➔ Phenomenal World

August 3rd, 2020

➔ Phenomenal World

Nocturnal Pasture

OFFSHORING

Much research has documented the vast sums of "missing wealth" stored in tax havens, and detailed its implications for inequality, fiscal policy, and economic growth. Less present in the discussion is the institutional and political history of these offshore financial centers.

In a 2017 paper, VANESSA OGLE recounts the making of what she terms the offshore "archipelago"—the various institutions that, outside of the core of powerful nation-states, became central to the international financial system. From the paper:

"Contemporary definitions of tax havens are often too static to capture the more fluid and multifaceted legal constellation among such sites as they appear to the historian. In the age of empire, the natural state of affairs entailed legal unevenness. This world was made up of centralized nation-states, multiethnic land empires, overseas empires with their colonies, protectorates, settlements, and dominions, as well as 'informal empire' with its regimes of extraterritoriality and legal pluralism. Local administrations in overseas territories had considerable leeway in drafting company and bank laws or tax codes and accounting standards for these respective entities and sub-entities. Legal and political unevenness greatly benefited tax avoidance on a global scale.

As empires came undone, an archipelago-like landscape of distinct legal spaces re-created some of the unevenness that had characterized the nineteenth century. Yet in the twentieth century, this offshore world and the unevenness it offered existed in and for a world order in which bounded, homogeneous national state spaces and generally sizable nation states had eventually become the norm. The New Deal, the European welfare state, decolonization, and the Bretton Woods system were state-based and government-driven projects. The offshore world emerged on a more significant scale precisely at the moment when these state-based projects began to assume their greatest importance. It consisted of tax havens, flags of convenience registries, offshore financial markets and banking institutions, and special economic zones. This landscape allowed free-market capitalism to flourish on the sidelines of a world increasingly dominated by larger and more interventionist nation-states."

Link to the piece.

  • Antonio Coppola, Matteo Maggiori, Brent Neiman, and Jesse Schreger recalculate global capital flows, accounting for cross-border financing and tax havens: "We find that portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly $600 bn, while China’s official net creditor position to the rest of the world is overstated by about 50 percent." Link.
  • Drawing on interviews with key informants from banks, shell companies, foreign real estate, and investor citizenship programs, Alexander Cooley and J. C. Sharman argue that "professionals in major financial centers serve to lower the transaction costs of transnational corruption by senior foreign officials." Link.
  • Daniela Gabor and Cornel Ban's 2017 paper on the political economy of shadow banking. Link. And Jan Fichtner's 2016 "anatomy" of the Cayman Islands offshore financial center. Link.
  • The 2011 book The New Fiscal Sociology, edited by Isaac Martin, Ajay Mehrotra, and Monica Prasad, marks and collects interdisciplinary research in the comparative history and politics of taxation. Link.
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January 19th, 2019

Self-Portrait

PLENARY CONFIDENCE

A look at China's social credit system

In a recent newsletter, we noted a spate of reporting drawing attention to the authoritarianism of China's growing Social Credit System. This week, we are sharing a paper by YU-JIE CHEN, CHING-FU LIN, AND HAN-WEI LIU that casts light on the details of the program's workings, corrects common misconceptions, proposes some likely and disturbing future scenarios, and offers a useful frame for understanding the significant shift it is bringing about in Chinese governance.

"A new mode of governance is emerging with the rise of China’s 'Social Credit System' (shehui xinyong zhidu) or SCS. The SCS is an unusual, comprehensive governance regime designed to tackle challenges that are commonly seen as a result of China’s 'trustless' society that has featured official corruption, business scandals and other fraudulent activities. The operation of the SCS relies on a number of important and distinctive features—information gathering, information sharing, labeling, and credit sanctions—which together constitute four essential elements of the system.

In our view, the regime of the SCS reflects what we call the 'rule of trust,' which has significant implications for the legal system and social control in China. We define the 'rule of trust' as a governance mode that imposes arbitrary restrictions—loosely defined and broadly interpreted trust-related rules—to condition, shape, and compel the behavior of the governed subjects… The 'rule of trust' is in fact undermining 'rule of law.'

In the context of governance, the unbounded notion of 'trust' and the unrestrained development of technology are a dangerous combination."

Link to the paper.

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January 12th, 2019

Worldviews

SOFT CYBER

Another kind of cybersecurity risk: the destruction of common knowledge

In a report for the Berkman Klein center, Henry Farrell and Bruce Schneier identify a gap in current approaches to cybersecurity. National cybersecurity officials still base their thinking on Cold War-type threats, where technologists focus on hackers. Combining both approaches, Farrell and Schneier make a wider argument about collective knowledge in democratic systems—and the dangers of its diminishment.

