Oh, there are a lot of candidates who are just begging for the Red Queen treatment, but that’s not whom I referring to. I’m referring to the band. Headed out to see them at House of Blues Houston tonight. Just what I need. Some spiritual, uplifting music.
What’s up with the prevalence of the name Vlad in the comments? It reminds me of one of my favorite Python sketches:
So, to all commentors: Mind if I call you Vlad?
Several stories converge to tell a single story.
1. and 2. are symptomatic of a sputtering economy that cannot generate the growth or the capital necessary to pay for Putin’s promises, or his ambitions. 3., 4., and 5. show that Putin is at war with the bureaucracy-just like the Tsars and Commissars from the beginning of Russian history. 6. reveals Putin’s continued paranoia that NGOs are plotting some sort of Orange venture in Russia.
All suggest that Putin is increasingly beleaguered. Life was easy when the economy was doing well. Not so easy when it’s stagnating: given Russia’s presumptions as an emerging market, .1 percent growth is equivalent to a major recession in the US: a far cry from the 6+ percent of the mid-00s, and even the 4-5 percent which Medvedev and Putin have claimed to be expecting. Standing still is falling back, especially when Putin has promised big increases in both social and military spending.
So where does he turn? The predations of the bureaucracy are a drag on growth: so attack them, like the Tsars and Commissars before him. Uhm, good luck with that. Like cockroaches, the bureaucrats have always survived every attack against them. Stalin imposed some discipline-but look at what was required.
But outlawing foreign accounts is one knout that he can wield that hits them where it hurts. It also is a form of financial repression that can offset, in part anyways, the difficulties that Russia faces in attracting and retaining capital, due to its poisonous investment climate. In essence, Putin is attempting to reassert his power over the bureaucracy and at the same time to recirculate their ill-gotten gains within Russia, rather than without, thereby offsetting the reluctance of foreign investors to risk their capital to the whims of the Russian state and its agents.
But resorting to sticks, rather than carrots (“play along and you can share in the rents”) Putin is betraying some desperation. Moreover, although the bureaucrats may mulishly submit to the knout, they will resent Putin’s resort to coercion. They may falsify their preferences, and promise fealty. But they will be alienated.
This is the classic authoritarian dilemma. A subservient but resentful class of underlings. Coordination problems mean that few are willing to declare openly their opposition. But this equilibrium is quite tenuous. A shock to the system that weakens the autocrat-a natural disaster handled badly, an overreaction to an isolated act of opposition-can lead to a rapid and uncontrolled chain reaction in which those who suppressed their true feelings stop falsifying their preferences. This is the dynamic that toppled Mubarek in weeks, and unleashed civil war in Libya.
Stability in autocracy is one equilibrium in a global coordination game: complete collapse is another. The literature on global games predicts that the stable equilibrium is a fragile one. A small event can lead to a “run” on the autocratic bank of power.
That’s where Putin is now. I am not predicting that Putinism will collapse. I am saying that the risk of such collapse is heightened. The best evidence for this is Putin’s ratcheting up of oppressive measures, whether they be applied to bureaucrats theoretically subordinate to him, or NGOs.
Look back to posts I wrote in 2007-2008 where I emphasized the brittleness of Putinism. Putin recognizes this. His actions demonstrate that clearly. A confident autocrat would not do what he is doing.
I received a mass-distribution from Russell Baker (not that Russell Baker), the Executive Director of the Academic and Business Research Institute. It reads, in part:
I have recently been made aware of a case of plagiarism in one of our journals. The Journal of Academic and Business Ethics Volume 5 contained an article with a significant amount of plagiarism that went undetected in the review and publication process.
You can’t make up stuff like that.
Obama is playing the sequester game for all it is worth, by regaling the country with horror stories of what will happen if the sequester goes into effect. All he needs is a flashlight held under his chin while sitting by a campfire.
