The Volokh Conspiracy

Although only mid-August, school will be starting up for me only too soon … during the summer months, I make a vow (at best half kept most years) to spend two hours a day reading stuff, anything that is not strictly driven by a current writing project.  I’ve found that if I can persuade myself to stop surfing the web, put aside the immediate reading for whatever I’m writing, and read across a wider range of things, I am storing up – marinating, possibly – ideas for the future.  I haven’t done so well on that assignment this summer, but I thought I would share a couple of items on the wandering list of summer reading, ranging from things that are about current writing projects, to beach reading – well, not actual beach reading, because I didn’t go to the beach, but books I read in California while on a not-quite vacation while daughter looked at colleges.  Also some things I was listening to.  Below the fold … Continue reading ‘My Wandering Summer Reading’ »

I guess a better title would be “California’s Woes and Prop 13, Not.”  Also, never let it be said that Our Volokh Conspiracy – and its commenters – do not drive the intellectual agenda.

William Voegeli, a couple of whose articles on California’s finances have been linked here (see California tag), and who also provided a nice short commentary for VC on the topic, has a new piece in CityJournal on the legacy of Prop 13.  He told me in an email that it got started on account of being struck by how many VC commenters on his earlier post attributed California’s parlous fiscal state to Prop 13.  Hence the new article, “Don’t Blame Proposition 13.” Likewise I’m pleased to announce the publication of his new book, Never Enough: America’s Limitless Welfare State. Here is a bit from the California Prop 13 article :

According to liberals in politics, journalism, and academia, Proposition 13 is the reason for California’s worsening fiscal nightmare and the declining quality of the state’s public services, and the motives behind it were deplorable. And because Prop. 13 ignited a national tax revolt that remains potent, the Left also blames the measure for much of what it thinks has gone wrong in American political life generally over the past three decades.

Yet no matter how often their moral and intellectual “superiors” denounce them, California taxpayers continue to insist that the problem isn’t their purported stinginess but their government, which makes lousy use of the considerable funds that it continues to receive. On this point, the voters aren’t being stubborn, greedy, or stupid. The voters are right.

The first thing to recognize is that Proposition 13 did not destroy the tax base of California’s local governments. True, the average property-tax rate has fallen from 2.67 percent in 1977 to 1.1 percent today, observes David Doerr of the California Taxpayers’ Association. But the state still brings in a lot in property taxes. By 2007, the year of the most recent Census Bureau data comparing state finances, California’s state and local governments levied $1,141 in property taxes per capita, less—but only 11 percent less—than the corresponding average, $1,288, for the other 49 states and the District of Columbia. Property-tax revenues in the state have increased from $4.9 billion to $47 billion in the 30 years since Proposition 13. Adjust those figures for inflation and population growth, and property-tax revenues in California were 87 percent higher in 2009 than they were in 1979, chiefly because of rising property values.

And even if one tax is limited, others can rise. A recent article in the California Journal of Politics and Policy by Colin McCubbins and Mathew McCubbins shows that, adjusted again for population growth and inflation, total state and local tax revenues in California were higher ten years after Proposition 13’s enactment than they were just before—and that they were half again as high in 2000 as in 1978. Census Bureau data show that California ranked tenth in the nation in 2007 in terms of per-capita receipts from all state and local taxes (property, income, sales, and excise taxes) paid by individuals and corporations. Per-capita receipts from individual and corporate income taxes were 64 percent higher in California than they were in the rest of the country: $1,764 in California, $1,077 elsewhere. All told, California’s governments received $4,731 per resident from all taxes, 14 percent more than the $4,160 average outside California.

Ah, comes the objection: these numbers unfairly compare California with an aggregate that includes many rural states with low taxes and limited public services. But even if we confine our discussion to the ten most populous states in the nation, home to 54 percent of all Americans in 2009, California remains a high-tax jurisdiction. Its per-capita taxes exceed not only the national average but those of every other high-population state except New York ….

