Thursday, November 30, 2006

My favorite insider trading cases and why
Tom Smith

This is actually a post about my search engine, but the title is relevant, honest.  So, if you go to the Precydent engine and enter the search phrase "insider trading" (not inside quotation marks; just the two words), you get a bunch of obviously relevant and authoritative cases, Chirarella, yada yada.  Including our old friends Blue Chip Stamps, Santa Fe v. Green, and Ernst and Ernst.  They are certainly relevant to insider trading as they are about 10b-5.  Westlaw natural language search (which is stronger than Lexis's) does not return them.  Why not?  Because the phrase "insider trading" or some variant thereof does not appear in any of those three cases.  So our engine is able to find highly relevant cases to a query even when the words of that query do not occur in the case.  That, boys and girls, is a very big deal.   Interestingly (to me at least) is that this technology is also a lot cheaper than what we reckon Westlaw must be doing to make their natural language search as good as it is (and to be fair, it is pretty darn good for NLP).  They must be spending millions disambiguating legal words, etc. etc., while our little engine lets real judges (and law clerks) do all the work deciding what to cite, and then not-quite-free rides off of those human decisions.

Yes, I know we do not turn up O'Hagan, a very important insider trading case.  That is because it is not in our database, which is not very good and missing a lot of cases at this point.

November 30, 2006 | Permalink | Comments (0) | TrackBack (0)

Four Kinds of Interactions
Mike Rappaport

This article about antrhopologist Alan Fiske's theories seems quite interesting:

Fiske's conclusion: Just as every human language is composed of the same grammatical elements (subjects, verbs, etc.), all relationships are built from exactly four kinds of interactions.

Fiske labels these communal sharing, equality matching, authority ranking and market pricing. Here's what he means:

Communal sharing is how you treat your immediate family: All for one and one for all. Or as Marx put it: From each according to ability, to each according to need.

Equality matching, by contrast, means we all take turns. From kindergarten to the town meeting, it's all about fair shares, reciprocity, doing your part.

Authority ranking is how tribes function, not to mention armies, corporations and governments. Know your place, obey orders, and hail to the chief.

Market pricing, of course, is the basis of economics. It's what we do whenever we weigh costs and benefits, trade up (or down), save or invest.

When there are conflicts, moreover, Fiske maintains it's often because we aren't all using the same model.

For example, you might see housework as a communal-sharing function, while your spouse approaches it as equality-matching. Neither is wrong, yet you still end up angry or guilty when the laundry isn't done.

The same problem can afflict whole societies, as Fiske described to me recently. "The Danes pride themselves on being fair," he said. "They can't understand why they don't get along with their Middle Eastern immigrants."

But Fiske does: "The immigrants expect authority ranking. The Danes expect strict equality matching. Each side sees people constantly violating the models."

Hat tip: Marginal Revolution

November 30, 2006 | Permalink | Comments (0) | TrackBack (0)

Answering Al Gore
Mike Rappaport>

An interesting interview with Bjorn Lomborg, author of "The Skeptical Environmentalist."  If we follow Gore's advice on climate change, how will the future judge us?:

So if we stand back, as Al Gore asks us to do, and look at it from the coming generation's point of view, they are going to ask "what were they thinking?' They tried to do a tiny little bit about climate change at a fairly high cost, but have done very little good, whereas there are many other problems that they could have tackled that would have left a much better world behind.

Put differently, they pursued their emotional passions at the expense of real improvements. 

November 30, 2006 | Permalink | Comments (35) | TrackBack (0)

Wednesday, November 29, 2006

Milton Friedman on Supermajority Rules
Mike Rappaport

Milton Friedman's death has spurred me to re-read Capitalism and Freedom, which I have not done in decades.  It is quite bit of fun. 

Rereading classics sometimes turns up arguments that one forgot about or didn't fully appreciate the first time.  Although a good bit of my scholarly work has been addressed to supermajority rules, I hadn't realized that Friedman discussed this subject.  Here is what he says:

Unanimity is, of course, an ideal. In practice, we can afford neither the time nor the effort that would be required to achieve complete unanimity on every issue. We must perforce accept something less. We are thus led to accept majority rule in one form or another as an expedient. That majority rule is an expedient rather than itself a basic principal is clearly shown by the fact that our willingness to resort to majority rule, and the size of the majority we require, themselves depend on the seriousness of the issue involved. If the matter is of little moment and the minority has no strong feelings about being overruled a bare plurality will suffice. On the other hand, if the minority feels strongly about the issue involved, even a bare majority will not do. Few of us would be willing to have issues of free speech, for example, decided by a bare majority. Our legal structure is full of such distinctions among kinds of issues that require different kinds of majorities. At the extreme are those issues embodied in the Constitution. These are the principals that are so important that we are willing to make minimal concessions to expediency. Something like essential consensus was achieved initially in accepting them, and we require something like essential consensus for a change in them.

The self-denying ordinance to refrain from majority rule on certain kinds of issues that is embodied in our Constitution and in similar written or unwritten constitutions elsewhere, and the specific provisions in these constitutions or their equivalents prohibiting coercion of individuals, are themselves to be regarded as reached by free discussion and as reflecting essential unanimity about means.

His claims here are quite interesting for a couple of reasons.  First, Friedman seems to anticipate some of the conclusions that Buchanan and Tullock were to reach about the benefits and costs of supermajority rules in the Calculus of Consent.  Capitalism and Freedom was published the year before Buchanan and Tullock's classic.  Second, Friedman emphasizes, as few have, that constitutional law is supermajoritarian: Not only is a supermajority required to amend the Constitution; it was also required to enact the Constitution in the first place.   

