Tag Archives: Diversity

It’s a Big Government Mess

22 Tuesday Nov 2022

Posted by in Big Government, Uncategorized

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I’m really grateful to have the midterm elections behind us. Well, except for the runoff Senate race in Georgia, the cockeyed ranked-choice Senate race in Alaska, and a few stray House races that remain unsettled after almost two weeks. I’m tired of campaign ads, including the junk mail and pestering “unknown” callers — undoubtedly campaign reps or polling organizations.

It’s astonishing how much money is donated and spent by political campaigns. This year’s elections saw total campaign spending (all levels) hit $16.7 billion, a record for a mid-term. The recent growth in campaign spending for federal offices has been dramatic, as the chart below shows:

Do you think spending of a few hundred million dollars on a Senate campaign is crazy? Me too, though I don’t advocate for legal limits on campaign spending because, for better or worse, that issue is entangled with free speech rights. Campaigns are zero-sum events, but presumably a big donor thinks a success carries some asymmetric reward…. A success rate of better than 50% across several campaigns probably buys much more…. And donors can throw money at sure political bets that are probably worth a great deal…. Many donors spread their largess across both parties, perhaps as a form of “protection”. But it all seems so distasteful, and it’s surely a source of waste in the aggregate.

My reservations about profligate campaign spending include the fact that it is a symptom of big government. Donors obviously believe they are buying something that government, in one way or another, makes possible for them. The greater the scope of government activity, the more numerous are opportunities for rent seeking — private gains through manipulation of public actors. This is the playground of fascists!

There are people who believe that placing things in the hands of government is an obvious solution to the excesses of “greed”. However, politicians and government employees are every bit as self-interested and “greedy” as actors in the private sector. And they can do much more damage: government actors legally exercise coercive power, they are not subject in any way to external market discipline, and they often lack any form of accountability. They are not compelled to respect consumer sovereignty, and they make correspondingly little contribution to the nation’s productivity and welfare.

Actors in the private sector, on the other hand, face strong incentives to engage in optimizing behavior: they must please customers and strive to improve performance to stay ahead of their competition. That is, unless they are seduced by what power they might have to seek rents through public sector activism.

A people who grant a wide scope of government will always suffer consequences they should expect, but they often proceed in abject ignorance. So here is my rant, a brief rundown on some of the things naive statists should expect to get for their votes. Of course, this is a short list — it could be much longer:

  • Opportunities for graft as bureaucrats administer the spending of others’ money and manipulate economic activity via central planning.
  • A ballooning and increasingly complex tax code seemingly designed to benefit attorneys, the accounting profession, and certainly some taxpayers, but at the expense of most taxpayers.
  • Subsidies granted to producers and technologies that are often either unnecessary or uneconomic (and see here), leading to malinvestment of capital. This is often a consequence of the rent seeking and cronyism that goes hand-in-hand with government dominance and ham-handed central planning.
  • Redistribution of existing wealth, a zero- or even negative-sum activity from an economic perspective, is prioritized over growth.
  • Redistribution beyond a reasonable safety net for those unable to work and without resources is a prescription for unnecessary dependency, and it very often constitutes a surreptitious political buy-off.
  • Budgetary language under which “budget cuts” mean reductions in the growth of spending.
  • Large categories of spending, known in the U.S. as non-discretionary entitlements, that are essentially off limits to lawmakers within the normal budget appropriations process.
  • “Fiscal illusion” is exploited by politicians and statists to hide the cost of government expansion.
  • The strained refrain that too many private activities impose external costs is stretched to the point at which government authorities externalize internalities via coercive taxes, regulation, or legal actions.
  • Massive growth in regulation (see chart at top) extending to puddles classified as wetlands (EPA), the ”disparate impacts” of private hiring practices (EEOC), carbon footprints of your company and its suppliers (EPA, Fed, SEC), outrageous energy efficiency standards (DOE), and a multiplicity of other intrusions.
  • Growth in the costs of regulatory compliance.
  • A nearly complete lack of responsiveness to market prices, leading to misallocation of resources — waste.
  • Lack of value metrics for government activities to gauge the public’s “willingness to pay”.
  • Monopoly encouraged by regulatory capture and legal / compliance cost barriers to competition. Again, cronyism.
  • Monopoly granted by other mechanisms such as import restrictions and licensure requirements. Again, cronyism.
  • Ruination of key industries as government control takes it’s grip.
  • Shortages induced by price controls.
  • Inflation and diminished buying power stoked by monetized deficits, which is a long tradition in financing excessive government.
  • Malinvestment of private capital created by monetary excess and surplus liquidity.
  • That malinvestment of private capital creates macroeconomic instability. The poorly deployed capital must be written off and/or reallocated to productive uses at great cost.
  • Funding for bizarre activities folded into larger budget appropriations, like holograms of dead comedians, hamster fighting experiments, and an IHOP for a DC neighborhood.
  • A gigantic public sector workforce in whose interest is a large and growing government sector, and who believe that government shutdowns are the end of the world.
  • Attempts to achieve central control of information available to the public, and the quashing of dissent, even in a world with advanced private information technology. See the story of Hunter Biden’s laptop. This extends to control of scientific narratives to ensure support for certain government programs.
  • Central funding brings central pursestrings and control. This phenomenon is evident today in local governance, education, and science. This is another way in which big government fosters dependency.
  • Mission creep as increasing areas of economic activity are redefined as “public” in nature.
  • Law and tax enforcement, security, and investigative agencies pressed into service to defend established government interests and to compromise opposition.

I’ve barely scratched the surface! Many of the items above occur under big government precisely because various factions of the public demand responses to perceived problems or “injustices”, despite the broader harms interventions may bring. The press is partly responsible for this tendency, being largely ignorant and lacking the patience for private solutions and market processes. And obviously, those kinds of demands are a reason government gets big to begin with. In the past, I’ve referred to these knee-jerk demands as “do somethingism”, and politicians are usually too eager to play along. The squeaky wheel gets the oil.

I mentioned cronyism several times in the list. The very existence of broad public administration and spending invites the clamoring of obsequious cronies. They come forward to offer their services, do large and small “favors”, make policy suggestions, contribute to lawmakers, and to offer handsomely remunerative post-government employment opportunities. Of course, certaIn private parties also recognize the potential opportunities for market dominance when regulators come calling. We have here a perversion of the healthy economic incentives normally faced by private actors, and these are dynamics that gives rise to a fascist state.

