A job seeker pauses while filling out an application at a career fair on April 4, 2019, in San Francisco, California. | Justin Sullivan/Getty Images

California finally bans forced arbitration at work.

Millions of workers just won the right in California to sue their bosses.

Gov. Gavin Newsom signed a bill Thursday that outlaws forced arbitration, a common business practice that US employers use to stop workers from suing them for sexual harassment, discrimination, and wage theft. He also signed a bill that extends the amount of time employees have to file workplace civil rights complaints under state law.

Starting in January, businesses can no longer force workers to sign arbitration agreements, which are usually buried in the stack of hiring documents for new employees. These clauses, which are now common, require workers to waive their right to sue their employers for labor violations, discrimination, sexual harassment, and more. Instead, workers must resolve complaints through private arbitration, a quasi-legal forum with no judge, no jury, and nearly zero government oversight.

Passage of AB 51 is a striking win for women’s rights advocates one year after then-California Gov. Jerry Brown vetoed a similar bill.

“We did it!” tweeted former Fox News anchor Gretchen Carlson, who has been pressuring lawmakers across the country to ban mandatory arbitration.

The #MeToo movement has brought renewed attention to forced arbitration and the role it plays in silencing women who complain about sexual harassment in Hollywood, Silicon Valley, and the media. Carlson signed one, and so did ex-Uber engineer Susan Fowler. Both women accused their employers of creating a toxic work culture for women, and both discovered that they had waived their right to seek justice in the courts. They could only take their claims to arbitration, where workers are less likely to win their cases and where arbitrators award much less money than a jury would award in court.

Forced arbitration is now so common that about half of all US workers in the private sector who don’t belong to a union have waived their right to go to trial. California, as the most populous state in the country, might just provide enough momentum to reverse the trend.

The controversy over forced arbitration, explained

California is one of a handful of states that has been trying to ban companies from forcing employees to take complaints to arbitration. New York and Washington restricted these clauses; Vermont tried. The biggest challenge has been to write laws that don’t invalidate arbitration agreements altogether because the Supreme Court has said they’re legal.

California’s new law gets around that barrier by making it illegal for an employer to revoke a job offer or retaliate against an employee who chooses not to sign such an agreement. If they do sign it, however, the courts will likely enforce the arbitration clause.

“We will need a big education campaign for employees in California so they know they have rights and that they don’t have to agree to it,” Jacqueline Serna, legislative counsel for the Consumer Attorneys of California, which lobbied for the ban, told me last year. That’s still the case, she said.

Business groups such as the California Chamber of Commerce have criticized the bill as a “job killer” and hoped Newsom would veto the bill. That didn’t work.

Worker’s rights groups, including labor unions representing restaurant workers and Hollywood artists, believe that California’s new law is narrow enough to limit arbitration without banning it altogether. That’s pretty much all states can do unless Congress amends federal law.

The Supreme Court unleashed arbitration on American workers

The widespread use of arbitration clauses in the workplace came after a crucial 2001 Supreme Court ruling involving sexual harassment.

In that case, Circuit City Stores Inc. v. Adams, a salesperson working at a California Circuit City store sued the company for sexual harassment. The employee, a man named Saint Clair Adams, said his coworkers harassed him because he was gay. But Adams, like all other Circuit City employees, had signed an agreement to resolve all disputes with the company through private arbitration. Circuit City argued in federal court that Adams had to move his claim to arbitration.

The judge sided with Adams, arguing that the Federal Arbitration Act — which allows businesses to resolve contract disputes through arbitration — has a provision excluding employment contracts. The ruling was upheld by the Ninth Circuit Court of Appeals.

But Circuit City took the case to the Supreme Court, where the justices overturned the lower court’s ruling, allowing businesses to extend arbitration to nearly all employment contracts.

The justices, in their 5-4 opinion, created a very narrow interpretation of the employment exclusion in the Federal Arbitration Act. It came down to this line of the act: “but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in interstate or foreign commerce.”

The justices decided that this clause limited the exemption “to transportation workers.” In other words, only workers in the transportation industry were exempt from these mandatory agreements; all other workers could be forced to take their claims to arbitration.

There’s a reason employers want to avoid a jury

If you ask employers why they require workers to use arbitration, they often say it’s a faster and less expensive process than the courts. They’re not wrong. But legal research, surveys, and employment attorneys point to the largest incentive of all: keeping employment claims from reaching a jury.

Juries are considered more sympathetic to workers’ claims and more willing to award millions of dollars in damages to workers in these cases. The threat of a high jury award also gives workers leverage in negotiating larger settlements because businesses want to avoid trial. Arbitration hearings seem like court hearings, but they are not public and there is no jury. An arbitrator who works for a private arbitration firm is the one who decides whether an employer broke the law and, if so, how much money to award the worker.

Research shows that arbitrators can be biased toward employers who repeatedly pick them to handle their cases. This is known as the “repeat player effect,” a term coined in 1997 by Lisa Blomgren Amsler, a public affairs professor at Indiana University Bloomington whose research showed that workers were nearly five times less likely to win their cases if the arbitrator had handled past disputes involving their employers. Her research involved a small sample of cases but later studies have backed up her claim.

Alexander Colvin, a labor relations researcher at Cornell University, published a paper in 2011 that found another level of potential bias: Not only were arbitrators more likely to rule in favor of businesses that were repeat customers, but they were also more likely to award less money to their clients’ employees when they found the business at fault.

While arbitration might seem similar to the court process, it’s not really the same thing. Arbitrators are not required to be neutral, their opinions do not need to be written, and there are few options for appeal, argues Elizabeth Roma, an employment attorney.

The Supreme Court has ruled that the courts would only overturn an arbitrator’s decision based on a “manifest disregard of the law,” something most courts have interpreted as an intentional misapplication of the law. That means most federal appeals courts will only overturn an arbitrator’s decision if it involves fraud, evident partiality, misconduct, or exceeding of powers.

Mandatory arbitration is particularly bad for women and workers of color

When women began to come forward to describe rampant sexual harassment at companies like Fox News and the Weinstein Company, many realized that they could not seek legal justice in the courts because they had signed mandatory arbitration agreements. About 58 percent of women working in the private sector are subject to mandatory arbitration, according to researchers.

As more women speak up about sexual harassment in the workplace, many of them are pressuring members of Congress to restrict or abolish arbitration clauses from US workplaces.

Last month, The US House of Representatives pass the Forced Arbitration Injustice Repeal (FAIR) Act, a far-reaching bill that bans companies from requiring workers and consumers to resolve legal disputes in private arbitration — just like California’s AB 51.

So far, Senate Republicans have ignored the House bill.

I’ve already praised Amazon to the skies: “Amazon is simply the best store that ever existed, by far, with incredible selection and unearthly convenience.”  Recently, however, Amazon managed to exceed my sky-high expectations.

Over the last few months, my Sony Blu-Ray player has been losing streaming services one after the other.  Apparently I’m such a dinosaur that Hulu can’t be bothered to update my software.  Such is the price of progress…

Last week, Amazon joined this rush for the exit, sending me an email to let me know that my Amazon Prime streaming would soon be discontinued.  My knee-jerk reaction was, “Et tu, Amazon?”

Yet happily, the email didn’t end there.  Amazon informed me that I could restore service by buying a Fire TV device – and gave me a $25 coupon for such a product.  How much was the normal price of such a product?  You guessed it – $25.  Somewhat incredulously, I entered the coupon code – and confirmed that Amazon was giving me cutting-edge electronics for $0.00.

Two days later, I received my Fire TV Stick and easily installed it.  To my delight, it was superior in all respects to my previous streaming system.  Most notably, I often host Youtube karaoke parties, and the new interface works like a charm.  Amazon, I love you.

Am I overreacting?  I think not.  When I was a child, no one would have believed that a major company would treat its customers so well.  In all candor, Amazon treats me with far more respect and appreciation than I’ve ever received from the United States government.  Democratic government, Republican government, divided government; Amazon outshines them all.  If the feds ever go after Amazon, I know what side I’m on.

P.S. Here’s a screen cap of Amazon’s email to me.

P.P.S. If you’re thinking, “This isn’t a fair comparison.  Running the federal government is much harder than running Amazon,” I’m thinking, “Another great thing about Amazon is that it doesn’t email me excuses.”

(8 COMMENTS)

It was four years ago that the world first heard of a revolutionary power plant, which burns waste instead of fossil fuel, and has a roof that doubles as a ski slope. Copenhagen’s Amager Resource Center was hailed as a landmark example of public architecture from the outset. With a chimney that would rhythmically puff out steam rings for every ton of carbon dioxide produced by the plant, its architects wanted to put the “fun factor” into a nondescript industrial building. This was, in part, to raise consciousness about energy consumption and its effect on the planet.

That extraordinary concept is now a reality, as CopenHill ski slope opens to the public this weekend. Skiers and snowboarders can whiz down the 1,475 ft (450 m) slope, with dramatic views of Copenhagen’s skyline and Sweden in the distance. There are dedicated trails for runners and hikers, and the chance to climb to the structure’s 279 ft (85 m) summit. At the foot of CopenHill, a restaurant awaits skiers or those who want to skip the sporty possibilities of the visit altogether.

