Non-Insider "Insider Trading": Time For A Civics Lesson For Journalists

Several weeks ago I wrote two articles (here and here) trying to do my small part to educate the world about the law, or lack thereof, regarding non-insider insider trading.  The one-line version is that prosecutors for years have been systematically charging and imprisoning dozens of people for a crime that doesn't exist.  Thankfully, the Second Circuit has finally intervened (after many years of gross prosecutorial abuse) in the case of Newman and Chiasson to impose a small degree of lawfulness on our government, although in my view the court did not go nearly far enough.

Meanwhile, of course, nobody pays any attention to my efforts to educate them and the level of ignorance on the subject among those who should know better is truly appalling.  Many examples could be cited, and I don't mean to pick specifically on Bloomberg News, but an editorial there today attributed to "The Editors" is a particularly egregious example of the genre.  The editorial is titled "Insider Trading: There Oughta Be A Law."

The editorial starts from the most fundamental misconception of the very nature of our criminal law.  Check this out:

[T]he best way to clear away the confusion and mistrust this [Newman/Chiasson] decision has created is through legislation. Ideally, Congress would pass a law that defines and bans insider trading. More realistically, the Securities and Exchange Commission could clarify its rules on the subject.  The SEC issued rules long ago to prohibit trading on the basis of material nonpublic information revealed in violation of a fiduciary duty. Its authority is based on one provision in the Securities Exchange Act of 1934, which broadly bans frauds on the market.

Where do these people possibly get the idea that something that has not been made a crime by Congress can be made a crime through a process of an administrative agency, the SEC, "clarifying" its rules?  This is not something you need to be a fancy lawyer to understand.  Did anybody around here go to high school?  When I was in high school (admittedly a long time ago), they went through multiple times teaching us "how a bill becomes a law" (actually, I think the first time was in junior high school), and on the subject of crimes they definitely put in there that it's not a crime unless a duly passed statute says it is.  Could it be that they don't even teach this kind of basic civics in high school any more?  And how about that line in the Bloomberg editorial that the "SEC issued rules long ago to prohibit trading on the basis of material nonpublic information"?  Don't they even think to ask the question, how could the SEC assert a right to do such a thing when Congress has not passed such a statute?

To be fair to Bloomberg, they do advocate here that the preferred solution would be for Congress to pass a statute.  But they leave out what they think such a statute should say, other than this whopper:

What the U.S. needs is a proper statute -- one that doesn't shift shape depending on who is heading the SEC or who is the U.S. attorney for Manhattan. It must reach conduct that strikes the average investor as wrong and feeds the impression that the markets are rigged.

If they gave the subject even ten minutes thought, they would realize that no such statute can be formulated without making a huge swath of legitimate stock market activity prosecutable, including lots of trading by Aunt Millie and Cousin Betty.  Not just Wall Street professionals, but all kinds of people, regularly buy and sell stocks based on some combination of public information plus various amounts of rumor, unsourced information, misinformation, speculation, educated guesses, idle or semi-idle talk, and the like, often with no way of knowing where the information came from or how good it is.  Allowing humans to make judgments on all this very imperfect information and then to trade on those judgments is what makes our stock market relatively efficient, and it is highly important that the process continue to be legal.  Some people who participate in this process will make a lot of money, maybe through skill, maybe through luck, and maybe through schmoozing information out of a corporate insider that the insider should not have given away.  Why is that bad?

The thing that "strikes the average investor as wrong and feeds the impression that the markets are rigged" is generally that someone made too much money too quickly -- a terrible basis for making a statute.  This is about nothing more than jealousy.  Trading by stock market tippees does not impose losses on other stock market investors in the aggregate.  If somebody gets inside information and buys the stock, perhaps that drives the price up a little; but as to other investors in the market who don't have the information, for every one who was buying and could have bought a little cheaper without the leak (therefore suffered a theoretical loss), there is someone else who was selling and was able to sell for a little more as a result of it (therefore had an offsetting gain).  If you are a non-professional investor and invest for the long term, getting no tips and buying and selling at random times, then for every time insider trading allegedly "hurt" you, there will be another time when it benefited you.  I myself invest in the market (generally through mutual funds) and I am not offended at all that others get tips and sometimes make money off them.  The fact is that I incur no loss, and I am benefited by having a more efficient market.