It’s true, of course, that there are areas in which government action is justified, if not necessary. These include pure public goods such as national defense, as well as public safety, law enforcement, and a legal system for prosecuting crimes and adjudicating disputes. So a certain level of state capacity is a good thing. Nevertheless, as the list suggests, even these traditional roles for government are ripe for unhealthy mission creep and ultimately abuse by cronies.

The overriding issue motivating my voting patterns is the belief in limited government. Both major political parties in the U.S. violate this criterion, or at least carve out exceptions when it suits them. I usually identify the Democrat Party with statism, and there is no question that democrats rely far too heavily on government solutions and intervention in private markets. The GOP, on the other hand, often fails to recognize the statism inherent in it’s own public boondoggles, cronyism, and legislated morality. In the end, the best guide for voting would be a political candidate’s adherence to the constitutional principles of limited government and individual liberty, and whether they seem to understand those principles. Unfortunately, that is often too difficult to discern.

ESG Scoring: Political Tool Disguised as Investment Guide

30 Wednesday Mar 2022

Posted by in Capital Markets, Corporatism, Environmental Fascism, Social Justice

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ESG scores are used to rate companies on “Environmental, Social, and Governance” criteria. The truth, however, is that ESGs are wholly subjective measures of company performance. There are many different ESG scores available, with no uniform standards for methodology, specific inputs, or weighting schemes. If you think quarterly earnings reports are manipulated, ESGs are an even more pliable tool for misleading investors. It is a market fad, and fund managers are using it as an excuse to charge higher fees to investors. But like any trending phenomenon, for a time, the focus on ESGs might feed-back positively to returns on favored companies. That won’t be sustainable, however, without legislative and regulatory cover, plus a little manipulative help from the ESG engineers and “Great Reset” propagandists.

It’s 100% Political, 0% Economic

ESGs are founded on prioritizing objectives that have little to do with shareholder value or any well-understood yardsticks of financial or operating performance. The demands on company resources for scoring highly on ESG are often nakedly political. This includes adoption of environmental goals such as fraudulent “zero carbon” impacts, the nebulous “sustainability” objective promoted by “green” activists, diversity, inclusion and equity initiatives, and support for activist groups such as Black Lives Matter and Antifa.

Concepts like “stakeholder value” are critical to the rationale for ESGs. “Stakeholders” can include employees, suppliers, and customers, as well as potential employees. suppliers, and customers. In other words, they can be just about anyone in the broader community, or more likely activists for “social change” whose interests have but the thinnest connection to the business’s productive activities. In essence, so-called stakeholder capitalism amounts to a ceding of control over corporate resources, and ultimately confiscation of wealth from equity owners.

Corporations have long engaged in various kinds of defensive actions, amounting to a modern-day trade in indulgences. No one will be upset about your gas-powered fleet if you buy enough carbon offsets, which just might neutralize the impact of the fleet on your ESG! On a more sinister level, ESG’s provide opportunities for cover against information that might be damaging to firms, such as the use of slave labor overseas. Flatter the right people, give to their causes, “partner” with them on pet initiatives, and your sins will be ignored and your ESG will climb! And ESGs are used in attempts to pacify leftist investors who see the corporation as a vessel for their own social objectives, quite apart from any mission it might have had as a productive enterprise.

Your ESG will shine if you do business that’s politically-favored, like renewable energy, despite its inefficiencies and significant environmental blemishes. But ESGs are not merely used to reward those anointed as virtuous by the Left. They are more forcefully used to punish firms in industries that are out of favor, or firms refusing to participate in buying off authoritarian crusaders. For example, you might be so berserk as to think fossil fuels and climate change represent imminent threats of catastrophe. Naturally, you’ll want to punish oil and gas producers. In fact, if you are in charge of ESG modeling, you might want to penalize almost any extraction industry, with certain exceptions: the massive extraction and disposal costs of renewables will pass without notice.

All these machinations occur despite the huge uncertainty surrounding flimsy, model-based predictions of warming and global catastrophe. Never mind that fossil fuels are still relied upon to provide for most of our energy needs and will be for some time to come, including base-load power generation when intermittency prevents renewables from meeting demand. The stability of the power grid depends upon the availability of carbon-based energy, which in fact is marvelously efficient. Yet the ESG crowd (not to mention the Biden Administration) seeks to drive up its cost, including the cost of capital, and these added costs fall most heavily on the poor.

ESG-guided efforts by activists to deny capital to certain segments of the energy sector may constitute antitrust violations. Some big players in the financial industry, who together manage trillions of dollars in investment funds, belong to an advocacy organization called Climate Action 100+. They coordinate on a mission to completely transform the energy industry via “green” investments and divestments of presumptively “dirty” concerns. These players and their clients have huge investments in green energy, and it is in their interest to provide cheap capital to those firms while denying capital to fossil fuel industries. As Arizona Attorney General Mark Brnovich writes at the link above, this is restraint of trade “hiding in plain sight”.

Manipulation

ESGs could be the mother of all principal-agent problems. Corporate CEOs, hired by ownership as stewards and managers of productive assets, are promoting these metrics and activities, which may not align with the interests of ownership. ESG’s are not standardized, and most users will have little insight into exactly how these “stakeholder” sausages are stuffed. In fact, much of the information used for ESGs is extremely ad hoc, not universally disclosed, and is often qualitative. The applicability of these scores to the universe of stocks, and their reliability in guiding investment decisions, is extremely questionable no matter what the investor’s objectives. And of course the models can be manipulated to produce scores that suit the preferences of money managers who have a stake in certain firms or industry segments, and who inflate their fees in exchange for ESG investment advice. And firms can certainly engage in deceptions that boost ESGs, as already discussed.

Like many cultural or consumer trends, investment trends can feed off themselves for a time. If there are enough “woke” investors, ESGs might well feed an unvirtuous cycle of stock purchases in which returns become positively correlated with wokeness. Such a divorce from business fundamentals will eventually take its toll on returns, especially when economic or other conditions present challenges, but that’s not the answer you’ll get from many stock pickers and investment pundits.

At the same time, there are ways in which the preoccupation with ESGs dovetails with the rents often sought in the political arena. Subsidies, for example, will be awarded to firms producing renewables. Politically favored firms are also likely to receive better regulatory treatment.

There are other ways in which firms engaging in wasteful activities can survive profitably, at least for a time. Monopoly power is one, and companies often develop a symbiosis with regulators that hampers smaller competitors. This is traditional rent-seeking corporatism in action, along with the “too-big-to-fail” regime. Sometimes sheer growth in demand for new technologies or networking potential helps to conceal waste. Hot opportunities can leave growing companies awash in cash, some of which will be burned in wasteful endeavors. ESG scoring offers them additional cover.