The roof of the $670 million waste-to-energy plant, which began operations in 2017, is leased to an independent operator who runs the recreational facilities. CopenHill charges 220 kroner ($33) for an hour on the slopes and mandatory insurance. The hiking and running trails are accessible to the public during opening hours at no cost.

Architect Bjarke Ingels, whose firm designed CopenHill, likes to describe the project in terms of erecting an alpine mountain to add interest to Denmark’s flat topography. “The ski slope idea came from realizing that Copenhagen has a cold climate with several months of snow, but absolutely no mountains,” Ingels told Architecture Digest last year. “Copenhageners have to travel several hours by car to reach the ski slopes in Sweden. The roof is not only going to function as a ski slope, but as a real mountain with a green forest area, a hiking trail, and climbing walls.” CopenHill is a marquee example of “hedonistic sustainability,” a term Ingels coined to describe stunning, sustainability-focused architecture that recasts the often gloomy and highly technical discussions around energy conservation and climate change. “Suddenly sustainability actually becomes the more fun, the more enjoyable alternative to what we know,” Ingels says.

He adds that the building also functions as a sign of Copenhagen’s commitment to clean energy. “CopenHill is a blatant architectural expression of something that would otherwise have remained invisible: that it is the cleanest waste-to-energy power plant in the world,” Ingels said at CopenHill’s opening ceremony today. ”As a power plant, CopenHill is so clean that we have been able to turn its building mass into the bedrock of the social life of the city.”

Ingel’s cousin, Christian, runs the recreation facilities at CopenHill (Amager Skibakke in Danish). Christian says that building a public playground atop a garbage incinerator with a hard-pressure steam chimney posed several construction challenges. “It has been a construction site for a long time,” he explained to the Danish outlet TV 2 Lorry, which had a trial run on the slopes last week. “We are really looking forward to opening and getting people on the ground.”

Raytheon claims an annual economic impact of $2.6 billion in Arizona, according to a study conducted for it by the Seidman Research Institute at ASU.

The post Michael Avenatti: Stormy Daniels owes me $2 million for my excellent legal work appeared first on Hot Air.

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Consider a country with a very simple monetary base, just government issued coins made out of gold, silver and copper. And then someone decides that it would be more efficient to supplement the coins with paper money in larger denominations. Initially, only commercial banks are allowed to hold currency. They use the currency to clear balances between banks.

This example is not historically accurate, but it’s also not as far-fetched as it seems. Back in 1912, the entire monetary base was cash and coins, and very large bills were used almost exclusively to clear balances between banks:

Obviously it would be a weird system, and in fact the public always has been allowed to hold currency notes and coins.

Now imagine that the public can hold currency and a third type of base money is created, non-interest bearing deposits at the central bank, which are a sort of “electronic cash” that doesn’t face the risk of theft or fire. Once again, let’s assume that only commercial banks were allowed to hold this new and more efficient type of government created base money. That would be kind of weird, wouldn’t it? It certainly seems weird to me. But that’s exactly what we did in 1913.

Tyler Cowen has a new post that discusses proposals for central banks to create e-currency:

The various proposals are works in progress, but share one basic feature: Central banks would issue electronic deposits. These deposits would be available to eligible citizens or businesses, allowing a greater number of parties direct access to the accounting and payments mechanisms of the central bank. One simple version of the proposal would let individuals hold an account at the Federal Reserve, just as they can hold an account at Bank of America. It would be like a “public option” for banking, albeit with an electronic focus and direct access to the Fed.

I think it’s misleading to suggest these accounts are sort of like a bank account at Bank of America. If I have $10,000 in bills in a shoebox under my bed, is that sort of like an account at BOA? Clearly not. A commercial bank account is a loan of money from me to a commercial bank. A box of cash under my bed is not really a loan of money to the government in the conventional sense of the term (although it may be a sort of zero interest quasi-loan if the government commits to stabilize its value.) But a loan to BOA is risky, whereas a loan to a fiat money central bank is no more risky that holding cash. It may lose value from inflation, but default is very unlikely.

BTW, there is already a “public option” for deposits at the Fed, but it’s only for commercial banks.

On the other hand, deposits at the Fed would compete with commercial bank deposits, as commercial banks thrive on their ability to offer a close substitute for a deposit at the central bank—a commercial bank deposit insured by taxpayers at up to $250,000.

Tyler worries that this might put us on the path to a more socialist economy:

An alternative scenario is that the central bank decides to enter the commercial lending business, much as your current bank does. Will the central bank be a better lender than the private banks? Probably not. Central banks are conservative by nature, and have few “roots in the community” as the phrase is commonly understood. The end result would be more funds used to buy Treasury bonds and mortgage securities — highly institutionalized investments — and fewer loans to small and mid-sized local businesses.

This seems to mix up two issues. We’ve already essentially socialized the deposit side of the banking industry, at least from a risk perspective. Tyler suggests that this might lead central banks to begin lending to ordinary businesses. But if that were to happen it would mean we were already far down the road to socialism, and it’s not likely to hinge on a minor issue like whether or not the public is allowed to hold base money in deposits at the Fed.

I understand that many free market economists are skeptical of allowing central banks to offer deposits to the public. So am I. Indeed I’m probably about the only person in the world who has advocated totally abolishing accounts at the Fed, even for banks, and going back to the cash and coin monetary base of 1912. That system seemed to work fine (at least in Canada, where they didn’t have an insane set of banking regulations.) So I’m hardly a socialist on this issue. More like a reactionary.

On the other hand, I wish free market economists gave a bit more thought as to why both the public and banks can hold two of the types of base money (coins and currency) but only banks can hold the third (deposits at the central bank.) There may be a reason for that asymmetry, but I’ve never seen a convincing explanation.

Here’s Tyler:

This leads to my primary objection to an official government e-currency: It would, in effect, make many more economic institutions more like banks. Over time, those institutions would probably be regulated more like banks, too. For instance, if the Fed is directly transmitting payments made by a private company, it might be wary of credit risk and impose capital and reserve requirements on that company, much as it does on banks. Banks also might complain that they are facing unfair competition, and ask that consistent regulations be imposed. In any case, more of the economy likely will be subject to financial regulation, not just the relatively narrow core of the banking system.

I don’t follow this. Where is the risk in the public having deposits at the central bank? I don’t get regulated for having a shoebox of cash under my bed, why would moving that money into an account at the Fed cause the government to begin regulating me like a bank?

Again, I’m not saying that offering Fed accounts to the public is a good idea. Rather I’m waiting for free market economists to give me a plausible explanation as to why these deposits are not a good idea for the public, but are a good idea for commercial banks. What makes banks so special that they deserve this subsidy? Isn’t this like when the government says that only car dealers can sell new cars, not manufacturers? We don’t have a special regulatory burden on banks because they have deposits at the Fed, we have special regulations for banks because of FDIC and too-big-to-fail, which exposes taxpayers to losses resulting from moral hazard.

PS. One compromise might be to allow both the public and banks to have deposits at the Fed, but insist that they not earn any interest. That would make clearer their essential “cash-like” nature.

PPS. Whatever we do, I’m certain that it will be the wrong thing. Banks have way too much political power and any new regime will undoubtedly cater to their interests.

Bebeto Matthews/AP Images

• The supporters of the three Democratic frontrunners in the 2020 presidential primary really don't like Pete Buttigieg, according to Insider's polling.
• Fans of former Vice President Joe Biden, Sen. Elizabeth Warren, and Sen. Bernie Sanders all like Buttigieg much less than the typical Democrat does.
• Sen. Bernie Sanders' base is especially averse to Buttigieg. Compared to Democrats on the whole, they have less affinity for him than any other Democratic candidate.
• Sanders has run a grassroots campaign without the support of any billionaires, while Buttigieg has the highest number of billionaire donors in the field.
• Visit Business Insider's homepage for more stories.

The supporters of the frontrunners in the 2020 Democratic primary have something surprising in common: They really aren't fond of Pete Buttigieg, the 37-year-old presidential candidate who is mayor of South Bend, Indiana.

Since December 2018, Insider has been conducting national polls on a near-weekly basis, asking respondents who plan to vote in their state's Democratic primary or caucus who they would be satisfied with as the party nominee for president.See the rest of the story at Business Insider

NOW WATCH: Fox News pundits are using white supremacist language tied to 'The Great Replacement' conspiracy theory

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Michel Roggo/Wildlife Photographer of the Year

• The London Natural History Museum's annual Wildlife Photographer of the Year competition awards photographers whose work inspires us to consider our place in the natural world and our responsibility to protect it.
• This year, the contest received 48,000 entries from photographers in 100 countries.
• The front-runners captured images of a leopard seal lunging for a penguin, a male hippo crushing a newborn in its jaws, and a sea turtle strangled by a rope.
• Here are the 14 best photographs from this year's contest.
• Visit Business Insider's homepage for more stories.

Humans are rarely offered a glimpse into the raw, unfiltered world of the animal kingdom. But the astounding images from the annual Wildlife Photographer of the Year competition, which is developed and produced by the Natural History Museum in London, throw into sharp relief the brutality of predator-prey interactions and the resilience of species around the world.

This year, photographers traipsed through the Amazonian jungles of Peru, dove deep into the waters of French Polynesia, and stalked isolated ice floes in Antarctica to capture images of animals' struggles to survive and get a decent meal.