The prudent response to a need to cut spending due to a tightening of a budget constraint is to find the least important things, and cut those first. But Obama isn’t interested in being prudent. He is interested in being political. He is using the sequester as part of his war to the knife with House Republicans, and hence is going with the Washington Monument Strategy on Steroids, and focusing cutbacks on the most visible and vital services. For instance: furloughing TSA personnel. I am scheduled to fly to visit my parents on the day the sequester kicks in. Oh freaking joy. I say furlough them all. Forever. But no, we’ll get all of the stupid procedures with fewer people to implement them-and no doubt they will be under orders to work to rule to make the process as inefficient and painful as possible. Another for instance: releasing illegal aliens detained in prison. I could go on. But you get the point. It’s all about making the most painful and most visible and most inconveniencing cuts, all for political advantage. The man has no shame. This is not about executive leadership or stewardship. It is about Goebbels-esque propaganda theater.
Looking at Obama’s strategy brought this classic National Lampoon cover to mind:
Or, in the Obama version: if you don’t cave on the sequester (and everything else) we’ll . . .
The ultimate mendacity, moreover, is that Obama insisted on the sequester during a budget standoff in 2011, and signed it into law. He’s daddy, but is denying paternity: indeed, he’s asserting the Republicans did the deed. Oh, for a political DNA test.
But the problem is that even if such a test existed, it wouldn’t matter. The media knows the truth, but is so in the tank for Obama that they refuse to flog him over his hypocrisy and dishonesty: hell, they (Bob Woodward excepted) even refuse to acknowledge Obama’s insistence on including the sequester in the 2011 deal. A good portion of the populace is also indifferent to Obama’s duplicity. Further evidence of the degraded condition of our Republic.
A certain sort of libertarian-anarcho-libertarians, is probably more accurate-goes apoplectic about the corporate form, and in particular, the limited liability conferred on corporations. There are Twitter hashtags #limitedliability and #moralhazard where you can get a flavor for this apoplexy.
They seem to harken back to Adam Smith, who was skeptical of corporations:
The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.
I yield to no one in my admiration for Adam Smith, but believed it or not, economics has made progress since 1776. And one of the areas in which progress has been greatest is in the economics of organization.
The watershed paper is by Jensen and Meckling from almost 40 years ago-and ironically, exactly 200 years after the publication of Wealth of Nations. Jensen and Meckling, and the literature that follow it, address many of the phobias of the #limitedliability crowd.
Jensen and Meckling note that the limited liability is not perfect. There are agency costs associated with it. There is the “separation of ownership and control problem”, whereby it is costly to incentivize managers of corporations to act in the interest of shareholders. There are risk shifting problems: equity has an incentive to increase risk at the expenses of debt holders.
But the key thing is that those contracting with corporations know these things. They know them better than economists, most likely, because they have a very strong incentive to do so. Meaning that these costs are internalized: the costs of equity and debt reflect these agency costs. If the costs of the corporate form exceed the costs of alternative forms of organization, greedy individuals have no incentive to adopt this form.
This means that if costs are internalized, choice of the corporate form and equity finance will be efficient, relative to possible alternatives. To paraphrase Churchill, the corporate form and limited liability are the worst forms of organization, except for all the others that have been tried from time to time.
Put differently: showing that there are costs associated with limited liability and the corporate form and equity finance does not imply that these are inefficient. Many of the critics of the corporate form succumb to the Nirvana fallacy.
The survival of corporations-indeed, their dominance-strongly suggests that they are less costly in most situations than alternative forms of organization. Nobody compels incorporation. People choose it. They choose it in many circumstances-but not in all circumstances-because it is the least costly form of organization.
One under appreciated benefit of limited liability is that alternative forms can greatly inflate the cost of raising capital. As one example of an alternative, under unlimited liability, any investor in a corporation cares about the wealth of other investors, because his (or her) costs under joint and several liability would be greater, the less wealthy other investors.
