More on the Guns Study

26 October, 2006

Andrew Leigh’s thread continues to generate interesting comments on the recent study on gun deaths, including this one by Christine where she analyses the data. In particular she examines the log return (ie. percentages) rather than the absolute return which the study focused on, and finds firstly there is close to a break in the trend in 2004 if you consider the log return, and comments that the finding appears to be closer to “there is no definite effect” rather than there “was no effect”.

Don Weatherburn has an op-ed in the SMH where he discusses the study and the effect of the laws saying:

It doesn’t follow, however, that restrictions on firearm ownership should be dropped. The gun buyback may not have had any effect on the rate of firearm homicide but any policy that permitted large increases in the supply of guns in the community could still produce untoward effects.

The Port Arthur massacre graphically demonstrated the catastrophic effects that result when the wrong people get hold of guns. This is dangerous ground and we need to tread carefully.

Also Andrew has another post examining the study’s interpretation of the analysis of suicide by firearm.

Guns and short memories

24 October, 2006

The Sydney Morning Herald reports today on some research finding that the tightened gun laws post the Port Arthur massacre have had essentially no effect on reducing murder.

The only area where the package of Commonwealth and State laws, known as the National Firearms Agreement (NFA) may have had some impact was on the rate of suicide, but the study said the evidence was not clear and any reductions attributable to the new gun rules were slight.

“Homicide patterns (firearm and non-firearm) were not influenced by the NFA, the conclusion being that the gun buyback and restrictive legislative changes had no influence on firearm homicide in Australia,” the study says.

Despite quoting Don Weatherburn, the NSW statistician, at the end of the article, they fail to mention that he had come to pretty much the same conclusion in a statement he made almost exactly a year ago, which I referred to in an earlier piece on guns.
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Efficient Markets and the Law

26 September, 2006

I’ve been catching up on some reading and I found this article in The Economist which is a few weeks old. In general I seem to criticise those who rubbish the Efficient Markets Hypothesis too much, but then there is the US Supreme court who it seems may take it too seriously.

JAMIE OLIS knows better than most people that the ideas conjured up by economists in their ivory towers can have a big effect on the real world. The tax accountant, found guilty of committing fraud while working for Dynegy, an energy-trading firm, has been doing time since March 2004, in large part thanks to a controversial economic theory, the efficient markets hypothesis.

Not just a little bit of time mind you, but 24 years, at least until a court threw out the sentence.

…In 1988, in Basic Inc v Levinson, the court endorsed a theory known as “fraud on the market”, which relies on the efficient markets hypothesis. Because market prices reflect all available information, argued the [Supreme] court, misleading statements by a company will affect its share price. Investors rely on the integrity of the price as a guide to fundamental value. Thus, misleading statements defraud purchasers of the firm’s shares even if they do not rely directly on those statements, or are not even aware of them.

Which is fine except for the fact that we know that prices move around regardless of new information, at least not the sort of information that comes from public announcements. Similarly news may take some time to be absorbed by the market which may over-react, and it is well known that volatility clusters. Don’t announce a fraud when the market is already volatile, the moves are likely to be bigger. Its a very tough call to equate a market move after an announcement entirely to that announcement, or even know when do you consider the information fully incorporated.

Of course that hasn’t stopped the lawyers and Judges from using it.
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The liberal democratic party and guns

6 September, 2006

I’ve been having a look through the policies of the LDP essentially the Australian libertarian party. While I certainly disagree with some of their policies, I could say the same about most other Australian political parties. From my perspective I’m not sure whether they are further away from my positions than either of the two major parties. On most things I don’t disagree with the directions (social and economic liberalism) but am less certain of the positions. I would advocate a gradualist approach seeing how various steps turn out before liberalising further.

While I am not surprised they advocate looser gun laws, I am a little a little surprised by this section:.

There is copious evidence to show that, where gun ownership is high, crime involving actual or threatened violence is reduced. Conversely, when gun ownership is reduced, violent crime increases. Australia’s experience since 1996 and the UK since 1997 are clear confirmation of the latter point.

Now as I understand it while there appears to be little evidence to support the thesis that tightening guns laws reduces crime, conversely it appears to be the same with more relaxed gun laws not decreasing crime either. So why I don’t accept there is “copious evidence” for their statement I accept this is an arguable position. The last sentence however regarding Australia post 1996 is just plain false. The statements by the NSW statistician last year tells this story for NSW.

I would need to see more convincing evidence than there is to be able to say that gun laws have had any effect,” Dr Weatherburn said. “The best that could be said for the tougher laws is there has been no other mass killing using firearms [since Port Arthur].

“There has been a drop in firearm-related crime, particularly in homicide, but it began long before the new laws and has continued on afterwards. I don’t think anyone really understands why. A lot of people assume that the tougher laws did it, but I would need more specific, convincing evidence …

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Prisoner’s Dilemma

5 July, 2006

Today, the last two of the four NAB rogue traders involved in the $360 million foreign exchange loss were sentenced by the Victorian County Court. The head of the desk Luke Duffy and Senior trader Gianni Gray had already pleaded guilty and been sentenced to 29 months, and 16 months jail respectively. David Bullen and Vince Ficarra chose to fight the charges with Bullen representing himself, and much like in the classic game theory problem, suffered the higher penalties for fighting. Bullen receiving a 44 month sentence, and Ficarra 28 months.

What possessed Ficarra and Bullen to fight the charges is beyond me. Ficarra being the junior, in his first job, working for a group noted for their bullying behaviour had ample mitigating circumstances. These might have, if he had pleaded guilty and shown contrition saved him a custodial sentence, or at the very least got a very much lighter sentence than what he received. Trying to fight the charges in the face of taped evidence of them discussing lying to back office seems the sheerest folly. He may have been junior but he clearly knew what he was doing was wrong. In the end Ficarra received one month less than the leader of the group, perhaps part of the all or nothing risk attitude that got them into trouble in the first place.

The other thing that gets me about this, is why did everyone else get off for free? Sure a number lost jobs, but that hardly reflects the fact that the negligence in every area of letting this go was so breathtakingly extreme as to be unbelievable. While the fake trades may not have been discovered until too late, lots of other behaviour was completely out of the bounds of any reasonable trading activity and was clearly a target for further investigation.
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