Picture takers from 100 countries submitted 48,000 entries for the contest, including photos of a leopard seal lunging for a penguin, a male hippo crushing a newborn in its jaws, and a sea turtle strangled by a rope. 

Here are 14 of the "highly commended" front-runners in this year's contest. The overall winners will be announced on October 15.

Survival is challenging in the African savanna. Here, a newborn hippo gasps its last breath while being crushed to death in the jaws of an aggressive male.

Adrian Hirschi /Wildlife Photographer of the Year

The Swiss photographer Adrian Hirschi said he watched as the male hippo grabbed the infant from beside its mother in the shallows of Lake Kariba, Zimbabwe.

The calf died, though infanticide is rare among hippos. Male hippos overall are aggressively territorial, and brutal fights are not uncommon. Hippos are also known to attack and kill humans when they feel threatened.

More commonly, of course, animals are killed by predators, not members of their own species. Eduardo Del Álamo observed this lone gentoo penguin being stalked by a leopard seal.

Eduardo Del Álamo/Wildlife Photographer of the Year

The seal had slunk under Álamo's inflatable raft moments before, the photographer said. When it surged out of the water, mouth open, Álamo was ready.

Gentoo penguins are the fastest underwater swimmers of all penguins. But in this case, the leopard seal pursued the penguin for more than 15 minutes before catching and eating it.

Female leopard seals can grow to 11.5 feet long and weigh more than 1,100 pounds, with bodies built for slicing through the water and long sharp canines for chomping on prey.

While cheetahs are predators in their own right, they still face threats. Photographer Peter Haygarth snapped this look of surprise on a male cheetah's face as it was attacked by a pack of African wild dogs.

Peter Haygarth/Wildlife Photographer of the Year

Haygarth had been following the dogs as they hunted in Zimanga Private Game Reserve in KwaZulu-Natal, South Africa. The pack had just lost a warthog when they came across this cheetah.

As the rest of the 12-dog pack arrived, the animals' confidence grew, and they began to encircle the cat, chirping with excitement, the photographer said. The cheetah hissed and lunged back; it was able to flee a few minutes after the spat began.

See the rest of the story at Business Insider

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SEE ALSO: The best underwater photos of the year reveal shipwrecks, sharks, and terrifying deep-sea creatures

With all the controversy over Trump’s recent phone call with the Ukrainian president, people have tended to overlook an important point. In addition to being corrupt, Trump doesn’t do his job. He seems unqualified and also disinterested.

People focus a lot on the paragraph where Trump asks the Ukrainian leader to go after Biden. But take that paragraph out and the rest of the phone call is still pretty appalling.

There are actually two problems. First, some of Trump’s comments are rambling and incoherent, like those of senile old man. More importantly, at no time in the entire call does Trump actually do his job, which is to represent the interests of the US government in its dealings with the Ukraine. A normal president would have his staff provide him with some talking points, areas where Ukrainian/US relations need to be discussed. Maybe they’d talk about what we’d like the Ukraine to do that would further our interests. Or maybe we’d talk about how we think the Ukrainian government could improve the Ukraine. Or maybe we’d ask how we could help the Ukraine be more successful. But surely we’d have some public policy goal, which reflected the foreign policy position of the administration.

But the actual phone call has none of that; it’s all weird conspiracy theories, gossip about others, and requests for personal favors. At no time does Trump do his job. Trump has always viewed the presidency as serving him rather than the country.  He sees no difference between the Justice Department and his personal attorney.

Conservatives overlook Trump’s laziness and incompetence because his administration has not been all that unsuccessful. He got two conservatives on the Supreme Court. He got a tax bill through Congress. But these facts tell us nothing about Trump’s personal “value added”. He just picks Supreme Court people from a list presented by outsiders. Congress wrote the tax bill, and Trump merely signed it. A drug-addled homeless man could have done those two things. And a drug-addled homeless man could have had a conversation with the Ukrainian president that rambled on in much the same way that Trump did:

I would like you to do us a favor though because our country has been through a lot and Ukraine knows a lot about it. I would like you to find out what happened with this whole situation with Ukraine, they say Crowdstrike… I guess you have one of your wealthy people… The server, they say Ukraine has it. There are a lot of things that went on, the whole situation. I think you’re surrounding yourself with some of the same people. I would like to have the Attorney General call you or your people and I would like you to get to the bottom of it. As you saw yesterday, that whole nonsense ended with a very poor performance by a man named Robert Mueller, an incompetent performance, but they say a lot of it started with Ukraine. Whatever you can do, it’s very important that you do it if that’s possible.

What?!?!?

Apparently Trump was making some vague references to conspiracy theories in nutty right-wing corners of the internet.

When Trump himself must actually do something, he’s extraordinarily incompetent. Behind the scenes, Trump’s advisors often tell press people that he’s like a kindergartener that must be managed all the time. Some of his supporters claimed that’s fake news, as the comments are often made anonymously. Now we know it’s true.

Even more evidence comes from the fact that his advisors were so horrified by the call that they put it in a highly secret server, which would not normally be done for this sort of phone call. That’s called “consciousness of guilt”, but not in the usual sense.  It’s his advisors being conscious of Trump’s guilt.

He’ll probably be re-elected (the Dems are stupid enough to walk away from Biden and pick a left-wing loser.)  In his second term Trump will be even more senile, and now he’ll be totally unconstrained by public opinion polls. Rudi unleashed!!  But at least it should be entertaining.  It’ll help my blog.

If you want to claim that the Trump administration has been successful, I’ll mildly disagree (Iran, China, and Korea are all policy failures).  But the claim is at least plausible.  Even if the administration has been successful, however, Trump himself remains the worst president in US history.

PS.  Some of my commenters are comical.  These are people who when watching The Godfather would interpret, “Nice family you have there, shame if something were to happen to them” as a sincere expression of goodwill.

PPS.  Here’s the NYT:

All of this was taking place at a time of flux among key national security officials. Fiona Hill, the senior director for Europe at the National Security Council, was stepping down and had turned over her duties in July before the call. Three days after the call, Mr. Trump announced that Dan Coats, the director of national intelligence, would be resigning.

And of course Bolton recently resigned.  Conventional foreign policy types won’t put up with this garbage, and thus Trump is forced to dump them and stock his administration with corrupt political hacks.

Small countries have numerous advantages. For instance, they are less likely to get drawn into a trade war. The Netherlands and Germany have roughly the same size current account surplus (as a share of GDP), and yet it’s Germany that attracts all the criticism. Singapore’s current account surplus is far larger than China’s (as a share of GDP), but the US goes after China. Yes, there are now other issues with China beside trade, but at the beginning it was the Chinese CA surplus that people like President Trump were focusing on.

If every country in the world were as small as Singapore, Switzerland, and Belgium, it’s likely that global trade would be freer. Countries would have no incentive to adopt protectionist polices, as it would more obviously be just shooting oneself in the foot.

But today I’d like to focus on something else—monetary policy. It occurred to me that the decision to create the euro was even worse than I had thought. It certainly caused problems for Eurozone members, especially countries along the Mediterranean. But it also acted as a sort of black hole for the global economy. To see why, we need to back up and figure out why the first deflationary trap was in Japan, and not some other East Asian country.

When I did research on the interwar gold standard, I reached the conclusion that the so-called “liquidity trap” was actually a gold standard trap. Countries that stayed on the gold standard were prevented from adopting expansionary monetary policies. For this reason, I didn’t expect liquidity traps under fiat money, and I was caught off guard when Japan fell into this situation in the late 1990s.

In retrospect, it’s clear that Japan was trapped in something very much like the gold standard.  When they tried to devalue the yen to stimulate their economy, the US would pressure them to back off.  That’s not to absolve the Bank of Japan of mistakes, but US pressure made their job much harder.  Here’s Paul Krugman in 2001:

For the real tragedy right now is that however innovative and open-minded Mr. Koizumi may be, he will fail unless other important players — mainly the Bank of Japan, but also the U.S. Treasury Department — are prepared to learn from Andrew Mellon’s mistake. And all the evidence is that they are not. The head of the Bank of Japan insists that the country’s continuing slump is the result of inadequate reform — that is, insufficient purging of the rottenness. And although the details are in dispute, the U.S. Treasury secretary, Paul O’Neill, appears to have warned Japan not to let the yen weaken too much.

Poor Japan. It is the victim of those who refuse to learn from the past, and thereby condemn others to repeat it.

In contrast, smaller economies such as Singapore use the exchange rate as a monetary instrument. They are too small to attract attention. Importantly, if all countries were to simultaneously depreciate their currencies they cannot all reduce their real exchange rates, which average out to one, by definition.  But they can all simultaneously depreciate their currencies against goods and services, even when using exchange rates as a policy instrument.

Japan and the Eurozone are the two black holes of the modern global economy, pulling the global real interest rate ever lower.  The Eurozone is much larger than even Japan, and hence even less able to inconspicuously use exchange rates as a policy instrument.

If Greece and Italy had had their own currency in 2011, they obviously would have devalued.  Most people understand that fact, but they don’t understand the full implications.  The analysis is often presented in zero-sum terms, with the assumption being that the euro was too strong for Greece and too weak for Germany (based on Germany’s big CA surplus.)  Actually, during the Eurozone double-dip recession (2008-13) the euro was far too strong for Greece and even slightly too strong for Germany.  Even in Germany the inflation rate was too low.