This sharply limits the ability of non-limited liability entities to raise capital, and raises the costs of this form of organization. Investors will invest resources in investigating and monitoring the wealth and risk exposures of other investors. This inherently limits the number of potential investors. This, in turn has two deleterious effects. First, it limits the scale of enterprise, meaning that scale and scope economies cannot be realized. Second, it limits the potential for diversification. Remember that diffuse ownership and diversification that are facilitated by the corporate form, public equity, and limited liability, are analogous to insurance: risk is more cheaply insured under the corporate form and limited liability. Yes, moral hazard is a cost of insurance, but despite the existence of moral hazard, insurance markets exist nonetheless.
Where could externalities arise? Corporations provides something of a shield to equity holders from legal liability from costs imposed on third parties, or with parties with whom it contracts, but somehow deceives or defrauds. This could conceivably result in an externality, but its practical significance is limited. Limited liability shifts costs to third parties only to the extent that a corporation’s legal liabilities exceed its equity. The large corporations that attract the greatest ire typically sufficiently capitalized to pay fully legal judgments assessed against them. The Johns Manville’s of the world are the exception, not the rule. Again, costs are almost wholly internalized.
Another criticism leveled against corporations is that they influence government to adopt policies that transfer wealth from taxpayers (or other third parties) to the owners of the corporations. This criticism has some merit, but this is not sufficient to justify raising the costs of adopting the corporate form.
First, it is again necessary to consider: “what would happen under the alternative”? Those who think that outlawing corporations will reduce corruption, or will reduce incentives to importune government for favors, are sadly deluded. That is, the corporation is not a necessary condition for the existence of corrupt influence of government
Second, and relatedly, the fundamental issue here is the discretionary power of government. If government’s power to redistribute wealth is unconstrained, the politically connected will importune it to provide them benefits. No corporations? That doesn’t mean there will be no redistribution. Individual proprietors or partnerships will attempt to influence government. Indeed, in a world without limited liability, they may have an even stronger incentives than corporations to seek bailouts. With limited liability, owners’ personal wealth is not at risk beyond their initial investment. Without limited liability, personal wealth is at risk. This strengthens the incentive to secure government rescues.
It should also be emphasized that in the US today, incorporation is truly democratic. Anyone can incorporate, and obtain the protections of limited liability. Incorporation is not a privilege: it is almost a right, and states have liberalized laws to make it extremely easy and cheap to incorporate. Anyone can do it.
This is in stark contrast to Adam Smith’s time, and even in the US until the 1830s. Early on, corporate charters were special privileges granted by the Crown or legislatures. In those days, corruption and influence were indeed almost synonymous with incorporation. Only the favored received corporate charters, and corporate charters conferred special privileges that enriched those that obtained them.
In sum, the anti-corporate types, anarcho-libertarian or socialist, usually fall prey to the Nirvana fallacy. They obsess on the costs relative to some ideal of a frictionless world. But that’s not the relevant standard of comparison. We have to make choices between flawed alternatives. Limited liability, public equity, and diffuse ownership have costs. Duh. But that’s not the issue. The issue is whether these costs are higher are lower than the costs of alternative ways of organizing economic activity. The dominance of the corporate form and limited liability, despite the absence of notable externalities, provides compelling evidence that these costs are in fact lower for most economic activities. Not all, but most. And “not all” isn’t important: the fact that people can -and do-sometimes choose other forms means that they choose the corporate form when it is less costly, and don’t when it isn’t. That’s exactly what we want.
Many of the putative costs of the corporate form identified by the anarcho-libertarian types represent government failures, not market failures.
So spare me the shrieks about the costs of limited liability and corporations. If you want to have a serious discussion, show why corporate form is sometimes-nay, often-chosen despite the fact that it is more costly than the alternatives: again, compared to the real world alternatives, not perfection. Nirvana is still just a band.
Today is the 7th anniversary of SWP. What a long, strange trip it’s been. The blog has evolved and morphed in ways I never expected. I’ve always been a firm believer in serendipity, and this endeavor has only confirmed me in that belief. Writing about Russia was the furthest thing from my mind when I started. I didn’t anticipate writing much about politics. Even my original ostensible purpose-writing about financial market infrastructure and commodities-manifested itself in wholly unanticipated ways. The Financial Crisis and the laws and regulations it spawned, notably Frankendodd, propelled me in directions I couldn’t have even imagined at the apex of the Great Moderation in early-2006.
