Simple rules and gaming the system

Are sim­ple, easy-​​to-​​administer rules ruin­ing America? There’s a clas­sic debate over whether laws and reg­u­la­tions should be sim­ple rules or com­plex stan­dards. Systems with sim­ple rules are eas­ier to admin­ster, but they get results wrong some of the time. Standards get the right result more often, but they are expen­sive to admin­ster. A fan­ci­ful exam­ple: speed lim­its. A sin­gle speed limit—60 m.p.h.—may be gen­er­ally OK, but still often wrong because it’s too high in bad weather or at night, or too low when there’s no one on the road or for dri­vers rush­ing to the hos­pi­tal. A stan­dard would get it right, but be harder for cops to admin­is­ter on the spot. (Yes, I know dri­vers are sup­posed to change their speed based on con­di­tions, but this is just for illus­tra­tion.) Cheap sim­ple rules are should be pre­ferred when error costs (the fre­quency and sever­ity of wrong results) are low, but stan­dards should be used when the error costs are high enough. But is it pos­si­ble that using sim­ple rules gen­er­ally will cre­ate a cal­loused pub­lic that will seek to game the sys­tem more and make the sim­ple rules less efficient?

That ques­tion pop­poed into my mind when I read Frank Bruni’s op-​​ed cas­ti­gat­ing Tim Ferriss for sug­gest­ing that trav­el­ers place unloaded starter guns in their checked bags. (Ferriss says this will guar­an­tee close scrutiny, and reduce the risk of your bag being lost.) Bruni says that there’s an epi­demic of self­ish­ness in the country:

While I doubt there will be a rush on starter pis­tols by air­line pas­sen­gers — it’s just too much trou­ble, and too bizarre — his over­ar­ch­ing inter­est in gam­ing the sys­tem at hand is mir­rored in other Americans’ behav­ior. So is his empha­sis on per­sonal advan­tage over the pub­lic good, which would be under­mined if every trav­eler did as he coun­seled. There’d be bed­lam in air­port secu­rity oper­a­tions and a ludi­crous num­ber of peo­ple car­ry­ing around what could be mis­taken for lethal weapons.

Selfishness run amok is a national dis­ease (and, to judge by Greece, Italy and a few other European coun­tries, an inter­na­tional epi­demic). Too many peo­ple behave as if they live in a civic vac­uum, no broader impli­ca­tions to their indi­vid­ual behavior.

Is a sys­tem of sim­ple rules encour­ag­ing this? Perhaps if the sys­tem weren’t so easy to game, peo­ple would do it less? If peo­ple didn’t feel like oth­ers were tak­ing advan­tage of loop­holes, they wouldn’t try to do the same? If TSA agents could exer­cise judg­ment to punish—or make things harder—for folks like Ferriss, per­haps every­one would just fol­low the rules and every­thing would go more smoothely?

But con­sider also this Planet Money episode, where econ­o­mist Luigi Zingales argues that America is becom­ing more like Italy: a place where con­nec­tions and money deter­mine pub­lic pol­icy, instead of the gen­eral wel­fare. He argues that we need sim­pler rules, not more nuanced stan­dards. As he sees it, the more nuanced a rule is, the more likely it is to be read only by the rich (or their employ­ees) seek­ing to take advan­tage of the nuanced sub-​​clauses. These nuances are often inten­tional give­aways to favored groups or busi­nesses. And this looks a lot like Italy, in Zingales’ telling.

In Italy, post-​​World War II com­mu­nist gov­ern­ments needed to con­vince busi­nesses that they weren’t about to have their prop­erty and money con­fis­cated by the gov­ern­ment. So the gov­ern­ment offered sweet­heart deals and guar­an­tees to busi­nesses. But when bribes (or sweet con­tracts) first start being used, they become nec­es­sary. This raises prices for every­one, from infra­struc­ture projects to pro­duce. And it’s not just money: it’s trust. When he arrived here, Zingales was shocked when Americans paid atten­tion to local lead­ers’ warn­ings about a severe storm. He thought that the direc­tion to tape up win­dows meant someone’s brother owned a tape fac­tory. In Italy, as Zingales describes it, it was a good idea to find out what the gov­ern­ment wants you to do—then do the oppo­site. If peo­ple can’t trust their lead­ers, the costs of effec­tively han­dling crises and day-​​to-​​day gov­ern­ment activ­i­ties become enormous.