The euro didn’t just create a one-size-fits-all problem; Europe’s reliance on interest rates as the only policy instrument gave it a deflationary bias that doesn’t exist in smaller countries that can use exchange rate depreciation, and hence don’t face a zero bound problem.  (There’s no zero bound for the price of foreign exchange.)

The world now has 4 currency zones regarded as “big”, and that’s a problem.  China grows fast enough where it doesn’t face the zero bound problem . . . yet.  The US has flirted with the zero bound problem.  But Japan and the Eurozone are a major drag on the world economy.  It would be better if the euro didn’t exist and if Japan were viewed (by the US) as a small country.

That’s not to say smaller countries cannot fall into negative interest rates.  But that’s their choice.  Denmark is free to devalue its currency against the euro.  Switzerland is free to go back to the pre-2015 euro peg.  The Danish euro peg and the post-2014 Swiss currency appreciation were (conservative) policy choices.

For the most part, however, small countries are free of the zero interest rate trap.  If they are at or below zero, it’s because that’s where they want to be.  (The Swiss like low inflation.)  The creation of the euro made the world more susceptible to deflationary traps in two ways.  One is well known—the fact that the ECB was structured to have a low inflation bias.  Less well known is that large size itself results in a deflationary bias.  Large central banks can create inflation if they are determined enough, but to do so they may have to engage in activities that will be viewed as more “controversial” than what is required in small countries.  Size matters.

(19 COMMENTS)

Can a federal judge sentence you for a crime your jury says you didn't commit? In a sane world, the answer would be "no." If a prosecutor charges you with five crimes, and the jury finds you not guilty of four of them, the judge who then doles out the sentence should be able to consider only that one guilty verdict.

Yet federal judges can, and often do, use what's called "acquitted conduct"—charges for which a person has been found not guilty—when sentencing defendants for the crimes the jury says they did commit. It's a horrifying bug in the federal criminal justice system that doesn't get nearly enough attention. Until now. 

Sens. Dick Durbin (D–Ill.) and Chuck Grassley (R–Iowa) introduced a bill this week that would expressly prohibit the use of acquitted conduct at sentencing. "If any American is acquitted of charges by a jury of their peers, then some sentencing judge shouldn't be able to find them guilty anyway and add to their punishment," Grassley said in a statement released this week. "That's not acceptable and it's not American."

The power of acquitted conduct is a deadly arrow in the prosecutor's quiver. The fact that a judge will consider at sentencing every offense the prosecutor charges, even if jurors don't buy the prosecutor's pitch, essentially allows prosecutors to game the justice system. They can charge a defendant with an offense they know they can prove beyond a reasonable doubt, and then charge more serious offenses, with tougher penalties, that they can't prove. Even if jurors act responsibly by convicting only on charges proved beyond a reasonable doubt, and refuse to convict on the reach charges, the prosecutor still wins when the judge takes all the charges into consideration at sentencing.  

"Under our Constitution, defendants can only be convicted of a crime if a jury of their peers finds they are guilty beyond a reasonable doubt," Durbin said in a statement. "However, federal law inexplicably allows judges to override a jury verdict of 'not guilty' by sentencing defendants for acquitted conduct."

A laundry list of criminal justice reform groups supports Durbin and Grassley's bill, titled the Prohibiting Punishment of Acquitted Conduct Act. The bill would amend the federal criminal code "to preclude a court of the United States from considering, except for purposes of mitigating a sentence, acquitted conduct at sentencing," and it would "define 'acquitted conduct' to include acts for which a person was criminally charged and adjudicated not guilty after trial in a Federal, State, Tribal, or Juvenile court, or acts underlying a criminal charge or juvenile information dismissed upon a motion for acquittal."

The bill has support from several libertarian and conservative groups, including Americans for Prosperity, the American Conservative Union, Americans for Tax Reform, FreedomWorks, Prison Fellowship, the R Street Institute, Right on Crime, and Koch Industries. 

It's not hard to see why this bill has bipartisan support. But to understand why the practice exists at all—and why some people will inevitably eventually oppose this bill—it helps to think of the federal criminal code as a choose-your-own-adventure book in which three out of every four narrative choices end in "go to prison." Police and prosecutors want to keep it that way.

The use of acquitted conduct at sentencing empowers prosecutors at the very early stages of the justice adventure. Upon gathering enough evidence to make an arrest, the prosecutor can file enough charges that, if the defendant is convicted of all of them, he or she will go to prison for a very long time. So the prosecutor encourages the defendant to plead guilty and receive a lesser sentence. Staring down the barrel of 20 years in prison if they lose at trial, versus 10 or five if they plead guilty, more than 95 percent of federal defendants plead guilty.

But what if the defendant didn't do everything she was accused of, or if the prosecutor's evidence against her is weak? Well, she can take her case to trial and have it out before a jury. And instead of 20 years in prison, or 10, or five, maybe she is acquitted of all charges and gets no time in prison, or is convicted of only a fraction of the charges and spends only two or three years in prison.

That's when acquitted conduct comes into play. Prosecutors can lose before the jury and still win at sentencing. 

"Using acquitted conduct to set sentences heightens the temptation of prosecutorial overreach by blunting the downside to the government," reads an amicus brief filed by FAMM* and the National Association of Federal Defenders in Asaro v. United States, an acquitted conduct case that the Supreme Court has been asked to hear. The authors go on to write: 

If the defendant succumbs to the government's aggressive charges and pleads guilty, the government wins; if he goes to trial and is convicted on those charges, the government still wins; and if he goes to trial and persuades a jury that he is innocent of them, the government still wins, so long as it secures conviction on a more easily proved offense and persuades the sentencing judge of his guilt by a preponderance of the evidence. When acquittal of certain counts is just a "speed bump at sentencing"…prosecutors have little to lose by larding an indictment with charges they cannot prove beyond a reasonable doubt. The government has conceded as much, acknowledging that punishing acquitted conduct encourages charges prosecutors would otherwise forgo.

This is a bad practice. Thankfully, it's one Congress appears willing to address without waiting for the Supreme Court.

• Full disclosure: I served as FAMM's communications director from 2014 to 2016. 

As I have pointed out, Elizabeth Warren's wealth tax, as described, involves a substantial marriage penalty. Now Bernie Sanders comes along with his own wealth tax proposal. He solves the marriage penalty problem by halving the thresholds for singles.  This approach introduces the opposite problem--a marriage bonus.

As I understand the plan, if a single man is worth $30 million, he pays $140,000 per year under the Sanders wealth tax. If he marries his assistant, who has a wealth of less than $2 million, their tax liability falls to zero.

For a single man with higher wealth, the marriage bonus is even larger. Under the Sanders plan, for someone worth $100 million, marriage can reduce the tax liability by $410,000 per year.

Put another way, this plan can be viewed as imposing a tax on widows and widowers. A married couple worth $30 million does not pay anything. When one spouse dies, the surviving spouse then owes $140,000 per year.

Over the last decade, I’ve done numerous posts explaining why the bubble hypothesis is not useful. The bubble hypothesis claims that asset overvaluation is often “obvious” in real time, and implies expected future underperformance, on average. I’ve also argued that the lack of successful “bubble funds” is an indication that asset price bubbles do not exist. If they did, then mutual fund managers would be able to outperform the market by taking short positions in a wide variety of assets experiencing a price bubble.

In 2017, Joe Weisenthal had an amusing idea for a contrarian investment:

[B]ack in 2017, I did joke on Twitter that someone should create a portfolio consisting solely of assets that pundits love to warn are in a bubble. The premise was that people always call things that have gone up a lot a bubble, and most of the time those calls are wrong (or at least very premature), so it makes sense to buy them all as a basket.

It turns out that someone took his advice:

Paul McNamara, who runs an actual nonpretend hedge fund at GAM, went ahead and constructed a hypothetical bubble portfolio a few days later, consisting of things such as Netflix, Tencent Holdings, Tesla, a Canadian apartment REIT, a London property company, the Grayscale Bitcoin Trust, the Argentine century bond, Japanese government bonds, long-term zero-coupon U.S. Treasuries, and so forth—you know, all the things people have been calling overvalued for years. Some of the positions have blown up (thanks, Argentina), but by and large, performance has been robust.

Note that this portfolio is the opposite of what I proposed.  I suggested a fund that took a short position on “bubble” assets, whereas McNamara’s hypothetical portfolio took a long position.

Suppose I am wrong, and that mutual funds taking a short position in bubbles really could systematically outperform the market.  In that case, those funds would become very popular and this would quickly tend to move asset prices to their correct level.  So even if the bubble hypothesis were ever to become “true”, its validity would only last for a brief period, before being competed away by greedy investors.  Bubbles would last as long as a child’s soap bubbles blown into hurricane winds.

(13 COMMENTS)

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HBO

• The Emmys telecast ratings declined 32% to a new low of 6.9 million viewers on Sunday, according to Nielsen ratings.
• Streaming and cable dominated the Emmys, from "Game of Thrones" to "Fleabag."
• Not a single scripted TV series from a major US broadcast network won an award, despite the Emmys airing on Fox.
• Visit Business Insider's homepage for more stories.

"Game of Thrones" and "Fleabag" were the big winners of Sunday's Emmy awards, but the biggest loser might have been the ceremony itself.