The stats: 2031 posts, and 15060 comments. A pretty steady stream of 3500-4000 unique visitors/day, plus decent traffic at other sites that reproduce SWP content, like SeekingAlpha and Wall Street Pit. A steady stream of links at other sites. The strangest stat? That Latvia is the biggest non-US source of hits-about 10 percent of the total in November and December.
I’d just like to express my appreciation to all of you who read SWP, especially the regulars. You are the reason I keep plugging away here.
Where will SWP goes from here? Who knows? Certainly not I. That’s because for the most part what I write is driven by what is happening in the world and the markets, and those are unpredictable. Add to that my rather idiosyncratic, eclectic, and randomly evolving interests and fancies, all that I can predict is that unpredictability will characterize the future as it has the past. The trip to Serendip will continue, and I hope you all continue to accompany me on that journey.
I grew up in Chicago, and still consider myself a Chicagoan, as my peripatetic academic life has not led me to put down roots in any particular place. It therefore grieves me deeply to see the current state of the city.
In some ways it is much better. When I was in college and grad school, even near the lake you could not go south of Harrison Street (600 south, or about .6 miles south of the N-S dividing line in Chicago-Madison Street) without taking your life in your hands. Now there is upscale development near the lake all the way down to Cermak (2200 south). When I first went to Hyde Park in the late-70s, it was sketchy at best. Now it is unrecognizably upscale.
But outside of these pockets, the city is a dystopian hell. The West Side, especially the Austin neighborhood that my grandparents fled in the late-60s. The South Side outside of privileged enclaves like Hyde Park.
My first day in Chicago after returning from the Naval Academy is etched in my mind. I walked from my dorm (a/k/a The Roach Motel) at 54th and Greenwood to the AT&T store to set up a land line (there’s an anachronism for you). The store was located at 47th and King Drive. After crossing the corner of Cottage Grove and 47th I saw a blood trail on the sidewalk that led to a storefront clinic. Then the racial epithets from the people on the street started. When I got into the AT&T location, the woman behind the bullet proof glass stared at me like I was a space alien. ”How did you get here?” ”I walked.” ”Maybe you should call a cab to get home.” I took the bus instead, the #3, changing to the #55 at Garfield-again to the accompaniment of disbelieving stares of those on the buses.
Between my junior and senior years, I had a summer job going to pharmacies to count non-prescription medicines on the shelves as part of marketing studies for A.C. Nielsen. Since U of C let out late (in June), I was hired last and was assigned the worst neighborhoods. I remember going into (running into is more accurate) a pharmacy on 47th and Prairie Avenue where everything was behind bullet proof glass. Everything. Customers stood in a space about 5 feet by 5 feet, and asked the store employees standing behind the glass for what they wanted through a microphone-even a bottle of Excedrin. (At the turn of the 20th century, Prairie Avenue was the most prestigious address in Chicago. The shells of a few mansions remain, scattered among empty lots on dreary block after dreary block.) Hell, even the cooks and clerks at Harold’s Fried Chicken on 53rd Street were ensconced behind a wall of bullet proof glass, including a bullet proof turnstile on which they put your order. Ditto Ribs & Bibs on 53rd and Dorchester. I can’t imagine what the Harold’s on 63rd Street was like.
Those parts of Chicago aren’t better, and are arguably worse. This despite the dominance of Chicago politics and “governance” by “progressives” who pronounce to the world and the heavens their devotion to the poor and downtrodden. Or, I should say, because of the dominance of Chicago politics the self-same, self-described progressives.
Yeah. That gun control thing so beloved by the progs is working out great. (Chicago has had some of the most draconian gun control laws in the nation-laws that the SCOTUS has struck down.)
Take a look at this John Kass interview on CNN. Kass is the only prominent person in Chicago media who doesn’t have his head firmly implanted up his ass, or his lips firmly implanted on the asses of the progressive elite in Chicago-the elite that blessed the nation with Obama and Valerie Jarrett.
