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CAUGHT IN THE CLUTCH: St. Louis carjacker thwarted because he couldn’t drive a stick shift, victim s…

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CAUGHT IN THE CLUTCH: St. Louis carjacker thwarted because he couldn’t drive a stick shift, victim says.

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2 days ago
Princeton, NJ or NYC
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The Economy is Not a Sous-Vide Machine


Kevin Grier lets loose at Cherokee Gothic:

People! Check out this quote,

“Michael Gapen, chief U.S. economist at Barclays Plc in New York, said Fischer’s comments “reflect an ongoing divergence of opinion” at the central bank. Fischer “doesn’t see much room for running the economy hot” while Yellen’s views “seem to provide a wide-open door to do that. You have a chair and a vice chair who see policy differently right now,” he said.”

After the events of the great recession, it’s just amazing to me that people think the economy is a steak, the Fed is a precision sous-vide machine, and all we have to decide is medium-rare or well-done.

For the millionth or so time, the models implying the Fed can do this, completely and utterly failed during the great recession. There is also evidence that a large part of the good outcomes credited to the Fed during the great moderation were actually due to exogenous forces (i.e. good luck).

Neither the Fed nor the President “runs” the economy. There is no stable, exploitable Phillips Curve / sous vide machine that lets us cook at a certain temperature.

This Fed worship is more religious than scientific. The past 10 years should be enough to convince anyone with an open mind that the Fed’s power over the economy is quite limited and tenuous.

But I guess it’s comforting to think that the little old lady behind the curtain can fix things for us.

She can’t, Stan Fischer can’t, Bernanke couldn’t. Maybe the sous vide machine is unplugged?

Yup, whatever your prior was, after the events of the Great Recession, you should surely downgrade your belief that Fed has a lot of control over the economy and yet I see a resurgence of this view despite it being at all odds with the evidence.

The post The Economy is Not a Sous-Vide Machine appeared first on Marginal REVOLUTION.

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4 days ago
interesting analogy
Princeton, NJ or NYC
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1 public comment
4 days ago
I wonder how willing Mr. Grier & Alex are to blame BAD outcomes on the Fed though. If it's true that the Fed has little to no power to improve the economy through it's actions, wouldn't it follow that it also has little to no power to degrade the economy as well?

My gut reaction when reading this was to say "Yeah! That's right! Those rotten central bankers! All they can do is make things worse!" Then I went to type up a comment and realized how stupid my gut reaction was.

Just a thought.
Los Angeles, California, USA
3 days ago
I don't think the central bankers are rotten, but I do think that in their belief that they can improve the economy, they end up doing things that are a net negative for the economy. Especially this idea of negative or zero interest rates. Anything below the rate of inflation is effectively a negative interest rate and the economy doesn't seem like it can recover when those policies are in place, as demonstrated by Japan's decades of stagnation at 0%.

Levinson on growth

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I disagree rather profoundly with crucial parts of Marc Levison's essay "Why the Economy Doesn't Roar Anymore" in the Saturday Wall Street Journal.

Yes, growth is slow. Yes, the ultimate source of growth is productivity. But no, sclerotic productivity is not "just being ordinary." No, our economy is not generating as much productivity growth as is possible, so just get used to it. No, productivity does not fall randomly from the sky no matter what politicians do.

Mark starts well, with a nice and vivid review of the post WWII growth "miracles."

He stumbles a bit at the 1973 Yom Kippur war and oil embargo
"Politicians everywhere responded by putting energy high on their agendas. In the U.S., the crusade for “energy independence” led to energy efficiency standards, the creation of the Strategic Petroleum Reserve, large government investments in solar power and nuclear fusion, and price deregulation. [JC: ?? Price controls are not deregulation!] But it wasn’t the price of gasoline that brought the long run of global prosperity to an end. It just diverted attention from a more fundamental problem: Productivity growth had slowed sharply."
"The consequences of the productivity bust were severe.."
More good descriptions of eurosclerosis follow. But you see him veer off course, as  he sees little connection between the litany of ham-handed responses to the oil shock and the decline in productivity.

