Assignment #8

For this upcoming election, the state of California will not only be voting for the next President, but will also be voting on Proposition 34, which will determine the future of capital punishment in the state.  This article discusses the debate surrounding the Proposition.  In regards to my own research question, which deals with the effectiveness of capital punishment in controlling crime rates, the article doesn’t provide a great deal of new insight, but it does highlight the complexity of the issue.  Capital punishment can be supported or opposed from a variety of angles.  The proponents of this proposition have stated that elimination of the death penalty in California will help the state to save money due to decreased court costs resulting from repeated appeals from death row inmates.  Others have made fiscal arguments from the other direction, or cited moral reasons for their concerns.  Ultimately, the issue of capital punishment has been advocated or opposed for a myriad of reasons, and the findings of economists and other scholars who study its deterrent effects are not the only factors that help to shape the debate surrounding the death penalty.

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October Jobs Numbers

The October BLS jobs report indicated a decrease in the unemployment rate from 8.1% to 7.8%., and an increase in  total employment of 873,000 in September.  This increase in employment follows “three months of little change.”  The report is significantly more positive than the September report, however there remains some uncertainty about the future of growth in the US economy.  For example, while the economy added 114,000 new jobs, the total number of unemployed persons decreased by 456,000.  This means that almost 3/4 of the drop in the unemployment rate can be attributed to persons leaving the workforce based upon the statistical guidelines for being considered unemployed.  Simply put, these people gave up looking for a job and are thus not considered unemployed.

Based upon what I see in these numbers, the possibility that the drop in the unemployment rate can be traced back to a large number of people leaving the workforce is the only real concerning aspect of the report.  The rest of it appears quite positive (at least compared to what we’ve seen over the past few years).  For example, the reports for both July and August were revised upwards, indicating that the grim nature of the August report may not have been quite as alarming as we initially thought.  However, some economists are concerned that the October report has been skewed by a disproportionate amount of workers accepting part-time work because that is all they could find.  Overall, my impression of these numbers is that they are the most positive employment statistics we’ve seen in a long time, but that there remains a great deal of uncertainty around them.  As of right now, I am hesitant to become too optimistic.

Paper Outline

The Deterrent Effects of Capital Punishment

  1. Introduction
    1. Does the existence and implication of capital punishment within the US system of justice result in a decreased frequency in crimes punishable by death?
    2. This question has been at the heart of the debate over capital punishment ever since the development of our modern system of justice.

i.      American policymakers have pondered the question for decades, and have used the plethora of answers to support their own beliefs.

ii.      If a definitive answer to this question is reached, then we can narrow the debate over capital punishment.  It could become simply a moral debate, rather than both a moral and economic/social debate.

3.  My question is derived from my own interest in the matter, as I have always felt personally that certain particularly despicable crimes should be punishable by death.  However the recent fiscal debates left me wondering whether states could save money by executing prisoners convicted of certain crimes.  Thus, the effectiveness of actually implementing such a policy would be a very important component in creating an acceptance of it.

2. Literature Review

1.  There are a number of papers that have been published over the past few decades that deal with this very question.

i.      The Deterrent Effect of Capital Punishment: Evidence from a “Judicial Experiment”

1.  Hashem Dezhbakhsh and Joanna M. Shepherd

2.  2003

3.  Run time-series regressions of crime rates and executions

ii.      “The Deterrent Effect of Capital Punishment: Ehrlich and His Critics”

  1. Jon K. Peck
  2. 1976
  3. Summarizes conventional wisdom using a theoretical approach.

iii.      “Uses And Abuses Of Empirical Evidence In The Death Penalty Debate”

  1. John J. Donohue III and Justin Wolfers
  2. 2006
  3. Provides a critique of the various methods used to determine the deterrent effects of capital punishment in the past.
  4. Provide a brief summary of each paper as well as any other papers I may come across over the next few weeks and describe their relevance to the debate/topic

3.  Modeling

1.I plan to run a time series regression similar to the one run by Dezhbakhsh and Shepherd.

