Sunday, May 26, 2013

Immigration & Crime

On facebook lately, I've frequently seen posted articles about crimes committed by illegal immigrants, with the implication that this is a reason not to pass immigration reform. The line of reasoning isn't spelled out, but I assume it's something like this:
  1. Immigrants (or just illegal immigrants?) are more likely to commit crimes.
  2. Stricter immigration laws would prevent more immigrants from entering America.
  3. Therefore, in the interests of reducing crime, we should have strict immigration laws.

First, is it true that immigrants are more likely to commit crimes? For legal immigrants, we know the answer is no, simply by counting the number of immigrants and their incarceration rate relative to native-born Americans (link). Also, there is a consistent correlation between crime and cities that get the largest waves of immigrants - crime decreases with more immigration compared to cities with less immigration (link).

Most of the examples people use of immigrants whose crime rates are perceived to be extremely high are Mexicans, so what about them? In general, crime rates among Mexican-Americans are similar to those of white Americans, and what I found surprising was that among Mexican-Americans, those who immigrate here are less likely to commit crimes than those who were born here (link).

What about specifically illegal immigrants? We can't really be sure of that simply because we can't be sure how many illegal immigrants are here in the first place. Estimates range from 7-20 million, so even if we knew exactly how many illegal immigrants committed crimes, the crimes rates could vary a whole lot depending on what the real number of illegal immigrants is. For clues, we can simply look at the crime rates for immigrants in general that I mentioned above, since illegal immigrants would count toward those totals. But in some southern states, there is some evidence that crime from illegal immigrants is higher than average, such as this estimate from the Arizona Department Of Corrections. If that's true, why would that be? It can't be due to the culture or "nature" of latino people who come here, or else we would see the exact opposite of the crime trends among different generations of Mexican-American immigrants that I linked earlier. The most likely explanation would be the drug trade, which drives a lot of the illegal crossings on our southern border.

Now, if that is true, does it justify tighter immigration laws? I don't understand how it would. If we have an increase in crime due to our drug policy that suggests we should do something about... our drug policy. We also had an increase in organized crime among Italian-Americans during the Prohibition because of the black market for alcohol. It would be silly to suggest the solution should have been to get rid of Italians.

Also consider that there are other factors that correlate more definitively and strongly with crime rates. Crime rates are higher among impoverished African Americans. They are also higher among southerners, regardless of race and social status, than they are among northerners. Not being married is also correlated with higher crime rates, as is alcohol consumption. But the most relevant indicator of one's likelihood to commit crimes is whether they are a young male. So if we're going to discriminate against a group of people simply because their crime rates are higher than those outside that group, young males takes the cake.

So... should we update our immigration laws to simply not accept young men but accept anyone else? Or should our government discriminate against American-born young males and closely track their activity for a certain age range? Should northern states pass a law preventing/limiting southerners from visiting or moving there? Those hypothetical laws follow the logic against immigration-due-to-crime much better than anti-immigration laws do. Remember that tight immigration laws are a huge Big Government infringement on liberty and the free market. Telling people where they can go/work and employers who they can hire based on something as arbitrary as the location of their birth has a far bigger impact on people's freedom than background checks and other gun regulations that much of the anti-immigration advocates decried as tyranny.

And on top of all of this, the proposed immigration reform bill in Congress puts more money into border patrol, uses things like e-verify to keep businesses from hiring illegal immigrants, and makes it easier to immigrate here legally. Those things would be expected to reduce illegal immigration, right?

Saturday, May 25, 2013

Randomness Is Random

From The Better Angels of Our Nature - this is a bit off topic from the theme of the book, but I always find this type of thing (examples where our intuitions are wrong) really interesting:

Suppose you live in a place that has a constant chance of being struck by lightning at any time throughout the year. Suppose that the strikes are random: every day the chance of a strike is the same, and the rate works out to one strike a month. Your house is hit by lightning today, Monday. What is the most likely day for the next bolt to strike your house?