All the while proclaiming their devotion to the poor and minorities in Chicago, the progressive governing class of Chicago has looted the city and condemned its most vulnerable to a reign of terror.
As Kass notes, Chicago has always been a rough place. He mentions the gangsters of the 20s. (Family history: my great-uncle had a confrontation with a Capone lookout for the St. Valentine’s Day Massacre: he was fixing the pay phone the lookout wanted to use to call Capone’s men to alert them that Bugsy Malone’s men had arrived at the garage where the Massacre took place. My grandfather, another “telephone man” fixed Capone’s phone in the Lexington Hotel: Capone gave him a fedora to express his appreciation.) But for the most part, those conflicts were intramural. Yes, many (and arguably most) of today’s murders in Chicago are also intramural in nature, one gangbanger killing another. But the current situation is more anarchic than in the ’20s, and the spillovers more pronounced.
Chicago also has always been a very corrupt place. In the 19th century, it was the town of boodle and “wire workers.” In the 1950s-1970s, the Machine ruled, and raked off the proceeds of that rule. It was the Land of the Voting Dead. (My grandfather voted while dead.) Hence the Kennedy presidency.
The main difference is that there is a hypocrisy today that was absent in the 20s and the 1950s-1970s Indeed, in the Daley I years, there was an almost roguish pride in the thievishness of the machine. Richard the First did not have progressivist presumptions.
In contrast, those who rule over today’s dystopian Chicago are stalwarts of progressivism. They are oh-so-superior, and hardly shy about instructing the great unwashed about what is and what is not acceptable. Safe in their brownstones and high rises in the Gold Coast or other sanctuaries hard on Lake Michigan, far from the gunfire in Garfield Park or Humboldt Park, they preen in their moral rectitude.
All the while presiding over a bankrupt and violent city.
Kass scathingly refers to Obama’s failure to attend a single funeral in Chicago, whereas he makes highly publicized appearances in Tuscon or Newtown. Similarly, he made a big deal out of how Trayvon Martin could have been his son.
It rankles me that Obama has distanced himself from the neighborhood he represented in the Illinois legislature for years. He used it as a political springboard, but has left it far behind, never to be mentioned again.
Check out this website that tracks murders in Chicago. Take a little time, and see how many have taken place in Obama’s old state senate district.
Collectively, the toll is far greater than Newtown: in Chicago, the body count is about a Newtown every month. But Obama has attended not a single funeral. Indeed, he has spoken nary a word about it. He has left that world far behind. Could none of those killed have been his son? Could it be that to mention the holocaust there would be to draw attention to his failure, and the failures of the progressive “blue state” model he epitomizes?
Progressives continually assert a moral claim over the rest of us. I ask: On what basis? I look at Chicago, and see a yawning gap between the lofty asserted claims and the shabby, bloody reality.
I had a freakishly large number of media hits today. Mostly due to the ICE buyout of NYSE, with quotes in stories in the FT, NYT, WSJ, and the Chicago Sun Times. Also, a Matt Leising Bloomberg story on the potential systemic risks of clearing (in which my quote is the basis for the article title); a Reuters piece on power trading; and a WSJ MarketPlace blog post on the rising short interest in some inter-interdealer brokers, and the possible association thereof with the metastasizing Libor scandal.
The unspeakable horror in Newtown has understandably led to a surge in calls for greater gun control. Which in turn calls for a response, as I am skeptical of most gun control, and have supported concealed carry.
It goes without saying that I would like to live in a world where Newtowns don’t occur. But trying to bring that world into being requires addressing numerous practical difficulties, and taking seriously the unintended consequences and the trade-offs of any measure intended to achieve that end. Intentions are one thing: results are another. I am more interested in the latter.
