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The court found insufficient evidence to sustain 53 of 84 remaining counts against Lacey.

It's a frightening reminder of how far the government will go to get their way—and to warn tech companies against platforming speech it doesn't like.

Plus: Hospital shafts, poetry holes, Osama bin Laden, Randi Weingarten, and more...

In England, former Metropolitan Police Officer Mohammed Rahman was sentenced to 12 months in prison, suspended for two years, after he pleaded guilty to seven counts of misconduct in public office. Rahman used police databases to look up information on family members and friends and passed that information onto others. He also used those databases…

Robin Berzin used to work with me at Health 2.0 , as well as combining her medical training with lots of media production and other work. Fast forward a decade and RobinContinue reading...

Hard to believe it but 20 years ago (Aug 12 2003) I started writing THCB! Somehow 20 years later it’s still here. Lots of changes over the years. Hundreds of people haveContinue reading...

Crooked Timber is twenty years old today, which is an awfully long time for a website, never mind a blog, never mind one that is strictly non-commercial and run on volunteer labour. So here's to us, and here's to all those who have been on board at various times during our journey. To quote the […]

This is a second post from a set of comments I gave at the NBER Asset Pricing conference in early November at Stanford.  Conference agenda here. My full slides here. First post here, on new-Keynesian modelsI  commented on "Downward Nominal Rigidities and Bond Premia" by François Gourio  and Phuong Ngo. The paper was about bond premiums. Commenting made me realize that I thought I understood the issue, and now I realize I don't at all. Understanding term premiums still seems a fruitful area of research after all these years.  I thought I understood risk premiumsThe term premium question is, do you earn more money on average holding long term bonds or short-term bonds? Related, is the yield curve on average upward or downward sloping? Should an investor hold long or short term bonds? 1. In the beginning there was the mean variance frontier and the CAPM. Long term bonds have an almost stock-like standard deviation (around 10%, 16% for stocks) with a mean return barely above that of cash or short term bonds. They look like yucky investments. (They're not, or not just based on this observation. Bonds are around 40% of the market. Good final exam question: Given the above picture, should a mean-variance investor get out of bonds? Is the market price and quantity irrational? Hint: Individual stocks are also inside the frontier.) More precisely, short-term bonds or the "risk free rate" are the best investment for risk-averse investors. Long term bonds are at best part of the risky portfolio. Less risk averse investors hold some of them for slightly better return and diversification. That leads to the standard presupposition that long-term bonds have higher returns, and the yield curve slopes up, to compensate for their extra risk. That isn't quite right -- average return depends on betas. Long term bonds have higher returns, if their extra risk covaries with stock risk. They could be "negative beta" securities, but that is unlikely. Higher interest rates lower stock prices too.   2. Campbell and Viceira neatly reversed this conclusion in a beautiful AER paper. What is the risk-free investment for a long-horizon investor, one who wants a steady stream of consumption? Answer: an indexed perpetuity. A bond that pays (say) $100 per year, indexed for inflation, forever. This is obvious once you look at the payoffs, but not at all obvious from standard portfolio theory. There long-term bonds look like volatile investments whose returns miraculously correlated with innovations to state variables for investment opportunities. In English, long term bonds can have big mark to market losses. But when price goes down yield goes up, you make it back in the long run. Yes, they are risk free for long term investors. Portfolios for long-term investors is a long riff on this theme. Now, your presupposition is that long term bonds should have the lowest yields, being safest, and short-term bonds should have a higher mean return to compensate for extra risk. But we're talking about nominal bonds, not indexed bonds. The risk-free proposition holds if real interest rates vary, but inflation does not.In that case, short bonds have roll-over risk for long term investors, and long bonds have steady payouts. If inflation varies but real rates are constant, then short-term bonds have less risk for long term investors. That suggests an interesting view: Until 1980, inflation was pretty variable, and we should see upward sloping term structure and risk premium. After 1980, or at least after 1990, inflation was stable and real interest rates varied. The risk premium should turn around. 