*Feature* JPPE INTERVIEW, PASCUAL RESTREPO: Pascual Restrepo is an assistant professor at Boston University. His research focuses on the impact of technology on inequality, as well as labour markets and economic growth. Prior to joining BU’s faculty, he was a Cowles Foundation Fellow at Yale University, and earned his PhD in Economics at MIT. Besides research work, he has given numerous lectures at conferences, workshops and seminars across the country. October 2020 JPPE: Hi, everyone. I'm speaking right now with Professor Pascual Restrepo, who is an Assistant Professor at Boston University, whose research focuses on the impact of technology on inequality, as well as labor markets and economic growth. Hi, Pascual. How are you? Restrepo: Hi, Julian. How are you? Thanks for inviting me. JPPE: Thanks for taking the time to speak with me. So, the first thing I wanted to talk about is how you got into automation and inequality, and I saw that in your earlier work you tended to focus on the illicit economy--and from what I could tell, within that, the illicit economy in Colombia. And I wanted to know how you shifted from that towards automation and inequality. Restrepo: Yeah, absolutely. So I'm from Colombia, you know, and when I was doing my undergrad, I started doing my undergrad in mathematics, but then I got interested in economics. And the key topics in the public discussion in Colombia was always about violence, always about state capacity, always about corruption and political economy. And at the center of all of that, you always have these big illegal markets that were reinforcing, if not causing many of these things. So as a Colombian, it's natural to be interested in that, because it's a topic that is very close to our hearts, our history, and our future. And that's why I started doing research on that topic. Then when I moved to the US to start my PhD, the focus shifted a little bit. I guess that doing a PhD is a great opportunity to start seeing the world from a more global perspective, perhaps, and so I became more interested in problems that were perhaps not as important for Colombia. I mean, Colombia, I wouldn't say right now that automation, it's a big concern there. There's a lot of inequality, but for very different reasons. And so I became interested in these topics that I saw were very relevant for the developed world. And so I think that it's kind of nice that you get to do research on topics that you hear people talking about, right? So like, you open a newspaper, you read The Economist, and they're always talking about, you know, automation, inequality, technology, and so on, but when I was in Colombia, it was the case with illegal markets, so I guess that I'm just trying to follow that trail. You know, like, interesting stuff. JPPE: So the shift towards a more global topic, with far-reaching implications. So, do you remember, was there a specific thing that you read? That made you interested? Do you remember the moment when you thought that this is something you wanted to focus on? Restrepo: Yeah, I don't think that it was anything specific. I just think that it was like an accumulation of stuff. And you know, when I was starting my PhD, there was all of the fuss about Artificial Intelligence. Everyone was fussing about what it was going to be. And I was, like, listening to podcasts by, I don't know, Sam Harris and other people, or the book by Yuval Noah Harari, and I started reading all of these things, and I was like, "Oh, this is super interesting, I wonder if you can analyze this from an economics perspective," right? JPPE: Right. Restrepo: And then, like, Daron--who was my advisor--and Daron apparently was also super interested in this thing, so we started this collaboration. JPPE: Yeah, yeah. So, I- and I think that this is one of the things that is so interesting about the topic, too, is that it is something that gets discussed in these journalistic spheres like The Economist or more central, mainstream publications, but also in academia. And also in a slightly more sensationalistic way by futurists and so on, because the name 'Artificial Intelligence' is kind of, you know, some people think of Blade Runner, or cyborgs walking down the streets. So I think cutting through that is very interesting, which is why one thing I did want to ask is where you stand on the question of automation. And I have four or five studies that you wrote that I just wanted to briefly mention, in case some people aren't familiar with that. One is a piece that you co-authored called "Demographics in Automation," where--and correct me if any of these takeaways are wrong, but--you showed that robots tend to substitute for middle-aged workers. In the paper "Automation of New Tasks," you showed that there is a reinstatement effect of labor, these new digital, labor-saving technologies. In "Competing With Robots," you showed that the overall impact of robot adoption on an industry tends to reduce the employment in that same industry--the number of jobs, at least in the short run. And in "Unpacking the Skill Bias," which I believe is the most recent paper you showed that there is this powerful impact on inequality, and that there is a reduction in real wages. And that productivity increases might not even be that high relative to inequality, which I thought was a very interesting point. So to the extent that you can, where do you stand on automation and AI? Restrepo: Perfect, so let me try to reframe this question a little bit. One of the questions that you sent me earlier on--and feel free to tell me if you're going to discuss it later on, or where this is a good moment to discuss it, because you asked what's wrong with public discourse about automation, right? JPPE: That was my next one, so we can do that now. Restrepo: Perfect. So I guess that what would be useful for me is to tell you how I see public discourse, and where I see myself into the public discourse, and why I think that some of the perspectives that Daron and I have brought are different from the main views that you would find out there, right? Because you see that you are asking me where do I stand on automation. And I think that that's part of what's the problem with this topic, is that people want to divide themselves into two groups. There's kind of a false dichotomy, so either you believe in the robot-apocalypse: you know, robots are going to come and are going to take over all of jobs or you are a firm believer that this has happened before, and that we have already seen this, and technology is great, and nothing is going to happen. And I think that the reality's in the middle. Undoubtedly, technology is the only thing that has allowed us to achieve our standards of living. But I also think that there's no denying that technology sometimes achieves that at the expense of some groups of society. And I think that that's where I stand. Technology is a great force. Technology allows us to live better lives. But some technologies--not every technology, because technologies are all so different, right? Like, I wouldn't say that automation is the same thing as inventing new products, right? Those two things do different things. Some technologies, like automation in particular, have this peculiar feature that the way that they generate productivity--that the way that they generate additional capacity to produce--is by substituting very specific types of human labor. And those workers that get replaced and that get substituted, from their perspective, technology is a bad thing. Socially, technology is a good thing, but there are going to be losers--net losers. And I think that my thing is just to put the spotlight on those losers, and try to identify them and quantify those losses. The idea that technology generates winners and losers--I mean, people have that around, but we tend to think that the gains are so large that this is okay, we just need to redistribute. I don't know, the losses sometimes might be much more problematic than what you can compensate for with the gains. JPPE: Right, certainly. I think even in the way that people phrase it: 'short term losses,' 'disruption.' Some people might say that there's a slight underselling of what the human costs of that disruption are. But I wanted to ask about whether or not AI is fundamentally different in your view, because you said it's somewhere in the middle. And it sounded like you were saying it's not going to be "a temporary loss of some jobs, but it's fine because we'll create new ones" or "a complete joblessness apocalypse." It might be somewhere in the middle. And that seems to me very much in line with what past labor-saving technologies did during the Industrial Revolution. You know, the classic example where you had a spike in the automation- or, a spike in labor-saving devices that increased inequality in the short run--and we can talk about the extent to which that was tolerable--but in the long run, those jobs came back. So do you think that it is fundamentally different from how devices in the past performed, or is it in line with that history? Restrepo: Perfect, so that's a great question. You know, we talk a lot about Artificial Intelligence, but we don't really know what it does. Right? JPPE: [laughing] Yeah . Restrepo: Right, so I can talk about technologies that I know what they do. So for instance, automation of manufacturing via industrial robotics, or automation of white-collar jobs via software, right? So let's just start there, and then we'll speculate a little bit more about AI. So I think that industrial robotics and automation of white-collar jobs via software--the economic forces are very similar to what we saw in the past, let's say, with the mechanization of agriculture. Or the mechanization of textile production in England during the Industrial Revolution, right? You have very artisanal techniques where it took a bunch of people, kids and women, to weave and knit a particular piece of clothing. And then you come out with these machines where you just need one person to operate the whole machinery, and essentially what you did is you replaced all that artisanal and labor-intensive technique that used to be the main technique before. Like with agriculture, you see the same thing, right? Before it was like people with rudimentary tools, such as a scythe, or whatever who would reap the land. And then you have a tractor, right? And the tractor, there's just one person; and that person, the only thing that he has to do is drive the tractor. Nowadays they don't even need to drive the tractor, because these tractors are becoming increasingly self-driving tractors. And so, you can see that, essentially, we are moving to technologies that are more, more, more capital-intensive and that rely less and less and less on human labor. And I think that the consequences, to some extent, are similar. So like, many people say, "Oh no, we have a lot of mechanization in history, and we still have a bunch of jobs, so that's not bad." But then you look at historical records; that argument is not exactly right. Because for instance, England around the Industrial Revolution, there were about 60 years where wages were essentially stagnant. So yes, this technology created more bounty, they created higher incomes per capita, but most of this income went to the hands of capital owners: people who owned the machinery, people who owned the land. And those gains didn't trickle down to wages until after 60 years of these developments. 