Cracks In the Edifice

John Cochrane notes a fundamental, long-term contradiction for those who invest based on ESGs: an influx of capital will tend to drive down returns in those firms and industries, while the returns on firms having low ESGs will be driven upward. Yet advocates claim you can invest for virtue and superior returns. That can’t outlast real market forces, especially as ESG efforts dilute any mission a firm might have as a productive enterprise.

Vladimir Putin’s brutal invasion of Ukraine has revealed other cracks in the ESG edifice. We now have parties arguing that defense stocks should be awarded ESG points! Also, that oil production by specific nations should be scored highly. There is also an awakening to the viability of nuclear power as an energy source. Then we have the problem of delivering on Biden’s promise to Europe of more liquified natural gas exports. That will be difficult given the way Biden has bludgeoned the industry, as well as the ESG conspiracy to deny it access to capital. Just watch the ESG hacks backpedal. Now, even the evangelists at Blackrock are wavering. To see the thread of supposed ESG consistency unravel would be enough to make you laugh if the entire conspiracy weren’t so grotesque.

Closing

The pretensions underlying “green” initiatives undertaken by large corporations are good mainly for virtue signaling, to collect public subsidies, and to earn better ESG scores. They are usually wasteful in a pure economic sense. The same is true of social justice and diversity initiatives, which can be perversely racist in their effects and undermine the rule of law.

Ultimately, we must recognize that the best contribution any producer can make to society is to create value for shareholders and customers by doing what it does well. The business world, however, has gone far astray in the direction of rank corporatism, and keep this in mind: any company supporting a sprawling HR department, pervasive diversity efforts, “sustainability” initiatives, and preoccupations with “stakeholder” outreach is distracted from its raison d’etre, its purpose as a business enterprise to produce something of value. It is probably captive to outside interests who have essentially commandeered management’s attention and shareholders’ resources.

When it comes to investing, I prefer absolute neutrality with respect to out-of-mission social goals. Sure, do no harm, but the focus should remain squarely on goals inherent in the creation of value for customers and shareholders.

Parents and Taxpayers Confront Rogue Educrats

14 Thursday Oct 2021

Posted by in Critical Race Theory, Education, Propaganda, Uncategorized

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This Norman Rockwell painting is called “Freedom of Speech”. It depicts a Vermont dairy farmer speaking his mind at a school board meeting, and no, he is not a “domestic terrorist”! (A recent piece by Selina Zito reminded me of this painting.) Today, parents of schoolchildren have a very special reason to be upset: the teaching of critical race theory (CRT) as part of the regular curriculum. A better name for this vapid “theory” might be “critical race theology”, because it is no “theory” at all: it is a set of “woke” accusations leveled against “out groups” designated by leftists: whites, straights, men, and sometimes groups like Jews and Asians. Many people of color are just as dismayed as those among CRT’s targets because its wrongheaded and corrosive nature is so plain. CRT is itself straightforwardly racist.

Taxpayers have a place in this debate as well, at both the K-12 and public university levels. However, their role in funding the indoctrination taking place in public schools has been neglected in the story of the revolt against CRT.

The Parent Trap

Many parents have taken strong action in response to the CRT onslaught. Some have quietly removed their children from public schools, while others have chosen to register their objections with school officials, often at school board meetings. Also, there has been some success at the ballot box by dissident school board candidates. This is grass roots participatory democracy in action, local and vocal. Certainly parents have a greater stake in their childrens’ education than anyone (except the kids themselves). They have a right to know what’s being taught and to provide critical feedback to schools.

School officials, teachers unions, and CRT teacher-enthusiasts are not likely to be straightforward about whether CRT is actually taught, however. This link might help you see through the gaslighting to which we’ve all been subjected. This article discusses various political avenues for fighting CRT in the schools. And here’s a “tool kit” that might be helpful.

Garland’s Effrontery

To top it all off, recently we’ve witnessed an act of fascist authoritarianism by the U.S. Attorney General that, by all appearances, involves a conspiracy between the Biden Administration, top officials at the Department of Justice, and the National School Boards Association (NSBA). AG Merrick Garland’s memorandum of October 4 announced a “partnership among federal, state, local, tribal, and territorial law enforcement to address threats against school administrators, board members, teachers, and staff.“ He did not provide actual evidence of threats against school boards or personnel, however. Yet Garland is willing to treat interested parents as if they are domestic terrorists! His memorandum is a thinly veiled warning to anyone having the temerity to confront school authorities on issues like CRT, as well as school mask mandates (which are ineffective, unnecessary, and detrimental to learning, socialization, and the psychological well being of children). Furthermore, we now know of an obvious conflict of interest: Garland’s daughter is married to the cofounder of Panorama Education, which sells training materials for teachers of CRT.

While Garland’s attempt to undercut free speech might chill the willingness of some parents to speak out against CRT in the schools, many refuse to back down. The following is an excerpt from a letter to the NSBA written on behalf of 427,000 parent-members of 21 organizations:

“Our organizations unequivocally oppose violence and find it deeply troubling that you imply otherwise about concerned citizens who care deeply about their community’s children – and who are concerned by the direction that America’s schools have taken.

  • Citizens are angry that school boards and school officials around the country are restricting access to public meetings, limiting public comment, and in some cases conducting business via text messages in violation of state open meetings laws.
  • They are angry that schools are charging them thousands of dollars in public records requests to view curriculum and training materials that impact their children and that should be open to the public by default.
  • They are angry that pandemic-related learning losses have compounded the already-low reading, writing, and math proficiency rates in America’s schools.
  • They are angry that rather than focusing on declining student achievement, large numbers of districts have chosen to fund, often with hundreds of thousands of dollars in taxpayer money, “social justice” and “diversity, equity, and inclusion” programs with finite resources.”

Insularity At the Board

I’ll be surprised if Garland’s memorandum doesn’t inspire many parents to push harder against CRT in their local schools. However, getting in front of school boards is not always easy, thanks to restricted access for public comment. Here’s an example of the draconian reaction by school authorities in their effort to silence parents, from Orange County, CA. In my own local school district in Missouri, making a short comment at a board meeting first requires submission of a request detailing the subject or question you wish to address to the board. Not only can they simply ignore your request, but it also gives them an opportunity to “circle the wagons” in advance, as it were, even calling upon various “friends of the board” to attend en masse.

