Supreme Court Deep-Sixes Federal Wetlands Regulation

From a news bulletin I just received from the enviro trade publication Greenwire:

Supreme Court limits reach of Clean Water Act in 5-4 ruling

A divided Supreme Court ruled this morning that Clean Water Act protection of “waters of the United States” is limited to “permanent, standing or continuously flowing” water. The ruling limits protection for wetlands separated from “navigable waters” or their tributaries.

Justice Anthony M. Kennedy cast the swing vote in the 5-4 ruling in the joint case, Rapanos v. United States and Carabell v. U.S. Army Corps of Engineers.

This is a big win for the good guys!

More here.

Thud, Part II

In an email, Stuart Butler of the Heritage Foundation took issue with my characterization of his proposal (which has now been introduced as federal legislation) to foster health policy experimentation among the states. So I thought I might elaborate. (Readers can get the particulars of the proposal in Stuart’s paper.)

The system Stuart proposes seems predisposed to increase government health care spending and to produce little or no free-market reform.

Under his proposal, states would petition Congress for the funding or flexibility to experiment with different reforms within their borders. If the past is any guide, states would be more likely to request more federal money than either deregulation or less federal money. For example, we could count on states to ask Congress to fund expansions of government programs or the creation of state-chartered “purchasing pools.” It is less likely that states would request market-based reforms, such as capping and block granting federal Medicaid spending. Proposals to expand health savings accounts or eliminate the exclusion for employer-sponsored insurance in certain states would never get off the ground, for they would run afoul of the Constitution’s requirement that “all Duties, Imposts and Excises shall be uniform throughout the United States.” (Stuart argues that “other site-specific programs involving federal tax changes, such as enterprise zones, have passed muster.” But even if we could have the feds devise different tax rules for different states, would we want them to?)

Even if some free-market reforms could get approved, they would be less likely to survive than big-government reforms. To qualify for reauthorization, reforms would have to meet “clear and measurable goals, including coverage increases and quality improvements.” Yet new government programs would always have an advantage at “increasing coverage” because the state could always claim “you’ve got Medicaid!” even if you can’t get a doctor’s appointment. Free-market reforms – by definition – do not force coverage on people. With regard to quality, government programs whose funding is in the balance could force delivery of whatever the feds label “quality” health care, even if some patients get hurt. Meanwhile, if patients’ preferences deviate from the quality measures, market-based reforms lose because markets actually try to satisfy those diverse preferences. Finally, government-expanding reforms generally bestow benefits on concentrated interests, while market-based reforms (e.g., HSAs) produce benefits that are more diffuse. Thus big-government reforms would have a leg up in the political process that sets and evaluates compliance with performance measures. In short, free-market advocates don’t exactly dominate health policy, and would not dominate this process. The proposal thus ignores the lesson of O’Sullivan’s First Law.

It’s not that this is designed to be a big-government proposal. But it is not designed to be a limited-government proposal, which makes it almost certain that it would be hijacked by the forces of big government. That is why my initial impression boiled down to: Congress creates a commission, gives more money to the states.

But hey, I might be wrong. I’d like to hear Stuart’s thoughts.

Gambling Advocacy Now Illegal in Washington State

Earlier this month, I posted about a disturbing new law in Washington State that would impose up to a five-year prison term for people who gamble online. The law’s supporters said not to worry: no one would be breaking into homes to arrest individual gamblers (though even before the law took effect, there was some evidence to the contrary). Now we find out that not only are Washington State authorities willing to go after individual gamblers, they’re using the law to go after people who merely write about gambling. A Seattle Times columnist writes:

The first casualty in the state’s war on Internet gambling is a local Web site where nobody was actually doing any gambling.

What a Bellingham man did on his site was write about online gambling. He reviewed Internet casinos. He had links to them, and ran ads by them. He fancied himself a guide to an uncharted frontier, even compiling a list of “rogue casinos” that had bilked gamblers.

All that, says the state — the ads, the linking, even the discussing — violates a new state law barring online wagering or using the Internet to transmit “gambling information.”

“It’s what the feds would call ‘aiding and abetting,’ ” says the director of the state’s gambling commission, Rick Day. “Telling people how to gamble online, where to do it, giving a link to it — that’s all obviously enabling something that is illegal.”

Uh-oh. This is starting to get a little creepy.

I’ll say. It gets worse. The state’s puritans anti-gambling cops also lashed out at the Seattle Times itself:

Gambling officials told me The Seattle Times may be afoul of the law because we print a poker how-to column, “Card Shark,” by gambler Daniel Negreanu. He sometimes tells readers to hone their skills at online casinos. And at the end of each column is a Web address, fullcontactpoker.com, where readers can comment.

If you type in that address, you whiz off to Negreanu’s digital casino based in the Antilles.

It’s a tangled Web, isn’t it? The state says we’d best do our part to untangle it.

“My suggestion to you is to remove from your paper any advice about online gambling and any links to illegal sites,” Day said.

So even this column could be illegal?

Unfortunately, columnist Danny Westneat closes the piece by arguing that the state’s law against online gambling is “legitimate;” it’s only the act of extending it to people who write about gambling, he asserts, that crosses the line. But as we’ve seen with the drug war, once you’ve given the state the power to enforce consensual crimes that take no victims, it’s only a matter of time before government makes the case that it can’t enforce those laws unless it’s given the power to encroach on other civil liberties.

More on Exclusionary Rule

I add a couple of provisos to Tim’s post below. Justice Kennedy’s concurrence makes clear there are not five votes to limit the exclusionary rule in other areas:

Today’s decision determines only that in the specific context of the knock-and-announce requirement, a violation is not sufficiently related to the later discovery of evidence to justify suppression. (emphasis added)

That being said, its true that Justice Scalia’s reasoning could be extended to other areas of the law if there is another retirement from the Court. Scalia’s arguments against exclusion are:

(1) that police discipline and public interest lawsuits are an effective deterrent to violations;

(2) that the costs of its application – letting the guilty go free on a technicality – are large;

(3) the violation is causally attenuated when the police could have discovered the evidence if they had complied with the law in a hypothetical counterfactual world.

As Prof. Tracey Maclin’s brief for Cato argues, why wouldn’t this reasoning also permit introduction of evidence in a case like United States v. Chadwick, where police had probable cause to search a 200-pound footlocker in their possession, but did not obtain a warrant before prying it open and uncovering marijuana? There’s no principled line to draw between a case like Chadwick, where police have probable cause and almost certainly could have discovered the evidence if they had complied with the warrant requirement itself, and Hudson, except stare decisis, once you accept Scalia’s policy arguments against the exclusionary rule. The implications of the decision for the warrant requirement is surely one of the most troubling aspects of the decision.

There is one ray of hope for the no-knock rule. In his concurrence, Kennedy says that a widespread pattern or practice of abusive entry is “grave cause for concern.” Translated from lawyer-ese, this underscores a threat to jurisdictions that systematically violate the no-knock requirement. That threat is class-wide Section 1983 damages under Monell v. Department of Social Services, which makes localities liable for a pattern or practice of police violations of constitutional rights. Were a majority of the Court willing to robustly police systemic knock-and-announce violations against municipalities through the vehicle of class-wide statutory damages, that might well force some systemic reform of police practices in troubled jurisdictions.

Conceivably, as a deterrent matter, this outcome might improve upon applying the exclusionary rule to enforce knock-and-announce violations. (If, after all, Hudson had come out the other way, we might have seen, as Justice Breyer notes, an expansion of “no-knock warrants” – warrants that excuse the cops, before the fact, from complying with the knock-and-announce requirement based on pre-search judicial findings of exigency.)

Of course, I’m quite skeptical that the Court will follow through on the liability threat. But that’s where civil liberties litigators need to turn next.

The Exclusionary Rule

Yesterday’s ruling in Hudson v. Michigan could prove to be a landmark Supreme Court precedent. We already knew that it was an important case involving the “knock-and-announce” principle, but, as New York Times reporter Linda Greenhouse observes today, the majority opinion is so “dismissive of the exclusionary rule as to serve as an invitation to bring a direct challenge to the rule in a future case.” 