The Californians who refuse to jettison Proposition 13 have a well-founded suspicion: that the state’s public sector is starving on its high-calorie diet because of mismanagement and capitulations to public-employee unions ….

(Update.)  Thanks, Glenn, for the Instalanche!  Let’s add this front page article in the Financial Times today, Tuesday, February 9, 2010, “Traders in Record Bet Against the Euro.”

(You might also want to see my more general discussion in a post above on the directions of the EU regarding the unstable position of currency union without political/fiscal union.  Some people have raised some objections particularly to that post’s closing paragraphs regarding how the Obama administration views Western Europe – essentially losers in the globalized world, and no one worth paying attention to because anything of value that might have been learned from the internal European social democratic model has already been absorbed and priced into Obamism.  But I think it’s right – and I think that is the conclusion that European leaders have been drawing about what, not just Obama, but his senior cadre of intellectuals and elites think about Europe.

That’s quite apart from thinking that the Obama administration has so thoroughly absorbed the European lesson that a massive internal democratic socialist welfare state means geopolitical decline, that Obama is not just a weak leader in foreign policy – personally weak, as Sarkozy clearly thinks – but structurally weak as well, meaning that the foreign policy weakness is built into the structure of domestic policy shifts to a massive social democratic state.  These European leaders know better than anyone on the planet how the shift to their domestic social model implies geopolitical decline.  So they have no doubt as to where Obama is taking the US in foreign affairs.  As I said in the later post, we Atlanticists should have read Aron more recently.)

From the FT:

Traders and hedge funds have bet nearly $8bn (€5.9bn) against the euro, amassing the biggest ever short position in the single currency on fears of a eurozone debt crisis …  The build-up in net short positions represents more than 40,000 contracts traded against the euro, equivalent to $7.6bn. It suggests investors are losing confidence in the single currency’s ability to withstand any contagion from Greece’s budget problems to other European countries.

The WSJ’s ‘Heard on the Street’ has an interesting item today comparing California and Greece from the standpoint of the bond markets.  Bottom line is that California fares far better than Greece in investors’ minds.  It’s a question, of course, how much of that is attributable to how investors see the underlying economies of each place and, instead, how investors are pricing the sugar daddi, er, the US government and EU-Eurozone institutions that might be called upon to offer a bailout.  But in terms of spreads, take a look at this chart from the story:

It is important to bear in mind that these kind of spreads can turn very quickly – indicators of short term sentiment concerning something that is basically a political and so, these days at least, a volatile issue.  These spreads for California could turn tomorrow, depending upon how investors read signals from Washington DC, or several other places.  Thus the WSJ article notes with respect to Greece’s dire situation:

Adoption of the euro, by removing the threat of currency fluctuations, encouraged yield-hungry investors to bid up Greek bonds. Leverage allowed Greece to run big current account deficits, despite low productivity growth. The result, once the credit bubble burst, is today’s crisis. There is no easy European fix.

Greece has two main options to restore competitiveness and narrow its current-account deficit: Withdraw from the euro and devalue, or win large and ongoing transfers from European states with surpluses like Germany.

Leaving the euro looks unpalatable. Bilateral transfers to Greece, even dressed up as loans, would be hard to sell to German voters. And such aid wouldn’t address Greece’s lack of competitiveness. Only grinding domestic deflation, with the risk of social unrest, or withdrawal from the euro could do that.

The imposition of EU “discipline” on Greece in return for transfers would represent creeping political union of an undesirable kind – one forced by Germany for fiscal reasons rather than one negotiated by member states. But Greece’s saving grace may be a default there would likely drag down Spain and Portugal. Such a risk will concentrate minds in Europe to find a solution, even if a bailout would not answer the question of the euro’s suitability for uncompetitive Mediterranean economies.

I’ll take up separately the question of California.  Likewise the question of political economy in the Eurozone – currency union without political or fiscal union?  But the article essentially thinks that California is saved not by a better internal structural economy, but instead because of its place deep in the heart of its guarantor.  California has better political hold-up.  It’s got better positioning to be able to force the US as a whole to internalize its difficulties, in ways (according to the article) that Greece will likely not be able to do with German voters.

