Malani CBI: Valuing Laws as Local Amenities

On Wednesday, April 25, 2007, Professor Anup Malani delievered a Chicago's Best Ideas talk on "Valuing Laws as Local Amenities." Professor Malani thinks we go wrong in trying to determine the value of a law only by its direct effects - he argues that by looking at the effect that any given law has on wages and property values, we can determine the relative value of all laws. This allows us to treat laws just like any other community amenities, such as the fixing of potholes or the building of a swimming pool. Listen to the talk here, and read the full blurb after the jump.

The conventional approach to evaluating a law is to examine its effect on proximate behavior.  To evaluate a criminal law, for example, this approach would look to its effects on the crime rate.  In this lecture, Professor Malani argues that laws should instead be judged by the extent to which they raise housing prices and lower wages.  The logic is that the value of a law, much like the value of a lake or a public school, is capitalized into local housing and labor markets.  Desirable laws increase housing prices and decrease wages because more people want to live in the relevant jurisdiction; undesirable laws have the opposite effects.  Evaluating laws in this manner has several advantages.  It employs a more direct proxy for what economists call “utility.”  Moreover, it accounts for all the effects of a law, including hard-to-measure outcomes, unintended consequences, and enforcement costs.

Comments

[Joan A. Conway]

One can experience this outcome in San Diego, where professional employees out-number janitors and plumbers.

Professionals are paid in Sunshine Dollars, while the rent, modest by Chicago's rental market, is higher than it should be for the cheap construction of the apartment.

Further, the employee needs a car to commute to his place of employment, usually some 30 miles away. Living near the beach is both fun and appropriate for professionals, since the inlands are usually for the area's few families, usually military, its transplanted Texas, and other western states, cowboys, and a lot of retirees, mostly living in trailers.

One doesn't buy much in clothing in sunny San Diego. Eating is mostly salads, fresh fruits, and fish. Soup kitchens are a favorite place to eat for the surfers and sun bathers.

However, since the water supply, and job opportunities are low or none existent, usually for the wives of transferred-in-professors, many old-timers do not like newcomers, and their hostility is evident, such that living becomes a nightmare for some.

San Diegoeans like to charge a Chicagoean or other big city dweller a buck for a "Hello" or "Information." Big city dwellers have more money than they do, at least when they arrive, and probably not when they leave San Diego.

Paradise gets boring after two years.

They, living in California, which has had many mass-murders, are skeptical of strangers, as well they should be.

Most newcomers do not stay more than 6 years, even if they buy a home, which is prone to fires, sandslides, heavy winter rains, and small earthquakes.

Some people believe the military may of started some of these brush-fires in the recent past.

Certainly, many, who have been victims of these destructive forces, hold a grudge against those who have not experienced the full California dream, like they have.

One brings home a small piece of the American nightmare, that comes with that dream.

Otherwise the weather is ideal, except for the Santa Ana wind, which is like breathing razor blades at times.

The ocean is great! The salt air the best.

The eating better than you dare admit.

The activities non-stop.

It is an adult playground, and a suggested tourist spot for those from 18-40.

Serious professionals go to San Fransciso, where the rent is outrageous.

[LAK]

This sounds like the most ridiculous kind of social science. As if we could successfully isolate the effect of a single legal variable from all other changes in the law and economy that happen in any given community.

And what about considering the effect of the passage of time? Imagine an environmental law that costs jobs in the short term, causes flight initially, but ultimately results in the clean up or beautification of the area, which in turn leads, over time, to the repopulation of the area, perhaps by even more affluent people.

Methinks one whould have to integrate over a time integral to get an accurate picture, and I'm curious, admittedly not having listen to Anup's talk, how he might go about doing this and distinguishing the effect of one law over another, or say just bad weather or loss of demand for a commodity at the heart of that commhnity (I'm thinking GM and the flight from Detroit here - how do you separate the Toyota's competition from stricter emissions regulations and less driving?)

This sounds like super fishy economic sophistry to me, and I'm sure Anup, being the brainiac he is, spices up his paper with some fancy looking equations. But I'm not sure I'd believe he could take any kind of meaninful meaurement in this case to isolate a single legal variable.

I wish economists had to take physics first and spend some time in a real lab measuring dynamics of things far more easy to measure than the reasons for human decision making. I think they'd be a bit more humbled in the propositions they come up with.

[Erasmussimo]

Wait a minute. If a law increases property values, then it works to the advantage of property owners, but to the disadvantage of others, who must pay more rent because of the law. If a law depresses wages, then it works to the advantages of employers and to the disadvantage of employees. Thus, while it is correct to say that such laws have positive value to one group, they have negative value to other groups.

