Category: Political Economy

Two Views of Charities

The Tampa Bay Tribune has put out a list of “America’s Worst Charities,” based on payments to solicitors. Dan Pallotta offers some reservations regarding that approach:

[T]he overhead question has a number of flaws. A few of the easy ones to talk about and describe are, first, it operates on a mistaken theory of waste. So, a [soup kitchen] tells you $.90 of your donation goes to the cause and you think: Well, that’s great, now I know that they don’t waste any money. But you don’t know that at all. How do you know they are not wasting the $.90 that’s being spent on the cause? That’s where all the money goes; that’s where the largest opportunity for waste is. Related to that, it tells you nothing about the quality of services. So, that soup kitchen can tell you $.90 of every donation goes to the cause and you’ll never learn that the soup is rancid. . . .

Next, the percentage of your donation that goes to the cause depends entirely on how the charity defines the cause. So, the more broadly they define the cause, the higher the percentage they can tell you is going to the cause. It actually operates on a false theory of transparency as well, because unless you know the underlying accounting and definitions of the cause, there is no transparency in that simple articulation of an overhead percentage. Worse, this demand the charities keep overhead below prevents them from spending money on the overhead things they have to spend on in order to grow. And that’s how we institutionalize the miniaturization of these organizations.

Pallotta offers many provocative thoughts on how success is measured in the nonprofit sector.

The Locust and the Bee

LocustBeeFables have been in the politico-economic air of late. The FT’s Martin Wolf considered the locust part of a master metaphor for the future of the global economy. He concluded that “the financial crisis was the product of an unstable interaction between ants (excess savers), grasshoppers (excess borrowers) and locusts (the financial sector that intermediated between the two).”

Now Geoff Mulgan has entered the fray with the excellent book The Locust and the Bee: Predators and Creators in Capitalism’s Future. As Mulgan observes,

If you want to make money, you can choose between two fundamentally different strategies. One is to create genuinely new value by bringing resources together in ways that serve people’s wants and needs. The other is to seize value through predation, taking resources, money, or time from others, whether they like it or not.

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America’s Left: Find it on Twitter

Many thanks to Danielle for mentioning Barry Friedman and Dahlia Lithwick’s article “What’s Left? Have progressives abandoned every cause save gay marriage?” They argue:

[S]omehow, somewhere along the line, to be progressive … stopped meaning a commitment to help the poor. The central problems that defined the left from the early history of the Progressive movement through the Great Society are as urgent today as they ever were: Economic fairness; a war on poverty, meaningful education reform, voting rights, workers’ rights, racial justice, women’s rights, equal access to child care and health care. But while none of these social ills has been remedied in modern America (and many are now worse) all that talk about “welfare queens” seems to have scared folks off. Face it: There is not, and never has been, anything sexy about the minimum wage.

You certainly won’t find very egalitarian views expressed at a $10,000-a-plate Democratic Party fundraiser, or among the millionaire anchors of cable networks. But I think Friedman/Lithwick are looking for lefties in all the wrong places. Sure, the mainstream media isn’t going to take the concerns of workers seriously. It’s going to feature a lot of fauxgressives instead. But take a look at Sarah Jaffe and Josh Eidelson’s excellent podcast, Belabored. Both also do serious reporting on recent strikes and other labor actions led by people who, increasingly, have little left to lose. If you’re looking for direct legal interventions, check out the Center for Progressive Reform. They’ve been defending labor and environmental regulation for years.

As for welfare and poverty coverage: both Mother Jones and Alternet are outstanding. Sam Pizzigati of Too Much has doggedly exposed inequality. He’s also chronicled past actions (and present movements) to remedy grotesque disparities. There are many members of Congress who supported the “People’s Budget,” which tries to preserve health care and education funding.

Speaking of education: the dialogue about university life on twitter puts to shame any stuffy salon you’ll find on the New York Times’s “Room for Debate” page. Check out @reclaimuc, @zunguzungu, @tressiemcphd, @jhrees, @gerrycanavan, among many others. I think the single best magazine piece on the crisis in higher education today was written by two prolific tweeters, Aaron Bady and Mike Konczal. These are very exciting thinkers, thinking far more holistically and humanely than nearly anyone you’ll see featured in mainstream media.

Finally, in terms of progressive views of technology, Twitter is a godsend. As I completed an article on the role of algorithms in finance the past semester, I found inspiration in items shared by @dgolumbia, @evgenymorozov, @marginalutility, & @interfluidity. There are also communities I follow on health care and IP. Sick of hearing about financialization as a cure for pharma’s innovation fatigue? Follow @DrRimmer, or go whole hog for @JacobinMag’s feature on socializing pharma.