One last quote from the FT quoted in the update:

Thomas Stolper, economist at Goldman Sachs, said: “ Behind this intense focus on Greece obviously is the long-standing unresolved issue of how to enforce fiscal discipline in a currency union of sovereign states.”

[youtube]http://www.youtube.com/watch?v=yo7HiQRM7BA[/youtube]I’m at an academic conference at Stanford Law School this weekend and have had my attention drawn to the latest internet sensation: The “Demon Sheep” Video.  The video was produced for Carly Fiorina’s Republican  Senate campaign.  It is a 3 and 1/2 minute “attack ad” against Tom Campbell, a respected former Stanford law professor and congressman. 

    To dramatize its claim that Campbell is a big-spending wolf in fiscal-conservative sheep’s clothing, the video contains, well, a demon sheep — a sheep with glowing red devilish eyes. 

  The ad apparently has more than 375,000 views is something of an eye-opener, leading Mary Ham to write at the Weekly Standard:  “Someday, when your children are grown and the election of 2010 has long past, people will ask where you were when the demon sheep first came to American politics.”  (Read the whole thing here.)

  The ad is being widely lampooned across the internet (example here).  To mock the ad, another opponent of Fiorina in the Republic primary (Chck DeVore) has website that is the “home” of SFTEODSFOPD, or Society for the Eradication of Demon Sheep from our Political Discourse.

  The ad seems a bit over the top to me.   While the ad’s defenders say it is attracting lots of attention to the Fiorina campaign, the kind of buzz it is attracting will test the old saw that there’s no such thing as bad publicity.  I close with [insert your favorite sheep pun here ...]

Update:  A reader suggests I should have closed with any of the following:

1. The ad’s creator should take it on the lamb.
2. Ewe can fool all the voters some of the time, and some of the voters all of the time, but ewe. . . .
3. Fame is fleecing.
4. Baaaa humbug.
5. Where there’s a wool there’s a way.
6. I must be a mutton for punishment.
7. Cogito ergo ram. (I think; therefore, I ram.)

The Times Literary Supplement has a nice cover review-essay on California – Golden California – and it is, happy to say, open access.  It’s by Michael Saler and reviews two books, Imperial (on the Imperial Valley, by William Vollman) and Golden Dreams (part of California historian Kevin Starr’s multivolume series on California history).  Although agreeing (as everyone does, of course) with Saler that California is a disaster, I probably wouldn’t agree with him as to the priority of causes, though there are surely enough to go around.  It is a finely written, graceful essay on a place I love, and wish I still lived.  (Well, maybe today I would prefer the Nevada side of the border on the Eastern Sierra, but still, Not Here in the Mid-Atlantic. [Or do  you mean "Middle Atlantic"?  ed.]  Hmm.)

The novelist Wallace Stegner once defined California as America, “only more so”, a statement whose restraint better expresses his own roots in Iowa than it does the seismic character of the Golden State. Its dynamism, whether in the direction of boom or bust, has commandeered the world’s attention for at least a century: more than any Hollywood epic, California is its own best box office. From the singular plenitude of its Native American cultures, to the extravagant dysfunction of its current government, California residents like to vie with the sublimity of their natural surroundings, doing nothing by halves.

Writers hoping to uncover the state’s essence are more likely to strike quicksilver than gold. Yet commentators continue to see California as a beacon, for better or for worse, of the future, even as it remains stubbornly sui generis. When it became the most populous state in the nation in 1962, the media celebrated it as a global bellwether. Like the hot rods roaring out of the Mojave desert, however, California left others in the dust as it enacted three ambitious plans that saw fruition in the next two decades. The California Water Plan (1957) initiated the greatest water storage and distribution system in human history; the California Freeway System (1958) extended a massive freeway construction programme across the state; and the Master Plan for Higher Education (1960) ensured that all citizens had access to higher education whose sterling quality was in inverse proportion to the negligible fees students paid. The multi-campus University of California soon became the finest public university in the world.