And besides, stock market trading by non-insiders on the basis of tips cannot be effectively prohibited in a free society.  Congress should not waste its time chasing the hopeless ideal of equal information on both sides of all securities trades.   Down that road lies nothing but less efficient securities markets and hundreds of thousands if not millions of unwitting "criminals." 

A New Year's Thought: Let's Focus On What's Important

Happy New Year to all from the Manhattan Contrarian!

And for the new year, I'm going to rededicate myself to focusing on what is important in the world and therefore on identifying the side issues for what they are.   Somehow in America we have become so successful at solving some of our major problems that we have lost track of our great accomplishments and are even putting the big accomplishments at risk as we turn our focus to much less important issues.

For example, what is the single most important problem that the world faces?  I nominate the problem of human violence and warfare.  The history of the world is a history of endless warfare, with people forming themselves into groups on tribal, ethnic, language, ideological or religious lines, and having aggressive young males form armies to kill as many members of the other groups as possible and seize their lands.  What is called "history" going back more than a couple of hundred years is about literally nothing but such warfare; and even in recent decades plenty of it remains.  The European countries continued their endless wars to take territory from and kill their neighbors right up to 1945.  In most recent memory, think of inter-tribal violence in places like Nigeria, Liberia, Rwanda, and the Congo; of the ongoing tribal/religious fighting in Iraq and Afghanistan; and of the recent government overthrowings in Arab countries like Egypt and Libya.  

What conditions enable people to live in peace without the endless violence and warfare that have plagued humanity throughout history?  Actually, here in what is sometimes called the "first world," we seem to have the problem substantially licked.  The solution is capitalism.  Sometimes that system goes by the name of "private property and the rule of law." Under a capitalist system the aggressive young males have an alternative to forming armies and killing enemies, namely, they can go into the rough-and-tumble world of business and take out their aggressions by seeking to have more success and make more money than their rivals.  (For these purposes, professional sports are an example of business.)  Meanwhile, wealth is created and most people rise out of poverty in a way never previously possible.  The reduction of warfare and increase of wealth creation are tremendous triumphs of capitalism, most of this occurring in the past few hundred years at most. 

Look at the places where organized violence persists on a large scale and you will see that what they lack is the opportunity for young men to go into business and succeed.   Many sub-Saharan African countries have little functioning capitalist economy.  Same for Afghanistan.  Iraq?  The state controls all the oil and most other business, and 20% or more of the young men are unemployed with no real opportunity to form a business that can succeed.  So let's form ISIS and see if we can seize some oil and kill some enemies!  Investigate the other unstable Arab countries that have gone through recent revolutions and you find the same thing again and again: the state controls business, and there are no career opportunities for many young men, who then have lots of time on their hands to go out and commit violence.  Check out this Cato Institute study of the degree to which the state controls business in the Arab world.

But even as organized violence continues wherever capitalism has not taken hold, the trendy view is now that peace and order and wealth are the natural state of things and the important problem is "income inequality."  Certainly this is the perspective of our President, and in New York of our Mayor, not to mention of most of academia and the media.  Can you actually take a functioning capitalist system, impose on it sufficient redistribution by state force to substantially reduce income inequality, make it so that the most ambitious and aggressive young men cannot get meaningfully ahead in life, and yet not undermine the mechanism that brought about the peace, order and wealth in the first place?  Among those advocating "income inequality" as the "defining challenge of our time," I don't notice any recognition or discussion of this issue.