[Joan A. Conway, also known as Joan Cavalieri-Conway.]

January/February 2006 Volume 5 Issue 1
Inside this Issue

1. California’s Catastrophic 2003 Mega Fire “Cedar”

The Catastrophic 2003 Cedar Fire
Saturday, October 25, 2003, was not a good day for San Diego County, California.

Santa Ana near-hurricane wind gusts of up to 70 mph were already blowing from the east and northeast across the Southern California county in air whose humidity measured below 10 to 15 percent. On that Saturday, this “Santa Ana offshore wind event” fanned a small fire ignited by 34-year-old Sergio Martinez when he became lost near Cedar Creek in Cleveland National Forest.

The Cedar Fire was the largest and most destructive.

The 2003 Cedar Fire now ranks as the largest fire in California’s history.

State Assemblyman Jay LaSuer later wrote the following: “People died in their garages attempting to get in their automobiles while attempting to fell the fire.

Others died in their driveways, and still others were trapped on rads they thought would take them to safety.” In Featherstone Canyon, for example, fire blocked the way out.

Communications failed, because of overcrowded radio channels, which could carry only four conversations at once.

It was the drought and all the vegetation dying that generated a situation where the fire behaved differently than anything we’d seen in the past.”

The city’s single firefighting helicopter was not available because the lease had expired October 21, 2003.

Hundreds of off-duty firefighters reported for duty, but there were no fire engines for them to use.

All of these closures seriously affected interstate commerce.

The Cedar Fire was officially contained in San Diego County on November 4, 2003, by which time it had destroyed over 426 square miles and 2,820 homes and outbuildings, and had killed 14 people (1 firefighter).

Analysis of the 2003 Cedar Fire

The combination of fierce Santa Ana winds, impending nightfall, and inaccessible terrain prevented fire containment at the most desirable time when the fire was smallest and most manageable.

The USFS had not earlier employed the fire prevention strategy of closing the Cleveland National Forest to hunters because of the “extreme fire danger” because the agency had tried that the previous year (October 2002).

When it closed Cleveland, San Bernardino, and Angeles National Forests, deer hunters had reacted with anger, according to one report.

So the USFS in 2003 instead moved resources from northern to southern California before fire season, including air tankers and 21 helicopters, fire engines and personnel for quick deployment, if needed. The forests remained open to hunters and in went Sergio Martinez.

No number of resources or coordination methods via incident command system, famously developed in the State of California, could sufficiently combat a fire the size to which the Cedar Fire rapidly grew.

It didn’t help that preparedness for such a disaster in San Diego County paled by comparison to its county neighbors to the north (e.g., LA County).

Chief Jeff Bowman agreed with this assessment and, furthermore, placed responsibility and accountability with the Board of Supervisors for San Diego County, which had ignored local fire protection issues “plain and simple,” according to Bowman.

[Cavalieri-Conway, Joan]

San Diego County, meanwhile, is the largest urbanized county in the state that does not have its own fire department.

Instead, fire protection in the county is provided by more than 60 unequally funded fire departments, county service agencies, water districts, volunteer groups, tribal, state and federal agencies.

[Cavalieri-Conway, Joan]

"Desirable laws increase housing prices and decrease wages because more people want to live in the relevant jurisdiction; undesirable laws have the opposite effects. Evaluating laws in this manner has several advantages. It employs a more direct proxy for what economists call “utility.” Moreover, it accounts for all the effects of a law, including hard-to-measure outcomes, unintended consequences, and enforcement costs."

Unemployed get revenge on home owners with increased property values by its city legislators not preparing for the consequences of a "Cedar Fire."

Someone has to pay for the suggish economy, and it usually finds the deepest pockets to hit, the land-holders: be-it the state-owned territories, federally-owned territories, such as the Miramar-base destroyed by the Cedar Fire of October 2003.

When you have a inadequate environment for most kinds of employment, except the capitalistic-government-military complex and State Schools who hire professors, teaching staff, burning down property creates jobs for the unemployed.

This is a direct result of a community damaged by wind, fire, and storm, and it has "utility."

Insurance companies can skim profits from other home owners, while wiggle out of paying for the damage, leaving most home owners broke, confiscating their property.

While the Governments get the bill!

Like I said, many leave San Diego with less money than when they came into the community not only by the locals, but by the city's legislators neglect, failure to provide the necessary police power to protect its citizens and their property.

[Cavalieri-Conway, Joan]

Paying wages with Sunshine dollars, is another form of imposing wage controls to impoverish the employees and confiscate their property, before they realize that they are viewed as temporary labor force.

They are squandered for their love-worship of the harmful "Sun rays and the California Dream." The environment, lack of water, etc., cannot sustain them for too long.