3. That too is simplistic, because of course I'm looking again at variance not beta. Now, inflation reliably falls in recessions (see graph). Interest rates also fall in recessions, so bond prices rise. That means bonds are great negative-beta investments. Bonds overall should have very low returns. And this pattern has become much stronger since the 1980s, so bond returns should have gone down. They did. In all the arguments about "savings glut," "low r*" and so on, I never see this basic mechanism mentioned. Bonds are great negative-beta securities to hold in a recession or financial crisis. And, that holds especially for government bonds. Look at 2008, and remember that prices move inversely to yields.  Holding 10 year government bonds would have been much better than holding BAA bonds! That saving grace in a severe financial crisis, when the marginal utility of cash was high, might well account for some of the otherwise much higher yield of BAA bonds. But today we're looking at the term premium, long bonds vs short bonds, not the overall value of bonds. Now, short bond yields go down a lot more than long term yields. But price is 1/(1+y)^10, and the short bonds mature and roll over. It's not obvious from the graph which of long or short bonds has a better return after inflation going through the financial crisis. But that is easy enough to settle. But I didn't Reading Gourio and Ngo made me realize this cozy view was a bit lazy.  I was looking at covariance of return with one-period marginal utility, forgetting the whole long-horizon investor business that brought me here in the first place. The main lesson of Campbell and Vieira's work is that it is nuts to do one-period mean and alpha vs beta analysis of bond returns. More precisely, if you do that you must include "state variables for investment opportunities." When bond prices go down bond yields go up. You will make it all back. That matters. Yet here I was thinking about one-period bond returns and how they covary with instantaneous marginal utility. What matters for the long-horizon investor is how a bad outcome covaries with remaining lifetime consumption, remaining lifetime utility. Returns that fall in a recession shouldn't matter much at all if we know the recession will end. There is, of course, one special case in which consumption today is a sufficient statistic for lifetime utility -- the time-separable power utility case. To use that, though, you really have to look at nondurable consumption, not other measures of stress. And, of course, I'm assuming that long-term investors drive the market. Normally we do not impose the consumption-based model. So it remains true, if you are thinking about expected returns in terms of betas on various factors, it is absolutely nuts not to think about long term bonds with factors such as yields that are state variables for future investment opportunities. Gouio and Ngo use a consumption-based model, but with Epstein Zin utility. (Grumble grumble, habits are better for capturing time-varying risk premeia.) The power utility proposition that today's consumption is a sufficient statistic for information about the future also falls apart with Epstein Zin utility.  A lot of the point of Epstein Zin based asset pricing is that expected returns line up with consumption betas, but also and often predominantly with betas on information variables that indicate future consumption. Here, my comment is not critical, but just interpretive. If we want to understand how their or any model of the bond risk premium works, we cannot think as I did above simply in terms of returns and current consumption. We have to think in terms of returns and information variables about future consumption, a set of state-variable betas. Or, following back to Campbell and Viceira's beautiful insight, we should think about returns as increases in the whole stream of consumption. We should think about portfolio theory in terms of streams of payoffs and streams of consumption, not one-period correlations and state variables. What's the answer? Why do Gourio and Ngo find a shifting term premium? Well, I finally know the question, but not really the intuition of the answer. You can see how my attempt to find intuition for bond premiums follows advances in theory, from mean-variance portfolios and CAPM, to ICAPM with time-varying investment opportunities, which bonds have in spades, to a long-term payoff view of asset pricing, to time-varying multi factor models, to the consequences of Epstein Zin utility. But contemporary finance is now exploring a wild new west: "institutional finance" in which leveraged intermediaries are the crucial agents and the rest of us pretty passive; segmented markets, safe asset "shortages" "noise traders" and pure supply and demand curves for individual securities, neither connected across assets by familiar portfolio maximization nor connected over time by standard market efficiency arguments. With this model of markets in mind, obviously, who should (or can!) buy long term bonds, and how we understand term premiums, will be vastly different. So, I go from a very settled view with just a little clarification needed -- long vs short term bond recession betas -- to seeing that the basic story of term premiums really is still out there waiting to be found. 