  1. I expect to find a negative correlation between the number of executions performed and murder rates.
    1. There are a number of other factors that may impact my model which I either will not be testing for, or will force me to change my methodology.

i.      The number of executions performed may impact the following year’s crime rates, as opposed to the rates associated with that same year.

ii.      Perhaps it is not executions carried out that will impact crime rates, but the number of convicted criminals who are sentenced to death.  After all, many prisoners spend extremely long periods of time on death row before an execution is carried out, if at all.

4.  Data

A. I currently have data from the FBI uniform crime reports and the Bureau of Justice Statistics.

i.      National crime rates for violent crimes

ii.      Number of executions performed by year

B. I plan to collect more (state-by-state) data, in order to isolate states with and without the death penalty

5. Evidence

6. Conclusions

Poor Economics – Top of the Class

Poor Economics discusses some of the issues that the education systems in developing countries face, and to a certain extent, these issues can be found in within the American system as well.  According to the authors, one of the biggest obstacles to effectively educating every child is the discrepancy between what is offered to the rich, and what is available to the poor.  This discrepancy, in turn, fosters a feeling among the less privileged that the education available to them is not worthwhile or beneficial because it appears to them “quite early that they are not wanted unless they show some exceptional gifts” and based upon their own preconceptions, they do not possess these gifts.  The authors go on to explain how this creates an inefficient allocation of resources, as mediocre children end up being afforded every possible opportunity to succeed, while some very skilled or gifted children may fall through the cracks.

This post from Juan Williams of Fox News discusses the benefits of a recent decision to extend inner city voucher programs within the District of Columbia.  These vouchers provide poor families with more options regarding where to send their children to school, and according to data, those who received the voucher programs were much more likely to graduate from high school.  The voucher program discussed in the article provides choice for families who otherwise would be forced to send their children to some of the least effective schools in the country, and thus combats the idea of inequality discussed by the authors of Poor Economics.  The argument in support for these voucher systems is that by providing families with a choice, the negative effects of the discrepancy between what is available to the rich and poor can be negated, and the gap can be closed.

FOMC & QE3

The recent announcement from the Federal Reserve of plans to implement quantitative easing has been met with mixed reactions over the past week or so.  Essentially, the plan is for the central bank to purchase $40 Billion in mortgage-backed securities per month for an indefinite amount of time.  The goal of this plan is to drive interest rates even lower than they already are, in order to encourage borrowing/lending, and hopefully boost the housing market and employment.  According to the announcement, the lower rates should “make broader financial conditions more accomodative.”

One of the main hindrances of economic growth over the past several quarters has been lack of lending.  The Fed has acknowledged this and is thus taking steps to encourage businesses continue trying to get loans from banks.  The main problem however, is that banks are simply not lending.  Banks across the country are currently sitting on vast amounts of reserves, and rather than lending this money out, they are earning 0.25% from the Federal Reserve to store that money in the central bank.  Nin-Hai Tseng, of CNN Money argues that the Fed should lower this rate, perhaps even into the negatives, in order to encourage lending, rather than further lower interest rates in order to encourage borrowing.

Tseng’s argument is very compelling.  Ultimately, banks are the entity that decides whether the money is loaned, and so no matter how high the demand for loans is, the supply is constrained to the banks’ decision making, which is in turn driven by what the banks believe is most profitable.  At this time, banks clearly perceive it to be more profitable to sit on their reserves.  However, if the rate for keeping reserves with the central bank is negative, then perhaps this will encourage banks to lend more, being that it is now relatively more profitable.

In terms of the labor market, both of these approaches seek to accomplish the same thing.  They both aim to encourage the transfer of capital so that more investment can be made and businesses can grow, and as a result, begin hiring again.  I believe that if the desired impact is achieved, both approaches would prove effective in spurring growth in employment.  However, as stated above, the fact that banks ultimately decide whether a loan goes through makes me more supportive of the idea brought up by Tseng.