The answer is "tomorrow," Tuesday. That probability, to be sure, is not very high; let's approximate it at 0.03 (about once a month). Now think about the chance that the next strike will be the day after tomorrow, Wednesday. For that to happen, two things have to take place. First lightning has to strike on Wednesday, a probability of 0.03. Second, lightning can't have struck on Tuesday, or else Tuesday would have been the day of the next strike, not Wednesday. To calculate that probability, you have to multiply the chance that lightning will not strike on Tuesday (0.97, or 1 minus 0.03) by the chance that lightning will strike on Wednesday (0.03), which is 0.0291, a bit lower than Tuesday's chances. What about Thursday? For that to be the day, lightning can't have struck on Tuesday (0.97) or on Wednesday either (0.97 again) but it must strike on Thursday, so the chances are 0.97 x 0.97 x 0.03, which is 0.0282... With each day, the odds go down... because for a given day to be the next day that lightning strikes, all the previous days have to have been strike-free, and the more of these days there are, the lower the chances are that the streak will continue...

... events that occur at random will seem to come in clusters, because it would take a nonrandom process to space them out.

The human mind has great difficulty appreciating this law of probability. When I was a graduate student, I worked in an auditory perception lab. In one experiment listeners had to press a key as quickly as possible every time they heard a beep. The beeps were timed at random... The listeners, graduate students themselves, knew this, but as soon as the experiment began they would run out of the booth and say, "Your random event generator is broken. The beeps are coming in bursts." ... that's what randomness sounds like.

Sunday, May 19, 2013

More On Capital Gains Taxes

A continuation of (and a bit of a counter-weight to) this post from yesterday... Even though capital gains taxes are double taxation (assuming you invest money that was taxed at the income level), there are still reasons to support it. Basically, it can be just another way to make sure our taxes are progressive, since people who make a lot of money from investments will usually be much better off than people who don't.

Also, even though in theory our tax system could just tax wages and that should already be a tax on future capital gains, in reality this would create very high incentives for people to find (and/or create via lobbying) loopholes. This seems to be Paul Krugman's main reason for taxing capital gains. For instance, using the carried interest loophole, some people can currently get their income taxed at the rates of capital gains. If we only taxed "wages", some very rich people would pay zero taxes because their income would qualify as carried interest.

I assume a common objection to taxing capital gains extra would be that it punishes good behavior. Basically, if 2 people make the same income, the person who invests more of it is "doing the right thing" comparatively. I don't happen to believe in just deserts, but even if you do, you can't assume that a person who invests more is more virtuous than one who spends more. For instance, right out of college I was able to invest a good portion of my income compared to most people my age because I had no student debt. The fact that I was lucky enough to have parents that could and would pay my tuition doesn't make me "better" than anyone. I'm better than everyone for other reasons.

The best objection to taxing people extra for investments is its effect on incentives - we should want people to save/invest more, and having extra taxes for people to do so probably discourages more people from doing it. But the evidence is not clear-cut here. For instance, Germany used to have no capital gains tax, but in 2009 they created a capital gains tax rate of 25%. But their average savings rate has hardly budged. Of course, this isn't conclusive; there are many other variables that would be involved in their savings rate and maybe the economic crisis in the EU is temporarily hiding the long-term effect of that tax hike. Or maybe savings rates are mostly decided by culture, and cultural values shift very slowly in response to new circumstances. I'd be interested to see more data on cap-gains-tax-changes compared to average-savings-rates-changes from other places and times.

So putting all this and the previous post together, capital gains taxes aren't something I strongly oppose. But, all in all, I think we should get rid of them in favor of a progressive payroll/consumption tax. It's a shame that almost any politician who wants to get rid of them also wants to make our taxes much more regressive. I would definitely oppose ending capital gains taxes if that just meant shifting much more of our taxes onto the poor. But I would also strongly oppose making our capital gains tax rate as high as the income tax rate.

Saturday, May 18, 2013

Capital Gains Taxes Are Double Taxation

Last post, I mentioned this argument by Scott Sumner against capital gains taxes. I found it hard to follow, but he links to these posts by Steve Landsburg that make basically the same point more simply, IMO. And it made me realize that I've always thought about capital gains taxes incorrectly. This is another case where our intuition isn't very good at math, and we don't realize when we shouldn't trust that intuition. I'll try to sum up their basic point as simply as possible.