60 years is a long time. During these years we had a lot of unrest. We had many, many social reforms to appease, some of the unrest that resulted from these. We had the Luddites, right? That was kind of a response to all of these developments. So, you know, it was not a rosy- it was not an easy transition. Now, of course, that puts us into a fantastic path where eventually, people acquire skills; we came out with new industries, products, and so want to employ a bunch of people. But that was kind of like a choice, right? I mean, maybe that wouldn't happen. And so I guess that that's the next question: what are we going to be able to come out with? The jobs, the ideas, the tech force, the tasks, or all of the people that we displaced from manufacturing and all of the people that we are displacing from services. I mean, what are we going to employ all of these people, right? And perhaps, what if the future is one where we're going to have fewer jobs? JPPE: You really think that there's a chance that the future could look like, on aggregate, there are fewer jobs that the economy requires. Restrepo: Yeah. JPPE: So in essence, the whole principle of efficiency gains creating jobs in new industries, that that principle might break down. Restrepo: I mean, I think that that principle has worked in the past, but the fact that it has worked in the past does not guarantee that it's going to keep working in the future. I think that at least theoretically, conceptually, I mean, it's possible. I'm not saying that it's going to happen, but it's possible that we go into a future where the economy uses less labor. So you know, like, only 20% of the population works, and that's enough to supply all of the labor that the economy needs. I mean, this is a great thing if all of us only work one day per week. But the problem is that we might be going to a future where only 20% of us work the entire week. And that's very different because the implications for inequality are quite different, right? So I guess that that's kind of the challenge. The challenge to me is not so much whether the level of employment that you need to produce something is going to go down--for sure that's going to go down. I mean, we're going to produce much more with fewer workers. The question is, who's going to provide those hours of human labor, and who are the people in a position to benefit from that demand for labor that's going to be out there? JPPE: Mm. So, I'd love to talk more about the social and political implications of what you just said, but first I want to ask about a pandemic-related question. Restrepo: Yep. JPPE: So, The Wall Street Journal just ran a headline where they said that, essentially, meatpackers were, all of a sudden, beginning to automate more and more labor, and that that automated technology was not necessarily doing as good a job as the humans were, but the coronavirus had essentially hastened that shift. And I believe there are other instances of that in manufacturing as well. So is this something that you view as bringing automation much faster? Restrepo: Totally. One of the papers that you mentioned earlier on was this paper on demographics. And in that paper, what we showed is that a lot of what you see in terms of industrial automation--that is, automation by industrial robots and machinery in car manufacturing plants, for example--is driven by the scarcity of work. This is technology that responds to incentive. So what are the most automated countries in the world? Japan, Germany, Italy, countries where the population is aging very rapidly--where young workers with the muscle to weld a car are scarce. And so it's that scarcity of labor, in some sense, what has fueled a lot of this automation. And you can think of the pandemic as doing something similar; it's generating a scarcity of labor. Because workers--on the one hand, they cannot go to work because of either concerns or lockdown measures--but also, there's also some safety measures that might make some automation technologies more safe than human workers, right? So there's an element of that. On the other hand, you know, this pandemic also gave me another reflection that many of us- or, many people thought that humans were already kind of obsolete, and humans were no longer needed, and this pandemic kind of made me revisit that view because it does suggest that humans are still extremely important for the country. JPPE: [laughing] Yeah. Restrepo: Extremely important, right? You take out the human element, and the economy completely gets destroyed. JPPE: And human contact too. Restrepo: Yeah. Absolutely. So, you know, it's not only about production, but so much of our economy is about humans interacting with other humans, and human contact that- it also kind of gives me some pause. Yeah, maybe, sure, maybe we're going to automate a lot of jobs, but maybe there's- you know, the economy's increasingly becoming more intensive in the sort of activities that, by their nature, they're just not automatable. Or we don't want to automate them because the quality of the goods that we are consuming then, they're dependent on human interaction, right? JPPE: Mm. And certainly I think there are instances- I mean, the skeptics that I've talked to about AI have definitely brought up instances; they'll pull up a treasure trove of articles where someone says, "We can now automate kindergarten teachers." Restrepo: Exactly. JPPE: And then we could do some polling on the number of moms and dads that would be happy with a robot teaching their kids- or, their kindergarteners. Restrepo: Yeah. Absolutely. JPPE: [laughing] But, so, I did want to ask more about the social and political side of this as well, and I don't mean to be flippant with this question, but I wanted to know why inequality is necessarily a bad thing. Restrepo: Great. I think that that's a great question, and I think that the answer is that it's not necessarily a bad thing, at least in my mind. Let me tell you the feature about current inequality that I think is absolutely a bad thing. I think that the problem with current inequality is not- I mean, you can have inequality for two reasons. You can have inequality because everyone's incomes are growing, but some incomes are growing much more rapidly than others. Right? Maybe there are some political, philosophical, or ethical reasons to be opposed to that type of inequality. Okay. But there, I don't think there's a very strong argument that everyone should agree that that type of inequality is very bad. Because that type of inequality might reflect, "Oh, maybe the people whose incomes are growing more, it's because they started a business." Right? You know, like Bezos. But Bezos has- is like a billionaire. But I would say yeah, if you ask me, I think that--well, maybe I'm more stating my case here, but--yes, he deserves to be a millionaire because-and a billionaire, because the product that he created delivers a lot of value, right? So I think that there's a chunk of inequality that is good and that I'm not opposed, at least, in terms of first principle. But. I do think that the nature of contemporary inequality is very different from that story that I was telling. Contemporary inequality is not just about some people who came up with great ideas, and their incomes grow a lot, and all of our incomes kind of grow just if we happen to work hard, and so on. Contemporary inequality, if I had to describe it, has this feature that we see groups of society who are worse off than before. So it's not just how incomes are growing. It is that some incomes are falling in real terms. And for me, that is something that is just... the biggest contemporaneous problem. That we have people who are worse off than their parents, than their previous generation. So if, in the U.S., you are a person who has high school or less than a high school degree, who comes from a poor background, actually your parents were better off than you in terms of labor market income. And that's kind of the scary aspect of inequality, that it's not even progress, but sometimes it means no progress at all for some society. That's the reason that makes me worry. And those groups, of course--I mean, that's going to have political implications, everything. But just from a humanity perspective, I think that as a society we can afford- I mean, we should aspire for trying to make everyone gain from technology, everyone gain from globalization, there shouldn't be anyone who is worse off than a person like him or her 30 years ago. JPPE: Mm. Mm. Yeah, and so, I mean, there is the data from Thomas Piketty and Emmanuel Saez that tries to quantify how that inequality is today; and from what I have seen, it shows that it's roughly where it was at in the early 20th century. And so when you think about automation in conjunction with the general financialization of the economy, the rise of private debt, the extension of credit in the economy, do you feel like now is a particularly vulnerable moment for a shock to inequality through digitally-enabled automation? Restrepo: Yeah, absolutely. I think that part of the problem is that there's no safety net in this country. I mean, the safety net is kind of like- I mean we are seeing that with COVID, right? There's people whose finances are in an incredibly vulnerable position. And so imagine that you're in your 30s, you're in 40s, you have some debts, you don't own a lot of assets, and then they come out with this software that can do exactly what you're doing at your work, right? You are screwed! There's nothing you can do. JPPE: [laughing] Yeah. Restrepo: And then we turn to economists and the economists said, ‘no, because people can re-train, and people can relocate, and we're going to take that person and make that a coder, right? Or a software engineer.’ That's not going to happen! That's kind of like a lost generation there. And I think that we should care more about that potentially lost generation. JPPE: Mm. And in terms of reducing inequality, I actually- a month ago, I got to speak with historian Walter Scheidel on his thesis and The Great Leveler, that inequality only gets reduced or leveled by mass military mobilization, civil war, plague, or government collapse. And what was so striking about reading his book and talking with him was, it seemed to--on some level--be in opposition to a lot of the language in economics that seems to frame inequality and shocks as almost cyclical in nature, where there's a short run and a long run. And it seemed like Professor Scheidel's point was essentially that actually, there's been these exogenous forces in the form of, essentially, catastrophe, that have reduced inequality. And I'm wondering what your thoughts are on that. Restrepo: Yeah. So I think that for economists in general, I wouldn't say that inequality's just a cyclical phenomenon. I mean, if you read the labor economics literature, there's a lot of literature kind of emphasizing these trends and it's long-run trends. So like, over the long run, what we are seeing is that someone who has a college degree is earning much more than someone who does not have a college degree. And that just keeps expanding and expanding and expanding, and decelerated a bit and so on. But you know, there are these big trends. I wouldn't say that it's only about shocks. But I do think that economists emphasize much more the role of technology than politics. Right? I mean, there are some fields in Economics that emphasize much more the role of politics, and I think that in these shocks that you're mentioning, what needs to happen is a big shock, so that it triggers political reform, and so on. And that perhaps hasn't been so much included into the language of economists. The other thing that I would like to say is that, while I think that thesis is kind of interesting, you also see a lot of variation across countries. When you look at the data that are countries that technology is kind of universal- I mean, I was telling you about, you know, the Germans were the ones who invented industrial automation, same as Japan. And they don't have as much inequality as we do here in the U.S., right? That's also kind of a choice; I don't think that you need to have a war to reduce inequality. But you need to have more progressive taxation, and I mean when you think about inequality, that's the first thing that you should do! I mean, it's very simple. I mean, simple, technically. Politically, it might be difficult, but the solution is clear. JPPE: Right. And so, what do you think about proposals like a universal basic income, or a progressive basic income, or any variation of that? Negative income tax, and so on. Restrepo: Yeah, I think that anything that looks like a negative income tax, I think that would be greatly beneficial. Anything that looks like an earned income tax credit, that is subsidizing work for low-wage workers would be very beneficial. Also because it helps convince firms not to automate those jobs, so part of those jobs are subsidized. Anything like a universal basic income, I mean, I think it's- again, I like the idea; I don't like the idea of a universal basic income essentially substituting the whole safety net. I think that still having a government that buys insurance and that supplies all our programs that are more targeted to whoever it's useful. But I think that the spirit of all of these things is the same. We need a better safety net, right? And so, if you implement it one way or the other; if politically this is more feasible than this...I don't know. I'm fine. I just think that we do need some more safety net. JPPE: Right. So the last question I wanted to ask is: looking to the future, what are some open questions that you think would be really interesting to look at, either on inequality alone, or on automation and inequality and so on? And also, if not questions, some areas of research that you think, thus far, have been untapped. Restrepo: Perfect. So let me start with the first one. I think that one of the things that I find more puzzling about current technologies is that if you look at the labor market, you would conclude that there is a lot of disruption. You would conclude that there's inequality; the prices of different skills are changing the nature of jobs is changing; the types of jobs that we are posting are changing the skills that the labor market is valuing are changing. From looking at that, you would think, "Oh, technology is advancing at this amazing pace," but when you look at productivity, there's not a lot of productivity growth. And you know, this lack of productivity growth has been used by many to argue that automation, or that technology, is not a concern. So like, I saw that you did an interview with Paul Krugman at some point. JPPE: Yeah. He brought it up. Restrepo: Yeah, and I think he made that point. And I think that that point is kind of misguided. Because I think that one of the interesting things about automation technologies is that--and you already mentioned that this is something that we emphasize a lot--is that you can have automation without big productivity gains. And let me just give you an example of why that is the case. Imagine that I'm a worker working in a supermarket checkout machine, right? And then someone comes and invents a self-service kiosk, or whatever, right? That innovation is going to substitute me; but in terms of cost, how much is it going to reduce the cost for the supermarket? Very little! Because the worker was already very cheap; the machine itself is very cheap, but not as much! Right? Installing all of the equipment, programming, all of that--at the end of the day, the productivity gains is, I don't know, 1%? Something even smaller than that, that's just a small part of the cost? So at the end of the day, you unroll this technology, you deploy this technology, you substitute all of the checkout clerks, right? So that's a chunk of the population, and what are the productivity gains from doing that? Not that big. They're not that big; it's just like, you saved a little bit on costs. So automation has this thing that as long as you save a little bit on costs, you're going to adopt it. So you can have the adoption of a lot of automation technologies that have very small efficiency gains. And I think that that principle has escaped current discussions about automation. People equate productivity or technology with automation. Automation is just one particular type of technology--concerning one particular component of productivity--that has this feature that it can generate big distributional impacts just by having small productivity gains. But I think that the interesting research question there is to try to understand, why are we adopting automation technologies that have such, very low productivity gains? And that our candidate- one candidate is perhaps taxation. Maybe we're doing this because we're taxing labor a lot so that's inducing us to adopt more automation, even if that's not very profitable, from an engineering perspective. Or maybe it's a cultural thing. So I think that those are the big, important questions. What determines the direction of technology? Are we going to keep focusing on automation, automation, automation? Or are we going to have a more balanced element of technologies that, in the long run, it's going to end up being more beneficial for all of those people--that I already discussed--that have experienced net losses in their income in the last 30, 40 years? JPPE: Professor Restrepo, thanks so much. Restrepo: Thanks. Thanks for having me, Julian.

Rebecca Berman Predictive Algorithms in the Criminal Justice System: Evaluating the Racial Bias Objection Rebecca Berman Increasingly, many courtrooms around the U.S. are utilizing predictive algorithms (PAs). PAs are an AI that assigns risk [of future offending] scores to defendants based upon various data about the defendant, not including race, to inform bail, sentencing, and parole decisions with the goals of increasing public safety, increasing fairness, and reducing mass incarceration. Although these PAs are intended to introduce greater objectivity to the courtroom by more accurately and fairly predicting who is most likely to commit future crimes, many worry about the racial inequities that these algorithms may perpetuate. Here, I scrutinize and subsequently support the claim that PAs can operate in racially biased ways, providing a strong ethical objection against their use. Then, I raise and consider the rejoinder that we should still utilize PAs because they are morally preferable to the alternative: leaving judges to their own devices. I conclude that the rejoinder adequately, but not conclusively, succeeds in rebutting the objection. Unfair racial bias in PAs is not sufficient grounds to outright reject their use, for we must evaluate the potential racial inequities perpetuated by utilizing these algorithms relative to the potentially greater racial inequities perpetuated without their use. The Racial Bias Objection to Predictive Risk Assessment ProPublica conducted research to support concerns that COMPAS (a leading predictive algorithm used in many courtrooms) is unfairly racially biased. Its re- search on risk scores for defendants in Florida showed: a. 44.9% of black defendants who do not end up recidivating are mislabeled as “high risk” (defined as a score of 5 or above), while only 23.5% of white defendants who do not end up recidivating are mislabeled as “high risk.” b. 47.7% of white defendants who end up recidivating are mislabeled as “low risk,” while only 28% of black defendants who end up recidivating are mislabeled as “low risk” (1). Intuitively, these findings strike us as an unfair racial disparity. COMPAS’s errors operate in different directions for white and black defendants: disproportionately overestimating the risk of black defendants while disproportionately underestimating the risk of white defendants. In “Measuring Algorithmic Fairness,” Deborah Hellman further unpacks the unfairness of this kind of racialized error rate disparity: First, different directions of error carry different costs. In the criminal justice system, we generally view false positives, which punishes an innocent person or over-punishes someone who deserves less punishment, as more costly and morally troublesome than false negatives, which fails to punish or under-punishes someone who is guilty. The policies and practices we have constructed in the U.S. system reflect this view. Defendants are innocent until proven guilty, and there is a high burden of proof for conviction. Because of this, the judicial system airs on the side of producing more false negatives than false positives. Given the widely accepted view that false positives (punishing an innocent person or over-punishing someone) carry a greater moral cost than false negatives (failing to punish or under-punish- ing a guilty individual) in the criminal justice system, we should be especially troubled by black defendants disproportionately receiving errors in the false positive direction (2). A black defendant mislabeled as “high risk” may very well lead judges to impose a much longer sentence or post higher bail than fair or necessary, a cost that black defendants would be shouldering disproportionately (in comparison to white defendants) given the error rate disparity produced by COMPAS. Second, COMPAS’s lack of error rate parity is particularly problematic due to its links to structural biases in data used by PAs. Mathematically, a calibrated algorithm will yield more false positives in the group with a higher base rate of the outcome being predicted. PAs act upon data that suggest a much higher base rate of black offending than white offending, and this base rate discrepancy can reflect structural injustices: I. Measurement Error: Black communities are over-policed, so a crime committed by a black person is much more likely to lead to an arrest than a crime committed by a white person. Therefore, the measured difference of offending between black and white offenders is much greater than the real (statistically unknowable) difference in offending between black and white offenders, and PAs unavoidably utilize this racially biased arrest data (3). II. Compounding Injustice: Due to historical and ongoing systemic racism, black Americans are more likely to live in conditions, such as poverty, certain neighborhoods, and low educational attainment, that correlate with higher predicted criminal behavior. Therefore, if and when PAs utilize criminogenic conditions as data points, relatively more black offenders will score “high risk” as a reflection of past injustices (4). To summarize, data reflecting unfair racial disparities are