Freakonomics Ch 3

This chapter is not only an analysis of the economics of drug dealing, but also the sociological factors that foster it.  The authors discuss the way in which drug dealers are looked upon in urban society.  Many young kids see drug dealers driving around in fancy cars and spending a great deal of money, and thus aspire to be just like them.  When considering the lives many children in these neighborhoods lead, this is an understandable reaction.  In a way, for these young people, they are witnessing their own version of the American Dream.  However, this chapter illuminates the reality of drug dealing, in that it is both dangerous, and contrary to popular belief, not particularly lucrative.  What struck me most about this chapter was how sophisticated and concise the gang was about its operations.  I always kind of imagined the drug dealer on the corner as simply being a regular guy with some extra drugs he was willing to part with for a price.  I didn’t realize there was so much more to the operation.  I suppose I am a little sheltered.  Anyway, the authors highlight the real dangers and expenses associated with dealing drugs through their use of narrative as well as statistics that support that narrative:

1.  J.T. made roughly $100,000 per year ($66 per hour), tax free.  While those above him on the ‘board’ made about $500,000 per year.

2.  There were roughly 5,300 other members of the Black Disciples who worked under J.T. and the other franchises, as well as another 20,000 unpaid associates vying to become full members.  These ’employees’ were paid $7 per hour (officers) and $3.30 per hour (everyone else).

3.  1/3 of the top ranking members of the Black Disciples were imprisoned at any given time.

4.  Your chances of being killed as a drug dealer were 1 in 4.

The first statistic reveals the perks of being at the top.  The authors mention how strikingly similar this is to working in a typical ‘capitalist enterprise.’  They compare the bottom ranking members to burger flippers of Wal-Mart shelf stockers.  This is an interesting comparison, and one that creates a more relatable sense of the structure of the gang.  What struck me about this comparison is that this particular market (cocaine) is one of the most purely capitalistic markets within our economy.  It has virtually no regulation because it is a black market, and its unwritten laws are enforced with violence rather than jail time or simple ethical values.  It’s an interesting way to think about drug dealing.

The second statistic reveals just how unlikely it is that becoming a drug dealer will become a reliable way to pay the bills.  The odds of you reaching the top are virtually nonexistent.  You’re probably better off just working at Wal-Mart.

The third and fourth statistic further prove my statement that you are better off at Wal-Mart.  Even if you reach the top, you are very likely to end up in jail, and almost as likely to end up dead before you even reach the top.  Put simply, these statistics disprove the notion that drug dealers lead a comfortable lifestyle, filled with fancy cars and big, tax-free paychecks.  The more accurate description is that they lead terrifying lives of constant struggle, poor pay, and terrible working conditions.  And worst of all, there is no drug dealers union to help them negotiate better wages and more comfortable/safe working conditions.

Assignment #3 – Term Paper Topic/Data

For my project, I plan to explore the impact of capital punishment as a deterrent to crime.  I may also look into the effects of harsher sentences on crimes that are not punishable by death, as well as the costs associated with executing the death penalty as opposed to a prisoner serving a life sentence.  I expect to conclude that there exists a significant deterrent effect associated with capital punishment, and that by utilizing the death penalty, state governments save a significant amount of money by not remaining responsible for an inmates well-being for the duration of his/her life.  I chose this topic because the death penalty remains a very prominent social issue, and one that I have always felt strongly about.  And so I think that this project could be a great opportunity for me to really get a firm grasp of the implications/effectiveness of capital punishment within our justice system and society.  Currently, I have data from both The Guardian, the University of Pennsylvania, and the Justice Dept. about the costs associated with life sentences, the frequency of executions, and crime rates.  I also have several regressions that have already been run by economists and statisticians.  I plan to use these as a guide for my own research.  Before I continue, I would like to collect more data regarding other crimes not punishable by death, as well as state-by-state data.