Archives: October, 2009

First Amendment Exceptions

The Supreme Court today is considering the case of United States v. Stevens, a challenge to a 1999 federal law outlawing depictions of animal cruelty. The government says that such depictions are “unprotected” speech. Many First Amendment advocates and news organizations are supporting the challenge to the law.

It seems an easy enough case to decide, given the plain language of the First Amendment:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, except in the case of depictions of animal cruelty.


For a more substantive discussion of the issues in United States vs. Stevens, see the Cato Institute’s amicus curiae brief.

Congress Shall Make No Law … But Regulators Act Anyway

Lovers of free speech should feel their stomachs turn when they look at the actions of the Federal Trade Commission and Federal Communications Commission these days.

Not that they took a sharp turn with the Obama administration, or with the chairmanships of Jon Leibowitz or Jules Genachowski. These are run-of-the-mill bureaucracies, constantly reaching for new powers, nevermind even constitutional limits on the federal government’s authority.

Item 1: Blogger, You’re an Advertiser Now

Via the L.A. Times blog, the FTC issued a guidance document yesterday requiring bloggers who write testimonials about products to disclose large gifts or payments, or they will run afoul of the FTC’s regulations on advertising.

Is that the right thing to do? Yep. Is that an appropriate thing to require in federal law? Absolutely not.

The FTC is putting itself in the business of guaranteeing the veracity of speech and the honesty and straightforwardness of bloggers. “No” means no law abridging the freedom of speech or of the press.

The “protection” in this regulatory scheme encourages consumers to be supine and irresponsible. State law should deal with frauds as they occur. There should be no law barring or limiting paid endorsements — certainly not a federal law.

Item 2: An Establishment of the Press?

Via the Examiner, it probably didn’t occur to the framers of the constitution to bar the government from establishing its own press, so they didn’t do that in the First Amendment. But we’re heading down that road, and the FTC wants to take us there.

In early December, it will hold a “workshop” called ”From Town Criers to Bloggers: How Will Journalism Survive the Internet Age?”

Here’s an idea for a “workshop”: Taking the Budget of the Federal Trade Commission and Giving it Back to Taxpayers.

Item 3: Just a Modest Takeover of the Communications Infrastructure

As discussed here several times before, FCC Chairman Genachowski has proposed to regulate the terms on which Internet service providers supply broadband services to the public. It’s pretty much the same thing as regulating how printing presses work, or the delivery decisions of newspapers.

The federal government is specifically disabled from regulating speech and the press in the constitution. But in various ways the regulators at the FCC and FTC have talked themselves into the role of censor.

Enough of this unconstitutional consumer coddling. It’s time to shut these agencies down and restore the funds that support them to American taxpayers. Now that would be a consumer protection!

An early version of this post collapsed the FTC and FCC together. Author Jim Harper swears he knows the difference and claims he was briefly blinded with rage at unconstitutional government. Jim thanks the Cato@Liberty reader who slapped him around, getting him focused once again on *happily* railing against unconstitutional government.

Hawks and Havens

The Washington Post’s oped page is a safe haven for hawks.  Today we have Michael O’Hanlon and Richard Cohen fighting for the war in Afghanistan.

O’Hanlon is for generals respecting the president’s policy decisions, except when he isn’t – cases where the general is obviously right, in that he agrees with O’Hanlon. (To me, this McChrystal incident shows the robustness of civilian control. McChrystal spoke too freely and got rebuked. The Republic seems OK. So does the Army.)

O’Hanlon’s other goal is to attack those who want to limit the objectives in Afghanistan to counter-terrorism. To do so, he imputes his nation-building goals to the less ambitious strategy. He says we tried the narrow mission under Bush and it failed.

A. Not really. Does this, for example, sound like counter-terrorism?

B. It only failed to achieve the counterinsurgency strategy’s (maybe impossible) objectives of a stable, centralized state in Afghanistan. A counter-terrorism (or go small) strategy sacrifices some probability of heightened stability for less cost in blood and dollars. We have been doing fine at counter-terrorism all along, largely because al Qaeda is overrated. Afghanistan is not a terrorist haven anymore.

