, and said they were “flimsy” and appeared in “second-tier journals.”

“This isn’t left vs. right. This is a nerdy statistician saying it’s too hard to tell,” Wolfers said. “Within the advocacy community and legal scholars who are not as statistically adept, they will tell you it’s still an open question. Among the small number of economists at leading universities whose bread and butter is statistical analysis, the argument is finished.”

Several authors of the pro-deterrent reports said they welcome criticism in the interests of science, but said their work is being attacked by opponents of capital punishment for their findings, not their flaws.

“Instead of people sitting down and saying ‘let’s see what the data shows,’ it’s people sitting down and saying ‘let’s show this is wrong,'” said Paul Rubin, an economist and co-author of an Emory University study. “Some scientists are out seeking the truth, and some of them have a position they would like to defend.”

The latest arguments replay a 1970s debate that had an impact far beyond academic circles.

Then, economist Isaac Ehrlich had also concluded that executions deterred future crimes. His 1975 report was the subject of mainstream news articles and public debate, and was cited in papers before the U.S. Supreme Court arguing for a reversal of the court’s 1972 suspension of executions. (The court, in 1976, reinstated the death penalty.)

Ultimately, a panel was set up by the National Academy of Sciences which decided that Ehrlich’s conclusions were flawed. But the new pro-deterrent studies haven’t gotten that kind of scrutiny.

At least not yet. The academic debate, and the larger national argument about the death penalty itself — with questions about racial and economic disparities in its implementation — shows no signs of fading away.

Steven Shavell, a professor of law and economics at Harvard Law School and co-editor-in-chief of the American Law and Economics Review, said in an e-mail exchange that his journal intends to publish several articles on the statistical studies on deterrence in an upcoming issue.

Of particular importance is this line, “Each execution deters an average of 18 murders“. The full article can be found here. More here.