This year's Emmys on Fox declined 32% from last year's record-low NBC broadcast, according to Nielsen ratings, sinking to a new all-time low of 6.9 million viewers.See the rest of the story at Business Insider

NOW WATCH: Pixar has a secret formula for making perfect films. Here are 5 rules that make its movies so special.

See Also:

• 17 top-rated products to clean every room in your house
• The 12 youngest Emmy award nominees and winners of all time
• HBO held onto its crown at the 2019 Emmy Awards, while Amazon cleaned up in comedy

SEE ALSO: The 12 youngest Emmy award nominees and winners of all time

One thing I got wrong about China was their exchange rate. In the early 2010s, I expected their real exchange rate to appreciate strongly against the dollar, due to the Balassa-Samuelson effect. It hasn’t. And even after visiting China, I’m not quite sure why. FWIW, here I’ll report some things I noticed on my trip.

BTW, a quick reminder that a prediction that the Chinese yuan would appreciate in real terms is identical to a prediction that China would get much less cheap.

1. China is still really cheap. And it doesn’t just seem to related to wages. Subways in Beijing are roughly 55 cents, only about 1/5th the level of NYC. That means that if you priced the 4 billion annual subway trips in Beijing at NYC subway prices, revenue would rise from about $2 billion to $10 billion. That’s why comparisons of US and Chinese GDPs at market exchange rates are utterly meaningless. America is much richer, even in PPP terms, but the market price gap wildly overstates the actual difference. China’s total GDP in terms of actual output is obviously higher than the US.  (BTW, Beijing’s subways are also far nicer than in New York.)

2. What’s true of subways is also true of buses, taxis and intercity rail. They are all ridiculously cheap by American standards, maybe 1/5th as expensive. The “output” of China’s transit system at American prices would be huge. The difference is smaller for air travel, where the cost is mostly the airplane and jet fuel.

3. Wages have risen sharply. In the early 2000s, a lady who cleaned and cooked for households in Beijing earned about 70 cents an hour. Now she earns $3.50 an hour. In PPP terms that’s close to America’s minimum wage. But this sort of worker in New York or LA earns far more than the national minimum wage, so unskilled workers in China have much lower living standards than in the US.

4. Haircuts are very labor intensive. I paid $1.20 in 2001, $4 in 2012, and $6.90 on my most recent trip, all in the same place. There’s no tipping, so prices are a bit less than half what I pay in America.  Nonetheless, nominal wages in China are rising fast; the government is not lying about that fact.

5. Because nominal wages are rising fast (and we know this without resorting to questionable government data), we also know that China’s nominal GDP is rising fast. Debates about RGDP growth then revolve around the issue of inflation.

6. I have no reason to question China’s inflation data. Other than haircuts, most things don’t seem much more expensive than I recall from previous trips. Restaurant meals are still dirt-cheap, although compared to the US there’s much more price variation on an individual menu. That’s because labor is a much smaller part of the total cost than in the US. A stir-fried veggie dish might be $2.50, a meat dish $5, and a nice seafood dish $10. Prices include tax and there’s no tipping.

7. In 2009, a high-speed train to Tianjin cost $8. Today it’s about the same, which surprised me.  China’s clearly had only modest inflation.  The biggest constraint on urban Chinese living standards is housing, and ironically that is even truer in capitalist Hong Kong, where housing is the one socialist sector.

If we combine China’s modest inflation with the rapid nominal wage growth, it’s obvious that their real GDP has risen sharply.  We don’t need to rely on government data to know that.  But then anyone just looking around the cities (or even the countryside) would know that—the country looks much more developed.

So why didn’t the Balassa–Samuelson effect have the impact I predicted?  I’m still not sure, but over at Econlog I have a new post explaining why PPP comparisons are so important.  In the post, I point out that the real foreign exchange value of the Japanese yen has plummeted since 1994, so much so that if you believe in market exchange rates you’d be forced to conclude that Japan has experienced one of the worst depressions in global history.  Actually, Japan’s doing OK, but only in PPP terms.

We tend to think of China’s currency vis-a-vis the US dollar.  But China’s economy is more like Japan’s, another East Asian exporter of manufactured goods.  If we look at the yuan vs. the yen, then there’s been a huge Balassa-Samuelson effect since 1994.  The Chinese currency has appreciated very strongly in real terms against the Japanese yen.  So at least there’s that.

Thus it seems that part of my mistake was not anticipating the strength of the US dollar.  In 1994, I did not anticipate that countries like Japan would become much cheaper for American tourists.  At the time, Japan was quite expensive.

Perhaps the way the US dominates the global high tech industries (which also causes our stock market to outperform foreign markets) is part of the story.  In any case, I was wrong about the Chinese exchange rate.  (Lars Christensen was right.)

For me, the two biggest surprises were that the air pollution in Beijing wasn’t bad, and that the level of authoritarianism was much worse than I expected.  The air pollution may have been a fluke; perhaps factories were shut down to clear the air for the big October 1 celebration.  Air is gradually getting cleaner in Beijing, but not as dramatically as it seemed on my trip.

The authoritarianism is no fluke, although even that was probably ramped up a bit for October 1.  It’s not so much what they do (which is often the same as we do here—pointless security checks, CCTVs, etc.) rather it’s the overwhelming scale of the security apparatus.  I found it extremely annoying.  (Of course this is in eastern China, Xinjiang is far, far worse.)

A Wednesday night U.S. drone strike intended for Islamic State forces killed 30 pine nut farmers in Afghanistan and wounded an additional 40 civilians. Reports indicate more are missing.

The victims of this strike were reportedly sitting around a fire after a long day of work when the drone strike hit Nangarhar Province.

Although Wednesday's strike was particularly large, these farmers are only a small proportion of an estimated 1,366 civilian deaths that have occurred in Afghanistan as part of ongoing warfare in the nation from January to July of 2019.

Andrea Prasow, the Washington director of Human Rights Watch, calls the situation in Afghanistan "excruciating," largely due to the remote nature of the conflict. Prasow notes that warfare was significantly altered when actual U.S. presence in Afghanistan was abandoned in favor of drone warfare.

"We've been seeing [and] documenting [these] kinds of drone strikes for years," Prasow tells Reason. She notes that civilians have been bearing the costs of drone strikes due to an array of issues that arise from their use, including "faulty information, poor targeting, poor warning systems, and [the] inability to differentiate between combatants and non-combatants."

Prasow also says the increasingly remote nature of warfare has lowered the risk for a key aspect of warfare: retaliation.

"It used to be the case that if you bombed the wrong village, you would have a whole bunch of angry villagers outside your base, [providing] an additional motivation" to conduct warfare in a less aggressive manner, Prasow says. So while reducing our physical military presence in Afghanistan is welcome, it may not be easing tensions if we're just replacing on-the-ground soldiers with drone strikes.

The U.S. government makes it hard for its citizens to know how frequently these drone strikes go awry. As Reason's Scott Shackford reported earlier this year, Daniel Hale, a former Air Force intelligence analyst, was arrested on May 9 and charged with espionage for leaking information in 2013 and 2014 to journalists that revealed that the government has been classifying anybody the U.S. killed via drone strike as enemy combatants. This suggests that the actual number of civilian deaths could be even higher than what has been acknowledged by the government.

Shutterstock

• Many Americans are settling in the suburbs.
• With the help of Zillow, Business Insider has uncovered the most expensive suburb in each state based on median home value.
• For the purposes of this study, a suburb is defined as a residential area that is adjacent to or within commuting distance of a city, per the Merriam-Webster dictionary.
• Visit Business Insider's homepage for more stories.

American suburbs are growing increasingly popular. 

In fact, around 175 million Americans live in the country's suburbs — that's more than half the country's current total population, which is around 329 million.

A suburb, according to Merriam-Webster, is a residential area that is adjacent to or within commuting distance of a city.

Read more: The most famous home in every US state, from LA's Playboy Mansion to a 'Beer Can House' in Houston

Factors like good public schools and low crime rates can make certain suburbs more desirable than others. And as is so often the case, desirable areas come with expensive price tags attached.

With the help of Zillow, Business Insider has uncovered the most expensive suburb in every state.

Read more: The 25 best places to live in America

To create this list, Zillow first ranked the communities in each state by highest to lowest median home value. From there, the data analyst found the community in each state that has the highest median home value and is located within a major metro area, defining this as the state's most expensive suburb.

Keep reading to find out if your suburb made the list.

Alabama: Mountain Brook

Ralph Daily/Wikimedia Commons

Metro area: Birmingham-Hoover

Median home value: $648,300

Population: 20,438

Alaska: Lakes

Shutterstock

Metro area: Anchorage

Median home value: $296,100

Population: 8,364*

*As of the 2010 Census, when the population of Lakes was last recorded.

Arizona: Paradise Valley

Shutterstock

Metro area: Phoenix-Mesa-Scottsdale

Median home value: $1,834,400

Population: 13,961

See the rest of the story at Business Insider

See Also:

• A Los Angeles megamansion that's been on the market for 2 years just raised its price by $20 million. Yes, you read that right.
• View from the top: Inside the Billionaire's Row skyscraper that just became the tallest residential building in the world at 1,550 feet
• The 25 best places to live in America

SEE ALSO: Here's how much space $1 million will get you in 25 major US cities

DON'T MISS: The best suburbs in every state in America

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» In Chicago, conflicts between local transit services and the commuter rail network have impinged on peoples’ mobility for decades. The institutional context encourages divides, not cooperation, to the detriment of riders.