We (and most countries) tax income at a higher rate than we tax capital gains. Most people, including myself, will think this means that people who successfully invest a lot of their income will be taxed much less overall. This will lead to cases such as the well-known example where in most years Warren Buffett pays less taxes than his secretary. But our intuition is wrong here; a tax on income is effectively a tax on your future capital gains because it reduces the amount you can invest, and all capital gains are in proportion to how much you invested. Any additional capital gains tax means you will pay a higher tax rate overall. I had to walk myself through the math to prove to myself that this is right:

Largely stealing from Steve Landsburg's example, assume there are two people named Bob and Tom that each make $100. Bob invests that money in a stock that doubles in value, but Tom does not invest any of it. So overall, with no taxation, Bob would make a total of $200, and Tom would make a total of $100.

Now assume a 50% income tax and no capital gains tax. They still make $100, but after tax they have $50. After doubling that money with his investment, Bob increases his money to $100, and Tom just sticks with his $50. Compare that to what they would have made with no taxes: they both have 50% less, even though Bob's capital gains were not directly taxed.

So... if you add a capital gains tax of 10%, Bob now pays $5 on his $50 gain, which leaves him with $95 out of the $200 he would have had with no taxes. That is an effective tax rate of 52.5% in the long-run! And yet, when Bob pays that additional tax, people will look at that single point of taxation and incorrectly think he is paying less taxes than the rest of us. Moral of the story: this isn't a case of people not paying their "fair share".

However, I don't think this means that we must not tax capital gains as Scott Sumner says, assuming one agrees with progressive taxation (as he does). For the sake of simplicity, I'll save that for another post.

Friday, May 17, 2013

Am I A Liberaltarian?

I had this old post from Scott Sumner's blog bookmarked for a long time with the intention to go read it later. It's mainly an argument that we should not tax capital gains, and it's a little information-dense for my short attention span, so I've put off reading it for a long time even though it looked interesting. I finally got around to reading it, but the thing that interested me the most wasn't his argument about capital gains taxes. It was a part at the end where he says this about the Democratic Party (he is a moderate libertarian):
It would only take four things to make me become a card-carrying Democrat:
1. If they dumped Keynesianism and favored using monetary policy to target NGDP
2. If they favored replacing our current tax system with a progressive consumption tax
3. If they favored replacing the public school monopoly with universal vouchers.
4. HSAs through forced saving plus subsidies for the lower incomes

What surprised me is that I would be fine with all of those changes. I already figured that if I lived someplace like California, I'd feel more conservative than I currently do. But this makes me wonder if I have much less in common with the "average" Democrat than I thought. I live in Texas where I don't personally know many Democrats, and I don't watch stuff like MSNBC or Michael Moore documentaries or whatever. When I think of "the Democratic Party" I largely think of the economics blogs I read, which I guess I should expect to not be a representative sample.

I may make my next few posts about each of the 4 items on Scott Sumner's list and why I think those are good ideas.

Tuesday, May 14, 2013

World Military Spending

We spend almost 40% of the world's total spending. From here:

Saturday, May 11, 2013

Difference between Northerners and Southerners

Students were recruited for a psychology experiment ... In the hallway on their way to the lab, the students had to pass by an accomplice of the experimenter who was filing papers in a cabinet. In half of the cases, when the student brushed past the accomplice, he slammed the drawer shut and muttered, "Asshole." Then the experimenter (who was kept in the dark as to whether the student had been insulted) welcomed the student into the lab, observed his demeanor, gave him a questionnaire, and drew a blood sample. The students from the northern states, they found, laughed off the insult and behaved no differently from the control group who had entered without incident. But the insulted students from the southern states walked in fuming. They reported lower self-esteem in a questionnaire, and their blood samples showed elevated levels of testosterone and of cortisol, a stress hormone. They behaved more dominantly toward the experimenter and shook his hand more firmly, and when approaching another accomplice in the narrow hallway on their way out, they refused to step aside to let him pass.
Yeehaw! Also...
In one study, they sent fake letters inquiring about jobs to companies all over the country. Half of them contained ...(a confession about accidentally killing someone in a fight over his fiancee in the past and now regretting it)... The other half contained a similar paragraph in which the applicant confessed to a felony conviction for grand theft auto, which, he said, he had foolishly committed to help support his wife and young children... northern companies were more forgiving of the auto theft than the honor killing; the southern and western companies were more forgiving of the honor killing
Both from The Better Angels of Our Nature: Why Violence Has Declined. Very interesting so far.