The leftists who support CRT fight dirty, as this article notes:

“Nicole Solas, a mother who has complained about her school board, has been harassed and even sued by the authorities. Go ahead, ‘arrest me,’ she said on Twitter. ‘They wanted to publicly humiliate me,’ she said. ‘They paid a PR firm to call me a racist in the national media. So they really wanted to ostracize me from my community.’”

The anger of parents toward this bankrupt philosophy in our schools, and its belligerent proponents, is well justified. Parents obviously have the biggest stake in this controversy. My kids are grown, but I’m angry too, in part because the once-fine education offered by our school district has digressed to brutish proselytization about victimhood, its supposed perpetrators, and the emphasis on the Left’s version of “social justice”. I’m also angry as a taxpayer. While the student population might shrink as decent families abandon the brainwashing camps in favor of private schools or home schooling, does anyone expect the tax bill to decline commensurately? At all? School taxes should be a ripe area for activism, because lots of people don’t want to pay for this shit!

Our Taxes, Our Schools?

Opponents of CRT won a victory of sorts this summer when the U.S. Department of Education amended a proposal that would have prioritized CRT initiatives in awarding grant money.

“The Department of Education withdrew ‘the requirement that grantees incorporate curriculum and instruction based on or similar to the 1619 Project or the works of Ibram X. Kendi.’”

Hooray for that. And in August, the U.S. Senate passed a “STOP CRT” amendment to the otherwise misbegotten $3.5 trillion “social infrastructure” bill. The amendment would ban the use of federal funds for teaching CRT in schools. Of course, that the federal government has any role in funding local schools, and in shaping their curricula, is itself regrettable.

At the state level, many Republican office-holders seem unaware of the use of state resources for CRT in schools, as this piece about Indiana demonstrates. Perhaps they’ve been cowed, and are reluctant to comment for fear of being called racists by CRT proponents. Registering strong displeasure with state legislators regarding the onslaught of CRT is something all within our opposition should be doing.

Local taxes still account for most school funding. There’s obviously no way to get around school district bond servicing. Most ballot initiatives on school taxes appear at the behest of the school districts themselves, and generally those go in only one direction: up! General funding may be subject to reduction via ballot initiative, but petitions are usually necessary, and apparently those have been few and far between. A more promising avenue for wresting control over school funding are school voucher programs, whereby school funds (either state or local dollars) follow the student rather than remaining under the control of monopoly school districts. School choice is expanding across a number of states, having been given a boost by the pandemic. CRT might prove to be an additional impetus in some states. But parents should be careful: some private schools are just as brazen as public schools when it comes to peddling CRT. And there is the danger that vouchers, one day, will bring unwelcome government curriculum mandates.

Joining Arms

The widespread adoption of critical theology in public schools (and universities) is not only a corruption of education: it is institutional roguery and a misappropriation of taxpayer funds for political indoctrination. This is aggravated by the unresponsiveness of many school boards, administrators, and teachers. Parents have good cause to be infuriated, and so do taxpayers. They are natural allies in this struggle to win back our educational institutions.

It’s Time to Make Woke Corporations Hurt!

12 Wednesday May 2021

Posted by in Corporatism, Social Justice, Virtue Signaling

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It’s a BLM discount! You need only shout the magic words! Ah, but if “woke” corporations are sincere in their avowals to help end racial injustice, there is so much more they can do! In fact, let me describe an idea so good and rich that we really must partner with Black Lives Matter and Antifa to bring it on!

Yes, we know how much the social justice warriors of corporate America care about diversity, inclusion, and eliminating unconscious bias. Also, in their business practices, they are eager to avoid “disparate impacts” on “protected classes” of individuals. However, if they want to get serious, they need to put real money where their mouths are. The Fuzzy Logic blog (FLB) suggests that we dare corporations celebrating “wokeness” to offer free products and services to people of color (POC)!

There is a strong rationale under current law for a slightly less drastic version of this proposal. For example, in 2019, the median household income of African Americans was about 60% that of whites, but Disney charges blacks and whites the same admission price to their theme parks. That means it costs a black family proportionately more of their income than a white family to spend a day at the park in Orlando. That, my friends, is a disparate impact!

I’m not aware of any legal challenges along these lines, but it’s not as if “one price” is a business necessity, which would otherwise offer Disney a defense against such a claim. Disney already offers discounts to seniors and other groups. But why wait for the EEOC to take action when Disney can demonstrate its high-mindedness and good faith by offering race-based discounts right now?

It would be fun to see how the company reacts to pressure for that kind of action. Based on income disparities, the company could discount tickets by 40% to African Americans and by about 26% for Hispanics. Discounting should be extended to Disney Plus subscriptions as well. Those discounts can be revisited each year with appropriate adjustments until such time as income parity is achieved.

In reality, differential pricing is practiced broadly by American businesses. It’s called price discrimination, and it is generally legal. Higher prices tend to be charged to market segments with less elastic (price-sensitive) demand, and lower prices are offered to segments with more elastic demand. It is a rational and often profit-maximizing approach to pricing, but its practice tends to be more subtle than discriminating on price with respect to race or ethnicity. It’s safe to say that pressure to do so would be disruptive and unwelcome to these firms. So I still like the idea!

But again, FLB’s post goes much farther: given past injustices, why limit the reparations to a correction for the disparate impact of pricing? Something more radical is needed as this is a matter of conscience, not merely a legal hurdle to neutralize income disparities:

“These companies (and the many thousands more engaged in this woke crap) must put their own profits where their big, fat lying mouths are. There will be no government bailouts for them; they must pay for their part in condoning and pushing white supremacy for the past bazillion years, and they must pay with their own wealth, wealth they say they accumulated on the backs of black and brown people.”

Therefore, FLB insists that Disney should offer free admission and streaming on Disney Plus to certain racial and ethnic minorities for a period of several years…and free accommodations at Disney Hotels! What a tremendous show of good faith in wokeness that would be!

We’re picking on Disney, and it’s not alone in its professed racial consciousness and pursuit of equal outcomes. There are so many others! Coca-Cola could issue coupons redeemable at full price through a program of outreach in minority communities. Delta Airlines could institute a program of “Black Life Passports” to bona fide African Americans (meaning one must identify as such!) for discounted or free fares. Bank of America will probably want to exceed the minimum requirements under community banking law by offering free banking services and heavily discounted account management fees to African Americans. Amazon will no doubt want to offer free Prime memberships to certain minorities and perhaps throw in some freebies at Whole Foods as well. And Apple has plenty of merchandise to give away. Why wait for Joe Biden to offer free phones in the run-up to the 2024 election like his old boss did?