All across the developed world,* cities have transitioned their commuter rail networks—services designed for infrequent, relatively long-distance travel at peak hours between suburbs and central cities—into regional rail systems. Regional rail, exemplified by Germany’s S-Bahn and France’s RER systems, encompasses all-day, two-way, frequent service, often with through-running, meaning service from suburb to suburb via downtown. Regional rail is typically also integrated into the metropolitan transit fare system, such that a ride on regional rail costs no different than one on a local bus and train, as long as the origin and destination are the same.

These regional rail services have transformed metropolitan travel in the places where they’ve been implemented because they make show-up-and-go, fast service available to whole regional populations, not just those who live in center cities, where frequent local rail and bus options are available.

Why is it, then, that U.S. transit agencies have failed, practically universally, to adopt such changes? Why is commuter rail service in every U.S. city where it’s offered so infrequent? And why is it typically so much more expensive than other types of transit?

There are a number of reasonable explanations—commuter rail often travels on tracks also used by freight, so it’s difficult to add service; commuter rail journeys are longer, so they cost more to provide; and suburban Americans are less comfortable using transit than their foreign counterparts, so there is less demand for the service.

Yet there are also institutional constraints that have made U.S. regions so incapable of investing in regional rail. These are resolvable problems, but doing so will require a significant political lift.

Even so, if American cities are serious about moving people into transit, reducing transportation-related greenhouse-gas emissions, and providing an alternative to car-dependence at the metropolitan scale, regional rail is a necessary investment. It is the only mechanism available to provide fast, frequent, reliable, and long-distance transportation for large numbers of people. Finding the political will to surmount these institutional constraints and develop regional rail should be a priority in virtually every metropolitan area.

Chicago: A difficult case study

The Chicago metropolitan area would, in theory, make for an ideal place to implement regional rail. Less than a third of the area’s nine million inhabitants live in the central city, but Chicago’s downtown Loop is a massive jobs hub, and much of the region grew out along rail lines, now operated by Metra, the commuter rail service.

For years, advocates in Chicago have pushed for improvements on Metra Electric, a commuter line that runs south from downtown through the city and into the suburbs. They argued that it could provide frequent, all-day service and allow transfers to-and-from Chicago Transit Authority (CTA) local bus and rail routes; the Electric, which once had faregates and frequent all-day service, also had the advantage of operating on tracks not shared with freight trains. These improvements, they suggested, would increase transit use, reduce commute times, and help reinvigorate a low-income community.

The Chicago region, like most metropolitan areas around the U.S., has rapidly lost transit riders over the last decade, and needs a new strategy to build back the use of public transportation.

This year, change finally seemed to be afoot: The state passed a huge gas-tax increase, providing new funding for transportation investments. And Cook County President Toni Preckwinkle announced that she wanted to subsidize Metra to increase service not only on the Electric, but also on the adjacent Rock Island line, and reduce fares to levels equivalent to those on the CTA—just $2.50 a ride in the city.

But this week, Chicago Mayor Lori Lightfoot announced her opposition to the proposal. The fact that Preckwinkle was Lightfoot’s opponent in last February’s mayoral race suggests that personality politics may be partly to blame. Officially, for the new mayor, however, the policy is problematic because it would shift riders from CTA onto Metra, hurting the CTA.

CTA is an independent agency that the mayor of Chicago controls through appointees. Metra is a state agency whose board is largely composed of appointees from Chicago-region counties, including Cook County.

This leaves Cook County’s proposal with an unclear future. It’s not obvious that Metra will be able to assemble the political constituency to move forward without the city’s agreement, since the majority of people who would benefit from the service live and work in the city.

If Mayor Lightfoot’s opposition is successful, the citizens of the city will be worse off. The proposal to improve and cheapen Metra services would boost overall transit ridership, reduce car dependence, increase equity of access, and generally make the Chicago region a better place to live.

So what gives? Much can be explained by the current institutional configuration of transit in the Chicago region, which isn’t so far off from those of transit systems elsewhere in the U.S.

Institutional constraints at play

Let’s consider the current institutional configuration of transit systems in the Chicago region. The CTA, again, is controlled by the mayor, since she can appoint four of its seven board members (the other three are appointed by Illinois’ governor). Of Metra’s 11 board members, five are appointed by suburban county boards, one is appointed by the Cook County president, one is appointed by the mayor of Chicago, and four are appointed by suburban members of the Cook County board.

There is also an organization called the Regional Transportation Authority (RTA), which is supposed to oversee CTA, Metra, and Pace, the suburban bus service, but whose actual power is largely limited to distributing a small share of grant funds and vetoing the other agencies’ budgets, a power it has not engaged in.

CTA and Metra largely receive funding from the same sources: Sales taxes collected throughout the Chicago region and state financial assistance; together, these accounted for 95 percent of public subsidies to the two services in 2019. In other words, generally the same taxpayers are paying for services operated by CTA and Metra (though the transit-related sales tax rate in Cook County and Chicago, 1.25%, is higher than in the rest of the region, 0.5%).

Despite these shared sources of funds and official oversight of both agencies by RTA, CTA and Metra operate as if they were competitors. As an example, the CTA runs express bus services to the South Side, such as the #6, J14, and #26 buses, which serve destinations just adjacent to station stops of the Metra Electric—despite the fact that Metra Electric services are faster and more reliable.

Metra services, meanwhile, are more expensive than their CTA equivalents. One-way travel between the Loop and the South Side of Chicago costs between $4 and $5.50, compared to $2.25 for CTA bus and $2.50 for CTA rail fares. Metra’s fare doesn’t allow for transfers to other parts of the city on CTA services, whereas such transfers cost $0.25 for those using the CTA.

Cook County’s proposal would address some of these deficiencies, making Metra trains more convenient from both a timing and cost perspective.

It is unquestionably true that Mayor Lightfoot is right in suspecting that such changes would move riders out of CTA and onto Metra.

People on much of the South Side of Chicago are currently using CTA services instead of Metra for two reasons. First, they’re cheaper; many people who ride transit are financially constrained, and they make choices that reflect that fact. Second, CTA is more convenient, since its buses and trains operate more frequently.

Making Metra cheaper and more frequent would address those two problems to a significant degree. Allowing people access to regional rail service would improve their lives, allowing them to spend less time in transit and increasing the distance they could travel in a given period of time.

But Mayor Lightfoot has little incentive to encourage people to move from CTA to Metra. Doing so would reduce her political constituency by moving riders from a service she controls to one she does not. It would also put pressure on CTA’s finances by reducing its revenues to some degree.

Moreover, CTA officials are right to believe that relying on Metra to make wholehearted change is a tenuous bet at minimum. For instance, despite a state mandate for Metra to accept the Ventra transit card used by CTA and Pace, the agency still doesn’t accept the card in conventional forms. The suburban control of Metra’s board, meanwhile, means the agency has for decades undermined its urban customers—those living in the city of Chicago—to prioritize service for suburban riders. And even as CTA has slowly but steadily improved—for example, buying up-to-date railcars and buses—Metra remains stuck in the 1970s from a technological perspective. So encouraging a shift to Metra won’t necessarily be all roses.

The result, however, is a continued competition for riders, an absurd situation when both CTA and Metra are relying on the same market of passengers and both are receiving public subsidies from the same tax sources.

This is not an effective strategy for growing transit ridership.

What is the purpose of public transportation?

Setting aside institutional conflicts for a moment, this Chicago case raises questions about what the purpose of public transportation is, and what its goals should be, in a modern city. From my perspective, the answer to this is relatively straightforward: Provide high-quality service that encourages people to stop relying on automobiles to get around, and that ensures that everyone has access to affordable and reliable mobility.

If this is a shared view, then increasing regional ridership should be one of public transportation’s primary goals. But increasing regional ridership does not necessarily mean increasing the ridership of every individual service—it means improving the services as a whole such that the system is more attractive in general.

This isn’t a particularly complicated concept. For example, when a transit agency opens a new rail line, it generally expects people using buses along the same route to move to the new line. And that’s great! When people move from buses to rail on the same route, they’re generally getting faster, more reliable, more comfortable service. There’s nothing wrong with that. And the investment in this improved service will, in turn, bring in more passengers.

The problem with Mayor Lightfoot’s approach is that it acts as if the goal for regional transit should be to increase ridership on the CTA, not on the system as a whole. To pursue this deeply questionably line of logic would be to oppose investing in a new rail line because doing so might result in less ridership on existing buses. On the face of it, the city’s position on improvements for Metra Electric appear to be motivated by agency promotion, not by the region’s best interest of increasing transit ridership.

The result of stopping improved Metra service may be, yes, the maintenance of existing levels of CTA ridership (though they are declining, so something is amiss already). But it certainly will not produce the increase in ridership associated with providing people who need it better access to transit.

As I noted, however, there are institutional and historic reasons why the CTA might be concerned about moving people out of its services and onto Metra.

A course forward for thinking about regional transit

I’m hardly the first person to suggest that a lack of regional integration in transit systems produces pathologies when it comes to the motivations of officials involved in related decision making.