I’m afraid that may well be right. If so, it means we are moving from an important battle, which we just lost, over the knock-and-announce doctrine, to a battle royal over the Fourth Amendment generally.

For background on the exclusionary rule, go here.

Have You No Respect for the Law (of Demand)?!

The law of demand is a bitter pill for defenders of labor market price controls. Noted economic theorist Matt Yglesias has grown weary of appeals to “Economics 101” in the minimum wage debate. “After all,” Yglesias writes, “there’s a reason they offer more economics classes and you don’t get your degree after taking just one.” His American Prospect colleague Ezra Klein says of the law of demand that “It’s a good guideline, but it’s got no end of exceptions.” The minimum wage, of course, is one those exceptions.

They’re both right in general, if not about the minimum wage in particular. There are more economics classes, and they do teach exceptions. However, let’s not imagine that there is some advanced economic class in which you learn that the law of demand is false. (Well, no doubt there is somewhere. There is contradiction-friendly “paraconsistent logic,” after all.)

To use Yglesias’s misapplied example, Econ 101 principles do not stand to higher-level economics in the way that Newtonian physics stands to relativity and quantum machanics: as a useful, but literally false, simplification of reality. Economic laws are not strict laws of nature, codifying ineluctable relationships of necessity, and they do not pretend to be. So counterexamples are not ipso facto falsifying, and the law of demand is never replaced with a better, more empirically adequate, law. The law of demand is very, very empirically adequate as it is: It captures a ubiquitous regularity of human behavior that is abundantly comfirmed every moment of every day, and without which there would be no science of economics.

But it is just a regularity, like people flinching involuntarily when they hear a sudden, loud sound. It doesn’t have to happen, but it’s pretty surprising when it doesn’t. (“Is he deaf? Paralyzed?”) And when it doesn’t, there’s need for some special explanation.

Economic laws, like the principles of all the “special sciences,” are ceteris paribus generalizations: generalizations that are true other things being equal. Econ 101 lays out the basic laws and explains what follows from them ceteris paribus. Later, students learn about cases when other things are not equal – when there are exceptions to the generalization. So, it is always possible to argue that the law of demand does not apply in this or that kind of circumstance. A certain necessary auxiliary condition, which is almost always present, may be absent in a certain kind of case, causing the regularity to break down. But then, in order to predict an exception to the regular pattern, you need to cite the absence of the relevant auxiliary condition (e.g., “He can’t hear; that’s why he didn’t flinch”). I hope Yglesias is not also tired of Philosophy of Science 101.

Now, let’s note two things. First, you will be utterly hopeless in reliably identifying exceptions to a ceteris paribus law when you never grasped its logic in the first place. Exhortations to mind your Econ 101 generally aren’t exhortations to stop being so darn advanced. They are exhortations to actually comprehend the principles upon which advancement depends. And, second, the fact that a law is ceteris paribus does not mean you can deny its applicability whenever you want to. Political convenience tends not to be an appropriate auxiliary condition. You can’t wave your hands and just hope that a good argument is in some upper-level textbook you haven’t read.

If you want to say that a wage floor is not going to throw some low-wage workers out of their jobs (or prevent them from getting jobs), you’ve got to say, in a principled way, why not. The burden is on those who predict an exception to an immensely reliable regularity. The most popular principled explanation for the failure of minimum wage increases to create unemployment is a story about monopsony conditions for low-wage labor, i.e., imperfectly competitive labor market conditions in which there is a single buyer of low-wage labor (or a colluding band of buyers), that is able to set wages that workers have little choice but to accept. A simple model (Econ 101, even!) shows that under such conditions, an increase in the minimum wage, within a certain range, could even increase employment and raise efficiency.

Card and Krueger’s famed statistical work on minimum wage, which wage-increase advocates wave around as if it were proof of the Resurrection, tells a kind of very complex monopsony story. They recognize, unlike many of the people who abuse their findings, that their statistical results on minimum wage hikes, in isolation from further theory, can at best establish that other things were not equal at a certain place and time (e.g., fast food restaurants in Pennsylvania and New Jersy in the mid-1990s). This provides no basis for predicting the effects of future minimum wage increases unless it is accompanied by a principled theory of what general features of the situation were not equal.