necessarily incorporated into COMPAS’s calculations, so unfair racial disparities will come out of COMPAS predictions. For all of these reasons—the high cost of false positives, measurement error, and compounding injustice—lack of error rate parity is a morally relevant attack on the fairness of COMPAS. By being twice as likely to label black defendants that do not end up re-offending as “high risk” than white defendants, COMPAS operates in an unfairly racially biased way. Consequently, we should not use PAs like COM- PAS in the criminal justice system. Rejoinder to the Racial Bias Objection to Predictive Risk Assessment The argument, however, is not that simple. An important rejoinder is based on the very reason why we find such tools appealing in the first place: humans are imperfect, biased decision-makers. We must consider the alternative to using risk tools in criminal justice settings: sole reliance on a human decision-maker, one that may be just as susceptible, if not more, to racial bias. Due to historical and continuing forces in the U.S. creating an association between dark skin and criminality and the fact that judges are disproportionately white, judges are unavoidably in- grained with implicit or even explicit bias that leads them to perceive black defendants as more dangerous than their white counterparts. This bias inevitably seeps into judges’ highly subjective decisions. Many studies of judicial decision-making show racially disparate outcomes in bail, sentencing, and other key criminal justice decisions (5). For example: a. Arnold, Dobbie, and Yang (2018) find, “black defendants are 3.6 percentage points more likely to be assigned monetary bail than white defendants and, conditional on being assigned monetary bail, receive bail amounts that are $9,923 greater” (6). b. According to the Bureau of Justice Statistics, “between 2005 and 2012, black men received roughly 5% to 10% longer prison sentences than white men for similar crimes, after accounting for the facts surrounding the case” (7). Consequently, the critical and challenging question is not whether or not PAs are tainted by racial biases, but rather becomes: which is the “lesser of two evils” in terms of racial justice: utilizing PAs or leaving judges to their own devices? I will argue the former, especially if we consider the long-term potential for improving our predictive decision-making through PAs. First, although empirical data on this precise matter is limited, we have reason to believe that utilizing well-constructed PAs can reduce racial inequities in the criminal justice system. Kleinberg et al. (2017) modeled New York City pre-trial hearings and found that “a properly built algorithm can reduce crime and jail populations while simultaneously reducing racial disparities” (8). Even though the ProPublica analysis highlighted disconcerting racial data, it did not compare decision-making using COMPAS to decisions made by judges without such a tool. Second, evidence-based algorithms present more readily available means for improvement than the subjective assessments of judges. Scholars and journalists can critically examine the metrics and their relative weights used by algorithms and work to eliminate or reduce the weight of metrics that are found to be especially potent in producing racially skewed and inaccurate predictions. Also, as Hellman suggests, race can be soundly incorporated into PAs to increase their overall accuracy because certain metrics can be distinctly predictive of recidivism in white versus black offenders. For example, “housing stability” might be more predictive of recidivism in white offenders than black offenders (9). If an algorithm’s assessment of this metric were to occur in conjunction with information on race, its overall predictions would improve, reducing the level of unfair error rate dis- parity (10). Furthermore, PAs’ level of bias is consistent and uniform, while the biases of judges are highly variable and hard to predict or assess. Uniform bias is easier to ameliorate than variable, individual bias, for only one agent of bias has to be tackled rather than an abundance of agents of bias. All in all, there appear to be promising ways to reduce the unfairness of PAs—particularly if we construct these tools with a concern for systemic biases—while there currently does not appear to be ready means to better ensure a judiciary full of systematically less biased judges. The question here is not “which is more biased: PAs or judges?” but rather “which produces more racially inequitable outcomes: judges utilizing PAs or judges alone?” Even if improved algorithms’ judgments are less biased than those of judges, we must consider how the human judge, who is still the final arbiter of decisions, interacts with the tool. Is a “high risk” score more salient to a judge when given to a black defendant, perhaps leading to continued or even heightened punitive treatment being disproportionately shown towards black offenders? Simultaneously, is a “low risk” score only salient to judges when given to a white defendant, or can it help a judge overcome implicit biases to also show more leniency towards a “low risk” black offender? In other words, does utilizing this tool serve to exacerbate, confirm, or ameliorate the perpetuation of racial inequity in judges’ decisions? Much more empirical data is required to explore these questions and come to more definitive conclusions. However, this uncertainty is no reason to completely abandon PAs at this stage, for PAs hold great promise for net gains in racial equity because we can and should keep working to overcome their structural flaws. In conclusion, while COMPAS in its current form operates in a racially biased way, this factor alone is not enough to forgo the use of PAs in the criminal justice system: we must consider the extent of unfair racial disparities perpetuated by tools like COMPAS relative to the extent of unfair racial disparities perpetuated when judges make decisions without the help of a tool like COMPAS. Despite PAs’ flaws, we must not instinctively fall back on the alternative of leaving judges to their own devices, where human cognitive biases reign unchecked. We must embrace the possibility that we can improve human decision-making by using ever-improving tools like properly crafted risk assessment instruments. Endnotes 1 ProPublica, “Machine Bias.” 2 Hellman, “Measuring Algorithmic Fairness,” 832-836. 3 Ibid, 840-841. 4 Ibid, 840-841. 5 National Institute of Justice, “Relationship between Race, Ethnicity, and Sentencing Outcomes: A Meta-Analysis of Sentencing Research.” 6 Arnold, Dobbie, and Yang, “Racial Bias in Bail Decisions,” 1886. 7 Bureau of Justice Statistics, “Federal Sentencing Disparity: 2005-2012,” 1. 8 Kleinberg et al., “Human Decisions and Machine Predictions,” 241. 9 Corbett-Davies et al., “Algorithmic Decision Making and the Cost of Fairness,” 9. 10 Hellman, “Measuring Algorithmic Fairness,” 865. Bibliography Angwin, Julia, Jeff Larson, Surya Mattu, Lauren Kirchner. “Machine Bias.” Pro- Publica. May 23, 2016. https://www.propublica.org/article/machine-bi- as-risk-assessments-in-criminal- sentencing. Arnold, Savid, Will Dobbie, Crystal S Yang. “Racial Bias in Bail Decisions.” The Quarterly Journal of Economics 133 , no. 4 (November 2018): 1885–1932. https://doi.org/10.1093/qje/qjy012. Bureau of Justice Statistics, “Federal Sentencing Disparity: 2005-2012.” 248768. October, 2015. https://www.bjs.gov/content/pub/pdf/fsd0512_sum.pdf. Corbett-Davies, Sam, Emma Pierson, Avi Feller, Sharad Goel, and Aziz Huq. “Algorithmic Decision Making and the Cost of Fairness.” In Proceedings of the 23rd acm sigkdd international conference on knowledge discovery and data mining , pp. 797-806. 2017. Hellman, Deborah. “Measuring Algorithmic Fairness.” Virginia Public Law and Legal Theory Research Paper, no. 2019-39 (July 2019). Kleinberg, Jon, Himabindu Lakkaraju, Jure Leskovec, Jens Ludwig, Sendhil Mul- lainathan. “Human Decisions and Machine Predictions.” The Quarterly Journal of Economics 133, no. 1 (February 2018): 237–293. https://doi. org/10.1093/qje/qjx032. National Institute of Justice. “Relationship between Race, Ethnicity, and Sen- tencing Outcomes: A Meta-Analysis of Sentencing Research.” Ojmarrh Mitchell, Doris L. MacKenzie. 208129. December, 2004. https://www. ojp.gov/pdffiles1/nij/grants/208129.pdf. Acknowledgments I would like to thank Professor Frick and Masny for teaching the seminar “The Ethics of Emerging Technologies” for which I wrote this paper. Thank you for bringing my attention to this topic and Hellman’s paper and for helping me clarify my argument. I would like to thank my dad for helping me talk through ideas and providing feedback on my first draft of this paper. Previous Next

State-Owned Banks and the Promise of an Equitable Financial Sector Elias van Emmerick Pomona College April 2021 This paper will propose that state-owned banks resolve many of the issues facing commercial banks today. To substantiate this claim, it will investigate specific areas where a state-owned bank would produce more favorable outcomes than a commercial bank, trace the steps required to establish such a bank, and evaluate a contemporary example of a state-owned bank, the Sparkassen 1. Introduction The financial sector increasingly takes up space in our economy. What originated as a means to an end (a middleman to collect and distribute funds) has for many become an end unto itself. Top students from prestigious universities across the globe desperately pursue jobs at investment banks, hedge funds, and private equity firms. For example, more than a third of Harvard’s class of 2017 pursued finance or consulting upon graduating. In fact, the finance, insurance, and real estate industries make up one fifth of domestic GDP, more than any other sector. At the same time, this industry has often brought us close to financial collapse. Nobel Prize winning economist Joseph Stiglitz describes the financial sector’s work as being at least partly “rent-seeking”: an economic activity that redistributes wealth (often from the poor to the rich), but does not actually generate meaningful increases in overall economic growth. As an economist would put it, they do not grow the pie, they simply take a larger slice of it. This paper will aim to investigate to what extent state-owned commercial banks could alleviate some of the major issues related to the financial sector we see today, and how they could do so. Subsequently, the paper will detail how the creation of a public bank could happen, as well as evaluate two existing state-owned banks, the Bank of North Dakota and the German Sparkassen. Finally, it will summarize contemporary efforts to establish government-owned commercial banks in the United States. Throughout this paper, I use a number of terms in a particular way. Specifically, I will make frequent use of the terms “liquidity,” “public,” and “bank.” I will take “liquidity” to mean the M2 money supply: the amount of cash, checkings and savings deposits, and time deposits available in the economy at a given time. “Public” will refer to ownership of an entity by the government, rather than an entity being publicly traded on the stock market. Finally, “bank” will refer to the commercial kind unless otherwise noted. This last distinction is important to draw, as many of the conclusions reached in this paper would not transfer to investment or merchant banks. 