The immediate post-war years were California’s best of times. Now, as it faces perhaps its worst of times, the state continues to be cited as a symbol for the nation and the world, albeit in less complimentary terms. Its political gridlock appears to be replicated by divisive partisanship at a national level, leading the economist Paul Krugman to wonder “if California’s political paralysis foreshadows the future of the nation as a whole”. Its budgetary deficits (currently projected at 21 billion dollars), decaying infrastructure, high unemployment and cuts to public services are often interpreted as the unfortunate but widely shared fallout of the global recession.

Even in its misery, however, California hates company. It is true that its budgetary woes and political paralysis have been exacerbated by the contemporary financial crisis, but the state has been increasingly difficult to govern for the past three decades because of its unique political structure.

The Financial Times runs a story today by Francesco Guerrera and Nicole Bullock on the looming problems of underfunded public pensions at the state and local level in the United States.  The news story cites a new study by Orin Kramer, chairman of New Jersey’s pension fund:

The estimate by Orin Kramer will fuel investors’ concerns over the deteriorating financial health of US states after the recession. “State and local governments are correctly perceived to be in serious difficulty,” Mr Kramer told the Financial Times.

“If you factor in the reality of these unfunded promises, their deficits will rise exponentially.”

Estimates of aggregate funding requirement of the US pension system have ranged between $400bn and $500bn, but Mr Kramer’s analysis concluded that public funds would need to find more than $2,000bn to meet future pension obligations.

Two trillion dollars?  One question about these obligations is whether taxpayers will stick around to pay them, or instead will vote with their feet.  (“Vote with their feet” is something that has been discussed in various ways at VC – as an aspect of a federal system and states with their own laws.)  Many of these pension obligations have been incurred by municipalities and others by states, and in some cases the obligations are intertwined.  But what happens if voters-taxpayers move out?

The assumption has long been that taxpayers are stuck, on account of jobs and other circumstance.  But query whether that is necessarily true as the baby boom generation retires.  In that case, it might find itself far more mobile, in circumstances where rising taxes at every level make relocation a more valuable decision at the margin.  For that matter, if otherwise desirable locales manage to tax their businesses away, will the baby boomers’ kids and grandkids have reason ever to locate in places that lack jobs?  They might have been raised there – but would they go back?

Would people leave California? They are leaving now, true, but would they leave in the future specifically for this reason or generally on account of the tax burden, particularly as retirees?  Or New Jersey?  What about the city of Oakland?  Or even smaller cities, such as the towns in California – not large at all, small towns, that have already declared bankruptcy over pension obligations?  It’s easy to move out of those towns.  For that matter, what about a municipality declaring bankruptcy in anticipation of un-meetable pension burdens down the road – in other words, you know it can’t be met, you know that your tax base will move out, and even though you are solvent now, you see that you won’t be down the road – and if you restructure now, you can save a much worse situation by not driving out your taxpayers.  But is that available under bankruptcy?  I’m not a bankruptcy specialist – it might not be possible to do so as a matter of law; someone can tell me in the comments.

In theory, all parties should be able to see the train wreck coming and renegotiate now, but the reality is, parties won’t do that, because they will lock horns over how much of promised benefits can get paid by increased taxation, and many other things.  That’s why bankruptcy judges have much of their discretionary power to impose things on parties nearly all of whom have varying degrees of hold-up.  Query too whether less heavily obligated jurisdictions might woo people to come, and perhaps pass measures as part of state constitutions limiting levels of indebtedness and writing in provisions that would cover future contingent pension payments.

How might the heavily indebted jurisdictions respond to taxpayer exit?  (Their position becomes a little like the position of utilities with “stranded” costs – and presumably that is how they would present their case, not as having profligately promised benefits as politicians to favored public employee constituencies, but instead as having provided services to taxpayers over decades but now getting stuck with the check.)  One way would be to try and impose taxes (and perhaps “fees”) that “follow” people who leave the jurisdiction.  More likely, I would think, would be an effort to federalize the pension bill.  Alternative one would simply  have the federal government assume the burdens, and presumably set the rules for future pensions.  Alternative two would be to leave the debts where they are, but have series of federal transfers to state and local jurisdictions to cover them, the unending bailout-stimulus.

