There are basically three things available to graduates of elite colleges that other students, no matter how hard they work, have little or no access to: elite consulting jobs, investment banking, and corporate law.

Kids from elite colleges aren’t much smarter or harder working than those from the next tier, who are cheaper to hire. But elite grads do have much more polish, shine, etc. – in a word, status. If this helps explain an elite school focus in management consulting, can it also help explain a similar focus in investment banking and corporate law?

Corporate law seems easier. If, as I suggested, our inherited sense of who will tend to win a contest in coalition politics uses certain standard status markers, then the status of one’s corporate lawyers can influence attitudes about who will win a court case. So having a high status lawyer can help get folks within an organization to support standing firm, cow lower status opponents into backing down, and influence the verdict of a judge or jury.

For investment banking, a lot of that is about getting folks with deep pockets to open their wallets to back new ventures. The more it seems that important folks associated with a venture are high status, the more others may be willing to affiliate with that venture as customers, suppliers, investors, compliant regulators, etc. So there should be a big premium on having the key person who represents a venture to potential investors be high status.

I remember Bryan Caplan once suggesting that successful real estate agents tend to be the sort of people who were popular in high school, and that house buyers (especially women) prefer to affiliate with a locally popular person as they enter a new community. Investment banking could be similar, but on higher status scale.

More men make more violence: here, here,

More men make less violence: here, here, here.

Mixed results: here, here.

I quit, and tentatively conclude the evidence is unclear.

First, note that we now tolerate huge variations in the ease of catching law violators, without exempting hard-to-catch cases. For example, sales tax must be paid not only when using a credit cared at a chain store, but also for cash purchases at flea markets. Income tax must be paid not only for full-time employees of big firms, but also when paying cash to a transient to do some yard work. It is just as illegal to shoplift a dress from Macy’s as it is to nap a trinket from some’s house you visit. Putting trash in the wrong recycling bin is against the rules even when there’s almost no chance of catching you. Rape can be quite hard to prove, yet few are sympathetic to legalizing rape in the situations where rapists are hardest to catch.

Second, note that it usually makes more sense to adapt to hard-to-catch cases by increasing punishments, rather than exempting them from punishment. They hung horse thieves in the old wild west not because horses were more valuable than other items whose theft didn’t induce a death penalty, but because it was much harder to catch horse thieves. Punishment is often reduced for criminals who turn themselves in, as that increase the chance of catching them.

Third, note that we often require changes to common behaviors to make it easier to catch law violators. For example, we require visible license plates on cars, and require publicly traded firms to keep careful accounting records. We do this even when such rules may prevent many related behaviors. So the fact that changes might be required to make it easier to catch violators of some proposed law hardly makes it obvious that we wouldn’t adopt such a law, or those changes.

For example, if we wanted we could limit the number of hours per week that students study for classes. Yes, that rule might be hard to enforce without other supporting changes. But we could require that studying only be done in approved study halls. Or we could increase the punishment for violations. Or we could just accept that the law would be evaded often. But it seems to me far more likely that we don’t actually want to limit student hours per week of study.

This argument makes some sense, but it would make a lot more sense if we set broader and more consistent limits. Yet we don’t at all limit housework, and place few limits on self-employed work. Furthermore, high status occupations are especially exempt. Doctors, lawyers, managers, financiers, artists, writers, athletes, academics, and software engineers often work crazy hours. Yet the signaling argument would seem to apply nearly as well if not better to such high status work. Why are we so selective in our limits?

One explanation is a battle for relative status between professions and activities. Areas where work hours are limited produce less, and so look less impressive. Ambitious folks who want to show their high abilities then choose other areas, leading to an equilibrium were observers reasonably less respect folks who work in limited areas. On this story, work hour limits were set in manufacturing and manual labor in order to reduce the status of such activities.

A second related explanation is that each society is eager to look good to other societies. So each society prefers to encourage, not discourage, activities that are especially visible to outsiders. When outsiders evaluate societies more on the basis of their athletes than their shop technicians, societies naturally subsidize the former relative to the latter.