2. The Rationale Behind a Public Bank America has had a tumultuous relationship with private financial institutions, and a number of historical figures struggled with determining the role a finance sector should play. Andrew Jackson wrote that “if Congress has the right under the constitution to issue paper money, it was given them to be used by themselves, not to be delegated to individuals or corporations.” Jackson referred to what many contemporary economists consider to be a significant flaw of the private banking system: control over the money supply. Economists traditionally assume that the federal government regulates the money supply. The Federal Reserve (the Fed) can control the money supply by trading Treasury notes with commercial banks, or the Treasury itself can physically print more bills in order to increase the money supply. It is inherently desirable to have a government without a profit motive perform this function—unchecked increases in the money supply would lead to devastating inflation and a loss of faith in our currency. Furthermore, this also means that the government is able to control the amount of money in the economy during times of crisis, and to some extent prevent liquidity from drying up. Control over the money supply is a useful policy tool that is best wielded by the state, with the interest of its constituents in mind. The reality is that, by and large, the money supply is heavily influenced by the decisions of commercial banks. Economists have reached a consensus on what is known as the “fractional reserve theory of money creation.” This theory states that banks must lend out a percentage of each deposit they receive, equal to the total deposit minus the “reserve requirement”⁠—an amount set by the Federal Reserve that banks are required to retain of each deposit— as an insurance against bank runs. After the bank lends out this percentage of a deposit, the person who receives the loan theoretically deposits that money in another account, where a part of it is loaned out, and so on. Every person in this chain now has additional money in their account, and their spending decisions will be made accordingly. The original deposit was multiplied; thus, money was “created.” Conversely, banks may also decide to call back their loans or refuse to issue new ones. In effect, this results in a removal of money from the money supply. The diagram below illustrates how liquidity in the system increases through this process. Image 1: Illustration of the fractional reserve theory of money creation given a 10% reserve requirement The unfortunate truth is that this method of money creation works to exacerbate any swings in the wider economic environment. When the economy is heating up (and thus is experiencing inflationary pressures), banks will be more eager to lend money, which in turn will increase the money supply, thereby further increasing inflation. When the economy is in a rut, fewer loans will be extended, contracting the money supply and further pushing down spending and aggravating potential deflation. When banks follow “rational incentives,” meaning that they become less risk averse during periods of growth and more risk averse during economic slowdowns, the economy does not always benefit. One could argue that the Fed is tasked with preventing these swings. During economic booms they raise interest rates, which curbs lending, and during busts they lower them, which in turn boosts spending. The problem is that the government is now acting as a middleman, when this is a system they are supposed to have complete control over. Commercial banks’ role as distributor of liquidity has other downsides. Since these banks are asked to maximize shareholder value, they are incentivized to extend capital only to those who are likely to repay it. Individuals or businesses that are deemed high-risk are penalized with high interest rates and other unfavorable loan terms. This is not incompatible with prevalent economic theories. The bank is assuming the risk, and for taking on higher risk should be eligible to receive a larger reward. However, a closer examination reveals the perversity behind this idea. Access to capital is essential for a number of activities that can lead to prosperity. Home ownership, starting a business, or going to college all typically require some form of lending. Low-income individuals are thus required to pay a higher price, both in absolute and relative terms, for these opportunities. It is morally bankrupt, as well as socially undesirable, to make loans more expensive for those who already have very little, and there is substantial evidence that this system contributes to the “poverty trap.” Studies have shown that low-income individuals on average do pay more for any kind of loan. The Federal Reserve also found a positive correlation between income and credit score, and a number of other studies have further shown that minorities typically have lower credit scores, even when the data is controlled for disparities in income. There is a strong negative correlation between credit scores and interest rates payable on loans—the lower your score, the more you are asked to pay. It is understandable that banks employ this system, but that does not mean that it is beneficial to society as a whole. In essence, the credit score system is a regressive tax—the poorer you are, the more you pay. The graph below shows the average credit score of each income group on a bar chart and superimposes the median mortgage rate for each credit score. There is a clear positive correlation between credit score and income level, and a negative correlation between credit score and median mortgage rate. This data shows that income is in turn negatively correlated with mortgage rates; that is, the lower one’s income, the higher their mortgage rate is likely to be. Image 2: Median credit score and mortgage rate versus income. A public bank could step in and resolve this issue. It could extend loans not with the intent of making a profit, but rather with the intent of stimulating the economy. This might mean providing loans to low-income communities at break-even interest rates, as they are likely to spend that money in a way that benefits the wider economy. A public bank could further act as a tool for policymakers. If politicians want to stimulate homeownership and reduce emissions, mortgages could become cheaper and car financing more expensive. A public bank would provide a direct way of injecting money into desirable areas of the economy. Banks’ focus on generating returns for their shareholders costs the general public in a number of other ways as well. Most Americans have their checking and saving accounts with one of the major banks—37.6% of all deposits were placed with one of the five largest banks, and 30.82% were placed with one of the three largest. In fact, the five largest American banks control 56.9% of all assets held by U.S. banks. Today’s financial sector can be (and has been) accurately described as an oligopoly—a few key players control such a significant share of the market that they are able to work together and set rates in a way that is favorable to them. In this case, savings rates are artificially held down. As mentioned before, banks make money from each dollar they receive in deposits. Unfortunately, almost none of that money returns to their clients. Savings accounts at most commercial banks generate negligible interest, and checking accounts frequently cost money for those who deposit under a certain amount. Interest rates offered on savings accounts remain low, even as the Fed has increased its discount rate. The below graph shows the federal funds rate as compared to the average interest rate Americans received on savings below $100,000. Both were lowered after the 2008 financial crisis in an effort to discourage saving and encourage spending, but the federal funds rate has since increased significantly. In contrast, the interest rate on savings accounts has remained mostly stagnant. The profits banks make on deposits can be approximated by the difference between these two rates—the less they pay to depositors and the more they charge for loans, the more profitable lending becomes. Image 3: Average interest rate on savings accounts versus the federal funds rate A public bank would primarily aim to further public interest rather than make a profit, and is therefore more likely to offer a savings rate that closely mirrors the discount rate. Not only would this provide customers with a better alternative to the rates offered by commercial banks, it might also force banks to match that rate if they want to retain their clients. In effect, this would constitute a redistribution of wealth from the banks and their shareholders to the general public. Although online banks currently offer higher interest rates on savings accounts, they are rather niche and lack the visibility to threaten larger banks. An accessible, well-known public bank could succeed where these online banks have failed and significantly drive up the average interest rate on savings accounts. A lack of profit incentive would also reduce a public bank’s exposure to risk. In the years leading up to the Great Recession, nearly every bank filled their balance sheet with subprime mortgages and risky derivatives, even though they were aware of the risks associated with these products. Banks simply could not explain to their shareholders that they were going to hold off on products that were generating sizeable returns for their competitors. Commercial banks’ profit incentive has at times generated genuine financial innovation, but more often than not has caused them to cut corners and harm communities. Wells Fargo, for example, was convicted of engaging in predatory lending throughout the US in the years leading up to 2008. The bank knowingly extended credit to those who were unlikely to pay it back, charging high upfront fees and then passing the actual debt on to other firms. Wells Fargo knew the risks involved, but ultimately decided short-term profits were more important. Unlike traditional banks, a public bank would not answer to shareholders, but rather to elected officials who represent the public’s best interest. Research has already shown that banks who answer to a large number of shareholders are more risk-averse than those who answer only to a select group of the corporate elite. These findings could be extrapolated to infer that a bank that answers to the general population would be significantly more risk-averse than current financial institutions. Public banks clearly offer a solution to many of the issues our financial system struggles with today. A wholly different incentive structure would allow these banks to deploy capital where it would stimulate the economy, rather than where it would only generate profits for the bank. The absence of a responsibility to shareholders would lead to higher interest rates on savings accounts and the adoption of a more sustainable risk profile. As a competitor to commercial banks, a public bank would realign the industry to be more concerned with the needs of its customers. Regardless of a public bank’s merits, the US is currently home to just one public bank, whose assets total $7 billion–about 0.004% of total commercial bank assets. The next section will investigate the steps required to create a public bank and discuss potential pitfalls in the process. 