Government investigators found mold, gas leaks, brown tap water, and broken sewage pipes in U.S. military barracks despite record-high Pentagon spending, according to a major report released by the Government Accountability Office on Tuesday."We found that living conditions in some military barracks may pose potentially serious risks to the physical and mental health of service members, as well as their safety," the GAO reported, noting that the conditions also impact troop readiness.The independent investigation paints a shocking picture of the conditions at U.S. military barracks, which all enlisted service members must live in at the start of their military careers. As GAO notes, the problem is far from new. The watchdog issued several reports in the early 2000s that found widespread safety issues in barracks across the world, and conditions appear to have gotten worse in the intervening years.The scathing report linked the poor conditions in barracks to the military's ongoing issues with recruitment. "Thousands of service members come through this base for training every year and live in these barracks," an anonymous enlisted officer told the GAO. "They go home and tell their friends and family not to join the military because of living conditions."GAO wrote that, as of last year, there was a $137 billion backlog of deferred maintenance costs for Pentagon facilities. Barracks and other "lower-priority facilities" are "chronically neglected and experience increased deterioration," the report notes. The impressive sum represents a fraction of current military spending, which is set to reach $886 billion next year.Investigators, who visited 10 barracks and held focus groups with service members, recommended 31 policy changes to increase oversight of the facilities and improve living conditions for service members. The Pentagon endorsed most of the suggestions and noted several cases in which efforts were already underway to address them.One major target for reform is the Department of Defense's scoring system for barracks, which rates each facility's condition on a scale from 0 to 100. In a barrack near Washington, DC, with a score of 86, GAO investigators found that 25 percent of rooms had broken air conditioning systems, subjecting soldiers to excessive heat during the summer. They also found a dozen broken windows and 150 rooms with inadequate lighting.According to GAO, soldiers at several different barracks were held responsible for removing any hazardous materials from their rooms, including mold or sewage. One service member told investigators that he had developed chronic wheezing due to frequent exposure to harsh chemicals used to clean mold. "There is a leak and black mold in the shower and maintenance still won't fix it, no matter how often it is reported," an anonymous soldier told GAO.At one site, officials told the GAO that "service members are responsible for cleaning biological waste that may remain in a barracks room after a suicide."Broken windows and "insufficient security" have helped create conditions for crime in the barracks as well. Investigators found one site in which an unknown person had started squatting in a vacant room after climbing through a broken window, and in another case a soldier's ex-spouse broke in and assaulted the service member in their room. The pervasive safety issues in barracks "contributed to an environment where theft, property damage, and sexual assault were more likely," the report notes.

It's legacy-salvaging time as the embers die on the
Democrat Gov. John
Bel Edwards Administration, with a full-bore effort to turn impossibly a
sow's ear into a silk purse.

At the specific policy level, for example, you
have its Commissioner of Administration trying to stave off the undoing by
incoming governor Republican Atty. Gen. Jeff Landry of a costly
and counterproductive taxpayer-funded parental leave scheme for state employees
while proclaiming
"History is going to look very favorably on … Edwards and what he's done." This
shilling is backed more broadly by a propaganda campaign
using tax dollars touting alleged accomplishments, if not reframing failures.

Dardenne is dead wrong: if history is kind, it
will relegate the Edwards years as a footnote; if bluntly realistic, it will
register the 2016-23 period as one where his policies botched economic growth
and development and coarsened society while privileging special interests at
the expense of Louisianans – all in all, a retreat into the past following an
agenda that disserved the state for decades. The data leave no other assessment
possible.

While Landry has yet to take office, already he
has signaled he will undo as much as he can of what Edwards inflicted. There is
not much of what Edwards did which can't be reversed in its entirety, but,
unfortunately, where he did the most damage are things that will be the hardest
to contain.

Most egregiously, he grew government at an alarming
rate, much higher than inflation. From the total spending by the state from six
months into his first term through what is budgeted through the six months after
his second term ends, total
state spending will rise 91 percent. Some of this was driven by bad choices
that force fed federal dollars into the state (which now comprise just over
half of budgeted spending), but even from state sources general
fund spending will rise 36 percent in the period while statutory
dedications will rise 72 percent and self-generated dollars will rise 50
percent. For all 50 states, the fiscal
year 2016 to FY
2022 increase was only 59 percent. Meanwhile, inflation increased
only 28 percent in the period through last month.

This spending orgy particularly was egged on by
expanding Medicaid at the start of FY 2017. It now costs Louisianans over
$450 million extra a year in state funds (using FY 2021 figures; this will
rocket higher because of Wuhan coronavirus pandemic policies for the next couple
of years which fortunately since have been discontinued), redistributing wealth
to eligible enrollees anywhere from a third to a half of whom already had
health insurance and providing a benefit that discourages work. And not that it
seems to have done much relative to other states, as its 2017 rank is the same
as its 2023 rank for public
health according to U.S. News and World Report, 45th, while
United Health Care's America's Health Rankings annual report for 2017
and 2022
shows the state slipped – from next from dead last to dead last.