But the Chicago case should remind us that an institutional configuration that separates control of transit agencies in the same metropolitan area to different political actors can produce negative outcomes for the region as a whole. We have yet to resolve this situation related to Metra Electric improvements, but decades of little to no integration between CTA and Metra suggests that the current environment isn’t working.

Simply integrating services does not necessarily solve the problem, however. New York’s MTA, for example, technically oversees the New York City Subway, buses, Metro-North Railroad, and Long Island Rail Road—and yet neither Metro-North nor Long Island Rail Road offer regional rail services, and neither offers free transfers to Subway or bus services, let alone reasonably priced fares in areas where service is overlapping.

Moreover, Chicago’s CTA does have the distinct benefit of being directly answerable to the city’s mayor, which I’m convinced improves political accountability and makes the service better over the long run.

So simply saying that CTA and Metra should be merged into a regional entity will not, by itself, make today’s problems disappear.

Even so, the agencies need to find a way to agree on a new set of ground rules. It should be self-evident that the goal of transit in the Chicago region is to grow overall ridership, not ridership on a particular service—and that might mean sacrifice on one service or another once in a while. Moreover, it should be obvious that the current situation, where customers are treated as if they’re supposed to choose between competing services—despite the fact that both are subsidized by the same tax revenues—is unacceptable.

If Chicago’s transit agencies are able to move toward such a détente, they would be taking a big step forward toward reducing the conflicts native to the current institutional configuration. They would also be moving the region toward a transit service that actually benefits the people of the metropolitan area. Perhaps Chicago could be a model for the rest of the country.

* Frequent, all-day, two-way regional rail services are currently available in Basel, Bilbao, Leipzig, Madrid, Milan, Munich, Paris, and Zurich, among others. They are in development in Brussels, Buenos Aires, Geneva, and Toronto, among others.

Image at top: Metra tracks on Chicago’s South Side, from Flickr user The West End (cc).

Everyone always talks about how much money there is in politics. This is the wrong framing. The right framing is Ansolabehere et al’s: why is there so little money in politics? But Ansolabehere focuses on elections, and the mystery is wider than that.

Sure, during the 2018 election, candidates, parties, PACs, and outsiders combined spent about $5 billion – $2.5 billion on Democrats, $2 billion on Republicans, and $0.5 billion on third parties. And although that sounds like a lot of money to you or me, on the national scale, it’s puny. The US almond industry earns $12 billion per year. Americans spent about 2.5x as much on almonds as on candidates last year.

But also, what about lobbying? Open Secrets reports $3.5 billion in lobbying spending in 2018. Again, sounds like a lot. But when we add $3.5 billion in lobbying to the $5 billion in election spending, we only get $8.5 billion – still less than almonds.

What about think tanks? Based on numbers discussed in this post, I estimate that the budget for all US think tanks, liberal and conservative combined, is probably around $500 million per year. Again, an amount of money that I wish I had. But add it to the total, and we’re only at $9 billion. Still less than almonds!

What about political activist organizations? The National Rifle Association, the two-ton gorilla of advocacy groups, has a yearly budget of $400 million. The ACLU is a little smaller, at $234 million. AIPAC is $80 million. The NAACP is $24 million. None of them are anywhere close to the first-person shooter video game “Overwatch”, which made $1 billion last year. And when we add them all to the total, we’re still less than almonds.

Add up all US spending on candidates, PACs, lobbying, think tanks, and advocacy organizations – liberal and conservative combined – and we’re still $2 billion short of what we spend on almonds each year. In fact, we’re still less than Elon Musk’s personal fortune; Musk could personally fund the entire US political ecosystem on both sides for a whole two-year election cycle.

But let’s go further.

According to this article, Mic.com sold for less than $5 million. Mashable sold for less than $50 million. The whole Gawker network (plus some other stuff including the Onion) sold for $50 million. There are some hints that Vox is worth a high-eight-digit to low-nine-digit amount of money. The Washington Post was sold for $250 million in 2013 (though it’s probably worth more now). These properties seem to be priced entirely as cash cows – based on their ability to make money through subscriptions or ads. The extra value of using them for political influence seems to be priced around zero, and this price seems to be correct based on how little money is spent on political causes.

Or: Jacobin spends a lot of time advocating socialism. The Economist spends a lot of time advocating liberalism. First Things spends a lot of time advocating conservatism. They all have one thing in common: paywalls. How could this be efficient? There are millions of people who follow all of these philosophies and really want to spread them. And there are other people who have dedicated their lives to producing great stories and essays advocating and explaining these philosophies – but people have to pay $29.99 for a subscription to read their work? Why do ideologies make people pay to read their propaganda?

Maybe the most extreme example here is Tumblr.com, which recently sold for $3 million, ie the cost of a medium-sized house in San Francisco. Tumblr has 400 million monthly visitors, and at least tens of millions of active users. These people talk politics all the time, usually of a far-left variety. Nobody thinks that one of the central political discussion platforms of the far-left is worth more than $3 million? Nobody on the right wants to shut it down? Nobody on the left wants to prevent that from happening? Nobody with a weird idiosyncratic agenda thinks being able to promote, censor, or advertise different topics on a site with tens of millions of politically engaged people is at all interesting?

(in case you’re keeping track: all donations to all candidates, all lobbying, all think tanks, all advocacy organizations, the Washington Post, Vox, Mic, Mashable, Gawker, and Tumblr, combined, are still worth a little bit less than the almond industry. And Musk could buy them all.)

The low level of money in politics should be really surprising for three reasons.

First, we should expect ordinary people to donate more to politics. A lot of the ordinary people I know care a lot about politics. In many of the events they care about most, like the presidential primaries, small donations matter a lot – just witness Tom Steyer begging for small donations despite being a billionaire. If every American donated $25 to some candidate they supported, election spending would surpass the almond industry. But this isn’t even close to happening. Bernie Sanders is rightly famous for getting unusually many small donations from ordinary people. It’s not clear exactly how much he’s received, but it looks like about $50 million total. This sounds like a lot of money, but if you use polls to estimate how many supporters he has, it looks like each supporter has on average given him $2. This is a nice token gesture, but surely less than these people’s yearly almond budget.

Second, we should expect the rich to donate more to politics. Many politicians want to tax billionaires; billionaires presumably want to prevent that from happening. Or wealthy people might just have honestly-held political opinions of their own. As rich as Elon Musk is, he’s only one of five hundred billionaires, and some of the others are even richer. So how come the amount of money in politics is so much less than many individual billionaires’ personal fortunes?

Third, we should expect big corporations to donate more to politics. Post Citizens United, corporations can supposedly put as much money into politics as they want. And they should want a lot. The government regulates corporations, so having friendly politicians in power can mean life or death for entire industries. Suppose hostile government regulation could decrease Exxon Mobil’s revenues 5% – you would think Exxon Mobil would be willing to spend 4% of its revenue to prevent this. But Exxon makes $280 billion per year. 4% of its revenue would already be larger than the whole US political ecosystem! In fact, according to Exxon’s own records, they only spend about $1 million per cycle. While they’re probably hiding something, they couldn’t hide donations the size of the whole rest of the political ecosystem, so it’s still pretty mysterious.

I think there are individual factors affecting all of these. As mentioned before, elections have spending limits (however inconsistently enforced) and may not be tractable to money. Think tanks may be more talent-limited than funding-limited. Media properties may be limited by the opinions of their journalists and subscribers (the Washington Post couldn’t pivot to being a conservative outlet without getting completely different employees and customers). Tumblr has already proven unable to censor its users without sparking a mass exodus. These issues are probably responsible for part of the underpricing. But it still seems surprising.

In his paper on elections, Ansolabehere focuses on the corporate perspective. He argues that money neither makes a candidate much more likely to win, nor buys much influence with a candidate who does win. Corporations know this, which is why they don’t bother spending more. Most research (plus the 2016 results) confirms that money has little effect on victory, so maybe this is true. But it would also have to be true that lobbying, the NRA, the media, etc don’t affect politics very much, which seems like a harder sell.

That leaves the Bernie Sanders supporters. Even if money doesn’t affect politics, Sanders supporters seem like about the least likely people to believe that. I think here we have to go back to the same explanation I give in Does Class Warfare Have A Free Rider Problem? People just can’t coordinate. If everyone who cared about homelessness donated $100 to the problem, homelessness would be solved. Nobody does this, because they know that nobody else is going to do it, and their $100 is just going to feel like a tiny drop in the ocean that doesn’t change anything. People know that a single person can’t make a difference, so they don’t want to spend any money, so no money gets spent. This is true for ordinary people, but it’s also true for billionaires and greedy corporations. No single greedy corporation wants to pony up the money to change the laws to favor greedy corporations all on its own, while its competitors lie back and free-ride on its hard work. So they basically donate token amounts and do nothing. By all accounts the Koch brothers actually believed in everything they were doing, and they had to, because you couldn’t make billionaires spend Koch-brothers-like levels of time and money out of self-interest.

In this model, the difference between politics and almonds is that if you spend $2 on almonds, you get $2 worth of almonds. In politics, if you spend $2 on Bernie Sanders, you get nothing, unless millions of other people also spend their $2 on him. People are great at spending money on direct consumption goods, and terrible at spending money on coordination problems.

I don’t want more money in politics. But the same factors that keep money out of politics keep it out of charity too.