3. Creating a Public Bank During the 2008 recession, the government could have created a national public bank simply by taking over an existing commercial bank. The value of most commercial banks’ balance sheets had dropped drastically following the collapse of mortgage-backed securities, making them an easy target for takeovers. Although this solution may have ultimately generated more returns for taxpayers and fewer for wealthy shareholders than bank bail-outs did, it would have created a set of unique and difficult-to-solve challenges. Balance sheets would have to be cleaned of toxic and risky assets, and the bank would have to gradually reduce its exposure to financial products that are not in line with the mission statement of a public bank. Entire divisions that handled these products would have had to be laid off, and many clients might find that services they used would no longer be on offer. Luckily, our current economic outlook is a lot rosier than it was a decade ago, and few banks (perhaps with the exception of the ever-troubled Wells Fargo) seem in danger of failing any time soon. A public bank would thus need to be created from scratch—something that would allow for greater control over the bank’s structure and design. A number of states and cities (Vermont, New Jersey, Massachusetts, Los Angeles, San Francisco, etc.) have conducted or are in the process of conducting feasibility studies for the creation of regional public banks, and as such, there is a substantial range of literature available with detailed descriptions of the steps required to start such a bank. Although many studies have focused on public banks as providers of capital for infrastructure investment and providers of solutions for state financing needs, the basic principle behind their construction remains the same. The technicalities behind a bank’s creation are simple. The bank needs to have sufficient assets to begin lending, a few employees, and physical branches. Typically, feasibility studies assume the city or state responsible for creating the bank would move its current cash reserves to the new bank, thereby providing capital without the need for loans or other costly financing techniques. The only existing American public bank—the Bank of North Dakota—was initially financed by a $2 million bond offering in 1919, which would amount to about $29 million today. Research suggests that, due to the increased complexity of the contemporary economy, the required capitalization would be closer to $325 million. Since most states hold a multiple of that amount in commercial banks currently, it is unlikely that a bond offering would be necessary today. California, for example, holds nearly $15 billion in its “rainy day” fund alone. A public bank would have the local government as its sole shareholder, and any returns it made would be returned to the state or city in which it is located. As such, public banks would prevent capital drain to out-of-state bondholders and keep profits within the local economy. The creation of a public bank would be relatively uncomplicated, and a variety of feasibility studies have cited high potential upsides. For example, a public bank in New Jersey would generate about $16-21 million in additional state output, and raise state income by about $3.8-5.2 million, for every $10 million lent out. Furthermore, for every $10 million lent out the bank would add roughly 60-93 new jobs. Yet, strong opposition to the idea exists. In Maine, a bill to commission a study on the effects of a public bank failed to pass the state legislature, even though 72% of small businesses and farmers in the state supported the creation of a state-owned bank. Opponents often cite currently adequate availability of credit through commercial channels and increased risk to state assets as arguments against a government-controlled bank. Internationally, the idea has also fallen out of favor with economists, who claim that public banks are often inefficient and influenced by political pressures. The next section of this paper will investigate a current example of a state-owned banking system to determine the merits of these arguments. 4. Public Banks Today a. The Bank of North Dakota The Bank of North Dakota (BND) is the United States’ only existing example of a government-owned bank, and it is often cited as an example of the potential benefits of such an institution. The bank certainly has reported impressive figures since its founding in 1919. As shown in the graph below, it has made a net profit every year since its founding, even during the Great Depression and the Great Recession. Image 4: Yearly profits of the Bank of North Dakota Additionally, the bank has managed to return much of that profit to the state government, keeping North Dakota from running a budget deficit when other revenue sources have fallen short. The historical context surrounding the bank’s founding is oddly reminiscent of our contemporary situation—around the start of the 20th century, a populist movement in North Dakota renounced the high fees farmers were being charged by out-of-state financiers and pushed for a local bank that would be tasked with “promoting agriculture, commerce and industry.” Local commercial banks were concerned that a public bank would drive them out of business and managed to convince the legislature to impose strict limits on what would become the BND. Initially, the bank was “prohibited from opening branches, engaging in retail banking, and providing commercial lending other than farm real estate loans.” A number of these restrictions were later loosened, but the bank still is not a real substitute for a commercial bank. The BND operates conservatively, shows itself to be risk averse, and sees “maintaining a strong and stable balance sheet” as a key priority. In this sense, it has been hard to use the success of the BND as an argument for public banks in the broader United States. The bank does provide affordable loans for small businesses (albeit not for individual consumers), but “roughly 50 percent of the bank’s loan portfolio consists of loan participations and loan purchases from community banks,” rather than regular loans. During financial crises, the bank helps to maintain liquidity in the markets, but it does so by purchasing loans from smaller banks rather than by actively extending loans. The BND is a successful experiment in state-ownership of banks, but the restrictions imposed on it by the legislature prevent it from being a truly transformative force. Its lack of access to consumers and emphasis on cooperation with commercial banks mean that most North Dakotans are still forced to obtain the majority of their financial services from for-profit companies. Furthermore, the legislature’s eagerness to use profits from the BND for state expenditures means that the bank is still required to make a profit—the only difference is that this money goes back into the local community, rather than towards mostly wealthy shareholders. The bank’s conservative approach to investments may also not produce socially optimal outcomes seeing as many investments with significant potential upsides, such as small business loans or mortgages for low-income families, have a fairly high risk profile. Instead of maintaining a low-risk balance sheet, the BND could focus on providing loans that “serve a social purpose but that the private sector would find too risky.” It is also important to note that the BND has operated independently of political forces. Rick Clayburgh, president of the North Dakota Bankers Association and former state tax commissioner and state legislator, has said: “Our legislature... has kept their politics out of the governance of the Bank of North Dakota”. The supposed interdependence between public banks and the legislature is an oft-cited criticism against public banks, and this paper will explore the veracity of this claim further in the following chapters. In the case of the BND, concerns of the legislature influencing the bank’s decisions appear to be unfounded. The Bank of North Dakota is a successful institution, but it has hardly lived up to the disruptive potential of a public bank. More than anything else, the BND shows that merely having a state-owned bank is not enough to achieve the goals set out at the start of this paper—a bank has to provide a viable alternative to the commercial banking sector, as well as have a set goal of promoting investments that serve a social purpose, if it is to meaningfully change the way the finance sector operates today. b. Germany’s Public Banks: The Sparkassen Germany’s commercial financial sector consists of three “pillars”: commercial banks, cooperative banks (owned by their customers), and public banks. Examples of the last include the aforementioned Sparkassen and Landesbanken, which engage in wholesale banking, as well as the LBS Bayerische Landesbausparkasse, a public sector loan and building association. Sparkassen are a unique example of state-owned, easily accessible banks that offer basic commercial banking services to consumers and small- to medium-sized enterprises (SMEs). The Sparkassen have been operating since 1778 and were originally founded by merchants hoping to support local communities. Today, the Sparkassen have over fifteen thousand branches and control over €2 trillion in assets. The banks operate in a decentralized manner with strong geographic boundaries, meaning that each city or region has its own Sparkasse that serves local clients and provides loans for local investments. The banks are owned by the cities or regions in which they operate but are also are backed by a national organization that maintains a “rainy day fund” which Sparkassen can tap into, so that a region of Germany experiencing financial distress can obtain support from Sparkassen in prospering regions. Image 5: Representative structure of the Sparkassen system Germany’s Sparkassen are mandated by law to serve the public interest and promote regional development. In fact, their success is measured not by returns generated for shareholders or profit, but by their impact on the communities they serve. Stakeholder value, rather than shareholder value, is the key metric by which these banks are judged. Instead of generating profits for those who invested in the bank, the Sparkassen are required to deliver returns for local stakeholders. Such stakeholders include local residents, small businesses, and municipal governments. The banks are highly popular with their audience, with about 70% of all SMEs obtaining their financing from a Sparkasse. About 60% of all Germans interact with these banks in some way, with low-income families specifically making up the largest part of the Sparkassen’s customers. This broad reach is partly because of their indiscriminate approach to banking—they are mandated to not deny anyone a savings account, and they must provide the same rate of return for each customer. Furthermore, the legislature explicitly states that Sparkassen are supposed to “satisfy the credit demands of local businesses.” Besides serving customers and enterprises, Sparkassen fund socially desirable projects with the express intent of promoting the public interest. The banks together provided €488 million (about $550 million) to social projects in 2018 alone, and a 