But maybe here the issue isn’t that the rules are too sim­ple: it’s that they’re too com­plex. Getting on a plane is a mas­sive ordeal. And appar­ently it’s OK to pack an unloaded starter gun in checked lug­gage. (Are oth­ers for­bid­den?) Perhaps if it were sim­pler to get on a plane (and to check lug­gage), every­one wouldn’t feel so shafted, and Bruni’s “self­ish­ness” wouldn’t be such a problem.

Marriage federalism

So President Obama has finally done what every­one thought he was going to do: he endorsed gay mar­riage. (Bully for him for doing it before the elec­tion. Though Biden’s loose lips basi­cally forced him to.) But there’s still an argu­ment about his qual­i­fi­ca­tion: he thinks states should be allowed to choose whether to have gay mar­riage. He’s right. (And I hope he stops evolv­ing right there.)

There are good rea­sons for let­ting states con­trol mar­riage. Marriage and fam­ily law has tra­di­tion­ally been a state issue. They have the exper­tise in this area.

The fed­eral gov­ern­ment does not. Federal laws deal­ing with gay mar­riage gen­er­ally pig­gy­back on state laws. (This is a rea­son to ques­tion the wis­dom of DOMA.) When the fed­eral gov­ern­ment mucks around in marriage—which affects lots of related inter­ests, like adop­tion, inher­i­tance, and benefits—unforeseen issues can become incred­i­bly thorny. And while fed­eral courts could be expected to decide the issues rea­son­ably, they’re already over­bur­dened, and adding a host of fam­ily law issues will only add to that burden.

Traditional prin­ci­ples in favor of fed­er­al­ism also coun­sel let­ting states own mar­riage. The national gov­ern­ment has lim­ited pow­ers, gen­er­ally related to national wel­fare, while states are left to run their own inter­nal affairs, so long as they fol­low the Constitution and don’t intrude on national affairs. This divi­sion of sov­er­eignty puts deci­sion mak­ing power at the low­est pos­si­ble level, ensur­ing that those most affected by gov­ern­ment action don’t have to talk to some­one far away—by dis­tance, inter­ests, or beliefs—to get heard.

Apart from legal prin­ci­ples, there’s real­ity. All it takes is look­ing Roe v. Wade—the Supreme Court deci­sion that legal­ized abortion—and the effects it had on America. The deci­sion ripped the issue away from the states just as many were begin­ning to come to a con­sen­sus that abor­tion should be legal in some cir­cum­stances. The mod­ern, socially con­ser­v­a­tive Republican Party can thank Roe for its exis­tence. The for­mal legal­iza­tion of abor­tion also didn’t have much effect on abor­tion access. In many states, abor­tion is effec­tively unavail­able or nearly so, thanks to oner­ous regimes. (Even sup­port­ers of Roe, like Justice Ruth Bader Ginsburg, acknowl­edge that it went to far and poi­soned politics.)

Even if you think that mar­riage is a fun­da­men­tal right (not some­thing I agree with, even as a gay-​​marriage sup­porter), you should ask whether you think imme­di­ate, national gay mar­riage is worth another quar­ter cen­tury of pol­i­tics divided along social lines. As a gay mar­riage sup­porter dis­mayed by the state con­sti­tu­tional pro­vi­sions around the coun­try ban­ning gay mar­riage, I still rest com­fort­ably know­ing that in 10 or 20 years, all those pro­vi­sions will be gone. Young peo­ple sup­port gay mar­riage, and as they get more power and older oppo­nents of gay mar­riage die or con­vert, the tide will shift enough for gay mar­riage to become the law of the land in every state.

Letting that process run nat­u­rally will allow our pol­i­tics to become more sane, more respect­ful. And you’ll still get what you want.

Bad history

Eliot Spitzer argues that orig­i­nal­ist oppo­si­tion to the indi­vid­ual man­date in President Obama’s Affordable Care Act is wrong because the founders passed indi­vid­ual man­dates just like ACA’s. But Spitzer’s argu­ment is wrong because the man­dates he points to are fun­da­men­tally dif­fer­ent from ACA’s.