The European countries are often held up as examples of how to achieve lower levels of income inequality than we have here in the U.S.  Take France, for example, which has large communities of immigrants, mostly Muslim, living on state handouts with high levels of unemployment for the young men.  Any problem with that?  Riots among unemployed young men in France have not gotten much play in U.S. press since the big ones in the Paris suburbs in 2007; but there have been plenty more of same, for example in the city of Amiens in 2012, and even more recently in Marseille.   Similar riots have even hit places as seemingly tranquil as Sweden in the past year.

And that's just one example.  Many times potential goals are in conflict and we have to pick one over the other.  As another example, which is more important, that the average world temperature might go up by one degree, or that a billion or so people lack electricity and the cheapest way to provide it is by burning fossil fuels?  Somehow our leaders seem to have lost their way in identifying the important, but I promise to work on that in the coming year. 

Fallacious Keynesianism: Alive Or Dead?

An anecdote that dramatically illustrates the fallacy of fake Keynesianism is sometimes attributed to the great economist Milton Friedman.  Quote investigator has its doubts about whether Friedman is the original source of the anecdote, so I'll use the letters MF to designate the protagonist.  The anecdote goes like this:  MF was visiting China during the Maoist era, and was taken by his hosts to observe the construction site of a huge new dam.  There MF saw thousands of workers toiling away using picks and shovels to move the massive amounts of earth needed for the project.  MF asked, "Instead of having thousands of workers toiling with picks and shovels, why not use modern tools like bulldozers and other mechanized equipment?"  His hosts answered, "This is a jobs project.  We want to employ as many people as possible."  MF responded, "Then why not give them spoons instead of shovels?"

Keep this anecdote in mind if you find yourself somehow going along with the idea that the answer to some slack in the economy is more government spending, no matter how wasteful.   Anybody who observes the world economy can see that the governments that watch every nickel of spending carefully have the most successful economies (Singapore, Switzerland), that those that engage in wildly uncontrolled blowout spending are the least successful (Venezuela, Greece), that uncareful spenders that let wasteful government spending grow too much languish (Europe) while somewhat more careful spenders are able to maintain growth, if somewhat impaired (United States).  And these correlations can be clearly observed despite the unsupportable convention of counting government spending at 100 cents on the dollar in GDP even when it is intentionally wasted. 

In an op-ed in the Wall Street Journal last week headlined "An Autopsy for the Keynesians," John Cochrane of the University of Chicago is ready to declare the most recent post-financial-crisis burst of Keynesianism dead. 

This year the tide changed in the economy. Growth seems finally to be returning. The tide also changed in economic ideas. The brief resurgence of traditional Keynesian ideas is washing away from the world of economic policy.

Cochrane gets to the point of ridicule in listing some of the fallacies you have to believe if you buy into the fundamental Keynesian proposition that more government spending "stimulates" an economy:

Hurricanes are good, rising oil prices are good, and ATMs are bad, we were advised: Destroying capital, lower productivity and costly oil will raise inflation and occasion government spending, which will stimulate output. . . .  In Keynesian models, government spending stimulates even if totally wasted. Pay people to dig ditches and fill them up again. By Keynesian logic, fraud is good; thieves have notoriously high marginal propensities to consume.

And thus Cochrane concludes that Keynesianism has thoroughly disproved itself and isn't coming back.  Well, one can hope.  But look around and the evidence is that this is an idea that needs to be killed at least a thousand times.  Take for example the cover story in Business Week on October 30, "John Maynard Keynes Is The Economist The World Needs Now," by Peter Coy.

Is there a doctor in the house? The global economy is failing to thrive, and its caretakers are fumbling. . . .  There is a doctor in the house, and his prescriptions are more relevant than ever. True, he’s been dead since 1946. But even in the past tense, the British economist, investor, and civil servant John Maynard Keynes has more to teach us about how to save the global economy than an army of modern Ph.D.s equipped with models of dynamic stochastic general equilibrium.

Coy goes on to advocate for blowout government spending as the cure to current slow economic growth, although he does grudgingly concede that government spending that goes to real projects is at least preferable to pure waste.  Well, Peter, how about hiring workers to build a dam with spoons?