Tuesday, May 7, 2013

When Should We Give To Charity?

To help think through our moral obligations around charitable giving, you can step through the somewhat-famous "drowning child" thought experiment here. It starts with a simple scenario: you pass by a pond where you see a child is drowning - do you have a moral obligation to try to save the child? And then it expands from there to the conclusion that we should give more to charity. I just have one issue... The final part of the thought experiment (on that site, at least) implies that we have an obligation not just to give but to do so "within the next few days". Why? Suppose I make $1 every day that I can give to charity. Why would it be better to give $1 every day than to give $365 once a year?

The timing is different than in the drowning child scenario because saving a drowning child today does not in any way prevent me from saving a different child tomorrow. But with donating money, a dollar I donate today is a dollar I cannot donate tomorrow. And since not all charitable opportunities are equal, we should be picky about where we donate our money. So IMO the thought experiment should encourage people to at least take the time needed to choose the right charity.

But even if you have figured out which charities to support (shout out), what is the best frequency for giving? I don't know. I'm torn between a few options:

Once a year. AFAIK, this is most common. The main benefit is that you can give in larger amounts at a time, and this page by Against Malaria Foundation (rated #1 most effective charity by GiveWell, Giving What We Can, and The Life You Can Save) helps explain why that matters. Basically, you can minimize transaction/overhead costs and therefore can do more good per dollar given.

Once a month. For the same overall amount, this may not be as efficient as annual giving. However, if you just plan on giving annually, there's a good chance you will find an excuse to spend some of that before the year is up or keep more of it for yourself when the time comes to write that check. So, when considering the human element rather than just financial efficiency, you may end up giving much more overall if you give more frequently.

Right before you die. Yep. Just save/invest everything you can and only give to charity at the end of your life. This suggestion shocked me at first, but there's a pretty good case for it. Robin Hanson makes this argument, and you can read a summary here. Basically, if you invest X dollars throughout your life and then donate it just before you die, you will have given much more overall than if you gave it sooner. And the only reason he suggests giving it before you die is because giving after you die is "legally complicated".

That idea hurts my brain; I can't decide what my opinion should be. By the same logic, if it weren't for the "legal complications", should nobody currently give anything to charity as long as "the real rate of return on investment (is) higher than the growth rate"? That seems absurd, but yet is it really that different from the reason why giving annually is better than giving daily? AGH! I think this also points to one of the most difficult problems with utilitarianism in general: how to value the long-run versus the short-run.

The most convincing argument I've seen against Robin Hanson's viewpoint is this post by GiveWell. Basically, there are good reasons to think that world poverty is currently shrinking at an incredibly fast pace. So although we may be able to give more money overall by investing everything now, the current charitable opportunities actually provide much more bang-per-buck than will likely exist at the end of our life. You can find Robin Hanson's take on that here.

I'm beginning to wonder if I should just accept the uncertainty of all this and split my approach equally between the three giving-intervals I listed above. I'm interested in anyone else's thoughts.

Sunday, May 5, 2013

I Don't Understand Liquor Laws

In Plano (my city), next weekend you can vote to allow liquor stores. I will probably go in to vote yes. I'm not fundamentally opposed to laws aimed at discouraging/reducing the consumption of alcohol; I believe that, overall, the world would be a better place if alcohol did not exist. But the current liquor laws seem really stupid...

Like many cities around here, in Plano we currently cannot have liquor stores. But a nearby city does, so if I really want to buy some liquor to have at home, I just have to drive further to buy it. Hopefully a desperate alcoholic doesn't decide that longer drive is too long to wait before getting home to start drinking. But what's much dumber IMO is this law combined with the fact that restaurants can serve liquor. At a liquor store you have to buy your liquor, go home, and then drink. The difference with restaurants is just that you have to drink before you go home. Great! How is this not, in effect, increasing drunk driving? Is there something I'm missing here?