First, let’s look at the argu­ment that Spitzer thinks that he refutes. Everyone agrees that the Constitution gives Congress cer­tain and lim­ited pow­ers. (“Everyone” includes the Solicitor General, who argued the case in the Supreme Court for Obama.) Among Congress’s pow­ers is the power to “reg­u­late com­merce with for­eign nations, and among the sev­eral states, and with the Indian tribes.” ACA’s oppo­nents say this grant of power does not let Congress force us to engage in com­merce. Instead, this grant only lets Congress reg­u­late us after we choose to engage in com­merce. By forc­ing us to enter commerce—that is, to pay for health care before we seek it—Congress exceeded its powers.

Spitzer says that early his­tor­i­cal evi­dence shows that the Constitution couldn’t have meant that. Let’s look at his evi­dence. Spitzer points to three man­dates passed by early Congresses and says that they prove that mem­bers of the found­ing gen­er­a­tion didn’t think that man­dates exceeded Congress’s power. He writes

• In 1790, a Congress includ­ing 20 Founders passed a law requir­ing that ship own­ers buy med­ical insur­ance for their sea­men. Washington signed it into law.
• In 1792, another law signed by Washington required that all able-​​bodied men buy a firearm. (So much for the argu­ment that Congress can’t force us to par­tic­i­pate in com­merce.)
• And in 1798, a Congress with five framers passed a law requir­ing that all sea­men buy hos­pi­tal insur­ance for them­selves. Adams signed this legislation.

He thinks that the pas­sage of these laws means that “the Founders and the Congress of the time were will­ing to force all of us to par­tic­i­pate in a par­tic­u­lar act of com­mence and were com­fort­able requir­ing both the owner of a busi­ness and the indi­vid­ual employee to buy insur­ance in order to assure that health costs would be cov­ered at a soci­etal level” (emphases added). He takes it too far, though.

His exam­ples show that Congress under­stood that it had the author­ity to address the health of indi­vid­u­als engaged in inter­na­tional or inter­state com­merce, and to reg­u­late the mil­i­tary and the mili­tia. But it’s too strong to argue that laws forc­ing sea­men, ship own­ers, or even able-​​bodied men to pur­chase things in com­merce activ­ity mean Congress could force every­one to pur­chase things in commerce.

Let’s deal with each of his exam­ples.  First, the sea­men (shh—stop tit­ter­ing, silly imma­ture folk). A sea­man, by def­i­n­i­tion, has already cho­sen to engage in inter­na­tional or inter-​​state com­merce: he’s work­ing on a ship, the very instru­ment of inter­na­tional or inter­state com­merce. Congress can reg­u­late his activ­i­ties so long as its laws are “nec­es­sary and proper” to exe­cute the com­merce power. But the sec­ond the sea­man quit the crew, he was free to pur­chase or refuse insur­ance how­ever he liked.

Second, the ship owner. That’s the same as the sea­man. The ship is an instru­ment of inter­na­tional or inter­state com­merce: Congress can reg­u­late it if its laws are “nec­es­sary and proper” to exe­cut­ing the com­merce power. (It’s another ques­tion whether the ship owner would have to pur­chase insur­ance if he were only oper­at­ing in intrastate com­merce. I think he wouldn’t have to, but some might dis­agree, cit­ing a 1942 Supreme Court case called Wickard v. Fillburn.)

Third, the able-​​bodied men. That looks dif­fer­ent from the ship and crew exam­ples. But that’s because that law relies on other con­gres­sional pow­ers: the power to “raise and sup­port armies” and the navy, and to “pro­vide for orga­niz­ing, arm­ing, and dis­ci­plin­ing, the mili­tia.” So Congress can require all able-​​bodied men to buy firearms to be ready to serve in mili­tias or in the mil­i­tary, and it can even force peo­ple to join the mil­i­tary in a draft. But that’s for war pur­poses. Not com­mer­cial purposes.