You probably won’t be happy about this proposal if you’re a corporate shareholder, but then you should not be happy to have witnessed increasing management preoccupation with social justice, and you should not have been happy as your “agents” lost sight of their fundamental missions as business organizations: to produce something well and thereby do well for customers and shareholders. The sad consequence of “stakeholder capitalism” is that everything a business is supposed to do gets done worse.

I recently discussed the assignment of “scores” to public companies for their focus and performance on environmental, social, and governance (ESG) factors. These ESG scores are used by “woke” fund managers and advisors to select or rate stocks. I personally have no wish to invest in companies seeking to boost their ESGs, but you can read all about that at the link. For our purposes here, ESGs might serve well as a tool for identifying entities most in need of pressure to offer discounts and freebies to POC.

It would be great to see agitation against the woke-most corporations for race-based discounts and free products. Perhaps a broad discussion of the idea would prompt social justice warriors to get on board. It might provide some laughs, but the real hope is to shake the corporate wokesters from their virtue-signaling stupor. Most shareholders wouldn’t like race-based discounts, of course, and that’s part of the idea. A conceivable defensive maneuver for our “target” entities would be a lobbying effort for government action such as tax-financed reparations. That won’t necessarily be cheap for them or their shareholders, however. Get woke, go broke!

Social Credit Scores, ESGs, and Portfolio Rot

29 Thursday Apr 2021

Posted by in Capital Markets, Corporatism, Environment, Social Justice

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As a small investor I resent very much the use of so-called “ESG scores” to guide investment decisions on my behalf. ESG stands for “Environmental, Social, and Governance” criteria for rating companies. These scores or grades are developed and assigned by various firms (Refinitiv, CSRHub, and many others) to public companies. The scores are then marketed to financial institutions. While ESGs from various sources are not yet standardized, a public company can attempt to improve its ESG scoring through adoption of environmental goals such as “zero” carbon, diversity and inclusion initiatives, and (less objectionably) by enhancing its systems and processes to ensure protection of shareholder and other interests.

Who Uses ESGs?

An investment fund, for example, might target firms with high ESG scores as a way of appealing to progressive investors. Or an institutional investor like a pension fund might wish to invest in high ESG stocks in order to avoid riling “woke” activist investors, thus keeping the hounds at bay. This is nothing new: many corporations engage in various kinds of defensive actions, which amount to modern day “selling of indulgences”.

An aggregate ESG score can be calculated for a fund or portfolio of stocks by weighting individual holdings by market value. And of course, an ESG score can be calculated for YOUR portfolio. As a “service” to clients, Merrill Lynch plans to do just that.

My first reaction was to give my ML financial advisor an earful. Of course, ML’s presumed objective is to guide you to make “better” investment decisions. However, I do not wish to reward firms with capital based on their “social” positioning, nor do I wish to encourage exercises in “wokeness”. I simply want to supply capital based on a firm’s business fundamentals.

My advisor was more than sympathetic, and I believe he’s sincere. The problem is that corporate wokeness is so ubiquitous that it becomes difficult to invest in equities at all without accepting some of it and just holding your nose. That goes for virtually all ETFs and index funds.

ESGs Are Not Consumer Scores

I’m obviously unhappy about this as a Merrill account holder, and also as a financial economist and a libertarian. But first, a few words about what is not happening, at least not yet. A number of conservative commentators (see here, and here) have described this as an assignment of “social credit scores” to consumers based on their individual or household behavior, much as the Chinese government now grades people on the quality of their citizenship. These conservative voices have reacted to ESG scores as if they incorporate information on your energy usage, for example, to grade you along the environmental dimension. That is not the case, though ESGs can be used to grade the stocks you own. And yes, that is rather Orwellian!

One day, if present trends continue, banks might have access to our energy usage through affiliations with utilities, smart car companies, and various data aggregators. And who knows? They might also use information on your political contributions and subscriptions to grade you on your social “wokeness”, but only if they have access to payment records. Traditional credit information will be used as it is now, to grade you on financial discipline, but your “consumer ESG” might be folded into credit approval decisions, for example, or any number of other decisions that affect your way of life. But except for credit scoring, none of this is happening today. All the consumer information outside of traditional credit scoring data is too scattered and incomplete. So far, ESGs are confined to evaluating companies, funds, and perhaps your portfolio.

ESGs and Returns

ESGs get plenty of favorable coverage from the financial press and even from academics. This post from The Motley Fool from 2019 demonstrates the kind of praise often heaped upon ESGs. Sure, firms who cater to various cultural trends will be rewarded if they convince interested buyers they do it well, whatever it is. That includes delivering goods and services that appeal in some way to environmental consciousness or social justice concerns. So I don’t doubt for a moment that money can be made in the effort. Still, there are several difficulties in quantitatively assessing the value of ESG scores for investment purposes.

First, ESG inputs, calculations, and weights are often proprietary, so you don’t get to see exactly how the sausage is stuffed. On that point, it’s worth noting that much of the information used for ESG’s is rather ad hoc, not universally disclosed, or qualitative. Thus, the applicability (and reliability) of these scores to the universe of stocks is questionable.

Second, inputs to ESGs represent a mix of elements with positive and negative firm-level effects. I already mentioned that ESGs reward good governance on behalf of shareholders. The environmental component is almost surely correlated with lines of business that qualify for government subsidies. More generally, it might reflect conservation of certain materials having a favorable impact on costs. And attempts to measure diversity might extract legitimately positive signals from the employment of highly productive individuals, many of whom have come from distant shores. So ESG scores almost certainly have a few solidly useful components for investors.

The proprietary nature of ESG calculations also raises the question of whether they can be engineered to produce a more positive association with returns. There’s no doubt that they can, but I’m not sure it can be confirmed one way or the other for a particular ESG variant.

Like cultural or consumer trends, investment trends can feed off themselves for a time. If there are enough “woke” investors, ESGs might well feed an unvirtuous cycle of stock purchases in which returns become positively correlated with wokeness. My thinking is that such a divorce from business fundamentals will eventually take its toll on returns, especially when economic or other conditions present challenges, but that’s not the answer you’ll get from many stock pickers and investment pundits.

Remember also that while a particular ESG might be positively correlated with returns, that does not make it the best or even a good tool for evaluating stocks. In fact, it might not even rank well relative to traditional metrics.