The politics case is interesting because it’s so obvious. Nobody’s going to cynically declare “Oh, people don’t really care who wins the election, they just pretend to.” It’s coordination problems! It has to be!

So when I hear stories like that Americans could end homelessness by redirecting the money they spend on Christmas decorations, I don’t think that’s because they’re evil or hypocritical or don’t really care about the issue. I think they would if they could but the coordination problem gets in the way.

This is one reason I’m so gung ho about people pledging to donate 10% of their income to charity. It mows through these kinds of problems. I may not be a great person. But I spend more each year on the things I consider most important than I do on almonds, and this is the kind of thing that doesn’t happen naturally. It’s the kind of thing where I have to force myself to ignore the feeling of “just a drop in the ocean”, ignore whether I feel like other people are free-riding on me, and just do it. Pledging to donate money (and then figuring out what to do with it later) ensures I will take that effort, and not end up with revealed preferences that seem ridiculous in light of my values.

A Michigan man was jailed last month on a $500,000 bond after writing critical posts on Facebook about the judge who denied him custody of his son. Jonathan Vanderhagen, 35, is now standing trial for malicious use of telecommunication services.

The saga began two years ago when Vanderhagen petitioned Macomb County Circuit Court Judge Rachel Rancilio for sole custody of his 2-year-old son, Killian. Vanderhagen argued that Killian's biological mother was unfit to be Killian's sole guardian. Judge Rancilio disagreed and the child's mother was able to retain custody. 

Shortly after the custody dispute, Killian passed away in his mother's care from what authorities concluded was a preexisting medical condition.

Despite that conclusion, Vanderhagen believed that Killian would still be alive had he been granted custody. Since his son's death in 2017, Vanderhagen has used his Facebook page to criticize Rancilio's custody ruling. Those posts, none of which were deemed threatening by the police department that investigated them, landed Vanderhagen in jail. 

According to a complaint and an emergency bond hearing provided to Reason by Vanderhagen's lawyer, Nicholas Somberg, Vanderhagen was charged with one misdemeanor count of malicious use of telecommunication services due to his criticism of Rancilio. The definition of "malicious use" includes using a telecommunication service with the intention of terrorizing, intimidating, threatening, or harassing Rancilio.

The case report filled out by Sgt. Jason Conklin of the Macomb County Sheriff's Office notes that Rancilio was made aware of Vanderhagen's posts, several of which included screenshots of her own Facebook page and pins on Pinterest. The screenshots are accompanied by captions promising to expose the corruption of the court system and calling Rancilio and Mary Duross, a 14-year veteran Friend of the Court who was involved in the custody case, "shady." 

"At no point does [Vanderhagen] threaten harm or violence towards Rancilio or Duross," Conklin wrote in the case report.

Conklin took various screenshots of Vanderhagen's Facebook posts, including the following. 

The Facebook post in question shows Vanderhagen holding a shovel with the photoshopped initials R.R. and M.D., believed to be Rancillio and Duross, respectively. The caption says, "Dada back to digging [and] you best believe [I'm] gonna dig up all the skeletons in this court's closet."

The post was published to Facebook on July 8. Somberg explains to Reason that the date of this particular post should have jeopardized the case brought against Vanderhagen.

Vanderhagen received a letter from Sgt. Morfino, dated July 10, informing him that there was a warrant for his arrest for malicious use of telecommunications. The letter says the actions occurred "on or about" July 7. Vanderhagen was arraigned before the Macomb County District Court on July 11.

Vanderhagen was released on a $10,000 bond under the condition that he would not engage in direct or third-party contact with Rancilio. Vanderhagen was also prohibited from sending "inadvertent messages by way of Facebook" to Rancilio.

Following the arraignment, Vanderhagen continued to use Facebook to post about his son, his son's mother, and his case, topics Somberg argues are not in violation of the bond conditions set on July 11. Regardless, Vanderhagen was summoned to appear before District Judge Sebastian Lucido at the end of July for an emergency bond hearing, allegedly for "posting messages" about Rancilio.

A list of exhibits presented to the court highlights Facebook posts calling his son a hero, criticisms of his son's mother, and criticisms of "the system," none of which directly referenced Rancilio.

The only reference to Rancilio is found in Exhibit 1, which features screenshots of Vanderhagen's July 8 Facebook post. Considering Vanderhagen did not receive his bond conditions until three days after that Facebook post was published online, however, its inclusion seems like an inappropriate attempt to paint Vanderhagen as more of a threat than he actually is.

In a transcript of the exchange between Somberg and Judge Lucido at the emergency bond hearing, Somberg argued that Vanderhagen has a First Amendment right to air his court-related grievances online:

MR. SOMBERG: Every one of these exhibits are innocuous, are irrelevant, are not threatening, are not harassing or not intimidating in any way whatsoever. And I would make the argument that he can F say the Judge, F the President of the United States. I mean you have the right to say that stuff.

Lucido's responded that there are "limits" to the First Amendment right to free speech:

THE COURT: There cannot be anything of a threatening nature. You can't yell. They used the example, the famous case, you can't yell fire in a public place or movie theater, something like that. We're talking about threatening a sitting Circuit Court Judge is the original allegation against Mr. Vanderhagen. When there's a no contact, it's no contact directly, indirectly or social media. These are [although] he likes to hint around the fringes of it, in my opinion they are of a threatening nature after the no contact was put in place.

Somberg then asked Lucido to explain why the other posts were considered threatening towards Rancilio. Lucido told Somberg that the Facebook posts "speak for themselves:"

THE COURT: You can sit there and read every one of them if you want but [they're] already part of the record.

MR. SOMBERG: I understand that, your Honor, but you just said that you found the exhibits to show that they are threatening in nature. I'm just asking what—

THE COURT: Correct—

MR. SOMBERG: —is threatening about them.

THE COURT: —because [they're] alluding to Judge Rancilio and I'm not going to sit here and explain it any further. But here's what I am going to read and what is also put in LEIN. Do not harass, intimidate, beat, molest, wound, stalk, threaten or engage in any other conduct that would place any of the following persons or a child of any of the following person's in reasonable fear of bodily injury, spouse, former spouse, individual with whom the defendant has a child in common, resident or former resident of the household. Do not assault, harass, intimidate, beat, wound or threaten the following persons, Rachel Rancilio. And in my opinion, he's violated that.

"People have a constitutional right to express opinions about government officials, including judges," says Loyola Law School Professor Aaron Caplan. "Defendants who appear before a judge have this right, just like anybody else. It might not be wise to criticize the judge hearing your case, but it is a right that defendants have if they want to exercise it."

Caplan notes that free speech "does not include the right to make what the law calls 'true threats' to inflict bodily harm on any other person, including judges."

Yet Conklin, the investigating sergeant in Vanderhagen's case, concluded that "[a]t no point does [Vanderhagen] threaten harm or violence towards Rancilio or Duross."

Not only does it appear that Vanderhagen's First Amendment rights have been violated, Judge Lucido also increased Vanderhagen's bond to $500,000, raising questions about the use of excessive bail amounts as a means of further punishing and suppressing Vanderhagen's speech. 

In an emergency appeal, Somberg argued that legal precedent states that "bail is excessive if it is in an amount greater than reasonably necessary to adequately assure that the accused will appear when his…presence is required." The nature of the offense, Somberg continued, also raises questions about the $500,000 bond. Vanderhagen was charged with a misdemeanor that carries a maximum sentence of six months in jail and a maximum fine of $1,000.

Somberg can see no logical explanation for the court's decision to increase Vanderhagen's bond 50 times the initial amount. Vanderhagen has no criminal record. Nor is he a registered firearm owner. These factors, Somberg argues, would justify a lower bond, not a higher bond.

In a statement to Reason, Somberg likens the high bond to intimidation. "He has never threatened anybody, has no criminal history, and is no flight risk. A $500,000 cash bond is what you would expect for a murderer or rapist. I can't think of any other reason to set such an astronomically high bond other than to intimidate and punish him for his speech. We are fighting this case not just for my client but to defend the constitutional rights of all of us," Somberg says.

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The media tends to dwell on bad news. Even when something is a smashing success, say Germany’s 2004 labor market reforms, the reporting is relentlessly downbeat. The same is true of Japan’s recent fiscal policy, which has finally brought the national debt under control.  The debt to GDP ratio has leveled off at roughly 240% of GDP since the 2014 tax increase:

Better yet, this fiscal austerity was associated with an extremely strong labor market, not at all the “disaster” predicted by Keynesian economists:

But that doesn’t stop the media from continuing to insist that the fiscal austerity was a failure. Here’s the Financial Times, discussing the planned October increase in Japan’s national sales tax, from 8% to 10%:

After the disastrous economic impact in 2014, when the tax went up from 5 to 8 per cent, the government has prepared a series of countermeasures.

“Disastrous”?  But at least the FT is hedging its bets this time around, as the article is entitled:

Fears recede of Japan recession sparked by consumption tax rise

I’ve been repeatedly insisting that those fears were groundless.  That’s not to say a recession cannot occur at some point, but it wouldn’t be caused by fiscal austerity.

The actual policy disaster occurred in 2008, when the Bank of Japan’s tight money policy led to a sharp fall in NGDP.  Fiscal policy (and also severe real shocks like the 2011 tsunami) don’t have much impact on employment.

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