From the abstract:

"We demonstrate systematic differences between how autocracies and democracies work as information systems, because they rely on different mixes of common and contested political knowledge. Stable autocracies will have common knowledge over who is in charge and their associated ideological or policy goals, but will generate contested knowledge over who the various political actors in society are, and how they might form coalitions and gain public support, so as to make it more difficult for coalitions to displace the regime. Stable democracies will have contested knowledge over who is in charge, but common knowledge over who the political actors are, and how they may form coalitions and gain public support... democracies are vulnerable to measures that 'flood' public debate and disrupt shared decentralized understandings of actors and coalitions, in ways that autocracies are not."

One compelling metaresearch point from the paper is that autocratic governments receive analysis of information trade-offs, while democratic governments do not:

"There is existing research literature on the informational trade-offs or 'dictators' dilemmas' that autocrats face, in seeking to balance between their own need for useful information and economic growth, and the risk that others can use available information to undermine their rule. There is no corresponding literature on the informational trade-offs that democracies face between desiderata like availability and stability."

Full paper available on SSRN here.

  • Farrell summarizes the work on Crooked Timber: "In other words, the same fake news techniques that benefit autocracies by making everyone unsure about political alternatives undermine democracies by making people question the common political systems that bind their society." Many substantive comments follow. Link.
  • Jeremy Wallace, an expert on authoritarianism, weighs in on Twitter: "Insiders, inevitably, have even more information about the contours of these debates. On the other hand, there's a lot that dictators don't know--about their own regimes, the threats that they are facing, etc." Link to Wallace's work on the topic.
  • Related reading recommended by Wallace, from Daniel Little, a 2016 paper on propaganda: "Surprisingly, the government tends to pick a high level of propaganda precisely when it is ineffective." Link.
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January 5th, 2019

Aunt Eliza

PROCESS INTEGRATION

Bringing evidence to bear on policy

Happy 2019. We’re beginning with a report from Evidence in Practice, a project from the Yale School of Management. The report focuses on how to integrate rigorously researched evidence with policy and practice, with an emphasis on international development. The needs numerous stakeholders involved in research and policymaking are enumerated, along with their own needs and priorities: funders, researchers, intermediaries, policymakers, and implementers each receive consideration. One of the strengths of the report is its quotations from dozens of interviews across these groups, which give a sense of the messy, at times frustrating, always collaborative business of effecting change in the world. As to the question of what works:

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July 27th, 2020

Avey From Cane

PUBLIC HEALTH FEDERALISM

Catastrophic deficiencies in the federal response to the Covid-19 pandemic have led to renewed discussion over federalism and its discontents. The divergence among state responses to the crisis in the absence of federal guidance has produced analyses of Trump’s unique, “narrow” sense of federalism, pronouncements of “a new era of federalism,” and hopes for a solidarity-minded “civic federalism.”

In a 1997 article, health law professor JAMES G. HODGE JR. analyzes the impact of state-centric “new federalism” jurisprudence on the government’s ability to realize public health goals. Hodge places new federalism in the context of decades of increasing intrusion by the federal government on states’ power over public health policy:

"The impact of new federalism on the field of public health law is seen in the history of public health regulation. The metamorphosis of public health regulation from purely local to predominantly national means resulted from increased federal presence in the field corresponding to a deemphasis on traditional federalism. It is an inescapable conclusion that an increased federal presence shifted public health goals. National public health priorities dominate local ones. New federalism restrains the federal intrusion on state public health powers by requiring Congress to operate within the constraints of the political process. As a result, state police powers exercised in the interest of public health are strengthened emphatically by the political process confining federal authority to enter the field."

Full paper available here.

  • In an article published this April, Hodge reassesses federal vs. state public health powers in light of disparate responses to the pandemic: "Americans are left wondering, 'which level of government is actually in charge here?' In the face of a pandemic like Covid-19, the answer under principles of federalism is increasingly clear: neither." Link.
  • "American federalism—with its fissures and fractures—haunts the state of emergency." A March post from Phillip Rocco. Link. (See also Rocco's recent post on fiscal federalism in Notes on the Crises.) Along similar lines: Rocco, Daniel Béland, and Alex Waddan on the fiscal barriers to pandemic response. Link. And Nicole Huberfeld, Sarah H. Gordon, and David K. Jones argues that the pandemic has magnified the state-level inequities fostered by federalism. Link.
  • For another view on the relationship between federalism and public health: A 2014 paper by Adam Varvel on the West Nile outbreak of 1999. Link. See also: A post-SARS policy brief on the impact of federalism on international health regulations. Link.
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December 22nd, 2018

Frohes Fest | Year in Review

The JFI Letter has grown and morphed over the past twelve months; thank you to our readers for opening, skimming, clicking, and writing us every week. We'll be offline until January 5. In the meantime, here's a list of our favorite spotlights from last year and a list of favorite researchers to watch in the next.