The alternative to all of these, of course, would be for states and localities to declare bankruptcy and have a judge restructure the obligations and, one assumes, lower the obligations and the benefits.  It is an alternative often touted.  I worry, however, that people who call for it assume that the bankruptcy system, which was created to deal with mostly manageable private bankruptcies and the occasional huge corporate wipeout and the occasional public finance disaster, would somehow stay above politics and remain the same essentially apolitical system it is now.  That, after all, is what people who look to the bankruptcy system to resolve all these public finance messes seek – a set of neutral, apolitical rules of the kinds that govern private bankruptcy.

When relatively apolitical systems of these kinds are asked to take on, however, not just the occasional role in deeply politicized issues, but instead to take them on as a whole endemic category, now and into the future – it is very hard to see that the apolitical nature of the system is not inevitably changed.  How could it not be, over time?  (The same is true of the Fed, I would think.)  A bankruptcy system that contains, for good reasons, much discretionary authority on the part of the judge, and the ability of Congress to revise the rules, and then gradually takes on as its most visible and public function the resolution of public (and hence political) finance questions, it seems to me, will sooner or later lose the elements of neutral, apolitical decision-making arising from a system fundamentally about private bankruptcy and corporate restructuring.  It will become something else.  Institutions and systems of governance are not static.

(Realistically, however, what happens regarding public pensions is a political function of  the political power of the public employee unions, at all levels of government, as highly organized, interested, focused political groups – as against disorganized publics as taxpayers, represented in theory, but often not in fact, by politicians in state and local government.)

One small nugget I took away from the (absolutely terrific) Stanford Law School robotics panel last week was a much better appreciation of how robotics will interact with advanced societies aging – elder-care, health care for the old and infirm, and so on.  Japan leads the way.

Paul Saffo (Stanford professor, futurist, and technology journalist, and very smart guy) remarked that the last ten years had seen an important technological shift, crucial to robotics, in the development of cheap sensor devices.  Sensor devices that could harness the computational power of the chip and make it possible to interface with the real world and, combined with improvements in elements of motion and locomotion, gives the world genuine robots.  It is movement, sensing, and computational power in combination that makes it possible for robots to do things, and do things for us.

That leads to the age of robotics, and – depending in part on what happens to R&D budgets in health care – the care of the elderly is one natural area of application, as well as a source of revenue to fund the industry.  More, faster please, as Glenn Reynolds might say.  Saffo also remarked that in a certain way, old people coming to depend on robots to help and do things for them as the fulfilment of “I have always depended on the kindness of strangers” – robotic strangers, in this case.

I added, and think it more important in setting out future technology trends here than one might initially figure, that a driver of robotic care for the elderly will be that the elderly themselves prefer robotic strangers caring for them, rather than human strangers.  Particularly in all the intimate, intrusive, personal things like bathing and toiletting – I at least would vastly prefer to interact with a machine rather than a home care person.  Robots in that sense help me avoid having to depend upon the kindness of strangers.

This is outside of my usual area of robotic remit – robots and the laws and ethics of war.  But I am rapidly moving to backfill into these other areas as it becomes clear that these questions of technology, but also of law, are interrelated and often versions of the same thing.  The robotic decision whether to fire a weapon or not, if technology ever comes to that point, is importantly interconnected with the question an eldercare robot might have to ask regarding whether to call 911.

(There are several topics raised by the Stanford discussion on robotics and I’ll try to get to several of them over the next few posts.  But I wanted to thank Ryan Calo and all the folks who put the discussion together – it was a great set of discussions for me and I hope for everyone who attended.  I realized, sitting and listening, that there are not that many places in the US where you could hold that kind of discussion, with an audience including engineers and technologists and scientists sitting in the office who actually work in the field, not just in academic departments, but in commercial firms and ventures, trying to make it real.)