Their theory, in a nutshell, is: “Turnover costs, imperfect information, search frictions, commuting costs, and inertia generate short-run, and possibly long-run, monopsony power for individual firms.” This is not exactly a simple condition, likely to apply uniformly across a huge, diverse country. That an increased minimum wage might not cause unemployment in some places where certain conditions apply does not provide a strong argument for raising it everywhere. And the monopsony story, as far as I understand it, establishes only that there is a range up to which the wage floor could be raised without creating a disemployment effect. In order to use Card and Krueger to support an increase to $7, you would need to provide evidence that the federal minimum is not already at the top of that range, and that $7 will not exceed it. Maybe somebody has done this, but I haven’t seen it.

Card and Krueger’s empirical work would constitute some evidence in favor of their monopsony hypothesis. But how well does the evidence support the theory? For a taste just from the Cato archives, try Douglas K. Adie and Lowell Gallaway’s review of C&K’s book Myth and Measurement in the Cato Journal, or “Sense and Nonsense on the Minimum Wage ” by Donald Deere, Kevin Murphy, and Finis Welch, in Regulation Magazine. Yglesias cites a petition of economists in favor of raising the minimum wage. Probably more informative is this serious 2002 NBER research summary by UC Irvine economist David Neumark, in which he reports that “although there may be some outlying perspectives, economists’ views of the effects of the minimum wage are centered in the range of the earlier [than Card & Krueger] estimates, and many of the more-recent estimates, of the [significantly positive] disemployment effects of minimum wages.” That is, C & K’s position is an “outlying perspective.”

But consensus tennis is a very silly game. Better is Neumark’s analysis of the state of play (in 2002) regarding the C & K studies:

More recent studies have used panel data covering multiple states over time, exploiting differences across states in minimum wages. This approach permits researchers to abstract from aggregate economic changes that may coincide with changes in the national minimum wage and hence make difficult untangling the effects of minimum wages in aggregate time-series data.

Evidence from these “second generation” studies has spurred considerable controversy regarding whether or not minimum wages reduce employment of low-skilled workers, with some researchers arguing that the predictions of the standard model are wrong, and that minimum wages do not reduce and may even increase employment. The most prominent and often-cited such study uses data collected from a telephone survey of managers or assistant managers in fast-food restaurants in New Jersey and Pennsylvania before and after a minimum wage increase in New Jersey.

Not only do these data fail to indicate a relative employment decline in New Jersey, but rather they show that employment rose sharply there (with positive employment elasticities in the range of 0.7).

On the other hand, much recent evidence using similar sorts of data tends to confirm the prediction that minimum wages reduce employment of low-skilled workers; so does earlier work with a much longer panel of states. Moreover, an approach to estimating the employment effects of minimum wages that focuses more explicitly on whether minimum wages are high relative to an equilibrium wage for affected workers reveals two things: first, disemployment effects appear when minimum wages are more likely to be binding (because the equilibrium wage absent the minimum is low); second, some of the small or zero estimated disemployment effects in other studies appear to be from regions or periods in which minimum wages were much less likely to have been binding. Finally, a re-examination of the New Jersey-Pennsylvania study that I conducted, based on payroll records collected from fast-food establishments, finds that the original telephone survey data were plagued by severe measurement error, and that the payroll data generally point to negative employment elasticities.

That is to say, C & K’s findings have been challenged.

Meanwhile, studies continue to appear emphasizing the hazards of minimum wage laws. I find Neumark’s recent paper with Olena Nizalova especially unsettling. They find evidence that minimum wage laws discourage teenagers and young adults from acquiring the human capital they need in order to get better jobs and higher wages later in life. That is, minimum wage laws work to ensure that those who already have the fewest opportunities to develop their capacities, have even fewer still. They say this baleful effect is strongest for young blacks.

Progressives find grand, symbolic political importance in the minimum wage. But isn’t their most important concern the welfare and prospects of the poor?