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December 15th, 2018

Space Dance

SCIENTIFIC RETURNS

A new book examines the economic and social impacts of R&D

Last May, we highlighted a report on workforce training and technological competitiveness which outlined trends in research and development investment. The report found that despite "total U.S. R&D funding reaching an all-time high in 2015," it's shifted dramatically to the private sector: "federal funding for R&D, which goes overwhelmingly to basic scientific research, has declined steadily and is now at the lowest level since the early 1950s." This week, we take a look at the returns to these investments and discuss how best to measure and trace the ways research spending affects economic activity and policy.

In the most recent Issues in Science and Technology, IRWIN FELLER reviewsMeasuring the Economic Value of Research, a technical monograph that discusses how best to measure the impact and value of research on policy objectives. Notably, the book highlights UMETRICS, a unified dataset from a consortium of universities "that can be used to better inform decisions relating to the level, apportionment, human capital needs, and physical facility requirements of public investments in R&D and the returns of these investments." While it represents a big data approach to program evaluation, Feller notes that UMETRICS' strength is in the "small data, theory-driven, and exacting construction of its constituent datasets," all of which offer insight into the importance of human capital in successful R&D:

"The book’s characterization of the ways in which scientific ideas are transmitted to and constitute value to the broader economy encompasses publications and patents, but most importantly includes the employment of people trained in food safety research. This emphasis on human capital reflects a core proposition of UMETRICS, namely the 'importance of people—students, principal investigators, postdoctoral researchers, and research staff—who conduct research, create new knowledge, and transmit that knowledge into the broader economy.'

In particular, the chapters on workforce dynamics relating to employment, earnings, occupations, and early careers highlight the nuanced, disaggregated, and policy-relevant information made possible by UMETRICS. These data provide much-needed reinforcement to the historic proposition advanced by research-oriented universities that their major contribution to societal well-being—economic and beyond—is through the joint production of research and graduate education, more than patents or other metrics of technology transfer or firm formation."

The UMETRICS dataset traces the social and economic returns of research universities and allows for a larger examination of universities as sociopolitical anchors and scientific infrastructure.

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December 1st, 2018

Energy Field

GREEN INFLUENCE

A discussion of different approaches to climate policy

Last week, the U.S. government released the Fourth National Climate Assessmentwhich outlined the dire economic and environmental consequences of climate change. Instead of highlighting key findings of the report—two good summaries are available here and here—we'll contextualize the current climate debate within legal history, which shows the limitations of current economically-focused arguments for climate policy.

A 2010 Yale Law Journal article by Jedediah Purdy situates the current climate debate within the long tradition of political argument about the natural world, and challenges assumptions that environmental values which appeal to moral and civic duty are too weak and vague to spur political action. In fact, Purdy argues that major environmental legislation emerged from "democratic argument over the value of the natural world and its role in competing ideas of citizenship, national purpose, and the role and scale of government." Purdy does more than just argue that environmental public language is more coherent than conventionally understood, he argues that understanding climate policy through economic self-interest diminishes the role political struggle plays in shaping national values and interests:

"Consider one example that makes little sense through the lens of narrow self-interest, much more as part of an ongoing debate over environmental values: the organizing project that has led 1015 city governments to adopt the goals of the Kyoto Protocol (a seven percent reduction in greenhouse-gas emissions from 1990 levels by 2012) through an instrument called the Mayors Climate Protection Agreement. Since the costs are not zero, and the benefits, in theory, are almost exactly that, the question of motivation is still fairly sharply presented.

...

In private interviews and public statements, city officials explain their efforts in several ways. They are quick to cite the advantage certain regions hope to enjoy from early adoption and manufacture of technologies that may later become standard. They embrace a simple public-choice motive: city governments hope to benefit from green-development block grants and, in the longer term, density-friendly economic development, and early efforts may position them to do both.
They also regard themselves as engaged in political persuasion that they hope will induce others to take similar action. Whether this is plausible is partly endogenous to the politics itself. This politics seeks to affect the reasons—specifically those grounded in environmental values—that people understand themselves to have for joining collective undertakings. Rather than a specimen of an independently established logic of collective action, it is an engagement with that logic itself."

Link to full paper.

  • In a 2018 article, Purdy looks more deeply at the history of environmental justice, and why its concerns were left out of mainstream environmental law: "Mainstream environmental law was the last major legal product of 'the great exception,' the decades of the mid-twentieth century when, unlike any other time in modern history, economic inequality was declining and robust growth was widely shared." Link.

  • A 2017 dissertation examines the environment as an object of politics, as opposed to natural capital, and argues that the environment is a "political problem that entails ongoing negotiations over the legitimacy of market rule, the role of the state in relation to the market, and the value of ecological stewardship." Link.