At the outset, it is worthwhile to point out that there are two distinct problems with guns: mass shootings like Newtown and Aurora, and the daily toll of gun-related violence, which tends to be disproportionately concentrated in particular urban neighborhoods. (Case in point: Chicago. There have been 516 murders this year in Chicago, most with guns, and most in a handful of neighborhoods of the city). There are approximately 11,000 firearms homicides in the US each year, of which a small fraction are the results of mass shootings. Most are sad and grubby deaths that receive cursory attention. A newspaper article or two, a report on the evening news, before disappearing into oblivion.
It is also essential to remember that there is considerable evidence (some of which is admittedly controversial) that firearms ownership by law abiding individuals, and permitting individuals to carry firearms outside their homes reduces crime, including violent and property crimes.
Insofar as mass murders involving guns (a subset of all mass murders) are concerned, it is evident that the problem is an intersection between madness and guns. Which raises the questions: How can the dangerously insane be prevented from accessing weapons? What are the costs of doing so?
The difficulties of preventing the dangerously insane from obtaining weapons are severe, and the costs of doing so are likely to be extreme. And by “costs” I do not mean merely the dollar costs of enforcement, but the hardships imposed on individuals that result from the inability to identify reliably who is a real danger of committing a mass murder.
In brief, we know that mass murderers are crazy, but very few crazy people are even potential mass murderers. What’s more, we know that there is little ability to identify, ex ante, which individuals out of the population of the emotionally disturbed are true risks. We are dealing with tail risks of a population that is already in the tails of the general population. People whose behavior is irrational by definition, making it extremely difficult to identify just who from among the population of mentally disturbed individuals has a rare form of disturbance that makes them a higher risk to commit mass violence.
Perhaps some necessary conditions, or things approaching necessary conditions can be identified. Loners. Obsession with violent video games. These individuals share some characteristics, but only a few people with those characteristics are risks.
Meaning that any attempt to identify those who pose the greatest risk is likely to be subject to very high rates of both false positives and false negatives, even if there was a concerted effort to evaluate the mental health of every gun purchaser. Some of the high risks will go unidentified, and some of the low risks will be falsely considered high risk.
Both types of error are costly, and it is necessary to recognize that there is a trade-off. If you try to reduce the risk of a false negative (a real threat that goes undetected) you increase the likelihood of false positives (those who pose no threat are prevented from obtaining a firearm, or even worse, are institutionalized or medicated against their will).
Making the best trade off depends on the costs of the two types of errors. Those advocating far more restrictive gun laws believe that the cost of a false negative is so high that we should accept a very high rate of false positives. That is, that there is little cost of denying anyone who poses even the slightest risk from obtaining a weapon: what does anyone need a gun for, anyways? And especially: what does anyone need a semi-automatic weapon for?
If you really believe that there is no benefits to owning a gun, but only costs, you would conclude that gun bans are justified: the cost of a false positive is zero, and there is no need even to attempt trying to identify who is a risk or not. Psychological screening would be a waste. If you believe the cost of a false positive is zero, any effort to try to identify is a risk is unjustified.
But that means that the question of the efficient response to the risk of mass shooting is inevitably tied to the potential benefits of gun ownership, and also to the efficacy of bans and their potential unintended consequences.
The evidence here is admittedly controversial, but my reading of that evidence is that it is highly likely that private gun ownership, and permitting people to carry firearms outside the home, does provide substantial benefits in terms of reduced violent and property crime.
Moreover, there is some evidence that private ownership and concealed carry deters some mass shooting episodes. A paper by Lott and Landes presents evidence that “that the only policy factor to have a consistently significant influence on multiple victim public shootings is the passage of concealed handgun laws.” Further, their evidence suggests that concealed carry reduces the death and injury rate in an attack; Lott and Landes explain this as the result of the ability of armed individuals to disrupt or end an attack before law enforcement can arrive to do so: one example is the principal in Pearl, MS, who stopped a mass shooter with the gun he retrieved from his car before police arrived. They also present evidence that gun free zones actually increase the risk of mass shootings: would be mass killers deliberately choose to carry out their plans where the odds of facing armed opposition are the lowest. Yes, they are insane in the sense that they relish taking human life, but that does not mean they are not calculating and rational in the sense of being able to devise means best suited to carry out their twisted aims. Indeed, they can be hyper-rational in this respect, making elaborate plans to obtain weapons and to use them in ways that will maximize their kill counts.