O’Hanlon also says that we won’t collect as much intelligence without a full-scale counterinsurgency. Again, this is true, but insufficient. A smaller footprint provides benefits (less radicalization, less cost) that we exchange, in a sense, for lost intelligence-gathering opportunities. In any case, intelligence needed to target airstrikes can come from allies on the ground, intercepts, and overhead surveillance, as in Pakistan. Progress in surveillance and strike capability and the will to use it means that a rerun of the 1990s, where al Qaeda was safe in Afghan camps, is a phony nightmare. O’Hanlon also claims that absent a large U.S. ground force, we would have to offshore all UAV bases that range western Pakistan. This is a pessimistic assessment; we could defend most of our airfields with a limited force in Afghanistan, and we have at least one UAV base in Pakistan.

Cohen calls Obama soft for letting McChrystal run amok, ignoring the fact that both the Secretary of Defense and the National Security Adviser publicly rebuked him.  Cohen approvingly cites Obama’s foolish claim that Afghanistan is a war of necessity. One can’t say enough that this is senseless; even wars of pure self-defense aren’t strictly necessary, and Afghanistan, at this point, isn’t that.  He then drops the dominos. Should we leave, he says, the Taliban will take over Afghanistan and then Pakistan, grabbing nukes. India then invades Pakistan, and we get 1947, but nuclear. He doesn’t say how the Taliban columns advancing on Kabul will suppress our airpower. The widespread Afghan and Pakistani hostility to the Taliban – especially among the non-Pashtuns who support and dominate both governments – doesn’t impress him. He doesn’t mention the fact that the Pakistani military keeps close hold on its nukes, no matter who is officially in power.  One could go on, but suffice it to say that there is an equally plausible worst-case scenario that results from following Cohen’s advice and expanding the war.

To be fair though, Cohen is a clear-eyed realist compared to Daniel Twining, who writes for Foreign Policy’s Shadow Government blog. Twining sees the war in Afghanistan as a means to keep Russia in a box, China down, India up, world trade humming, and the current international order, whatever that is, intact. I’m not going to bother to explain how all this works, but I picture the causal diagram as somewhat psychedelic. It’s almost like a parody of Jack Synder’ work on imperial myths, like he missed the part of the story where it says these aren’t theories you copy but BS people use to sell wars.

For a relatively coherent version of the idea that we should fight in Afghanistan to help Pakistan, read Steve Biddle. Biddle has two arguments that he thinks are one – that instability in Afghanistan will spread to Pakistan and that Taliban power in Afghanistan (not the same thing as instability) will provide extremists a base to attack Pakistan’s government. One problem with the first claim is that historically Afghanistan’s troubles have not destabilized Pakistan. The second argument struggles with the fact that we likely cause insurrection among Pashtun Pakistanis by warring with their Afghan cousins. And, as Justin Logan and Matt Yglesias note, the Taliban was in power for Afghanistan for years while Pakistan did OK, and many Pakistani elites want it back.

Limitations of Bank Capital Regulation

Politicians and bank regulators across the world have come to the conclusion that excessive leverage, that is too much debt relative to equity, contributed to the depth of our recent financial crisis.  Their solution:  require banks to have more capital.  If only it were so easy.

As Raghuram Rajan points out in a recent piece for the Financial Times, “banks will not be passive in the face of regulatory change.”  Indeed, they will not.  For instance, if you simply double a bank’s minimum required capital, the bank could respond by doubling the risk of loans on its portfolio.   You move capital 8% to 16%, the bank can makes loans that default with expected losses at 16% and you haven’t done anything to reduce the risk in the system.

The problem with excessive leverage in our financial system was not that there was too much debt, but that debt-holders believed they would be bailed-out and hence provided little to no monitoring of bank activities.  Reducing leverage does not increase the incentives of debt-holders to monitor, in fact it may reduce it, because debt-holders will now believe there is an even bigger cushion before they take any losses.

Why is it important for debt-holders to monitor the behavior of banks anyway?  Because they are the largest piece of a bank’s capital structure.  With an 8% equity stake, debt makes up 92% of the capital structure; with even a 16% equity stake, debt is still 84% of the capital structure.  If there is no market discipline on debt-holders, then we essentially have no market discipline.

So how then to give debt-holders the appropriate incentives to monitor bank behavior?  Quite simple, put them on the hook for losses.  Rajan suggests we create “contingent capital” - debt that would convert to equity if capital levels fell below a certain level.  While the devil is in the details, providing some system to impose losses on debt-holders is essential if we ever want to have functioning financial markets.  Simply raising capital requirements does not solve that problem.