I don’t want to just give a list of names, but I will say this: no one should lament reformers “missing in action”. Virtual communities dedicated to protecting the interests of the disadvantaged exist, and can find each other now more easily than ever. A progressive press would do better to cover the existing left than to lament the failings of liberals.

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Citizens United, Graffiti, and the Web

We need more outlets to challenge the way things run. Challenging corporations is difficult, necessary, and proper. Someone in San Diego tried to do that. He is losing his case. It turns out that if you scribble anti-bank messages, you could face 13 years in jail. The medium: washable children’s chalk, not spray paint, on the sidewalk in front of banks. The bank: Bank of America. Now, you might think the First Amendment would be an issue here; it’s not. According the news report, “a judge had opted to prevent the defendant’s attorney from ‘mentioning the First Amendment, free speech, free expression, public forum, expressive conduct, or political speech during the trial,’ and the defendant must now stand trial on 13 counts of vandalism.” The defendant was saying other banks were better banks. Bank of America did not like it, claimed it cost $6,000 to clean up the chalk, and apparently used its influence to have the city gang unit investigate and hand the case to the attorney’s office. Given that this defendant may not be allowed to engage in this speech, because of anti-graffiti and, my bet, property laws, all that may be left is the Web. I think offline mediums matter and should be protected. The Web is an alternative, not a substitute. But even on the Web a protester will have problems.

As I argue in Speech, Citizenry, and the Market: A Corporate Public Figure Doctrine, corporate power to speak has gone up. Corporate power to limit speech has not. A corporate public figure doctrine would allow someone to use a corporation’s logo and name to challenge to corporation on public issues. A corporation’s word mark is its given name; its logo, its face. Just as we would not limit the ability to question and identify human public figures for speech, we should not do so for corporate public figures. A foundational commitment of free speech law, perhaps the foundational commitment, is that public figures don’t and can’t own their reputations. Yet, through trademark and commercial speech doctrines corporations have powerful control over their reputations. If corporations are people for free speech purposes, as a constitutional matter, their control over their reputations can be no greater than the control other public figures have. Corporations cannot have it both ways. Corporations want and receive many of the legal rights natural persons receive. They should be subject to the same limits as other powerful, public figures.

HT: Fred von Lohmann for noting the story on Facebook.

PS. I am not saying corporations should be challenged, because they are corporations. That is silly. In that sense, I would challenge those who challenge, but that’s me.

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Interview with Marvin Kalb: The Road to War, Presidential Commitments Honored and Betrayed

I could not have timed my chat with Marvin Kalb220px-Marvin_Kalb better. On Sunday, before talking about cyber hate for the U.S. Holocaust Museum’s 20th Anniversary Tour in Chicago, Kalb and I discussed his most recent book, The Road to War: Presidential Commitments Honored and Betrayed (Brookings Institution Press 2013). The timing was auspicious not just because the book had come out days before but because at least 40% of the nation was reeling from learning about the most recent abuse of Executive power:  the NSA’s PRISM program and leaked FISA court Verizon order.

Before I recount some of the highlights of our conversation, I wanted to begin with a wonderful and incredibly apt description of Kalb written by a UPI reporter:

[Kalb] is the senior statesman of U.S. media. Tall, handsome, brilliant, unfailingly courteous, Marvin Kalb looks and acts more like a senior statesman than the chief diplomatic correspondent he was for CBS News and NBC over 30 years when these networks cared about world news. Now these media organizations still bill themselves as world news networks but, most nights, forget about the rest of the world.

Following his prize-studded reportorial career, Kalb became the first director of journalism’s school of higher learning at Harvard — the Joan Shorenstein Center on the Press, Politics and Public Policy. Now, still the profession’s senior statesman, he runs the center’s Washington office and hosts “The Kalb Report.” The author of two best-selling novels and a book titled, “One Scandalous Story: Clinton, Lewinsky and 13 days That Transformed American Journalism,” Kalb’s 13th book — his best — excoriates Congress for relinquishing its constitutional obligation to declare war.

The U.S. News and World Report’s Jamie Stiehm describes Kalb’s new book as “an elegantseg3_ssa_3 synthesis of how easy, too easy, it has become for an American president, any American president, to go to war” with Congress “ceding its rightful role in declaring war and tends to go along with the man in the White House.” Kalb’s book argues that so much power should not be concentrated in the President.

Here are some highlights from our conversation:

DC: Why has it been so easy for the Executive Branch to ignore the core constitutional guarantee that Congress declare war?

MK: We have a system of law undergirding Presidential authority to go to war — Congressional declaration of War and the power of the purse — yet it has been consistently ceded to the President. When I covered Vietnam in 1968, we had 500,000 troops on the ground. Who gave the President the authority to do so? I am a great believer of law, but if it is ignored with impunity, to whom do we turn?

DC: How did we get to that state of affairs–the President doing what he wants without check? Are things much different in light of recent revelations of our unsanctioned domestic intelligence apparatus?

MK: What we are witnessing this week stands as a confirmation of what we have ben seeing–unchecked Presidential power in the name of war time. In the Korea and Vietnam wars, one President after another made unchecked decisions and no one blew the whistle, most significantly Congress. Congress was successfully pressured to cede its power to the Executive Branch. For instance, only two Senators voted “no” for the Gulf of Tonkin resolution. When one of those senators, Senator Morse, saw President Johnson, the President put his arm around the Senator and said “Wayne, you are a good American. We do not want to hurt the troops.” Johnson wielded his power through persuasion and it worked–Congressional resistance was vanishingly small.

DC: What do you think of this week’s revelations about PRISM and the Verizon order?

MK: In important ways, I thought that we beat Big Brother when we prevailed in the Cold War. With the indiscriminate collection and analysis of all Verizon users’ telephony metadata (including who we called, where we were, and the inevitable revelation of sensitive information given the answer to the “who” question), we have become what we most fear–executive branch conducting surveillance over ordinary citizens in increasingly intrusive ways. Read More

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Defending Citizens United?

My thanks to Danielle and her co-bloggers for inviting me to share some of my thoughts.  This is my first foray into blogging, and I’m thrilled to join you for awhile.  I’d like to start by discussing a current project, which examines the internal governance of corporate political activity.  Comments, suggestions and critiques are most welcome.

Corporate political activity has long been an exceptionally contentious matter of public policy.  It also raises a hard and important question of corporate law:  assuming corporations can and will engage in political activity, who decides when they will speak and what they will say?  In several cases, the Supreme Court has provided a relatively clear, albeit under-developed, answer:  “[u]ltimately, shareholders may decide, through the procedures of corporate democracy, whether their corporation should engage in debate on public issues.”  (First Nat’l Bank of Boston v. Bellotti, cited with approval in Citizens United v. FEC).

This corporate law aspect of the decision has attracted substantial criticism alongside widespread calls for major reforms to corporate and securities laws.  Some argue that the Supreme Court misunderstands the reality of modern corporate law, insofar as shareholders have little practical ability to constrain managerial conduct.  Others question why political decisions should be made by either shareholders or managers, rather than some broader group of corporate stakeholders.  A third group claims that political activity is just another corporate decision protected by the business judgment rule.  Thus, empowering shareholders in this regard would improperly encroach on the board’s plenary decision-making authority.

Yet, despite these concerns, there may be pragmatic and normative merit to the Supreme Court’s approach.  In a current paper – “Democratizing Corporate Political Activity” – I present a case for shareholder regulation of corporate political activity through their power to enact bylaws.  I’ll describe the argument in more detail in subsequent posts, but, briefly, I present three normative justifications for this governance structure.  First, it may mitigate the unusual and potentially substantial agency costs arising from manager-directed corporate political activity.  Second, it may increase social welfare by: (i) reducing deadweight losses and transaction costs associated with rent-seeking; and (ii) making corporations less vulnerable to political extortion.  Third, if corporate speech can shape our society’s distributional rules, corporate law should not interpose an additional representative filter in the democratic process.  That is, we should not assume that investors – merely by purchasing stock in a public company, often through an intermediary such as a mutual fund – grant managers the unilateral authority to engage in political activity on their behalf.

With that said, I should be clear upfront that there are important challenges and objections to each of these arguments.  I will describe the main concerns as I proceed.

The next post will lay out the Supreme Court’s vision of corporate political activity, and explain why the shareholder bylaw power best fits the Court’s description of shareholder democracy in this context.

Do Corporations Enjoy a 2nd Amendment Right to Drones?

An emerging, “solutionist” narrative about drones goes something like this:

Yes, we should be very worried about government misuse of drones at home and abroad. But the answer is not to ban, or even blame, the technology itself. Rather, we need to spread the technology among more people. Worried that the government will spy on you? Get your own drones to watch the watchers. Fearful of malevolent drones? Develop your own protective force. The answer is more technology, not regulation of particular technologies.

I’d like to believe that’s true, if only because technology develops so quickly, and government seems paralyzed by comparison. But I think it’s a naive position. It manages to understate both the threats posed by drones, and the governance challenges they precipitate.
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“Kicking the Tires” is not “Looking Under the Hood”

Celebrated in the tech press only a week ago, the FTC inaction (and non-explanation of its inaction) with respect to search bias concerns is already starting to curdle. The FT ran a front page headline titled “Europe Takes Tough Stance on Google.” Another story included this striking comment from the EU’s competition chief:

Almunia insists that the Federal Trade Commission decision will be “neither an obstacle [for the European Commission] nor an advantage [for Google]. You can also think, well, this European authority, the commission, has received a gift from the American authorities, given that now every result they will get will be much better than the conclusions of the FTC,” he said with playful confidence. “Google people know very well that they need to provide results and real remedies, not arguments or comparisons with what happened on the other side [of the Atlantic].”