Another third explanation is that voters support limits on work hours in some jobs mainly as a way to defy and “stick it to” employers, who are seen as evil and in need of taking down. Firms who employ low status workers may themselves seem lower status and “exploitive,” and thus more acceptable targets of ire. Work hour limits serve as a quantity limit which raises wages and thus employer expenses. Any reduction of signaling losses is nice, but mainly a side effect.

To punish criminals, we could kick them out of the country to whatever other place they choose, among those that will take them. To give them an incentive to get some place to take them, we might offer a modest subsidy, and reserve an especially big punishment if no one will take them.

People worry that fines give governments too strong an incentive to find the innocent guilty (though fines paid to bounty hunters avoid that problem). People worry that torture doesn’t keep criminals off the street, and that it makes us seem cruel. Exile doesn’t have any of these problems! On cruelty, we already prevent most of the world from living here, so how can it be too cruel to prevent a few more?

Some think exile can’t impose small punishments. But you can exile someone for a year, a month, or a week. Some worry that exile can’t impose extreme punishments. But exile doesn’t have to be the whole solution, just part of a solution. For example, to impose punishments bigger than lifetime exile, beat them a bit first.

Some worry about variation in how much people dislike exile. But there is also variation in how much people dislike fines, prison, torture, and public humiliation. The best way to reduce punishment variation is probably to bundle together many kinds of punishment. Maybe fine them some, beat them a little, humiliate them a bit, and then exile them for a while.

In 2006 the US spent $69 billion on corrections, and 2.3 million adults were incarcerated at year-end 2009. A state prisoner cost an average of $24,000 per year in 2005 (source). Why waste all that money?!

A vast system that tracks the comings and goings of anyone driving around the District. … More than 250 cameras in the District and its suburbs scan license plates in real time. ..

With virtually no public debate, police agencies have begun storing the information from the cameras, building databases that document the travels of millions of vehicles. … The District [of Columbia] … has more than one plate-reader per square mile, the highest concentration in the nation. Police in the Washington suburbs have dozens of them as well … creating a comprehensive dragnet that will include all the approaches into the District. … The data are kept for three years in the District. … Police can also plug any license plate number into the database and, as long as it passed a camera, determine where that vehicle has been and when. …

The tag readers … cost about $20,000 each. … The District has 73 readers; 38 of them sit stationary and the rest are attached to police cars. D.C. officials say every police car will have one some day. … The District’s … officers make an average of an arrest a day directly from the plate readers. … There are no laws governing how or when Washington area police can use the tag reader technology. … 37 percent of large police agencies in the United States now use license plate reader technology. (more; also)

As prices rapidly fall, this will be widely deployed. Unless there is a public outcry, which seems unlikely at the moment, within twenty years most traffic intersections will probably have tag readers, neighboring jurisdictions will share databases, and so police will basically track all cars all the time. With this precedent, cameras that track pedestrians and people in cars via their faces and gaits will follow within another decade or two.

If firms tried to set up camera networks to collect and sell similar info, I would expect an outcry and regulations to stop them. But police will be not only be allowed to continue, they’ll probably also usually succeed in intimidating citizens away from recording police interactions with citizens, no matter what the official rules say.

The human mind consists of many specialized units. … While these modules sometimes work together seamlessly, they don’t always, resulting in impossibly contradictory beliefs.

Leo Katz has a new book that also explains legal hypocrisy as mainly accidental. He says that when we make decisions based on multiple considerations, each consideration is like a voter in our minds. So just as there can be voting cycles where A beats B beats C beats A, our minds can similarly have non-transitive preferences. As a result our choices depend on how they are framed. When the law does this, it leaves legal loopholes that clever lawyers can exploit.