Last week I blogged about a very interesting article in the Manhattan Institute’s City Journal by Claremont Review of Books contributing editor William Voegeli titled “The Big-Spending, High-Taxing, Lousy Services Paradigm” (Autumn 2009).  It compared the tax-services models of California and Texas.  VC commenters were spirited as ever and raised a number of important questions.

Although I haven’t had the pleasure of meeting William Voegeli, I took the liberty of contacting him through the Claremont Institute and asked if he might have any additional thoughts for us, particularly responding to VC commenters.  Mr. Voegeli was kind enough to say yes, and has sent along the following response, below.  Let me add, on behalf of the VC community, myself as well as readers and commenters, our great thanks for engaging with us.  And let me add to the VC commenting community, that in the spirit of the original article, you might call Volokh Conspiracy a … Low-Taxing, High-Services blog!  Mr. Voegeli:

Dear Prof. Anderson:

Thank you for bringing my City Journal article (http://www.city-journal.org/2009/19_4_california.html) on California and Texas to the attention of the Volokh conspirators, and for your generous and thoughtful analysis (http://volokh.com/2009/11/02/the-california-versus-texas-model-and-public-choice/) of the piece.  Your post elicited many . . . spirited comments.  It would be cumbersome to address them individually, but I can offer a few points that speak to some of the general questions your readers brought up.

My essay argues that it’s not enough to look at how much states and localities spend because how well they spend is very important.  I understand several people in the comments section to be saying that this principle applies to the tax side of the equation, too.  Thus, California’s problem is not so much that it is a high-tax state but, as one commenter says, that it is a “constrained-and-erratic tax” state.

That’s a fair point.  The combination of direct democracy and the state’s belief that vast optimism could overcome mundane realities left Californians believing they could somehow be “taxed like libertarians, but subsidized like socialists,” as Troy Senik recently said (http://www.nationalaffairs.com/publications/detail/who-killed-california) in National Affairs.  Not only did it prove impossible to achieve the best of both worlds, but the political impotence created by undertaking the effort helped bring about the worst of both: “In a grim irony, Californians are now being taxed like socialists and subsidized like libertarians.”

Proposition 13 is certainly not beyond criticism.  Some things need to be said in defense of the law and its advocates, however. Lots of poorly drawn laws and state constitutional amendments have been passed at the ballot box.  The ballot initiative is never going to be a precision instrument, however, and it’s unfair to hand the voters an axe and then judge their work as if they possessed a scalpel.

The best way to have averted the enactment of Proposition 13 would have been if California’s political establishment in 1978 had put forward a better alternative, one that addressed Californians’ anxieties about tax escalation without 13’s flaws.  Instead, Gov. Jerry Brown and the Democratic legislature held off for as long as possible in offering any sort of response to the people angry and fearful about rapidly rising property taxes, in the hope that the political problem would blow over.  When it didn’t, they finally devised a tax limitation alternative to 13 whose distinguishing feature was that it didn’t guarantee that anyone’s taxes would be limited.

In the 31 years since Proposition 13 was enacted that bait-and-switch problem crops up over and over.  When people here complain that taxes are too high, especially given the doubtful quality of the public services they purchase, the enlightened response is always that taxes aren’t high so much as they’re arbitrary and complicated.  The correctives proposed to enhance the quality of the citizen’s tax-paying experience all purport to make taxes fairer and simpler, but their one clear outcome is that taxes would be higher.  Thus, the reforms that would streamline how California’s governments collect money would have the consequence of relieving those governments of any obligation to devise better, smarter and fairer ways to spend it.  It takes a trusting spirit to believe that this outcome would be an accidental byproduct of tax reform.