And how about the case of Japan?  If there is any example that conclusively disproves the Keynesian hypothesis that fiscal "stimulus" spending can get an economy moving, it has to be Japan.  Since its economy went into stagnation in approximately 1990, Japan has had one Keynesian "stimulus" program after another, the result being the 25 years of stagnation plus bonded debt exceeding 200% of GDP.  But the stagnation continues, so over the weekend Prime Minister Abe announced the latest government program to get the economy moving again.  Yes, it is another round of so-called "stimulus":

Japanese Prime Minister Shinzo Abe on Saturday approved a $29.17 billion stimulus package meant to boost consumer spending and regional economic activity, seeking to revive an economy in recession. The spending package focuses on small businesses, rural communities and post-disaster reconstruction.

Well, Mr. Abe, if you believe the Keynesian hypothesis that the "stimulus" of more government spending gets an economy going, instead of the $29 billion why not make it $1 trillion, or for that matter $10 trillion?   

A Christmas Tale Of New York's Housing Follies

If you are looking for a heartwarming story to savor this Christmastime, perhaps you will enjoy the tale of Ms. Noelle Penraat of Manhattan.  Ms. Penraat's tale illustrates the results that New York has been able to accomplish by putting in place an array of housing programs designed to achieve perfect fairness between and among all people through government direction.  

Ms. Penraat, 62 years old, occupies a four-bedroom duplex apartment overlooking Central Park at 315 Central Park West, corner of West 91st Street.  Those familiar with the most expensive sub-markets of super-expensive Manhattan real estate will recognize this address as something quite close to the very top of the food chain.  Yes, a similar apartment a little further south on CPW in the 60s or 70s would command yet a higher price, and maybe something on Central Park South would go for even more still.  However, even without being given the square footage of the apartment, we can be sure that its monthly free market rental value would be at least $10,000, and likely even $15,000.  In other words, Ms. Penraat is a top member of the New York real estate nobility.

But despite her status as a top member of the real estate nobility, somehow New York City has decided that Ms. Penraat should be entitled to a massive rent discount.  She is a beneficiary of a New York City program called "rent control," which limits rent increases to minimal amounts for a now small class of tenants who have occupied their apartments continuously since 1971 (or earlier).  (Today there are fewer than 40,000 "rent-controlled" apartments in New York City.  Another program called "rent stabilization" regulates the rents of another one million plus apartments.)  And then there's another New York City program called "Senior Citizen Rent Increase Exemption," or "SCRIE," under which those 62 and older with incomes less than $50,000 can claim exemption from any further rent increases for the rest of their lives, and the taxpayers pick up the increases through credits against the landlord's real estate taxes.  Ms. Penraat has also claimed the benefit of this program.  

According a December 23 article in the New York Law Journal, Ms. Penraat's controlled rent is $4477 per month, minus another $284 per month for her SCRIE exemption, leaving a net of $4193 per month.  In other words, by virtue of New York's rent regulation efforts, Ms. Penraat receives discounts off market rent of something in the range of about $6000 to $11,000 per month, or $72,000 to $132,000 per year -- none of which, of course, counts in her "income."  Somehow, this is what the City of New York has determined to be "fair" in the case of Ms. Penraat, although it is not really possible to explain exactly why she is the one out of all of New York's 8.4 million residents who gets the premier CPW park view apartment at a huge discount. 

With lots of extra space in the apartment and great Central Park views, Ms. Penraat then did what any self-respecting American would do with the opportunity, namely she listed various bedrooms in her apartment on Airbnb to make a buck.  By early this year she had quite a business going.  According to the Law Journal, she averaged $6500 in monthly rental income in the period January to June 2014 -- well in excess of her $4193 monthly rent outlay.  