In response to allegations of search bias, Google has essentially said, “Trust us.” And at the end of its investigation into the potential bias, the FTC has essentially said the same. One public interest group has already put in a FOIA request for communications between Google and the FTC. Consumer Watchdog has requested a staff report that was reported to have recommended more robust action. Will Google, an advocate of openness in government and the internet generally, hold firm to its professed principles and commend those requests?
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Schneier Calls Out Papers on How Terroristist Groups End

Bruce Schneier noted some research by Rand about How Terrorist Groups End. The abstract

Abstract: How do terrorist groups end? The evidence since 1968 indicates that terrorist groups rarely cease to exist as a result of winning or losing a military campaign. Rather, most groups end because of operations carried out by local police or intelligence agencies or because they join the political process. This suggests that the United States should pursue a counterterrorism strategy against al Qa’ida that emphasizes policing and intelligence gathering rather than a “war on terrorism” approach that relies heavily on military force.

likely rings true to many who question the use of drones etc. (The comments on Bruce’s page get into some of this point).

To me the fact that RAND put the paper out is interesting. I can never tell whether RAND or what RAND is about. It would seem that claims that RAND is only going to support the government’s goals might be challenged here. Also Bruce calls out the work of Max Abrahms who in 2008 and 2011 addressed these ideas as well. I urge you read the 2008 post and here is the 2011 abstract

The basic narrative of bargaining theory predicts that, all else equal, anarchy favors concessions to challengers who demonstrate the will and ability to escalate against defenders. For this reason, post-9/11 political science research explained terrorism as rational strategic behavior for non-state challengers to induce government compliance given their constraints. Over the past decade, however, empirical research has consistently found that neither escalating to terrorism nor with terrorism helps non-state actors to achieve their demands. In fact, escalating to terrorism or with terrorism increases the odds that target countries will dig in their political heels, depriving the nonstate challengers of their given preferences. These empirical findings across disciplines, methodologies, as well as salient global events raise important research questions, with implications for counterterrorism strategy.

Bruce was cool enough to include a link to the paper.

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In case you missed it, ISPs now have a 6 Strikes Plan, A Whiff of ICANN?

Ah yes the ever-vigilant Internet democracy must have been watching, or maybe it agreed to ISP policing for copyright sort of like Google’s decision to take down search results for copyright issues. Who knows? The Shadow? Anyway, ISPs are now going to monitor usage to police copyright scofflaws. According to Wired, it is a six strikes plan

backed by the Obama administration and pushed by Hollywood and the major record labels to disrupt and possibly terminate internet access for online copyright scofflaws. … The plan, now four years in the making, [will trigger with] four offenses, [participating] residential internet providers {including AT&T, Cablevision Systems, Comcast, Time Warner Cable and Verizon] [will] initiate so-called “mitigation measures” (.pdf) that might include reducing internet speeds and redirecting a subscriber’s service to an “educational” landing page about infringement. The internet companies may eliminate service altogether for repeat file-sharing offenders, although the plan does not directly call for such drastic action.

The action reminds me a little of Stanford University policy on file sharing where three strikes means you are shut out of Internet access and must pay $1,000 to reactivate. As more and more of life is online, I wonder about such a broad stroke for copyright violators. Then again some countries take away driver’s licenses for drunk driving. The U.S.A. is more lax on that front, I think. I am surprised to see that the Center for Copyright Information has a mix of members including Gigi Sohn; as Tim Lee put it “The picks suggest that the architects of the “Copyright Alert” system may be making a serious effort to strike a balance between the interests of copyright holders and the rights of users.”

Tim explained, however, that the board “has little direct authority over the Copyright Alerts system. The real power lies in the hands of the CCI’s executive board, which is stocked with content companies and ISPs.” He has some faith that the advisory roles give the noisy exit power to “public interest advocates like Berman and Sohn some leverage” who “can always resign in protest, giving the CCI a black eye in the press.” I am not so sure that anyone will give a damn in a way that can change the system even if such an exit is needed.

I also wonder whther this is a whiff of ICANN. Tim explained (he is rather good isn’t he?) that “The Copyright Alerts system will provide users with an opportunity to appeal “alerts” to an independent entity. That independent review process will be overseen by the American Arbitration Association. The AAA will train independent reviewers who will, in turn, hear appeals by individual users.” Given the numbers needed and the way ICANN and the UDRP has operated, I am again a bit wary of how this will all play out.

Given the folks involved, I hope my concerns do not pan out. But I would say keep an eye on this one before someone has to say “Help me Obi Wan, err Google? You’re my only hope.” They may not be up for the battle either.