A final note.  One commenter argued that government is expensive in California largely because housing is expensive, thus disproving the idea that California governments spend their money in undisciplined, ineffective ways.  Two points:

• 1) California’s state and local employees are the best compensated in the country (http://www.census.gov/compendia/statab/tables/09s0448.pdf) and the differences between them and their counterparts in states that are also expensive are not trivial.  Local government employees make 11.5% more in California than Connecticut, and 21.4% more than those in Massachusetts.  State workers in California make 13.1% more than New York’s and 19.9% more than those in Massachusetts.
• 2) The high cost of living in California, especially the high cost of housing, is a problem for government, in that it puts pressure on it to increase the pay scale for public employees.  That fact does not preclude the possibility that the high cost of housing is, in significant measure, a problem caused by California’s governments.

Let me close on this point by bringing in an expert witness, Edward Glaeser of Harvard’s economics department and Taubman Center for State and Local Government.  In a Los Angeles Times article (http://www.latimes.com/news/opinion/commentary/la-oe-glaeser4-2009mar04,0,4085382,print.story) earlier this year he said:

Although California is a populous state, it still has plenty of land. Santa Clara County, the home of Silicon Valley, only has about 2.2 people per acre. Even in denser places, such as Los Angeles, there is plenty of room to build.

California’s growth has slowed because the state has made it increasingly difficult to build new homes. There is an almost perfect correlation between the growth of an area and the amount of housing that is permitted in that area. California has some of the toughest land-use regulations in the country, which are often justified as environmental measures. When high housing demand is met with restrictions — not construction — California homes become unaffordable and new construction goes somewhere else.

Best regards,

Bill Voegeli

If you are going to be around Palo Alto next Thursday evening, you might consider attending a panel discussion on robotics and law at Stanford Law School.  I’ll be on a panel alongside some very interesting and knowledgeable folks taking up varied aspects of robotics (my particular interest is robotics and war, but the panel will be considering many areas of robotics).  The particulars are below the fold.

(Update:)  Here’s the assigned topic for comments, following up on Laura’s opening comment … should the panel discuss the Three Laws?  Are they a useful ethical/legal frame for dealing with robots in various aspects of human life?  Did Asimov lead us all astray by proposing them?  Should we instead avoid discussing them altogether?  What would you propose would be a better set of principles/laws/guidelines for robot-human interactions?

(I’ll also be giving a lunch talk/discussion that same day sponsored by various student organizations at SLS specifically on robotics and armed conflict. And thanks Glenn for the Instalanche!)

Continue reading ‘Law and Robotics Panel at Stanford Law School’ »

William Voegeli, a contributing editor at The Claremont Review of Books, has an excellent essay in Manhattan Journal comparing the economic performance of California and Texas.  (I believe a short opinion page version appeared recently in the LAT.)  Among other things, the article provides a good example for how a public choice analysis can be applied to show, in this case, capture of public revenues and the process of increasing public revenues by public employees in California.

The most interesting feature of the article, however, is that it does not start out from a position of hostility toward California and its high tax model.  On the contrary, it says that there is a tradeoff that different people will make differently with respect to high tax/ high public services jurisdictions and low tax/ low public services jurisdictions.  There is a perfectly good argument for the former as well as for the latter.

It’s true that many people are less sensitive to taxes and more concerned about public goods, and these consumer-voters will congregate in places with extensive services. But it’s also true, all things being equal, that everyone would rather pay lower than higher taxes. The high-benefit, high-tax model can work, but only if the high taxes actually purchase high benefits—that is, public goods that far surpass the quality of those available to people who pay low taxes.

I grew up in California and despite my Upper Upper NW DC address, will always count myself a Californian, product of its public schools and a proud graduate of UCLA.  I was a beneficiary of the high tax/ high benefits model, and gravitate toward it.  The problem, as Voegeli documents, is two fold.  First, California is today a high tax/ low benefits model, while Texas, even with relatively low taxes, has managed remarkably to catch up and even pass California in ways I would not have believed possible.  But Voegeli’s data, as I have discussed it with other Californians and Texans, seems to me pretty robust.  His conclusion?

“Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California,” Joel Kotkin, executive editor of NewGeography.com and a presidential fellow at Chapman University in Southern California, told the Los Angeles Timesthis past March. “Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California’s government and the middle class is constantly being renegotiated to the disadvantage of the middle class.”

Similarly, the CEO of a manufacturing company in suburban Los Angeles told a Times reporter that his business suffered less from California’s high taxes than from its ineffectual services. As a result, the company pays “a fortune” to educate its employees, many of whom graduated from California public schools, “on basic things like writing and math skills.” According to a report issued earlier this year by McKinsey & Company, Texas students “are, on average, one to two years of learning ahead of California students of the same age,” though expenditures per public school student are 12 percent higher in California.

State and local government expenditures as a whole were 46.8 percent higher in California than in Texas in 2005–06—$10,070 per person compared with $6,858. And Texas not only spends its citizens’ dollars more effectively; it emphasizes priorities that are more broadly beneficial. In 2005–06, per-capita spending on transportation was 5.9 percent lower in California than in Texas, and highway expenditures in particular were 9.5 percent lower, a discovery both plausible and infuriating to any Los Angeles commuter losing the will to live while sitting in yet another freeway traffic jam.

What happened?  According to Voegeli, two things.  One is that scarce tax dollars in Texas are spent on priorities that have broad appeal, while California spends far more of its tax dollars on transfer payments to particular groups with political clout.  Second (and a subset of the first, really) is that the tax dollars in California go to public employees, public employee pensions, public sector unions – nominally to the service providers of the “high benefits” received in exchange for high taxes.  Voegeli reports that they soak up the additional revenue but provide increasingly poor services at an ever increasing cost.

In California, by contrast, more and more spending consists of either transfer payments to government dependents (as in welfare, health, housing, and community development programs) or generous payments to government employees and contractors (reflected in administrative costs, pensions, and general expenditures). Both kinds of spending weaken California’s appeal to consumer-voters, the first because redistributive transfer payments are the least publicly beneficial type of public good, and the second because the dues paid to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.

Californians have the best possible reason to believe that the state’s public sector is not holding up its end of the bargain: clear evidence that it used to do a better job. Bill Watkins, executive director of the Economic Forecast Project at the University of California at Santa Barbara, has calculated that once you adjust for population growth and inflation, the state government spent 26 percent more in 2007–08 than in 1997–98. Back then, “California had teachers. Prisoners were in jail. Health care was provided for those with the least resources.” Today, Watkins asks, “Are the roads 26 percent better? Are schools 26 percent better? What is 26 percent better?”

Watkins is not referring to the mythical golden past in which I grew up outside of LA; this is a mere decade ago.  But Voegeli observes that the task for California is inherently harder for it than for Texas; there is an asymmetry baked in:

If California doesn’t want to be Texas, it must find a way to be a better California. The easy thing about being Texas is that the government has a great deal of control over the part of its package deal that attracts consumer-voters—it must merely keep taxes low. California, on the other hand, must deliver on the high benefits promised in its sales pitch. It won’t be enough for its state and local governments to spend a lot of money; they have to spend it efficiently and effectively.

Agency capture of public institutions, their tax mechanisms and their benefits, is far from an unknown phenomenon.  But I have to say that the idea that California could ever be surpassed on any of the metrics above – education, liveability, transportation, quality of life, etc, – by Texas is … shocking.

(Note – and before everyone gets all p-o’d in the comments.  I do freely admit and guilty as charged that I feel pretty much about my home state as every Texan I’ve ever known feels about Texas, so no need to abuse me in the comments.  And I will also say that if I were able to move back to California today, and not have to worry about gainful employment as a law professor, I would move to … Carson City, Nevada, just below the Nevada side of Tahoe, on Highway 395 in the Eastern Sierra Nevada corridor, and have two-thirds the benefits of California (the mountains and the desert, minus the Pacific and the California coastal foothills) without the taxes.  I’m headed out to give a talk at Stanford Law School next week, and while terrifically excited to go talk about robots and war and grateful for the invite, I have serious regrets about not being able stay just long enough to drive over the Sierras.)