Briefly back to a sensible point
"Government leaders in the 1970s knew, or thought they knew, how to use traditional methods of economic management—adjusting interest rates, taxes and government spending—to restore an economy to health. But when it came to finding a fix for declining productivity growth, their toolbox was embarrassingly empty."
Let us speak the word: the methods of Keynesian demand-side economic management were, as any honest Keynesian will tell you, utterly unsuited to solving productivity, the ultimate "supply" problem. Given the Economist's enthusiasm for fiscal stimulus a bit more honesty on this one would be appreciated.

But then then he veers off course entirely
"Conservative politicians such as Margaret Thatcher in the U.K., Ronald Reagan in the U.S. and Helmut Kohl in West Germany swept into power, promising that freer markets and smaller government would reverse the decline, spur productivity and restore rapid growth." 
"But these leaders’ policies—deregulation, privatization, lower tax rates, balanced budgets and rigid rules for monetary policy—proved no more successful at boosting productivity than the statist policies that had preceded them. Some insist that the conservative revolution stimulated an economic renaissance, but the facts say otherwise: Great Britain’s productivity grew far more slowly under Thatcher’s rule than during the miserable 1970s, and Reagan’s supply-side tax cuts brought no productivity improvement at all. [My emphasis] Even the few countries that seemed to buck the trend of sluggish productivity growth in the 1970s and 1980s, notably Japan, did so only temporarily. A few years later, they found themselves mired in the same productivity slump as everyone else.."
This is just a whopper of... what to call it... factual error.

The US embarked on a second boom from 1980 to 2000. See John Taylor's excellent response, "Take off the muzzle and the economy will roar" for more discussion, and the graph reproduced at the left. Call it the Reagan-Bush-Clinton boom if it makes you feel better. But the boom was real.

From off course, Levinson arrives at a strange harbor. His bottom line is the astonishing proposition that productivity growth just happens; manna from heaven (or not) dissociated from any economic or political structure:
"Productivity, in historical context, grows in fits and starts. Innovation surely has something to do with it, but we have precious little idea how to stimulate innovation—and no way at all to predict which innovations will lead to higher productivity..."
"It is tempting to think that we know how to do better, that there is some secret sauce that governments can ladle out to make economies grow faster than the norm. But despite glib talk about “pro-growth” economic policies, productivity growth is something over which governments have very little control. Rapid productivity growth has occurred in countries with low tax rates but also in nations where tax rates were sky-high. Slashing government regulations has unleashed productivity growth at some times and places but undermined it at others. The claim that freer markets and smaller governments are always better for productivity than a larger, more powerful state is not one that can be verified by the data."
I'm sorry, the data -- and the immense literature that study that data -- come to the opposite conclusion. There is a reason that this manna seems to fall on the US and not, say, on Haiti. There is a reason it falls on South Korea and not North  Korea -- the most tragic but decisive controlled experiment known to economics.

Yes, the answers are not as simplistic as the minor tweaks represented by "pro-growth" policies of established parties in western democracies. But experience and formal analysis tell us clearly that innovation and productivity happen where there is rule of law, simple and predictable regulation, property rights, reasonable taxation, an open and competitive economy, and decent public infrastructure.  These, politicians do have ample control over, and ample opportunity to screw up.
"Here is the lesson: What some economists now call “secular stagnation” might better be termed “ordinary performance.” ... 
"Ever since the Golden Age vanished amid the gasoline lines of 1973, political leaders in every wealthy country have insisted that the right policies will bring back those heady days. Voters who have been trained to expect that their leaders can deliver something more than ordinary are likely to find reality disappointing."
I've got news for Mr. Levinson. "Ordinary performance" is what people experienced from the beginning of time to about 1750. Steady grinding poverty, 0% growth rate, each farming in his parents' footsteps. Even 2% was the result of an amazing and unprecedented set of "pro-growth" political institutions.

Not only can we do better better, if we think it all just falls from the sky no matter what our politicians do, we can do worse. A lot worse.

If  good policy does not help, then it follows that bad policies do not hurt. No

A good test of Mr. Levinson's view is that no
matter how much our politicians abandon "pro-growth" policies, to nativism, trade barriers, over-regualation, legal capture, arbitrarily high taxes, more controlled markets and larger government, growth will just bumble happen along at 2% anyway. Both the US and UK may soon put that one to the test.

Note: I use block quotes and embedded graphs. These show up on the original blogger verision of this post. I notice they get garbled at various other feeds. If you want better formatting, come back to the original

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5 days ago
Yeah, I was taken aback by that assertion about the post-oil shock years.
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Election angst

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Domestic politics in the United States are worse at this moment than they have ever been in my sad 46 years of life. And if your response is “they did it”, whoever they are, you are, I think missing the point, missing the problem. We are in this together. Once we’ve made a civil war of it we have already lost, however just the side you choose to fight on. Often moral errors feel like moral imperatives at the time.

One of the many ways contemporary social science is a poor mode for understanding human affairs is its fetish for individual-centered explanations, “methodological individualism” in the lingo. The most robust fact of social affairs is that communal characteristics trump individual characteristics in explaining almost any phenomenon of interest. All of the things we idiot idolize — educational attainment, future earnings, likelihood of poverty, likelihood of imprisonment, whatever — are much better explained by communal factors than by individual factors to the degree that we can orthogonalize the two. [1] Political phenomena are social phenomena. All social facts, characteristics that we too easily essentialize like race, characteristics we perceive as facts of nature like the unity and continuity of our identities, are socially constructed. It is much more accurate to say that communities create individuals than to say that individuals create communities, although of course both statements are true in their ways.

Politics is not about individuals. It is about communities and communal identities. Osama Bin Laden was a wealthy man, the men who brought down the twin towers were educated people who would have been able to live and prosper in Western countries. Surely, then, such acts of terrorism have nothing to do with the poverty and pathologies and resentments of Middle Eastern countries, since the individuals who perpetrate terrorism are not primarily the poor or those most directly affected by those pathologies? Terrorists must just be motivated by terrorism, that is the only explanation. I hope that the shallowness of this argument is self-evident, dear reader.

Dylan Matthews at Vox writes:

There is absolutely no evidence that Trump’s supporters, either in the primary or the general election, are disproportionately poor or working class. Exit polling from the primaries found that Trump voters made about as much as Ted Cruz voters, and significantly more than supporters of either Hillary Clinton or Bernie Sanders. Trump voters, FiveThirtyEight’s Nate Silver found, had a median household income of $72,000, a fair bit higher than the $62,000 median household income for non-Hispanic whites in America.

Vox is a wonderful publication along many dimensions. One of its virtues is that it provides constant exercises in how a few statistics or credentialed quotes combined with ones own authoritative voice can mislead bright writers into thinking they know the one scientific truth of things. Matthews and several of his peers at Vox have invested themselves in a narrative that says the sophisticated, carefully evidenced take on the Trump phenomenon is that it’s all racism, nothing else matters. Now, it is obvious that racism and nativism and neofascism are an important and particularly disturbing aspect of the Trump phenomenon, that people who overtly identify as racist or neo-Nazi have found a home in a tent that Donald Trump has made comfortable for them. But it is also obvious that, within the Republican Party, Trump’s support comes disproportionately from troubled communities, from places that have been left behind economically, that struggle with unusual rates of opiate addiction, low educational achievement, and other social vices. If you insist on focusing on individuals, you may miss the connection, because the worst off within communities — actual chronic discouraged workers, addicts — are likely to express no opinion to the degree they can be polled at all. Trump primary voters are white Republicans who vote, automatically a more affluent baseline than the white voters generally. At the community level, patterns are clear. (See this too.) Of course, it could still all be racism, because within white communities, measures of social and economic dysfunction are likely correlated with measures you could associate with racism. Social affairs are complicated and the real world does not hand us unique well-identified models. We always have to choose our explanations, and we should think carefully about how and why we do so. Explanations have consequences, not just for the people we are imposing them upon, but for our polity as a whole. I don’t get involved in these arguments to express some high-minded empathy for Trump voters, but because I think that monocausally attributing a broad political movement to racism when it has other plausible antecedents does real harm. (See also Carl Beijer on the same Vox piece.)

A nation-state is a relatively new form of human community. Its singular problem is scale. Among nation-states, there is a strong inverse correlation between nation-state “success” (however we want to measure that) and “socioethnic fragmentation”. Nation-states “work” when their members are most powerfully attached to common, broadly shared, communal identity. When members attach themselves primarily to more local or parochial identities, destructive politics of intercommunal struggle often plague the polity. Unfortunately, many people understand this relationship in a very simple, static way. The Nordic countries are famously “homogeneous”, and so are unusually successful as nation-states. Lebanon is a hodgepodge of sects and ethnicities, and has a hard time thriving.

But causal arrows in social affairs usually go both ways. It is equally accurate to say that the Nordic countries have succeeded as nation-states, and so have become “homogeneous”, while Lebanon has not thrived as a nation, and so finds itself ethnically fragmented. Shared communal identities across millions of geographically dispersed people simply do not arise without political organization. Nations create their own publics, or else they fail to do so and then they fail. The United States main claim to fame, its main claim to virtue in my view, is E pluribus unum. The United States, during some periods of its history, has been very good at integrating disparate groups of people into a strong national community. Communal identities are never static. Nation-states experience centripetal forces that tend towards integration and centrifugal forces that pull towards fragmentation. Open commerce, frequent geographic mixing, universal education, broadcast communication networks, rich transportation networks, a national civic religion, political consensus, a widely-shared popular culture, shared lifestyles across a broad middle class, and perceived general prosperity are all sources of integration. Physical segregation, widely divergent education, commercial segmentation or exclusion, self-organizing point-to-point communication networks, the absence or decay of civic religion, political polarization, absence of a broad popular culture, economic dispersion that stratifies lifestyles, perceived unfairness in patterns of prosperity, and immigration from external communities can be sources of fragmentation. Some of these “sources of fragmentation” are very good things! Self-organizing point-to-point communication and physical segregation derive from freedom of association. They potentially help enable a diversity of subnational communities and a rich civic society. Tolerance of immigration confers an incredibly valuable option upon potential immigrants, and can support the growth and economic strength of the nation-state. But a successful nation-state must budget the centrifugal forces it can tolerate against the centripetal forces it can generate.

Nations are either integrating or they are fragmenting. The United States spent much of the 20th Century integrating. It is currently fragmenting. We currently discuss and perceive this in very racialized terms (a fact which in my view is itself a symptom of the fragmentation). Through about the 1990s, more and more groups of people integrated into a community it is now offensive to describe as “American”. We now refer to this community as “white”, in order to emphasize by contrast the unfairness and horror of the United States’ greatest shame, our failure to fully integrate descendants of the immigrants we involuntarily imported and then brutally enslaved. Since around 2000, in my view, the “white” United States has been fragmenting. Integration has been replaced by ethnogenesis. The communities from which Trump enthusiasts disproportionately arise may be increasingly white supremicist, but they are no longer unproblematically “white” in its meaning as “default American”. They compete for national identity with ascendant “people of color”, sure, but before you go on about racial last-place aversion, note that they compete more directly and much more bitterly with a cosmopolitan but disproportionately “white” urban professional class, whose whiteness has itself been problematized, as underlined by a resurgent anti-Semitism where Jews stand-in for this class broadly.

But before we get caught up categorizing and imposing moral rankings on the various new ethnicities we are inventing, we should pause to emphasize that these are accidents, not essences. Our polity was going to fray, because we have allowed centrifugal forces to grow much stronger than the forces that might tend towards integration. Regular readers will be unsurprised that I think economic stratification and differential stagnation are the deepest sources of fragmentation and the first that we should address. We may also need to consider ideas like universal national service, or Singapore-style residential integration incentives. I hope we won’t consider rolling back our chaotic, open communication networks in favor of a more “curated” shared information environment. I hope we will find ways to define a more multidimensional space for our politics to play out, rather than limiting ourselves to an increasingly polarized line between two camps neither of which adequately represent us. Whatever we do, we will have to reconcile sometimes conflicting goals of national integration, economic success, and respect for liberal values.

For the moment, we have to get through the catastrophe that this election has become. A fault line was always going to appear between the economically dominant class and much of the rest of the country which has been left behind. In my view, it is a very great tragedy that Bernie Sanders did not win his primary campaign to represent the left-behind in a positive and inclusive way. All humans are racists in some ways and to some degrees, but it was not at all inevitable, I think, that we end up in a “battle between cosmopolitan finance capitalism and ethno-nationalist backlash”, as Chris Hayes put it. Donald Trump offered a particularly comfortable home to the most ethno-nationalist fraction of the left-behind, and no home at all to people of color. But many not-unusually-racist “white” people who, fairly or not, perceive Clinton as an icon of a corruption, now see Trump as the only game in town. It is tempting, among those of us who would be appalled by a Trump victory, to try to sway undecided voters by equating voting for Trump with racism full-stop. That’s a bad idea. If it becomes the mainstream view that Trump voters are simply racists, it leaves those who are already committed, those who are unwilling to abandon Trump or to stomach Clinton, little choice but to own what they’ve been accused of. Racist is the new queer. The same daring, transgressional psychology that, for gay people, converted an insult into a durable token of identity may persuade a mass of people who otherwise would not have challenged the social taboo surrounding racism to accept the epithet with defiant equanimity or even to embrace it. The assertion that Trump’s supporters are all racists has, I think, become partially self-fulfilling. In and of itself, that will make America’s already deeply ugly racial politics uglier. It will help justify the further pathologization of the emerging white underclass while doing nothing at all to help communities of color except, conveniently for some, to set the groups at one another’s throats so they cannot make common cause. It will become yet another excuse for beneficiaries of economic stratification to blame its victims. Things were bad before this election. They are worse now, and we should be very careful about how we carry this experience forward. These are frightening times.

P.S. I will be voting for Hillary Clinton. Not happily. Perhaps there is room for optimism. Perhaps I’ll be pleasantly surprised. I very much hope that the Democrats win the House and Senate as well. If I’m to be disappointed, I’d rather have clear lines of accountability rather than have blame diffused by claims of gridlock. I don’t think Donald Trump should be President. I think he’s unfit, and a statue of an upraised middle finger would be a better choice for all concerned. Regardless of my views, I respect your vote however you choose to cast it, because that is the first courtesy we owe one another in a democracy.

[1] What does that mean? For example, if you tell me an individuals’ parental incomes, that’s very informative about, say, likely educational achievement. But you are giving me information both about the individual and about her community, since incomes aren’t uniformly distributed across communities. If you offer me just one of (a) the decile of parental income within a person’s community (under almost any reasonable definition of community, but without identifying the community) or (b) the identity of the community from which which she hails without the specific income information, (b), the identity of the community, will be more informative.

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5 days ago
"Vox is a wonderful publication along many dimensions. One of its virtues is that it provides constant exercises in how a few statistics or credentialed quotes combined with ones own authoritative voice can mislead bright writers into thinking they know the one scientific truth of things. "
Princeton, NJ or NYC
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The Top-Down Reformer’s Calculation Problem

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Two recent examples.

1. I was invited to attend the Progressive Policy Institute on Wednesday, but not as a speaker. The topic is introduced by saying

Now that Congress has passed the Every Student Succeeds Act (ESSA), states are revamping their federally required systems to measure school quality and hold schools accountable for performance. But most are doing so using outdated assumptions, holdovers from the Industrial Era, when cookie-cutter public schools followed orders from central headquarters and students were assigned to the closest school.

In today’s world, that is no longer the norm. We are migrating toward systems made up of diverse, fairly autonomous schools of choice, some of them operated by independent organizations, as charter, contract, or innovation schools. Before revising their measurement and accountability systems, states need to rethink their assumptions.

2. And David Cutler must be happy to read this story.

Medicare on Friday unveiled a far-reaching overhaul of how it pays doctors and other clinicians. Compensation for medical professionals will start taking into account the quality of service – not just quantity.

A Nobel Prize in economics was just awarded in part for the insight that it is a bad idea to compensate workers on factors that are heavily influenced by luck. In my view, having someone in Washington evaluate a school or a teacher or a doctor does exactly that.

People who are close to the schooling process, including parents, peers, and principals, can use judgment to evaluate teachers. That’s the way it used to work 50 years ago, before the advent of consolidated, unionized school districts.

For doctors, the prevalence of third-party payments means that their compensation is being determined by remote bureaucrats regardless.

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5 days ago
"A Nobel Prize in economics was just awarded in part for the insight that it is a bad idea to compensate workers on factors that are heavily influenced by luck. In my view, having someone in Washington evaluate a school or a teacher or a doctor does exactly that. "
True, although my intuition is that local processes can be more political/crony-infested.
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No, it is not illegal to read Wikileaks

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This is also me when a Cuomo thinks he understands the First Amendment

This is also me when a Cuomo thinks
he understands the First Amendment

Chris Cuomo seems to be following his big brother's lead when it comes to the First Amendment.

On CNN, Cuomo said:

"Also interesting is, remember, it’s illegal to possess these stolen documents,” Cuomo says. “It’s different for the media, so everything you’re learning about this, you’re learning from us.”

Mr. Cuomo… I don't say this lightly…. but YOU EAT AT THE OLIVE GARDEN! (I just can't think of a worse insult to lob at an Italian. But yes, I went there.)

I'm not sure if he's confused, lying, or just mis-spoke. But, lets just make sure that no matter what his motivation, you, my dear readers, understand that a) it isn't true, and b) don't eat at the Olive Garden. Lets just skip point B for the sake of brevity.

Lets do this with feeling… ready? Repeat after me:

  1. It is not illegal for you to read Wikileaks.
  2. It is not illegal for you to download documents from Wikileaks.
  3. You do not need to rely on "the media" to spoon feed you the documents from Wikileaks.
  4. The Olive Garden is not Italian food.

Cuomo might be confused because of a couple little things.

In 2001, the Supreme Court held in Bartnicki v. Vopper ,532 U.S. 514 (2001) that the press has a right to report on materials that might have been created or gathered illegally – as long as the media outlet took no part in the illegal activity. In that case, a radio reporter got ahold of the tape of an illegally recorded phone call. Since it was a matter of public concern, the press had a right to use it. So, the Wikileaks documents may have been illegally obtained in the first place, but once the genie is out of the bottle, you can't put it back in. The press can report on it.

Of course, in 2001, the lines between "you" and "the media" weren't so blurred. And, I could see Mr. Cuomo thinking that since Bartnicki addresses the press, that this somehow excludes the rabble from that same privilege. However, the press doesn't actually get any special privileges here, just because Bartnicki did not address you downloading these documents to your hard drive. In fact, it wouldn't make too much sense for it to be legal for CNN to report on the documents, and to publish them, but you could then be prosecuted – unless you can show that you downloaded them from CNN.

Now maybe Cuomo was also confused by a 2010 memo where government employees were warned that they couldn't access leaked classified documents. Yeah, that might be true. If you work for the government, it can probably impose some limits on what you can possess when it comes to leaked classified material. Even if they can't prosecute an employee, they could certainly condition continued employment or continued security clearance on you being a good little doggie. And, perhaps if you're seeking employment with the federal government, you might not want to say "yeah, I did" if they ask if you ever read the Wikileaks releases.

Now what about "receiving stolen property?" Someone steals a car. They drop it off in front of my house with the keys in the ignition and a note that says "a gift from a friend." That doesn't mean I can hope in and go for a spin. But, laws governing receipt of stolen property are a bit hard to apply to documents and information. Further, even if some prosecutor wanted to prosecute you for it, they'd be hard pressed to get anywhere with that when it comes to information that is a matter of public concern — like this information.

And then, you get back to the question of "who is 'the media'?" How do we really draw a distinction there? Luckily, we don't have to. The Same Bartnicki case that we discussed before makes it clear that we "draw no distinction between the media respondents and" a non-institutional respondent." But, this was hardly revolutionary. See, e.g., Cohen v. Cowles Media Co., 501 U.S. 663 (1991) (press gets no special privileges when it comes to laws governing communication); Henry v. Collins, 380 U.S. 356, 357 (1965) (applying New York Times v. Sullivan to non-media defendant); Garrison v. Louisiana, 379 U.S. 64, 67–68 (1964) (same).

So go ahead. Read those documents. Talk about them. Publish them on your blog or your Facebook feed. And do that no matter who is in office. It isn't just your right, but it is your patriotic duty.

Ask not what you can do for your country; demand to know what your country has been doing to you.

Copyright 2016 by the named Popehat author.
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5 days ago
Cuomo making baseless legalt threats.
Princeton, NJ or NYC
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