So Spitzer’s exam­ples fall through. He should know bet­ter. At least Einer Elhauge, who Spitzer relies on, acknowl­edges that these exam­ples are open to debate. But Elhauge’s argu­ment is more refined: he acknowl­edges that the ship and crew laws applied to peo­ple who already chose to engage in com­merce. He  thinks that the health care mar­ket was so far removed from  ship­ping that the insur­ance man­dates effec­tively forced ship own­ers and sea­men to par­tic­i­pate in new mar­kets. Elhauge also argues that the fact that the gun-​​purchase law arose under the mili­tia power is imma­te­r­ial: his point is that pur­chase man­dates were approved by early Congresses.

And you know what, I’ll give him that last point. But these laws either applied to peo­ple who were already in com­merce, or under an entirely dif­fer­ent author­ity. There are no exam­ples of Congress forc­ing every­one to pur­chase some­thing under the com­merce power. And the gun pur­chase require­ment is sim­ply too far removed from ACA because it’s under the mili­tia power. I’d like to see the Congress that forced every­one to buy health insur­ance as part of the war effort.

In another post, I’ll take issue with Spitzer another issue: he argues that the five con­ser­v­a­tive jus­tices on the Supreme Court are wrong to inter­pret the Constitution accord­ing to some sup­posed “orig­i­nal intent.” His argu­ments against orig­i­nal intent are right, but they miss the mark, because today seri­ous orig­i­nal­ists swear fidelity to the Constitution’s orig­i­nal mean­ing, not the founder’s intent. And that, friends, is a dis­tinc­tion with a a lot of difference.

Piggybanks

Do you think your retire­ment sav­ings are safe? Don’t be so sure. Megan McArdle thinks that Congress will likely go after your Roth IRA pig­gy­bank, among other hoards.

When I look at the bud­get prob­lems we face, I’m skep­ti­cal that Congress is going to live up to its promise to keep its hands off that money.  At the very least, I’d bet that high earn­ers are going to see some sort of sur­tax on their Roth withdrawals.

Of course, I think this is true of non-​​Roth retire­ment sav­ings as well.  Ultimately, Congress is going to be faced with penal­iz­ing peo­ple who didn’t save ade­quately for retire­ment by cut­ting their ben­e­fits, or penal­iz­ing peo­ple who did save, by rais­ing taxes on their sav­ings.  For a lot of rea­sons, I expect them to err on the side of penal­iz­ing savings.

She’s adjust­ing her sav­ings accordingly.

I’ve started think­ing about sav­ing in ways that Uncle Sam won’t be tempted to touch–like pay­ing off your house early, maybe buy­ing a vaca­tion home (for cash) if you know where you’re likely to want to spend a lot of time, and doing the kind of ren­o­va­tions that save you money in the long run–better insu­la­tion, higher-​​end energy-​​efficient appli­ances, etc.  Paying now to lower your monthly costs later may have a bet­ter after-​​tax return than that “tax free” account.

But, of course, Rep. Paul Ryan finally opened the seri­ous debate about our long-​​term bud­get, and President Obama is going to fol­low with a (hope­fully) seri­ous response later this. With this debate under­way, maybe future Congress won’t feel the need to touch our piggybanks.

After all, bubonic plague is natural.

Marion Nestle thinks that con­sumers don’t need food col­or­ing in their food. In an email exchange with Adam Ozimek, she explains:

MN: Since they are unnec­es­sary and decep­tive, I can’t see any rea­son to do any­thing to pro­tect their use.
AO: You say that food col­or­ing is “unnec­es­sary and decep­tive”. But couldn’t you say the same thing of essen­tially any gar­nish or cook­ing tech­nique designed to make food appear more appeal­ing with­out phys­i­cally mod­i­fy­ing the fla­vor?
MN: The issue is arti­fi­cial. Food gar­nishes and cook­ing tech­niques are usu­ally not.

Megan McArdle argues that the nat­ural ver­sus arti­fi­cial dichotomy presents a false choice.

Actually “nat­ural” foods would also come with things like toxic fun­gus and hor­ri­ble par­a­sites which–I guarantee–are much worse for chil­dren and other liv­ing things than arti­fi­cial food col­or­ing. “Natural” is not syn­ony­mous with “bet­ter for you”. It’s absolutely true that you’re prob­a­bly less likely to get fat if you eschew highly processed foods in the snack and cereal aisles. But over­sim­pli­fy­ing this mes­sage to “nat­ural good, arti­fi­cial bad” quickly turns ridiculous.