November 29, 2006 | Permalink | Comments (1) | TrackBack (0)

My Project
Tom Smith

I've been really busy lately, and here's a big part of why.  Just don't want RC readers to think I'm neglecting them.  It's a new legal search engine, and you can visit it here.  Remember, though, this is very much the pre-Beta version.  Feedback will be gratefully welcomed and carefully studied.  Keep in mind this is working on an incomplete and none too clean database of 20,000 US Supreme Court cases only.

November 29, 2006 | Permalink | Comments (2) | TrackBack (0)

Monday, November 27, 2006

What to Do in Iraq
Mike Rappaport

This is one of the hardest questions that the United States currently faces.  There are a couple of suggestions that are frequently made:

1.  Withdraw the troops
2.  Threaten to withdraw the troops to get the Iraqi government to act against the violence
3.  Increase the troops
4.  Pursue a policy of dividing the country into three autonomous regions.

I have the following tentative proposal.  The United States should threaten to pursue 4 in order to get the Shia to agree to clamp down on the Shia militias and to agree to an agreement on oil revenues with the Sunnis.  To help enforce this arrangement, the US could increase troops (3) to support the new framework

If the existing Iraqi government does not work, perhaps the best move would be three autonomous regions.  The US could at least protect the Kurds.  The Shia would not like this policy, but that may be what is necessary to get them to agree to take the above actions.  Of course, the US would have to insist that the Sunnis agree to the new government and to start to take concrete actions, such as cooperating against any remaining insurgents.

It might not work, but then the US could fall back to the autonomous regions policy, which might avoid a civil war and would at least constrain Iran's influence over the non-Shia portions of Iraq.

November 27, 2006 | Permalink | Comments (4) | TrackBack (0)

Sunday, November 26, 2006

Shut Up and Shop
Gail Heriot

"Give the lady what she wants."--Marshall Field

"The lady must be crazy if she doesn't want what we tell her she wants."--Federated Department Stores, Inc.

Well perhaps Federated didn't state it quite that baldly, but that's been the upshot of its public relations strategy since its disastrous sales in October. We're told that Macy's is just as good as Marshall Field's and that we're just being obstinate for refusing to buy. It's our fault. We should shut up and shop.

Let's leave aside the fact that it's simply false that Macy's and Marshall Field's are equal.  Instead, let's assume for the sake of argument that Marshall Field's customers are simply being sentimental. Even if it were true, so what?  Of course, Chicagoans take a certain sentimental pride in being the home to the most historic and arguably the best department store in the world. That's what real flesh and blood human beings do. They love their local baseball team, their alma mater, and yes, some love their local department store. Many of them will prefer to shop anywhere than at the store owned by the company that destroyed the department store they love. You can call people like that irrational if you like, but if that's what it means to be irrational, then we're all irrational in one way or another. (And it's a good thing we are too, but that's another topic.)

Real merchants like Marshall Field know and understand their customers' sentimentality. It's a given. They deal with their customers the way they are, not the way they would like them to be. They are not foolish enough to regard it as inconvenient that their customers have their own tastes and loyalties.  Federated, on the other hand, seems to think it can get ahead by railing against its customers' sentimentality. If that's indeed what they're thinking, the folks there are being ... well ... irrational. They're following a loser's strategy.

November 26, 2006 | Permalink | Comments (1) | TrackBack (0)

Roni & Melanie's Big Fat Chaldean Wedding
Gail Heriot

Best wishes to my former research assistant Ronson Shamoun and his bride Melanie Dallo.  Roni and Melanie were married yesterday evening in a beautiful ceremony at St. Peter's Chaldean Catholic Cathedral.

When I left the reception a little before midnight, they were still dancing, and it didn't look like they were going to break up anytime soon.  For all I know the relatives are still there (although I hope Roni and Melanie have taken a break for their honeymoon).

Those who know Roni know that he likes to live large, and the Shamoun-Dallo wedding was no exception.  The invitation arrived in a beautifully-boxed scroll.  The bride and groom were attended by no less than nine bridesmaids, nine groomsmen, two junior groomsmen, one junior bridesmaid, one ring bearer, two flower girls, two candle boys,  one bell boy, and of course a best man and a maid of honor.  I would estimate that the guests at the reception numbered about 700.   I'm told this is "typical" for a Chaldean wedding in San Diego, but I have a hard time believing that anything associated with Roni Shamoun could ever be called typical.

Live long and prosper Mr. & Mrs. Shamoun.  And never stop dancing.

November 26, 2006 | Permalink | Comments (9) | TrackBack (0)

Improving Health Savings Accounts
Mike Rappaport

I am a big fan of Health Savings Accounts but I recognize that there are real limits on how much money they are likely to save.  Allowing people to spend their own money rather than an insurance company's money on the first $5000 will save some money, but much if not most of the waste occurs after the first $5000.  Bryan Caplan tries to minimize this problem, but I am only partially persuaded.   Not that many people are like his grandfather.   Moreover, people may have important needs that lead them to spend the initial $5,000; after that, they are not significantly constrained.

A more interesting solution would be to expand HSA beyond the first $5000.  Why not have people pay 5 percent coinsurance for the amount from $5000 to $100,000.  That results in an additional out of pocket of a maximum of $5000 (or a total out of pocket of $10,000 counting the initial deductible).  There are many people who would not pay $1000 for a $20,000 procedure unless it is useful. 

November 26, 2006 | Permalink | Comments (4) | TrackBack (0)

Saturday, November 25, 2006

Trudie on Long Distance Relationships
Mike Rappaport

I have always thought that this was one of Tyler Cowan's most interesting posts, and that is saying something.  It applies two different economic principles in a nonobvious way to long distance relationships.  Sure, we can all apply diminishing marginal utility to various aspects of romantic relationships, but the Archian and Allen Theorem?

November 25, 2006 | Permalink | Comments (1) | TrackBack (0)