Somehow, though, all this did not meet Ms. Penraat's landlord's concept of "fairness."  He has filed a case in New York State Supreme Court against Ms. Penraat asserting that she is taking unfair advantage of New York's rent regulation programs.  A decision in the case by Justice Carol Edmead got coverage on December 23 here in the New York Law Journal and here in the New York Post.  Per the Law Journal, Justice Edmead has granted a temporary injunction against Ms. Penraat, prohibiting further use of her apartment as a B and B:

The judge, who issued a temporary injunction against Noelle Penraat, said records Penraat presented indicated she made substantial income from renting to visitors arranged through Airbnb in 2013 and 2014 in an "incurable" violation of Rent Control Laws.

Well, but if she has committed an "incurable" violation of the Rent Control Laws, does she lose the massive rent discounts, or for that matter, get evicted from the apartment?  No word on that in this decision.  My bet is she will neither lose rent-controlled status nor get evicted.  In New York there is virtually no such thing as a lease violation sufficient to cause a person to lose out on rent control status.

And you are probably asking, how does Ms. Penraat get the SCRIE exemption -- supposedly available only to those with income under $50,000 -- when she gets a minimum of $72,000 in annual rent discounts, let alone $65,000 in revenue from the Airbnb rentals in just the six months from January to June 2014?  Clearly the $72,000 does not count for these purposes.  And I guess the $65,000 didn't count either, at least in the flexible mind of Ms. Penraat.  Hey, she's New York housing nobility!  She's just got the system figured out better than the rest of you saps who make cash income at a job and pay full taxes before taking most of what's left to pay your rent.  

Can We Eliminate All Tough Choices With The Infinite Credit Card?

One theory is that the whole idea behind capitalism is to force the making of tough economic choices.  Examples would be the decision of an employer to fire some people when the revenues of the business just don't support them any more; or the decision of a family to sell a beloved home when the expenses get too high.  Another theory is that the government has an infinite credit card, which can be drawn at any time, and the money given to whomever they want, so why is there ever a need to make a tough choice?

The best arena to observe the game of using the infinite credit card to avoid tough choices is the arena of healthcare.  And thus here in New York we have a state Assemblyman named Richard Gottfried (his Manhattan district is adjacent to my own) trying to push the idea of so-called "single-payer" healthcare for New York.  "Single-payer" means that all healthcare is paid for by one entity, namely the government.  Medicare is an example of a modified form of "single-payer," although it has some deductibles and co-pays that must be covered by the patient.  Lacking a federal single-payer program for those not covered by Medicare and Medicaid, Gottfried for a couple of decades has been advocating that New York should set up its own program at the state level.

Recently Gottfried was in Rochester holding a town meeting on the subject.  Here's a report from the Rochester Democrat and Chronicle on December 8.   According to Gottfried and his supporters, this is a moral issue, which I suppose means that if you oppose it you must be immoral and, probably, evil.  For example, here is one of the witnesses from Gottfried's Rochester hearing, Rev. Dr. Richard Gilbert, quoted in the D&C article:

"Healthcare is a human right," Gilbert said, "grounded in the moral fiber of major world religious traditions. It's not a commodity subject to political whims, economic theories, or social fashion, but grounded in the moral foundation of our very humanity."  Gilbert was one of several speakers expressing support for the proposed legislation. "It's passage is a moral imperative of our time," he said.

Well, Rev. Dr. Gilbert, does cost have anything to do with this?  In particular, is it morally permissible to ask, for example, how much taxes must be raised to pay for this and what burdens that might impose on people of limited means?  Actually, it appears that Gottfried and his witnesses at the hearing had what they thought was an answer to this question:

"New York can have a universal health coverage system that covers all of us, without premiums and deductibles and co-pays and restricted networks," Gottfried said. "It could save New Yorkers over $20 billion a year by not having to pay for insurance company administrative personnel and profit."

That's right, we'll have universal coverage for any and all medical problems, it will all be free to the consumer, and it will cost less than our current system.  No problem!