Furthermore, bans are not likely to be very effective at keeping weapons out of the hands of those who are more likely to commit (non-mass) murder or other violent crimes. Cities in the United States provide one example. Cities with very draconian gun laws also tend to have very high murder rates. Chicago is a prime example. Of course there is a cause-and-effect issue here (i.e., draconian laws are more likely to be adopted in jurisdictions with high crime rates), but increasing restrictions on gun ownership in these does not clearly result in declines in murder, and as noted before, there is evidence that reducing restrictions leads to declines in murder rates. Similar results are found in some international comparisons: high murder rates often go hand-in-hand with draconian restrictions on gun ownership (cf., Russia), meaning that bans are not sufficient to reduce murder rates to low levels. (Russian murder rates are substantially higher than in the US, for instance, despite the fact that gun laws in Russia are far more restrictive. Unfortunately, it appears that Russia does not break out firearms homicides, so a comparison of gun-related homicides in the US and Russia is not possible.) Other states-notably Switzerland-have high rates of gun ownership, and very low murder rates.
Bans also do not necessarily eliminate mass shootings. Norway and Germany, to mention but two examples, impose onerous restrictions on gun ownership, but have experienced mass shooting episodes.* Those obsessed with killing wholesale find can find ways to satisfy their obsessions.
The co-existence of highly restrictive gun laws and high murder rates, and the occurrence of mass shootings in jurisdictions with such restrictive laws show that “ban” is an intended effect of such laws, rather than their actual effect. This should not be surprising. These laws are likely to have the smallest impact on those who are involved in criminal activity precisely because guns are particularly useful in such endeavors. Restrictive laws tend to reduce substantially gun ownership by those who present a low risk of committing crimes, but whose ownership helps deter crime: they have much less of an impact on the possession of weapons by those who present a high risk of committing crimes. Thus, bans have a lot of false positives (the law abiding choose not to own weapons) and a lot of false negatives (criminals get guns), and both the false positives and false negatives are costly. They tend to disarm those who pose no danger, but not appreciably reduce the ability of the dangerous to obtain weapons.
Indeed, those deranged few who desire to commit mass murder are likely to be the least sensitive to increases in the cost of obtaining weapons that result from the adoption of more restrictive gun laws. Those bent on mass slaughter are willing to go to great lengths to achieve their twisted destinies. Their obsessions make them inelastic demanders, and drive them to find any way to circumvent restrictions on obtaining guns.
The numbers of weapons these individuals acquire is often taken as evidence of the laxity of gun laws. But the very fact that these individuals acquire far more weaponry than they need to carry out their crimes or could even possibly use suggests that raising the cost of acquiring a weapon is unlikely to have much of an impact on their ability to commit mass murder. Their purchases of weapons could be reduced substantially without reducing their ability to commit mayhem precisely because they tend to buy more weapons than they actually need for that purpose, or use in their crimes. The accumulation of excessively large arsenals is a symptom of their disorder, but their disorder is such that even if restrictive laws curtailed their arsenals, they would still accumulate enough weapons to engage in mass slaughter.
The (empirically supported) likelihood that gun ownership has a deterrent effect on mass killings, and the likelihood that restrictions on gun ownership will not reduce the willingness and ability of mass murderers to obtain weapons, mean that more restrictive gun laws may not even reduce the frequency or severity of mass shootings. Moreover, the (again empirically supported) likelihood that private ownership of guns and concealed carry laws have a deterrent effect on crimes (including murder) other than mass shooting, means that greater restrictions on gun ownership and use do come at a cost.
If this analysis is correct, more draconian gun laws motivated by a desire to ensure no Newtown ever happens again are unlikely to achieve their intended effect, and will have pernicious unintended effects. The laws will not constrain or deter those bent on mass murder, and will result in increases in other crimes (including murder).