Katz presents his theory as an alternative to:

The misguided idea … that we have loopholes because it is very hard to get laws right, … that is, … writing them in such a way that the law’s language exactly reflects its underlying purpose. (more)

Katz concludes that lawyers shouldn’t at all feel guilty about taking advantages of legal loopholes that appear to evade the law’s purpose, because, hey, there is no coherent purpose. He also excuses evading the laws of God as well as of men, as apparently one can’t expect God to be any more coherent than men, and he excuses trying to lie to associates indirectly rather than directly. It’s all good he says, no need to feel guilty.

Katz doesn’t even appear to consider the possibility I favor, that we are often designed to be hypocritical, to appear to support and follow social norms while actually evading them. Even so, Katz gives many nice examples of hypocrisy, legal and otherwise:

A lawyer tells a client who is on the verge of declaring bankruptcy, to move to a state with generous exemptions. … Another lawyer tells his client who is a visiting the US on a tourist visa but would very much like to make his home here, that he should try to qualify for political asylum. … Although lawyers give this kind of advice routinely, … they feel themselves to be taking advantage of a loophole and loopholes are in bad odor. …

[Consider] the way the devout treat religious commandments. They circumvent them with a brazenness that would put the most aggressively loophole-exploiting lawyer to shame. … To circumvent the prohibition against dueling, the Jesuits recommend contriving to create a situation of self-defense: … to circumvent God’s prohibition on operating a business or even performing such a minimal task as turning on a light on Shabbat, Jews hire a gentile to perform that task for them.

[When] religions prohibit lending money at interest, … followers usually feel free to circumvent the prohibition by … the sale of some valuable object by the debtor to the creditor, with an advance agreement that it be repurchased by him for a fixed higher price at some later date. … If the mismatch theory is right, what devout believers are doing involves nothing less than taking advantage of God’s failure to give a sufficiently airtight statement of his commandments. But that is clearly not what the devout see themselves as doing. …

Loophole exploitation also flourishes in another unexpected realm—dictatorial regimes. Subverting the ruler’s orders by seemingly obeying them but actually undermining them in subtle ways, though often in plain sight, is one the oldest forms of successful risk-minimizing resistance. In the early 1980’s Poles wanting to protest the government’s suppression of the dissident trade union Solidarnosz did so by taking a walk on the city’s main promenade timed to coincide exactly with the official news broadcast. They did so, moreover, wearing their hats backwards. … Since a dictatorship is not bound by the rule of law, why should it be possible to evade its laws in this way? And yet it is. …

Like everyone else, when I want to deceive someone, I find it much easier to mislead than to lie. … I just feel better when I lie circuitously rather than outright. … When I mislead, rather than lie, I am engaged in a legalistic-looking stratagem, but there is no law that I am anxiously trying to circumvent. (more)

FYI, here Katz lays out his accident theory in a journal article:

I do not think it an exaggeration to say that exploiting loopholes is most of what good lawyers spend most of their time doing. …

We engage in legalistic-looking stratagems even where there is no imperfectly drafted, loophole-riddled law anywhere in the vicinity. For instance, I prefer to dissemble by omission or evasion rather than an outright lie, even though the effect will be the same. I prefer to break up with my lover by provoking a quarrel that causes her to do the breaking up, even when it is perfectly transparent what I am doing. I might willfully blind myself to the suffering of a needy bystander rather than openly decline to help even when both he and I understand what I am doing …

What gives rise to the loophole here being exploited? The fact that the tax system appears to be trying to accommodate several different considerations. We want to tax the person who has earned the income, but there are a variety of criteria that go into determining who is the earner. With regard to investment income, those criteria will have to do with who has the legal authority to control what might be done with the asset being invested—who controls how it will be used, on what terms in may be lent out, at what price it might be sold, and so on. Of course, these criteria will often point in many different directions. Accommodating them all is what gives rise to the dependence on (seemingly) irrelevant alternatives, that is, loopholes. …