2015 report estimated that the banks added about €20 billion in value to local communities that year, equal to about 0.66% of Germany’s 2015 GDP. They also provide significant funding for start-ups, infrastructure repairs, and other socially desirable activities. Notwithstanding the several benefits associated with the Sparkassen system, the banks have been regularly criticized by European and American economists alike. Many of these critics primarily take issue with the concept of a state-owned bank rather than with a specific issue present in the system, but others have identified some salient flaws in the way the Sparkassen are run. Political involvement in the day-to-day operations of the banks has been and remains an area of concern. A study by the Brussels-based think tank Bruegel notes that, in the eight states they surveyed, 83% of the Sparkassen’s board chairs were current county heads or municipality heads. In five out of eight states, every single board chair was a current politician. More broadly, 18% of board members were politicians. Moreover, in the only state where politicians publicly declare their income, board chair fees made up an average of 12% of a politician’s income. The mayor of Regensburg, the fourth-largest city of Bavaria, is currently standing trial for accepting significant campaign donations from a real estate developer, allegedly in exchange for a favorable loan from the Sparkasse where the mayor held a board seat. Such cases are rare, but the degree of entwinement between politicians and the public banks is certainly cause for concern. Little research has been done on inefficiencies in the Sparkassen system caused by political entanglement, so the severity of these findings remains unclear. An American public bank could certainly model itself after the Sparkassen, but it might benefit from an explicit separation between currently serving politicians and the bank itself, if only to maintain public trust in the system. 5. Looking Forward: Public Banking Initiatives in the United States The public banking movement has seen a resurgence of sorts in the last decade, and a number of states and cities have introduced legislation to either establish a public bank or to conduct feasibility studies. Most notably, current New Jersey governor Phil Murphy ran his campaign partly on the promise of establishing a public bank, and he sponsored a bill on his first day in office to achieve that goal. Maine, Vermont, and New York have also voted on bills to establish state banks. Image 6: Public banking efforts by state Feasibility studies have generally predicted positive results. For example, a 2011 feasibility study predicted that a public bank would generate 3,500 new jobs in Maine, a 2013 study found that a public bank would create about 2,500 new jobs and $200 million in value added to the economy in Vermont, and a study for the city of Santa Fe found that every $1 million in lending from a public bank would generate an additional ten jobs in the local economy. Exceptions are the feasibility studies for California and DC. Both studies found that establishing a public bank would be legally difficult and capital intensive. The DC study is interesting in that it heavily relied on advice from the Federal Reserve, which stated that the income a city or state can gain by having a public bank is "relatively minor" and that the risk of losses is "real.” It is important to note that the Federal Reserve might have an inherent aversion to public banks, as these are not placed under the Fed’s supervision. Aside from this criticism, the DC study also found that public banks would spur local economic development and infrastructure investment, as well as reduce risk exposure of the financial system. The final version of the DC report is still being edited and is due to be released sometime later this year. Feasibility studies may have produced mixed results, but there has been nothing mixed about the legislative response to the idea of public banks. Maine’s bill was sent back from committee with a majority saying it should not pass. Vermont’s bill to establish a public bank did not pass either (although the legislature did approve $350 million in local investment instead), and New Jersey seems to have put its plans for a public bank on hold. As of today, North Dakota remains the only state with a public bank. The idea is seen as overly socialist by many, and as overly complex and costly by others. The DC feasibility study claimed that direct government spending towards socially beneficial programs would be far less complex and costly than establishing a public bank, which seems to be an argument that many lawmakers have bought into. Legal challenges also cause many legislators to view public banks unfavorably. Specifically, many state constitutions have provisions against “lending the credit of the state.” However, the Supreme Court’s ruling in Craig v. Missouri holds that such provisions “[do] not interfere with the power of a state to authorize banks to issue bank notes in the form of due-bills or of similar character, intended to pass as currency on the faith and credit of the bank itself, and not of the state which authorizes their issuance.” As such, banks (public or commercial) are able to provide credit that passes as currency. In Briscoe v. Bank of Commonwealth of Kentucky (1837), the Court held that Kentucky’s state bank did not violate the Constitution, as its loans contained “no pledge of the faith of the state for the notes issued by the institution.” The issue at hand is whether activities that are at the core of the bank’s operations (lending, investing, etc.) are explicitly backed by a government guarantee. If so, public banks would have an unfair advantage over private banks. So far, no proposal for a state bank has indicated that the bank would rely on such a state-sanctioned “pledge of faith,” and as such, it is unlikely that the constitutionality of a public bank could be challenged on these grounds. Furthermore, the Bank of North Dakota is proof that it is constitutionally permissible to operate a public bank. 6. Conclusion: An Uncertain Future There is a strong case to be made for the establishment of regional public banks throughout the United States. Increased control over the money supply, greater access to affordable loans for low-income families and small businesses, higher returns on savings accounts, and a lower risk profile would all result from having a public bank in place. As it stands, commercial banks largely engage in rent-seeking behavior. Predatory lending practices, low interest on savings accounts, and high credit card rates serve to generate profits for large banks by taking money from the economically vulnerable. The IMF has found that, as the financial sector grows relative to the size of the economy, inequality increases. Recent research by economists at Columbia University confirms this rise in inequality, and further found that this effect is not significantly offset by the easier access to credit financial markets supposedly provide. As it stands, encouraging progress is being made in many places. Feasibility studies are an important first step in moving this idea into the mainstream, and we might soon see a bill to establish a state bank appear in New Jersey. However, the unfortunate truth remains that lawmakers view public banks unfavorably. Beyond the practical hurdles associated with establishing one, there seems to be a general sentiment that a public bank would not fit with the capitalist ideals of the United States. Lenin’s claim that “without [public] banks, socialism would be impossible. The big banks are the ‘state apparatus’ which we need to bring about socialism [...]” has fundamentally linked the idea of a state bank with an overly leftist vision for many. I would argue that a public bank is fundamentally American. It is a state apparatus that enables the government to more efficiently support entrepreneurship, local communities, and infrastructure. A public bank, if given proper direction, could facilitate the achievement of the elusive American Dream. The Founders vocally opposed monopolies, championed a stable currency, and believed all should be able to acquire property and benefit from public infrastructure. Stiglitz wrote that, Rather than justice for all, we are evolving into a system of justice for those who can afford it. We have banks that are not only too big to fail, but too big to be held accountable. [...] The only true and sustainable prosperity is shared prosperity. Commercial banks today are hurdles keeping us from innovation, wealth creation, and achieving equality. A bank should facilitate the dreams of entrepreneurs from all backgrounds, not just those from Silicon Valley. It should not charge the poor more than the rich. In many ways, commercial banks violate some of the core values on which this country was founded. In short, there is nothing un-American about a state bank. 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*Feature* Jorge O. Elorza Jorge O. Elorza Mayor of Providence, RI Spring 2018 The strength of a society is a function of how equally its members share in its growth and progress. In a time when people throughout the country feel as though they are being left behind, Providence has invested in a full cradle-to-career approach to help all of our residents reach middle class by middle age. There is no single intervention that is either necessary or sufficient. Instead, what makes the difference is two fundamental beliefs: first, the understanding that a comprehensive infrastructure of support is required in this work, and second, that the community itself must be involved in designing the system. The City is taking a holistic approach to our economic revitalization process by hosting hundreds of community conversations across the City to help inform decisions around major projects. After hearing from our residents, we’ve prioritized investing in innovative educational programming to address historic inequities; creating dynamic workforce programs more suitable for an inclusive new economy; and leveraging our inherent strengths to produce more sustainable growth. One of our City’s greatest strengths is our diversity – nearly 60 percent of our public-school students come from homes where English is not the primary language spoken. Combined, students and their families speak 31 different languages and hail from 52 countries of origin. As mayor, one of my priorities has been to invest in innovative cradle-to-career programming to give all our students a competitive advantage in their education and eventually, in their future careers. The City has hired school culture coordinators for all middle schools who will serve as role models and provide support to students. To answer calls for better facilities, the Administration also announced a plan to invest up to $400 million in school infrastructure throughout the next 10 years. A yearlong public visioning process for school repairs, in which hundreds have already participated, was launched for a five-year plan that will later be submitted to the State. Here in Providence, only one out of three kindergarten registrants enter the classroom at the appropriate literary benchmark. Through Providence Talks, a nationally recognized program that aims to close the 30 million-word gap that separates children who grow up in less