Throwdown with Charles Murray

In a response to my post this morning, Charles Murray remains unconvinced that changes to our school system could result in dramatic improvements in educational outcomes.

He asks to see the scholarly study showing that a school has miraculously boosted achievement above the norm. In one way, this hurdle is too low, and in another it’s too high.

If we could only point to a single study of a single school, it wouldn’t instill much confidence in the generalizability of the phenomenon. A consistent pattern of scholarly results is necessary for that. On the other hand, asking for “miraculous” improvement is a needlessly high standard. My disagreement is with Murray’s earlier, lower threshold claim that:  “reforms of the schools can never do more than produce score improvements at the margin.”

Let’s call a marginal improvement an increase of less than .15  standard deviations above the current mean (typically considered a “small” effect in the social sciences). Taking that as our litmus test, is there a consistent pattern of scholarly evidence that better school system design can boost achievement by more than .15 standard deviations? Yes.

education markets v monopolies -- coulson

That pattern is presented in the figure above, drawn from my recent review of the global econometric literature comparing educational outcomes across different types of school systems. The figure relates the number of statistically significant findings favoring free education markets over state school monopolies (in white), significant findings of the reverse (in light grey), and insignificant findings (in dark grey). Markets beat monopolies by a ratio of 15 significant findings to 1, across the seven educational measures for which data are available.

While a few of these findings have small effect sizes, many are above .15 standard deviations – some of them well above it. A paper by Tooley, Dixon, Bao, and Merrifield (under consideration by the journal Economics of Education Review), for instance, finds that in Nigeria private schools outscore public schools by double that amount, after controls, while “in Delhi and Hyderabad private unrecognized schools top state-run schools in math instruction by about 2/3 of a standard deviation.” A recent randomized assignment study of the DC voucher program finds that voucher students who’ve been in the program for three years are reading two grade levels ahead of their public school peers (.42 std deviations), though the average voucher is worth only a quarter of what DC spends per pupil on public k-12 education.

These are more than marginal improvements, and they are part of a consistent pattern. That pattern strongly suggests that moving from our current monopoly school system to a free and competitive education marketplace would shift the bell curve of academic achievement significantly to the right, raising the mean achievement substantially above its current level.

No one should be surprised by that. Imagine how far the bell curve for median income across modern nations would shift to the left if all free markets were supplanted with centrally planned monopolies such as have ruined the economies of Cuba, North Korea, and until recently many other nations.

Why Is For-Profit Education So Difficult in the U.S.?

Matt Yglesias has a post up looking at the PISA scores, and he seems to imply that for-profit schooling has been tried and found wanting in Sweden and the U.S.:

The big difference is that many Swedish charters are run by for-profit firms. We’ve had some experiments with that in the U.S. and it hasn’t worked very well. Nobody’s really found a great way of making consistent profits running K-12 schools in America.

Of course even he notes that Sweden’s schools are highly regulated by the state.

And in the U.S., the difficulty of succeeding in for-profit education just might have something to do with that government monopoly on k-12 education and the $560 billion or so in tax revenues that fund it. Maybe.

Political Prisoners in Venezuela: Where Is the Organization of American States?

The Washington Post has a great story today on the swelling number of political prisoners in Venezuela. As the story points out, the government of Hugo Chávez is increasingly targeting university students who have been active in the opposition movement. They are jailed under bogus charges of “destabilizing the government,” or “inciting civil war.”

Unfortunately, despite stories and numerous reports from international media outlets and human rights groups, the Organization of American States—which has been very active in trying to reinstall Manuel Zelaya to the Honduran presidency—has remained silent on this issue. Last week, dozens of students went on a hunger strike in front of the OAS headquarters in Caracas, but no official from that organization came out to meet them. After several days some students were allowed to talk with the OAS ambassador in Caracas, who put them in touch with the director of the Inter-American Commission on Human Rights (IACHR). Jose Manuel Insulza, secretary general of the OAS, then asked the Venezuelan government to authorize the visit of a delegation of the IACHR, a request that hasn’t been granted. Judging by the lack of follow up efforts, the OAS, made up of a majority of countries that receive Venezuelan largesse of some form, seems mostly uninterested in pressing this issue.

The OAS seems ready to help deposed would-be autocrats in Latin America. Where is it when it comes to defending the rights of political prisoners in Venezuela?