A couple of other points.
The first is that many Americans derive utility from guns, for reasons other than their value in self-defense. For some it is hunting. For others, it is just throwing lead at paper. For others, gun ownership-and especially possession of assault rifles-is a statement of personal autonomy and individual liberty, and a connection with their heritage.
The Smart Set finds these attitudes-especially the last-totally alien and illegitimate, and unworthy of any consideration whatsoever. That is an assertion of the superiority over one belief system over another. It is interesting to see where those who go on endlessly about the importance of diversity draw the line, and just whom they put beyond the pale.
But if you respect the values of others, you cannot discount these attitudes when determining the trade-offs involved in restricting the rights of people to possess and use guns.
The second is that weapons do not pose unique issues. With virtually everything there is a tradeoff involving lives on one arm of the balance. Automobiles and swimming pools and bathtubs and step-ladders and even buckets (in which approximately 20 children drown annually) kill people every year. We accept this reality because the cost of further constraining our use of these things is greater than the value of the risk of death that necessarily accompanies their very existence.
The most vehement gun controllers view weapons differently from autos, to take one example, even though the number of people killed by autos per car in the US is about 3.6 times the number killed by guns for each firearm in the country. They do so because they believe that autos provide benefits that exceed the costs resulting from auto-related deaths, but deny that guns offer any benefit whatsoever.
I would grant that the benefits of guns are smaller, and more difficult to quantify, than the benefits of cars. But a strong case can be made that the costs of restricting gun ownership exceed the benefits of such restrictions, and by a large margin. Restrictions on gun ownership and use are unlikely to reduce the incidence of wholesale killing carried out primarily by the insane, and may indeed increase said incidence. Restrictions on gun ownership have little demonstrable effect at reducing retail killing in places like the South Side or West Side of Chicago, and likely subject the law abiding to greater risk. The denigration of the psychic utility of gun ownership is an act of cultural hegemony by an elite that would shriek in outrage at an attempt to impose Western values on Africans or Asians.
The desire to say “No More Newtowns!” is understandable. But there are no easy ways to achieve that laudable goal. The most commonly advocated measures to restrict access to guns would likely not reduce the risk of mass killings, but would have unintended, and largely unseen, effects. Most notably, they shift the balance of power between the criminal and the law abiding in favor of the former. People will die as a result, but the connection between these deaths and the restrictive laws is largely unseen.
As a general rule, I am highly skeptical about public policies adopted as the result of highly visible tragedies. The focus on the exceptional tends to distort judgment, and distract attention from the more diffuse-and hence less noticeable-effects of measures intended to prevent their recurrence. The unseen is easy to ignore, but it is there. It is imperative to look for it, and not overlook it in the glare of lurid tragedies.
This is especially true of events like those that transpired in Newtown. The urge to do something-anything-is understandably strong, given the unspeakable pain of seeing innocent lives cut down. But it is a sad fact that there is likely little that can be done that will reduce the risk of new Newtowns, and indeed, some measures may actually increase those risks. And these measures also increase the odds that innocent people will die at the hands of criminals, but that increase in innocent deaths, occurring one at a time throughout the country, does not have the same impact as a single act of mass violence even if the number of lives lost is actually greater.
We live in a fallen world. As much as we wish it were otherwise, there is no easy way to deter or prevent the depraved from committing their acts of depravity. And we must always be cognizant that our attempts to do so may actually do more harm than good.
Unfortunately, I think that reality is likely to be ignored.
*In a comment on an earlier gun-related post, Green as Grass acknowledges that mass killings have taken place in the UK despite gun bans, but suggests that the lower frequency of such episodes in the UK may show that bans at least reduce their likelihood. This may be true, but there are other differences between the US and the UK that could explain the difference. The US has always exhibited higher rates of violence than European countries; the reasons for this are the subject of intense dispute, but it is an empirical fact. In econometric terms, there is a country fixed effect, and once this is accounted for it is by no means obvious that the difference between the rates of mass killing in the US and the UK is explained by differences in gun laws.
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