Finally, there is the question of causality. There are both innocent and pernicious reasons why certain profitable firms are able to spend exorbitantly on initiatives that coincidentally enhance their ESGs. More on that below.

Social and Economic Rot

Most of the “green” initiatives undertaken by large corporations are good mainly for virtue signaling or to collect public subsidies. They are often wasteful in a pure economic sense, meaning they create more waste and other costs than their environmental benefits. The same is true of social justice and diversity initiatives, which can be perversely racist in their effects and undermine the rule of law. And acts on behalf of “stakeholders” often sacrifice shareholders’ interests unnecessarily.

There are many ways in which firms engaging in wasteful activities can survive profitably, at least for a time. Monopoly power is one way, of course. Large companies often develop a symbiosis with regulators which hampers smaller competitors. This is traditional corporatism in action, along with the “too big to fail” regime. And again, sheer growth in demand for new technologies or networking potential can hide a lot of warts. Hot opportunities sometimes leave growing companies awash in cash, some of which will be burned in wasteful endeavors.

Ultimately, we must recognize that the best contribution any producer can make to society is to create value for shareholders and customers by doing what it does well. But to see how far the corporate world has gone in the other direction, keep this in mind: any company supporting a sprawling HR department, pervasive diversity efforts, “sustainability” initiatives, and preoccupations with “stakeholder” outreach is distracted from its raison d’etre, its purpose as a business enterprise to produce something of value. It is probably captive to certain outside interests who have essentially commandeered management’s attention and shareholders’ resources. And this is evidence of rot.

My reference to “portfolio rot” reflects my conviction is that it is a mistake to dilute investment objectives by rewarding virtue signals. They are usually economically wasteful, though sometimes they might be rewarded via government industrial policy, regulators, and the good graces of activists. But ultimately, this waste will degrade the economy, undermine social cohesion, and devalue assets generally.

What Can We Do?

Despite the grim implications of widespread ESG scoring, there are a few things you can do. First, simply avoid any funds that extol progressive activism, whether based on ESGs or along any dimension. If you invest in individual stocks, you can avoid the worst corporate offenders. Here is one guide that lists some of the “woke-most” companies by industry, and it provides links to more detailed reviews. I gave my advisor a list of firms from which I wanted to permanently divest, including Bank of America, which owns Merrill! I also listed various firms that are owned and operated by Chinese interests because I am repulsed by the Chinese regime’s human rights violations.

If you have the time, you can do a little more research before voting your proxies. That goes for shareholder, board, or management proposals as well as electing board members. You are very unlikely to swing the vote, but it might send a useful signal. I recently voted against a Unilever green initiative. I also researched each of the candidates for board seats, voting against a few based on their political, social and environmental positions and activities. Good information can be hard to get, however, so I abstained from a few others. This kind of thing is time consuming and I’m not sure I’m eager to do very much of it.

You can also support organizations like the American Conservative Union, which is “taking a stand against the increasingly divisive and partisan activism by public corporations and organizations that are caving to ‘woke’ pressure.” And there is Stop Corporate Tyranny, which is “a one-stop shop for educational resources exposing the Left’s nearly completed takeover of corporate America, along with resources and tools for everyday Americans to fight back against the Left’s woke and censoring mob in the corporate lane.”

People can make it harder for social credit scoring to enter the consumer realm by protecting their privacy. There will be obstacles, however, as sellers offer certain benefits and apply “nudges” to obtain their customers’ data, and it is often shared with other sellers. Sadly, one day those who guard their privacy most closely might find themselves punished in the normal course of trade due to their “thin” social credit files. There are many dark aspects to a world with social credit scoring!

Conservative Social Scoring?

There are at least two ETFs available that utilize conservative “social scoring systems” in picking stocks: EGIS and LYFE. Both are sponsored by 2ndVote Funds. EGIS has as its stated theme to invest in stocks which receive a favorable rating in support of the Second Amendment right to bear arms and/or in the interest of border security. LYFE seeks to meet its long-term return objectives in stocks with a favorable rating on the pro-life agenda. Both have reasonable expense ratios, as those things go. Unfortunately, my advisor says Merrill won’t allow those funds to be purchased until they have close to a full year of experience.

Are these two ETFs really so special? Are they really just marketing gimmicks? After all, I noticed that EGIS has Goldman Sachs in its top 10 holdings. While Goldman might not be the worst of its peers in terms of wokeness, it has stooped to some politically-motivated “cancel capers”. Moreover, do I really want to mix my investment objectives with my social preferences? Leftist investors are doing it, so countering might be well-advised if you can afford the risk of diluting your returns. My heart says yes, but my investor brain isn’t sure.

Closing

When it comes to investing, I’d prefer absolute neutrality with to respect social goals, other than the social goals inherent in the creation of value for customers and shareholders. Any emphasis on ESG scores is objectionable, but it’s a regrettable fact that we have to live with to some extent. If “social scoring” is unavoidable, then perhaps the themes adopted by 2ndVote Funds are worth trying as part of an investment approach. After all, given my personal blacklist of woke corporations, I’ve already succumbed to the temptation to invest based on social goals. And I feel pretty good about it. Unfortunately, it might mean I’ll sacrifice return and witness the continued descent of western society into a woke hellscape.

Diversity and Despotism

14 Friday Feb 2020

Posted by in Affirmative Action, Diversity, Identity Politics

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Diversity is a fine thing, but who can define it precisely, and along what dimensions? It is essentially an amorphous concept, defined in ways that vary with context and often by political fiat. In my view, the best diversity outcome is always that which results from impartial decisions. That goes for hiring, firing, admission, and the like; in distributing rewards; in making loans; and in price or non-price rationing decisions. And by “impartiality” I mean those decisions should be made without respect to superficial qualities such as skin color, country of origin, sexual preference, religious faith, and political philosophy.

“Superficiality”, however, depends on the context of the decision at hand, or it might describe an outcome that is superficial to the decision criteria: an impartial selection of candidates for jobs that require great physical strength is likely to be skewed toward males. Likewise, an impartial selection of candidates for jobs that require strong English language skills is likely to favor those whose first language is English. And an impartial selection of a new physics professor should be the candidate having the strongest expertise in physics. The point is that impartiality can seldom guarantee outcomes that are consistent with the demands of diversity activists. In fact, to the extent that diversity objectives may emphasize qualities that are superficial to the decision at hand, they undermine impartiality.