Meanwhile, spurred by this ballooning of
government, the state began falling behind, if not retreating, economically.
Nowhere is this more clearly demonstrated, and is the most prominent legacy of
Edwards' policies, than in the depopulation of the Louisiana from the middle
of 2016 through mid-2022.
While the nation grew 3.2 percent and the state's southern neighbors experienced a 5.2 percent increase in residents, Louisiana lost 1.9 percent or 88,000
people as they left seeking better opportunity, if not better-run government.

Naturally enough, because of the state's relatively
poor economic performance. A lower proportion of able-bodied
adults younger than age 65 worked in last month, 59 percent, as opposed to
when Edwards' first budget kicked in in Jul., 2016, then at 60.2 percent, with
this latest figure seventh-lowest in the nation (and only as high as it is because
of the state's depopulation). Contrast this with the national rate of 62.7 percent. And the state's
rate is only as high as it is because of depopulation and aggregate job loss; since Jul., 2016 the state actually has
lost (preliminary Oct., 2023 estimate, seasonally adjusted) 6,000 jobs.

For those who did work, the Edwards' years have
been marked by falling behind. While personal
per capita income grew 39 percent from mid-2016 through last month nationally,
and in the southeast 40.7 percent, it grew just 35.6 percent in Louisiana. In compound
annual terms, the 4.6
percent growth rate ranked 35th among the states.

Regrettably, it will take time to unwind the
massive growth in government and effort to find ways to curtail Medicaid
expansion, unless it is eliminated which may be difficult politically to do
with a critical mass of individuals now hooked on redistribution of wealth to
them. Perhaps the only other consequential policy change – again, with an
overall negative impact – Edwards foisted was his criminal justice changes designed
to incarcerate fewer individuals that supposedly would save money.

People incarcerated since
the end of 2016 through Sept., 2023 have fallen around a fifth although by only
about a thousand in state prisons. Yet this was less than the over quarter
decline in all states (through
2021, the latest available data) And claims that the changes, designed to
send fewer people to prison, caused this decline are tempered
by demographic changes with the proportion of younger individuals falling
(younger males disproportionately commit crime) in this period. Nor was much
money saved, since the charge to house state prisoners in local jails increased.

Worse, despite these changes violent crime
increased in Louisiana from 2016-22,
some 11 percent. Meanwhile, violent crime across the U.S. barely budged, up
about a percent making it just 54 percent as high as Louisiana's. This lends credence
to charges by Landry and many others that the changes came at a cost of safety,
and portends they will intensify efforts over the past couple of years to clamp
down that didn't make it into law because of Edwards' vetoes.

Finally, perhaps the most insidious and tragic impact
Edwards had concerned his pandemic policy, which employed stricter measures
than in many states and, which research has demonstrated, largely
were useless in
combatting viral spread and suffering, but ending up induced misery in
other ways. In fact, running the numbers shows that Edwards'
lockdown policies cost more lives than they saved and certainly did more
damage to the economy and civil society (not
to mention the state Constitution) than did far less
heavy-handed responses from other states' governors who had access to the
very same data but who made wiser decisions.

Unquestionably, overall Edwards – aided by too few
legislative Republicans doing too little to counter him, although things would have
been worse had they not at least resisted his more egregious efforts to raise
taxes, to spend more, and to regulate more heavily – has produced a reign of error
that left the state and its people in relatively worse condition than when he
took over, if not absolutely worse in terms of residents, jobs, and lives lost.
No length to which public relations campaigns will go or amount of lackeys
trying to deflect from their own culpability in disserving the public can
change that fact.

Plus: Trump trial delays, a subway shooting, some choice words for Viktor Orban, and more...

From Thursday's story in the Sacramento Bee (Sam Stanton) (link added): More than two years after a Sacramento-area businesswoman was falsely accused of posting racist and hateful comments on the Facebook page for Sacramento's Black Lives Matter chapter, her lawsuit against BLM Sacramento has been settled with the group's founder issuing a public apology…. "On…

Arhoolie Records founder Chris Strachwitz's photos document blues, country, and Cajun music.

The Sullivan Institute trapped members and broke up families.

"The United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt."