New article draft posted on SSRN

I have just posted a recently completed article draft on SSRN, entitled "Multiple Myopias, Multiple Selves, and the Under-Saving Problem."  It's available here.

It will be appearing in 2015 in volume 47 of the Connecticut Law Review, as the lead article in a special Commentary Issue.  (It will thus be accompanied by two or three papers by people in the field offering comments.)

The abstract goes something like this:

In both public policy debate and the academic literature, there is widespread, though not universal, agreement that millions of Americans are saving too little for their own retirements.  If this is true, we could potentially increase such individuals’ welfare through the adoption of policies that resulted in their saving more.  A key dilemma, however, is that, unless one understands why people are under-saving, it is hard to evaluate the likely responses to or merits of a given policy.

Possible explanations for systematic under-saving include at least the following: (1) naïve myopia, (2) sophisticated or self-aware myopia, (3) procrastination, or putting off any active decision because deciding is difficult or stressful, (4) mistake aversion, or not wanting to risk regret of an “active” decision that turns out poorly, and (5) acting as if one had multiple selves with distinct utility functions, causing decisions to depend on which is dominant at a given time.

These causal accounts differ predictively, with regard to how they suggest people subject to them would respond to a given policy.  They also differ diagnostically, with regard to whether the increased saving induced would be by the “right” people (i.e., those whom we believe are under-saving).  Yet they can be hard to tell apart in practice.  What is more, the same individual may be subject to several at once, or to alternative ones at different times.

The alternative explanations for systematic under-saving can have very differing implications for such issues in U.S. public policy debate as the following:

1) Should income tax benefits for retirement saving be reduced or even repealed?

2) Should the U.S. federal income tax be partly or fully replaced by a consumption tax?

3) Should “nudges” such as automatic enrollment be used to increase employee participation in employer-run retirement savings plans?

4) Should Social Security retirement benefits be scaled back for long-term fiscal plans, or alternatively expanded?

5) Should the design of Social Security be changed, such as by making the relationship between payroll taxes paid and benefits received both actually and optically clearer?

            The paper’s aim is not to offer definite answers to any of these questions, but simply to improve understanding of the likely relationship between leading theoretical explanations for under-saving and the above issues.

Jotwell post on Piketty book

I have published a very brief essay on Jotwell concerning Thomas Piketty's Capital in the Twenty-First Century.  You  can find it here.

As you can perhaps see from reading it, it's less of an actual response to or full assessment of Piketty's book (unlike, say, Neil Buchanan's Jotwell piece on Piketty, which you can find here), than a preliminary statement of what I actually do want to write about at greater length.  This reflects that I will actually be doing so.  Further details to be available shortly.

What I'm doing on my summer vacation

Gad, but I love the summer.  First of all there's the weather.  So long as the AC in my house doesn't break, I say bring on the heat.  I like a real summer, and we've had bits of it although at times it's been too cool and wet.  The only thing I really don't like about this time of year is mosquitoes.

The horrible winter and early spring are still exacting their price re. one my favorite parts of the summer - fresh produce at the Union Square Farmers' Market.  Generally you get strawberries by mid-May, then by the start of June it goes full Technicolor.  Blueberries, red and black raspberries, apricots, soon after that peaches and blackberries, etcetera.  This year is different.  Blueberries and red raspberries were both 2 + weeks late, no black raspberries yet, and apricots and peaches may simply not happen in the Northeast this year.  That's a shame as they're way better than the stuff that gets shipped here from far away.  So I am still waiting for full Technicolor, and may have to wait until June 2015 (assuming the next winter is less awful).

OK, back to the summer positives. Weeks that aren't jammed full with appointments are one nice feature - even leaving aside classes, my calendar is never so open during the rest of the year.  And as it happens my summer travel (in the school calendar sense) has been scheduled just for May and August, so open time yawns in front of me.  But that's a good thing, and I wish there were more.

On the work front, I've just finished a draft of an article entitled "Multiple Myopia, Multiple Selves, and the Under-Saving Problem."  The piece will end up being the headline piece in a spring 2015 "Commentary Issue" of the Connecticut Law Review, where there will also be invited commentators.  I will post a draft of the article in SSRN at some point well before that, but I want to sit on it at least briefly first.  After all, while there are second bites at the apple (aka revisions before publishing), I suspect that the first SSRN draft is the one that gets read by the greatest number of people.

I've now started work on a piece that I will be co-authoring with a friend that addresses Piketty's Capital in the Twenty-First Century.  More on that in due course, including on the underlying event at which we'll be presenting the paper.

In the fall, I'll be writing a short Tax Notes piece for a conference to which I've been invited concerning certain of the perennial tax reform issues that are always on the table.  More on that in due course, after that event has been publicly announced.

And after that, I guess I'll have to see, though there are several possible candidates.  But I don't think I'll be writing much in international tax in the immediate future (as I like doing new things and changing my focus as needed to feel fresh).

Alternative (or complementary) theory to CEO narcissism

In an earlier post, I noted recent corporate governance literature suggesting that narcissist CEOs, who are identified by criteria that include their pay relative to that of other company officials, tend to perform worse in various ways, such as by reason of their taking undue risks.

There's also a recent paper suggesting that high-paid CEOs tend to perform worse than other CEOs through an entirely different mechanism.  According to the abstract:

"CEO pay is negatively related to future stock returns for periods up to three years after sorting on pay.  For example, firms that pay their CEOs in the top ten percent of excess pay earn negative abnormal returns over the next three years of approximately -8%.  The effect is stronger for CEOs who receive higher incentive pay relative to their peers.  Our results appear to be driven by high-pay induced CEO overconfidence that leads to shareholder wealth losses from activities such as over-investment and value-destroying mergers and acquisitions."

Some are born narcissistic, others achieve narcissism, and yet others have narcissism thrust upon them.  And no doubt, to paraphrase Joseph Heller's line in Catch-22 about Major Major Major and mediocrity, for some CEOs it is all three.

I let him go right afterwards

Let's hope he's still out there, happily catching mosquitoes.

Henry Simons article again

The Tax Prof blog has just posted a link to the recently published "100 years of the income tax" symposium issue of the FSU Law Review, which includes my piece, "The Forgotten Henry Simons."

As I like this piece and enjoyed writing it, even though it's in a sense between chairs - not quite either historical or analytical - and as some people have been kind enough to tell me that they enjoyed reading it - a response that I had indeed fairly centrally aimed for when writing it - I will treat this as an occasion to re-post a link to the piece, here.

Academic literature on CEO narcissism

This link on the TaxProf blog to a newly posted article called "The Effect of CEO Narcissism on Corporate Tax Policies" alerted me to the fact that there apparently is a broader literature, previously unknown to me, associating narcissistic personality traits of CEOs with the companies' playing more aggressive tax and accounting games, building larger empires through acquisitions, taking risks that lead to volatile economic outcomes, etcetera.  See, for example, this article and this one.

As it's accepted in this literature that the best measure of CEO narcissism - getting CEOs to fill out psychological surveys, presumably in a spirit of honest self-disclosure - is not realistically available, the papers use what (drawing on preexisting psychology literature) they call "unobtrusive indicators" of this personality profile.  These may include, for example, "the prominence of the CEO’s photograph in the company’s annual report; the CEO’s prominence in the company’s press releases; the length of the CEO’s Who’s Who entry; the CEO’s use of first person singular pronouns in interviews; the CEO’s cash compensation divided by that of the second-highest paid executive in the firm; and the CEO’s non-cash compensation divided by that of the second- highest paid executive in the firm." [From Chatterjee and Hambrick, which is the second of the three articles linked above.]

Certainly an interesting literature that I plan to look at some more when I have the chance.