Should research physicists devote their energies to dreaming up ways to promote diversity within their field? Electrical engineers? Will that help them advance the state of knowledge in their disciplines? As a member of an alumni board, I have personally witnessed the department of economics at a state university grapple with diversity reviews and/or mandates in hiring, class enrollment, and curriculum. Economics is actually a field that has strong things to say about the negative consequences of bias and discrimination, and the department should not have to jump through hoops proving it to “diversity administrators” who may well lack the qualifications necessary to assess that part of the curriculum. There is no question that devoting energy and resources to these bureaucratic pursuits is wasteful of faculty time as well as resources furnished by taxpayers. But that isn’t even the worst of it.

The amorphous nature of diversity confers power on its enforcers in business, government, and academia. We know that rank-ordering alternatives in pursuit of an objective may conflict with the selection that best satisfies the diversity fashion du jour. But today our society has devolved to the point at which corporate HR departments insist that individuals be browbeaten into “recognizing their bias” and evaluated on “promoting diversity”. Hiring and promotions at universities in fields as “diverse” as physics and language arts are dependent on a candidate’s ability to convince diversity administrators of their sincere and inventive strategies to promote diversity.

In a post titled “Wokeademia“, John Cochrane comments on these “diversity political tests”:

“It’s not about whether you are ‘diverse,’ meaning belonging to a racial, gender, or sexual-preference group the University wishes to hire. It is a statement, as it says, of your active participation in a political movement.”

He quotes Jerry Coyne on the “diversity equity and inclusion statement” required by the University of California:

“Why is it a political test? Politics are a reflection of how you believe society should be organized. Classical liberals aspire to treat every person as a unique individual, not as a representative of their gender or their ethnic group. The sample rubric dictates that in order to get a high diversity score, a candidate must have actively engaged in promoting different identity groups as part of their professional life…. Requiring candidates to believe that people should be treated differently according to their identity is indeed a political test…The idea of using a political test as a screen for job applicants should send a shiver down our collective spine….”

Cochrane sheds additional light on this phenomenon in a follow-up post:

“I started this series impressed by the obvious political and free speech ramifications. There is a much simpler economic explanation however. As the quotes from the UC system make clear, the central requirement of the diversity statements is to document past active participation in, and require future approval and participation in all the programs produced by the diversity staff.

Jerry Coyne may have nailed it: ‘By hiring large numbers of deans and administrators whose job is to promote initiatives like the above, colleges like Berkeley have guaranteed that this kind of process will only get more onerous and more invidious. After all, those people have to keep ratcheting up the process to keep their jobs going.'”

Here is one more follow-up from Cochrane on the spread of Wokeadamia in which he offers a sampling of academic job descriptions from schools around the country. The heavy emphasis on one’s track record in promoting diversity, and on one’s future plans to do so, may well eclipse a candidate’s actual qualifications for the job!

It’s fair to say the misplaced emphasis on diversity has reached crazy proportions. Mark Bauerlein, a professor of English at Emory University, reports on a recent episode at the University of Montana in which the school held an essay contest for Martin Luther King Day as part of its effort to respond to complaints of a lack of racial diversity on campus. The population of the state of Montana is just 0.4% African American, so it should come as no surprise that there are relatively few blacks on the campus of the state university. The nine-member prize selection committee had a non-white majority, but only six students entered the contest, all of whom were white. All four winners were white females. Not only were the selections condemned by activists, but the winners were threatened and the university effectively negated the whole contest.

Until such time as thought, feelings, personal preferences, and technical expertise are officially outlawed, people will make decisions that seem arbitrary to others. That’s often because others don’t understand the decision parameters and are in no position to judge its impartiality. But sometimes personal preferences will reflect bias against superficial characteristics. Economists have noted that such bias nearly always comes at a cost to the decision maker. For example, if the best job candidate is black, then the decision to hire a white is economically inferior and will harm the firm’s competitiveness. And of course there are laws prohibiting overt discrimination in many aspects of economic life. Beyond that, we can condemn such bias as might exist, but it is often impossible to discern except as an often errant appeal to statistical genera or “disparate impact”, and it cannot be prevented while maintaining a free society. Political tests, in particular, are not consistent with a free society and should themselves be prohibited.

American Homicide Rates: Which America?

12 Thursday Oct 2017

Posted by in Discrimination, Gun Control, Immigration

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A heterogenious society and the successful assimilation of minorities are two very different things, as much as we might wish otherwise. Two populations within a region will come into contact, but conditions promoting real assimilation are complex. (I’m avoiding use of the term “diversity” because it has come to imply the successful assimilation of distinct groups.) While cultural differences can enrich the lives of both populations, sharp economic gaps between minority and majority populations (and even some cultural differences) will tend to slow the process of assimilation. This is often associated with social dysfunction, such as high crime and homicide rates, especially among the minority group. This is a fairly common phenomenon in countries with racial and ethnic minority or immigrant populations, as Ryan McMaken writes in a recent piece on international differences in heterogeneity and homicide rates.

Heterogeneity In the West

Countries in the Western Hemisphere tend to have relatively high immigrant and minority populations, as McMaken describes:

“… when considering the Americas, … nation-states are in most cases frontier states with populations heavily affected by immigration, a history of conflict with indigenous populations, and institutionalized chattel slavery that lasted until the 19th century. The factors are significant through the region, and the United States cannot be held apart in this regard from the Caribbean, Brazil, Colombia, and other states impacted by all these factors. 

Importantly, these factors also make the Americas significantly different from Western Europe and other areas — Japan and Korea, for example — where the present situation is marked by much higher levels of cultural uniformity and quite different recent histories and current demographic trends.“

Homicides

McMaken questions popular theories of cross-country differences in homicide rates based on the degree of gun control and gun ownership rates. Homicides and violent victimization have been declining in the U.S. for many years even as gun ownership has soared. Furthermore, international comparisons are traditionally plagued by arbitrary country classifications and exclusions, as well as inconsistent definitions of homocide and gun ownership. However, McMaken points to other explanations for violent crime found to be fairly robust in the academic literature: poverty and population heterogeneity:

“… these factors contribute to lower levels of social cohesion, and thus higher levels of criminality and other socially-undesirable behaviors.“

McMaken cites research involving ethnic minority populations of Slavs in Germany, Italians in Argentina and the U.S., and Arabs in Europe, all of whom had crime rates far exceeding those in their countries of origin. The connection between heterogeneity and crime might have nothing to do with particular ethnic groups, though it seems all too easy for observers within individual countries to blame specific “others” for crime. It is a symptom of alienation from the majority as well as economic desperation and vulnerability to opportunities and threats arising from the underground economy. Illegal activities might truly provide the best alternatives available to low-skilled, minority job seekers. Needless to say, underground economic activity, such as the drug trade, involves high risk and often violence among users and between competing factions. This is an important source of the high crime and victimization that typifies many minority communities.