We do not ordinarily think of such a decision maker as being influenced by irrelevant alternatives, despite being quite obviously engaged in multi-criterion decision making. But that is because the utility function manages to hide that influence, not because it is absent. The reason there does not appear to be any such influence is that the function reflects a ranking of all possible outcomes. There are assumed not to be any extra outcomes out there whose intrusion might upset the ranking. Most of the time that we are making decisions, however, we are still in the process of constructing, by our choices, such a choice function. It is at this stage that the introduction or the withholding of alternatives might upset. …

Arrow’s theorem … tells us … that any decision-making rule that synthesizes multiple criteria into one final verdict is subject to something closely analogous to agenda manipulation. (more)

Because student loans can almost never be discharged in bankruptcy, defaulted loans can haunt students for a lifetime. … That is insane. A similar-sounding federal program, called income-based repayment, is now on the books and is scheduled to become somewhat more generous starting in 2014. But the program is administratively complicated, involving income-eligibility caps and requiring students to reapply every year. (more)

Yup, it can be easier to fund investments via “loans” whose repayment amounts are set to be a proportion the venture’s net income. This is usually called “stock,” however, and proposals for private sector stock in individual future income are usually criticized as “slavery.” Especially if such stock claims on income are exempt from the usual bankruptcy evasions. But to most folks the same policy doesn’t seem like slavery if the government does it, just like we refuse to call conscription slavery.

Some argue that the government needs to make student loans because private loan markets fail in this case. But if they fail, it is mainly because we purposely hobble private investors by not allowing them the tools we are allow governments to ensure a return on their investment. This is how a lot of market failures go these days – they are real failures, but failures caused in large part by refusing to allow private actors all the tools we allow governments.

There’s no way the US will legalize drugs anytime soon, but if drug laws were up to cities or counties, a few places would legalize them, and then everyone else could see if that works out ok. And then maybe more places would legalize. Those of you who saw The Wire may recall that its successful experiment in local drug legalization was shut down by threats from feds.

Back in ’09 I suggested a similar solution on medicine. There’s no way we’ll substantially privatize medicine anytime soon, but if cities were in charge then places that let spending get out of control would decline relative to others that controlled costs more effectively. Losers would learn from winners, to all our benefit.

Along the way, the movie vividly depicts profit-driven buying and selling of people, over which the people involved have little say. If traded, players must immediately move across the country, with little compensation. On the screen, it sure looks a lot like slavery. But I can’t find a single mention of slavery in any of the Moneyball commentary. It seems viewers don’t even notice the issue — even viewers who don’t know or care much for baseball, and doubt baseball makes the world a better place.

This supports the theory that we see “slavery” as low status by definition – so by definition anyone high status can’t be a slave. You may recall that in May I wrote:

Bryan is probably right – we don’t call conscripts slaves, but do call comfort women slaves, because the first is high status and the second low. … On reflection, the main effect here is probably that many people take “slavery is bad” to be part of the definition of slavery. So therefore by definition anything good cannot be slavery. (more)

Here is some detail on trading of baseball players:

Players eligible for neither free agency nor salary arbitration are very seldom offered contracts for much more than the league minimum salary, as the player has no recourse to try to obtain a better salary elsewhere. For this reason, in the first three major league years of their careers (except for the “Super Two” exception above), it is standard practice for players to accept comparatively low salaries even when their performance is stellar. (more)

Added 10a: It is possible to be sold into slavery, or to sell oneself into slavery, so up front compensation is consistent with slavery. The key is that while you are a slave you have little control over what you do. The “degree” of slavery is set by the size of the penalty if you don’t follow orders. A death penalty makes for a strong slave, while merely being fired from your current job with many similar jobs available makes for a rather weak “slave.” In baseball, the penalty is pretty big — never again working in your chosen profession and life-calling, and having almost no prospect for anything remotely as fun or profitable. For an analogy, imagine that if you don’t do what your boss says, you must to move permanently to a poor country where you don’t know anyone and have no unusually valuable skills.  That is a strong enough commitment that I’d be tempted to call it “slavery.” Even though you still have a choice.