No mention in the D&C article (or other coverage I have found of Gottfried's hearings) of what is going on across the border in Vermont.  There, Governor Peter Shumlin has made enactment of a single-payer healthcare system his signature initiative.  This article from Avik Roy at Forbes on December 21 gives some background and current developments.  After pledging in his first campaign to bring single-payer healthcare to Vermont, Shumlin got to work on the plan promptly after taking office in 2011.  He started by hiring lefty healthcare economists William Hsaio of Harvard and Jonathan Gruber of MIT (yes, that Gruber) who came up with the grand comprehensive socialized scheme.  A report on the projected costs of the plan was due in January 2013, but Shumlin failed to produce it.  A suit to force him to produce it failed.  That brings us to the recent 2014 election, where Shumlin's Republican opponent said, "the difference between Peter Shumlin and Scott Milne is that I will tell you before the election that single payer is dead.”  Shumlin kept quiet on the subject and won by 2,095 votes.

Then last week, safely re-elected, Shumlin let the cat out of the bag.  The projected cost of the Hsaio/Gruber Green Mountain Care single-payer system for 2017 would by $2.6 billion.  Did I mention that in Vermont, a state of just over 600,000 people, the entire existing state tax system only raises $1.6 billion per year?  To pay for GMC, that $1.6 billion would have to go to $4.2 billion, a 151% increase in the aggregate tax burden.  Supposedly this would be paid for by a brand-new 11.5% tax on all payrolls.  Needless to say, small businesses screamed bloody murder -- and small businesses are the only kind they have in Vermont.  As of now, it looks like GMC is completely dead.

But how to explain the discrepancy between the view of single-payer supporters, who think that single-payer can save enough from elimination of overheads and insurance companies that the aggregate cost of healthcare will fall, and the enormous costs that emerged in Vermont when they actually tried to design and implement a real-life system?  After all, don't many European countries with single-payer or modified single-payer systems spend a lower percent of GDP on healthcare than does the U.S.?  Megan McArdle of Bloomberg has a take on that in an article today.  The gist is that a government takeover of the healthcare system will inevitably start with a need to pay for nearly the full cost structure already in place:

Our spending is indeed high compared with the rest of the world, but that's because it started high. And while restraining government spending is easy, it is a walk in the proverbial (government-funded) park compared to actually cutting spending. Cutting spending means that a number of people are going to lose income and employment. They will have trouble paying their mortgages, car loans and little Johnny's bill for travel soccer. Then they are going to get organized and march on Washington and vote against the politicians who cut their jobs. 

And Megan doesn't even consider some of the major tough choice issues that simply must be confronted.  In healthcare, a big one is the recent proliferation of new pharmaceuticals, often for particular cancers, priced at $50,000, $100,000 or even $200,000 for a year of treatment.  According to this article from Bloomberg yesterday, there are now some 300,000 people in the United States taking drugs that cost an aggregate of $50,000 or more per year.  Well, in your single payer system, are you going to pay for those drugs or not? -- "not" of course meaning that someone dies.  And if you agree to pay for this latest drug at $100,000 per course of treatment, what's to keep the next one from being priced at $200,000, or, for that matter, $1,000,000?  What you thought was your infinite credit card will be tested very quickly.

The New Yorkers advocating single payer apparently think that we can avoid these problems because we are bigger, and maybe because we can just impose the costs on some big business, or maybe on a handful of foreign billionaires with apartments in Manhattan.  I would say that we may be able to avoid the tough choices for a longer period, but definitely not forever.  And the federal government can undoubtedly avoid the tough choices for even longer; but still, not forever. 

State-Controlled Capitalism, New York Edition

New York may well be the business capital of the world.  While most of the other original U.S. states began their existence as religious colonies of one sect or another, New York/Amsterdam was a trading center from day one and today stands as the premier world marketplace in finance and many other areas of business.  And yet we overwhelmingly elect politicians who have no comprehension whatsoever of how this works.  Our City also serves as the home to dozens of media outlets that define themselves by incessant bashing of our wealth-generation as somehow evil and immoral.

So, instead of relying on the free-wheeling capitalism that has made us so hugely successful, how about trying some of the state-controlled capital allocation that has done so well by places like Russia, Venezuela, Iran, and Argentina?  There have been multiple examples of that in New York over the last several days.