Now San Francisco has laws on its books that makes the homeless seek it out to the detriment of the health and safety of its residents. What is the motive of this governmental liberalism? It probably is a counter-balance to another problem and at this time I don't know the answer.

[Cavalieri-Conway, Joan]

In an attempt to blog a "Tale of Two Cities" [San Diego and San Francisco] I am looking for someone [another blogger, like LAK] to tell the tale on San Francisco's homesless laws, and how the legislation interfers with interstate commerce, or property rights, or rights of a pecuniary nature.

One can include the State of Wyoming's 'crack cocaine town' as well, with its punitive working hours, described below in another blog.

"All of these closures seriously affected interstate commerce."

See, In Re Debs, 158 U.S. 564 (1895)...

{"The entire strength of the nation may be used to enforce in any part of the land the full and free exercise of all national powers and the security of all rights entrusted by the Constitution to its care.

The strong arm of the national government may be put forth to brush away all obstructions to the freedom of interstate commerce or the transportation of the mails.

If the emergency arises, the army of the nation, and all its militia, are at the service of the nation to compel obedience to its laws."

"There must be some interferences, actual or threatened, with property or rights of a pecuniary nature, but when such interferences appear the jurisdiction of a court of equity arises, and is not destroyed by the fact that they are accompained by or are themselves violations of the criminal law....

Is it to assumed that these defendants (San Diego County legislators) were conducting a rebellion or inaugurating a revolutioon, and that they and their associates were thus placing themselves beyond the reach of the civil process of the courts?....

We enter into no examination of the [Sherman] act...upon which the Circuit Court relied mainly to sustain its jurisdiction."

The Supreme Court and the Constitution, Readings in American Constitutional History, 3rd Edition, Edited by Standley I. Kutler,: *E*, Labor problems, In Re Debs, "Without disputing the lower court's use of the anti-trust laws, the high court relied on other federal statutes and general equity jurisdiction to deny Deb's petition But the Supreme Court's silent acquiescence opened the floodgates for widespread use of the Sherman Act to secure injunctions against organized labor." Justice Brewer delived the opinion of the Court.

[Den Activist]

LMMFAO!

Basically what he is saying, with more flare and fancy is for example, is if California decriminalizes Cannabis or allows for medical marijuana, which is does, then MORE people who smoke cannabis would move to that area, thus increasing the housing prices while driving down wages.

Said the same way, euthanasia is legal in Oregon and those who want or require that service would move to Oregon to obtain that service.

Now, if we look at this concept closely, we will be able to see how this analysis PROMOTES economic and social segregation versus integration. Example, although a certain amount of people have the money to move to a certain area and this would reduce wages, it will also keep the POOR out of a certain area, as we currently ALREADY have in the US and other nations.

Families already live in the burbs while they work in the city where there tends to be a shortage professional while it has a large amount of unskilled and skilled laborers. --Check out Chicago's School of Sociology's Social Ecology Theory.

Therefore, while it might be attractive in some instances, it has negative effects in the long run with certain laws. Plain and simple, this concept is exactly what Karl Marx argued against because few rich BENEFIT from legislation while the common man, the disenfranchised, suffer. --Check out the Communist Manifesto.

To be the Devil's Advocate, what if there is a law in a particular state permitting pedophilia. Pedophiles would flood the area, increase the number of children in that state and sexually abuse children in their state and/or engage in other sexual misconduct and exploitation of children.

It sounds all fine and dandy using the analogy of housing prices and labor, but what about OTHER laws that affect the vulnerable such as children and the poor?

Disclaimer:
I didn't have the opportunity to hear the whole sound file. I got to the part where he says he'll make the argument of him caring what people THINK. That is EXACTLY how many behaviors are criminalized.

Studies show that the death penalty does NOT work as a general deterrent but instead INCREASES homicide rates after an execution.

The Netherlands has shown that it is best decriminalize cannabis and focus on strong drugs than waste resources on criminalizing the use of soft drugs.

[Joan A. Conway]

I believe you gave good examples of discerning what was asked of us that the utility of housing prices and wages is not perfectly related and is tangent evidence that still has to be brought forward with a totality of circumstances. Good job!

Quoting Den Activist: "To be the Devil's Advocate, what if there is a law in a particular state permitting pedophilia. Pedophiles would flood the area, increase the number of children in that state and sexually abuse children in their state and/or engage in other sexual misconduct and exploitation of children."

Don't we have a few particular states and their Office of Governorship that are so careless and indifferent to the welfare of children over the accommodations made to their pedophiles as to suggest they permit pedophilia, like Vermont and Florida and Utah?

Nevada has houses of prostitution and many 'Johns' moving there due to the availability of women-for-sale?