  • The new climate reports have brought attention back to solar geoengineering, which the Guardian, covering a Gernot Wagner paper, notes is extremely inexpensive and possibly an option for desperate circumstances: “The IPCC [Intergovernmental Panel on Climate Change] report said geoengineering might be adopted as a temporary “remedial measure” in extreme circumstances.”Link.

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November 17th, 2018

Poetry Machine

PLACE-BASED SUBSIDIES | UBERLAND | HISTORY OF QUANTIFICATION

STAGNANT INFLUENCE

The inefficiency of lobbying

A few weeks ago, we spotlighted work by Elliott Ash et. al. on the startling influence of the Manne economics seminars in shaping judicial decision-making. This week we’re looking at an industry that, conversely, seems extremely influential, but is frequently ineffectual: lobbying.

In a 2009 book, "Lobbying and Policy Change: Who Wins, Who Loses, and Why," FRANK R. BAUMGARTNER et. al. take an unprecedentedly thorough look at lobbying in Washington, scrutinizing "ninety-eight randomly selected policy issues in which interest groups were involved and then followed those issues across two Congresses." What they find is complexity and gridlock:

"Since we followed our issues for four years, we know a lot about what eventually occurred (if anything did). In fact, as we outline in the chapters to come, for the majority of our issues, little happened.

If what they are supposed to be doing is producing change, interest groups are a surprisingly ineffectual lot. A focus by the media and many academics on explaining political change or sensational examples of lobbying success obscures the fact that lobbyists often toil with little success in gaining attention to their causes or they meet such opposition to their efforts that the resulting battle leads to a stalemate.

Of course, many lobbyists are active because their organizations benefit from the status quo and they want to make sure that it stays in place. We will show that one of the best single predictors of success in the lobbying game is not how much money an organization has on its side, but simply whether it is attempting to protect the policy that is already in place."

Preview on Google Books here.

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November 10th, 2018

Two Figures

NEW UBI REPORTS | ELECTORAL VIOLENCE | BEYOND GDP

DISCRETION DIFFERENTIAL

On the varying modes of conceiving of privacy (and its violation) in the law

In a 2004 YALE LAW JOURNAL article, comparative legal scholar JAMES Q. WHITMAN explores differing cultural and legal postures toward privacy. Through his comparison, he draws a slim taxonomy: privacy rights are founded on either dignity (throughout Western Europe) or on liberty (in the United States). The distinction—while far from perfectly neat either historically or in the present—raises a number of interesting questions about privacy law that are currently being worked out as scholars and legislators move forward in the creation and implementation of digital governance procedures. From the paper:

"If privacy is a universal human need that gives rise to a fundamental human right, why does it take such disconcertingly diverse forms? This is a hard problem for privacy advocates who want to talk about the values of ‘personhood,’ harder than they typically acknowledge. It is a hard problem because of the way they usually try to make their case: Overwhelmingly, privacy advocates rely on what moral philosophers call ‘intuitionist’ arguments. In their crude form, these sorts of arguments suppose that human beings have a direct, intuitive grasp of right and wrong—an intuitive grasp that can guide us in our ordinary ethical decisionmaking. The typical privacy article rests its case precisely on an appeal to its reader’s intuitions and anxieties about the evils of privacy violations. Imagine invasions of your privacy, the argument runs. Do they not seem like violations of your very personhood?

Continental privacy protections are, at their very core, a form of protection of a right to respect andpersonal dignity. The core continental privacy rights are rights to one’s image, name, and reputation, and what Germans call the right to informational self-determination—the right to control the sorts of information disclosed about oneself. They are all rights to control your public image.

By contrast, America is much more oriented to values of liberty. At its conceptual core, the American right to privacy is the right to freedom of intrusions by the state, especially in one’s own home."

Link to the paper.

  • Forthcoming in the Harvard Journal of Law & Technology, an in-depth review of the significance of the Supreme Court's June decision in Carpenter v. United States: "Carpenter holds that the police may not collect historical [cellphone location tracking data] from a cellphone provider without a warrant. This is the opinion most privacy law scholars and privacy advocates have been awaiting for decades." Link.
  • An excellent repository of scholarship on the GDPR—the new European data protection law—from the journal International Data Privacy Law. Link.
  • Danielle Citron and Daniel Solove's 2016 paper explores how US courts have dealt with legal standards of harm—anxiety or risk—in cases of personal data breaches. Link. See also Ryan Calo's 2010 article "The Boundaries of Privacy Harm." Link.
  • Khiara Bridges' 2017 book The Poverty of Privacy Rights provides a corrective to universalist claims to a right to privacy: "Poor mothers actually do not possess privacy rights. This is the book’s strong claim." Link to the book page, link to the introductory chapter.
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