On Wednesday a state entity called the Gaming Facility Location Board recommended approval of three large new Las Vegas-style casinos in upstate New York.  Here is the report on the approvals from the New York Times.   The three approved locations are: one in relatively remote Sullivan County in the Catskills region (actually next to what once was the famous Concord Hotel); one in the Albany area; and one in the northern Finger Lakes between Syracuse and Rochester.

Now you are undoubtedly asking, why does this require a state "facility location board"?  Why doesn't anyone who wants to open a casino just open one wherever he wants, as we do with, say, laundromats or card stores?  That's a long story that has a lot to do with the unsavory coalition of Baptists and bootleggers, but suffice it to say that once casinos initially got banned, the process of handing out exceptions offers way too many opportunities for graft for the politicians ever to let go.  And thus we have come to a situation where to build a casino you must spend years making the right political contributions and cultivating the pols.  And the investment capital goes where the pols direct it to go and when they direct it to go there.  So after a process of consideration that has extended over decades, we now are getting these three casinos granted to the politically favored.

The timing of these casino approvals couldn't be more ridiculous.  Have they even noticed that Atlantic City is imploding right now before our very eyes?  This research report from UNLV (the Nevadans are rubbing it in!) shows Atlantic City gaming revenues off about 45% since a peak in 2007.   Casinos there are closing left and right.  The same New York Post today that has an op-ed by Bob McManus commenting on the ridiculous New York casino approval also has a news article in the business section reporting on the latest in the "Perils of Pauline" tale of the bankrupt Taj Mahal casino, second largest in Atlantic City, just (maybe? temporarily?) rescued from closure through an investment by Carl Icahn.

Casinos were supposed to be the salvation that would rescue Atlantic City from poverty.  The first casino opened in 1978.  Thirty-six years later, Atlantic City is a one-industry town with the industry collapsing -- remind anyone of Russia?  And it's still poor.  But don't worry, in upstate New York, casinos built by political favor and at political direction are going to bring you economic development!  Here's my favorite line from the Times article reporting on the Location Board approvals:

[The GFLB] rejected six applications in Orange County, the region closest to New York City, in favor of a single resort in neighboring Sullivan County, to the north, citing the need for economic development.    

Got that?  We won't allow these things where they might actually succeed, and instead we're going to duplicate the Atlantic City model of forcing them into economic backwaters because "economic development."

Meanwhile, the economic decline of upstate New York continues, and the experience of Atlantic City (and state-controlled capitalism in general), combined with the high taxes imposed by the City-and-suburban-centric political culture make it highly likely that the decline will continue.  The population declines in upstate New York, and particularly in the triangle defined by these three new casino locations, are really stunning.  Syracuse has declined from a peak of 221,000 people in 1950 to 145,000 (35%); Utica from a peak of 102,000 in 1930 to 62,000 (39%); and Binghamton from a peak of 81,000 in 1950 to 47,000 (41%).  The last person to leave should turn out the lights.

But there is another industry that very much wants to come into this area and create lots of jobs and wealth.  That, of course, would be the industry of "fracking" natural gas out of the shale formation that extends under most of New York's so-called southern tier.  This industry would require no government effort at all -- all the government needs to do is get out of the way and let it happen.  Oh, yesterday our Governor permanently banned it.  A permanent ban on investment in an industry is another example of state-controlled capitalism.  Sorry, upstate New York, but you'll just have to take your chances on the casinos.

UPDATE December 23, 2014: The Census Bureau has just announced that, according to new data as of July 1, 2014,  New York has slipped another notch in the state population rankings, this time getting passed by Florida.  The  populations of the four most populous states as of July 1 are now:  California 38.8 million, Texas 26.9 million, Florida 19.9 million, New York 19.8 million.  In case you're curious, when I first noticed census statistics back in 1960 the populations of those states were:  New York 16.8 million, California 15.7 million, Texas 9.6 million, Florida 5.0 million.  The consequences of high taxes and crony capitalism:  gradual, relative decline.