Despite declines since the 1970s, the U.S. still has a higher homicide rate than many other industrialized countries. Beyond the weakness cited above, such comparisons fail to control for other confounding effects, including the degree of heterogeneity across countries.

Policies

Heterogeneity poses a problem in the context of involuntary and often voluntary segregation of sub-cultures. If you don’t believe the “voluntary” part, take a close look at the different clusters of individuals in the cafeteria at almost any “diverse” university or corporate office. Judge for yourself. Differences in language, fertility, demographics, religion and cultural traditions may be noteworthy, but where crime is associated with effectively segregated minorities, there is usually a gap in economic status and mobility relative to society at large.

What policies can mitigate these conditions and their impact on crime? It would be nice to approach this question strictly from the perspective that heterogeneity is a given, but the degree of heterogeneity is, to some extent, an endogenous outcome. Restrictive immigration policies might leap to mind as a way of restraining heterogeneity, and there is little doubt that illegal immigrants are less likely to assimilate (many contend that their crime rate is low). Policies allowing less restricted flows of legal immigrants tend to be salutary if they are based on domestic economic need, economic potential, or compassion for those seeking asylum or a haven from political oppression. A legal immigrant receiving a welcome on new shores is more likely to assimilate successfully than an illegal immigrant, all else equal. Citizenship and language education are avenues through which assimilation might be encouraged. And there could be ways to improve sponsorships and even temporary visa programs so as to encourage assimilation.

What can be done to encourage more effective assimilation of all minorities? And what can be done to reduce the crime associated with unassimilated populations? One major corrective is a strong economy. Policies that encourage economic growth will lead to greater participation in markets and society, with consequent interaction and mixing of sub-cultures. Growth policies include low and non-distortionary taxes and light regulation.

The war on drugs also accounts for a major share of homicides, and that war interacts with non-assimilation in perverse ways. It is crippling to disadvantaged communities precisely because it creates risky “opportunities” in the underground economy. It also produces high levels of incarceration and dangerous forms of “cut” contraband. As I’ll discuss in my next post, ending the war on drugs would reduce violent crime and lead to safer drugs in relatively short order.

A short list of other policies that would foster assimilation and economic mobility would include: improved education: school choice and apprenticeship programs; better labor market outcomes: reduce the minimum wage or create sub-minimum wage categories to enhance opportunities to gain experience and skills; better housing: eliminate rent controls.

Assimilation is always more effective when it occurs “organically”. Affirmative action and forced diversity initiatives often fail to achieve effective assimilation. Beyond the obvious infringement on liberty, these policies may sow resentment among those who suffer reverse discrimination, and among those who witness it, to the probable detriment of efforts to eliminate bias. Even worse, these policies often put their intended beneficiaries into vulnerable, un-winnable situations: jobs or programs for which their skills are not adequate. There are undoubtedly excellent candidates among those placed in positions under quotas, but there is a likelihood that many will be unsuccessful in their roles.

Conclusion

The anti-gun left is eager to attribute differences in homicide rates to the impact of gun control policies, but a close examination of the facts reveals better explanations. A prominent factor contributing to differences in homicide rates is the degree of heterogeneity across countries. Those with more homogeneous populations tend to have lower homicide rates and vice versa. But the problem is not merely heterogeneity, but the difficulty of economic and cultural assimilation of minority populations. These factors appear to lead to greater crime within many minority populations. The U.S. is not unique in its experience with high minority crime rates, but it is a relatively heterogenous nation. This is an important factor in explaining why the homicide rate tends to be higher in the U.S. than in other industrialized countries. To close, I’ll offer something cogent from Bretigne Shaffer’s On the Banks blog, in which she offers this quote from an individual named Michael Owen (the soccer player?):

“... we don’t really have a single America with a moderately high rate of gun deaths. Instead, we have two Americas, one of which has very high rates of gun ownership but very low murder rates, very comparable to the rest of the First World democracies such as those in western & northern Europe, Australia, New Zealand, Canada, Japan, South Korea. The other America has much lower rates of gun ownership but much, much higher murder rates, akin to violent third world countries.“

The Comparative Diversity of Ferguson, Missouri

19 Tuesday Aug 2014

Posted by in Uncategorized

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I live in the St. Louis area, and like almost everyone in the region, I am disturbed by the unfortunate series of recent events in Ferguson, an “inner ring” suburb in St. Louis County. I found this post, “Is segregation the problem in Ferguson?” to be a good analysis of the degree of racial integration in Ferguson and in St. Louis County (which is separate from the city of St. Louis, the latter being essentially its own “county”). The author, Jonathan Rodden of The Hoover Institution, is a graduate of nearby McCluer North High School, part of the Ferguson-Florrissant School District. The post contains some nice maps and charts that shed light on the question of local diversity.

Rodden emphasizes the high degree of integration in Ferguson relative to St. Louis County, countering the notion that a lack of diversity has caused problems in Ferguson:

“While most of St. Louis County’s residents live in municipalities that are either homogeneous or internally segregated or both, Ferguson and its North County neighbors stand out for their relative heterogeneity and internal desegregation. Moreover, the income gap between blacks and whites is smaller in these municipalities than elsewhere.”

Rodden notes that much of the unrest has been focused on minimal African American representation on the city’s police force and in city government:

“The immediate problem in Ferguson is neither residential segregation nor its demise. Rather, as many have pointed out, it is that the racial integration of the community has not been reflected in the municipal government and police force, whose racial composition still reflects the status quo of the 1980s.”

He places some blame on certain interest groups who manipulate the election cycle: 

“Recent research by political scientists has shown that small but well-organized interest groups, such as unionized teachers and municipal workers, benefit handsomely from low-turnout off-cycle elections. Historically, off-cycle elections have been a favored strategy of established ethnic groups in American cities who wished to keep immigrants and minorities out of power.”

However, ultimately voter turnout is up to voters, so electing satisfactory representation should not be an insurmountable challenge within the existing system. Another quibble I have is that Rodden almost implies that the process of hiring a more diverse police force can be accomplished fairly easily and quickly. Such a change would probably have to occur through attrition of the existing force, which would take time.