affluent homes from their peers who are raised in middle- and high-income households, we are working to ensure that every child enters kindergarten ready to succeed. By providing free or low-cost innovative programming and initiatives, we are making sure that students will continue to build upon the strides they make all school year long. Our Eat, Play, Learn summer initiative ensures that our youth are spending their summers participating in outdoor, educational and thoughtful programming. Last year, we served over 188,000 free summer meals and distributed 15,000 summer reading passports where students could track their reading progress. Providing students with tools and resources needed to succeed in the 21st century is also among the highest priorities. That’s why we’ve set an ambitious goal of providing every Providence student with access to a tablet, laptop or computer in the classroom by the end of this summer. To close the digital divide, the City launched a partnership with Sprint, which has committed to providing 600 kids from all ten high schools with free 24/7 access to high speed internet throughout their high school careers. We’re also helping adults adapt their skills to the changing demands of our economy. With the launch of the Office of Economic Opportunity in July 2017, the City undertook critical work to provide training, support and resources to residents, particularly those unemployed or underemployed, to connect them to employment or prepare them to launch their own business. The City also supported Amos House’s A Hand Up program, which has offered over 350 people experiencing homelessness daily work opportunities. Through the Providence Business Loan Fund (PBLF), we’re helping existing businesses launch, scale and innovate, promoting economic dynamism and productivity. Under my administration, the PBLF has been restructured and rebranded and now has a board knowledgeable in lending practices with upgraded loan underwriting and record-keeping standards. Over the last three years, the PBLF has issued nearly $2 million in loans to help local businesses expand and create new employment opportunities. As the City is working to couple students, residents and entrepreneurs with better opportunities, we must also improve connectivity between our world-renowned public and private organizations to create new prospects for collaboration. Providence is an educational powerhouse – we are home to eight colleges and universities including Brown University, Rhode Island School of Design and the culinary arts institute Johnson & Wales University. In addition to these assets, we also possess eminent healthcare and cultural institutions. The City of Providence is teaming up with these institutions to expand employment opportunities and reinvent our Downtown. Partnering with Brown University, the University of Rhode Island College of Nursing and Rhode Island College and the state, the City could redevelop a century-old power station – one of its most iconic and beautiful buildings – to produce one of Providence’s greatest historic preservation success stories. This project is a perfect example of what is possible when the private sector joins with ‘Anchor Institutions’ to make something meaningful happen. Preserving and reusing our historic former industrial spaces is creating new energy in our Downtown Jewelry District, catalyzing development in the I-195 land, and promoting the new knowledge and innovation-based economy. When I-195 was relocated and 20 acres of Downtown land was suddenly made available for redevelopment, we were able to capitalize on this momentum to attract the interest of distinguished organizations such as Wexford Science & Technology and Cambridge Innovation Center. Providence is utilizing our inherent strengths and new tools to leverage rapid growth in ‘New Economy’ sectors such as food and biotechnology. In addition to having some of the most critically acclaimed restaurants in the country, Providence is growing as a food hub. As consumers are increasingly focused on healthier, locally-sourced and sustainably-produced foods, Providence is strategically positioned to take advantage of this economic trend. Food production, processing and other commercial industries can provide light manufacturing jobs to Providence residents as locally-sourced foods become more popular. Take, for instance, the case of Farm Fresh RI – Farm Fresh began in 2004 as a student project at Brown University to develop a direct connection between local farmers and residents. The nonprofit now operates 11 farmers markets, coordinates the distribution of more than $2.2 million in locally-grown food to more than 80 vendors and 200 customers annually and operates two Harvest Kitchen programs that have trained more than 300 young people who were directed into the job-training program through the state’s juvenile justice system. This model represents a paradigm shift in the way that we think about – and support businesses. Farm Fresh was recently awarded an $850,000 loan through the PBLF to relocate from Pawtucket to a 60,000-square-foot building it plans to construct on 3.2 acres in our Valley neighborhood. An attractive factor of the national trend is that when investments are made in local food, those dollars are reinvested in creating jobs and spurring the local economy. That’s why it’s particularly a growth area that we want to emphasize. In Providence, we’re preparing our talent and organizing our assets to produce long-term sustainable growth that is both inclusive and equitable. By making long-term investments in our schools and students, we’re inspiring the next generation to learn and empowering them to succeed. Through innovative workforce development programs and public-private partnerships, we’re catalyzing economic growth and attracting significant investments while creating sustainable employment opportunities for all of our residents.

Mark Carney The Road to Glasgow is Paved with Data Mark Carney In a little over a year, the world will converge physically and virtually on Glasgow for COP26 hosted the United Kingdom in partnership with Italy. It will then be six years after the landmark Paris Accord, and the stakes could not be higher. Despite prolonged lockdowns of large swathes of the global economy, the earth’s car- bon budget continues to be rapidly depleted, the physical risks of climate change continue to mount, and the sixth mass extinction continues to progress. Paris was a triumph of commitment and process. Commitment by [193] governments to limit temperature rises to below 2 degrees, with a stretch target of 1.5 degrees. Process in the innovation of Nationally Determined Contributions, whereby countries set their own pledges, and the world transparently added them up to see whether those efforts did the job. That calculation, 2.8 degrees of warm- ing even if all countries fulfilled their pledges, was as sobering as it was disciplined. And it set the tone on the road to Glasgow: climate policy in the public and private spheres would be driven by data and data analytics because slogans won’t solve an existential crisis. In the event, many countries have fallen short of their pledges, and the IPCC estimates that the world is on course for up to 4 degree warming by the end of the century. At current rates of emissions, we have less than a decade left to stay within the carbon budget that keeps temperature rises below 1.5 degrees with 50% probability. Getting back on track will require a redoubling of public efforts and a quantum change in private investment. The IEA estimates that the low-carbon transition could require $3.5trn in energy sector investments every year for decades – twice the rate at present. Under their scenario, in order for carbon to stabilise by 2050, nearly 95% of electricity supply will need to be low carbon, 70% of new cars electric, and the CO2 intensity of the building sector will need to fall by 80%. For private markets to anticipate and smooth the transition to a net zero world, they need the right reporting, risk management, return optimisation. Our objective for Glasgow is to build these frameworks so that there is a new financial system in which every decision takes climate change into account. This requires a fundamental reordering of the financial system so that all aspects of finance— investments, loans, derivatives, insurance products, whole markets—view climate change as much a determinant of value as creditworthiness, interest rates or technology. A world in which the impact of an activity on climate change is a new vector, a new determinant, of value. Doing so requires new data sets and new analytic techniques. The challenges are enormous and the timescales tight, but the prize are protecting the planet while seizing the greatest commercial opportunity of our time. In order to bring climate risks and resilience into the heart of financial decision making, climate disclosure ( reporting ) must become comprehensive; climate risk management must be transformed, and sustainable investing ( returns ) must go mainstream. Reporting Catalysed by the G20 and created by the private sector, the Task Force on Cli- mate-related Financial Disclosures (TCFD) is a comprehensive, practical and flexible framework for corporate disclosure of climate-related risks and opportunities. Since the TCFD set out its recommendations for climate-related disclosures, there has been a step change in both demand and supply of climate reporting. The demand for TCFD disclosure is now enormous. Current supporters control balance sheets totaling $140 trillion and include the world’s top banks, asset managers, pension funds, insurers, credit rating agencies, accounting firms and shareholder advisory services. The supply of disclosure is responding, with four fifths of the top 1100 G20 companies now disclosing climate-related financial risks in line with some of the TCFD recommendations. Suitable for use by all companies that raise capital, the TCFD recommendations include a mixture of objective, subjective and forward-looking metrics: - Include disclosure of governance , strategy and risk management ; - Establish consistent and comparable metrics applicable across all sectors, as well as specific metrics for the most carbon-intense sectors; and - Encourage use of scenario analysis so as to consider dynamically the potential impact of the risks and opportunities of the transition to a low carbon economy on strategy and financial planning. The TCFD will call on new skills from measuring Scope 3 emissions to assessing strategy, risk and performance under different climate pathways. The next step is to make these disclosures mandatory through initiatives by national authorities, regulators and international standard setters. Understanding and using such forward-looking impact disclosure will become a core skill across the private financial sector. Risk management The providers of capital—banks, insurers, asset managers—and those who supervise them all need to improve their understanding and management of climate-related financial risks. Changes in climate policies, new technologies and growing physical risks will prompt a reassessment of the value of virtually every financial asset. Firms that align their business models to the transition to a net zero world will be rewarded handsomely. Those that fail to adapt will cease to exist. The longer meaningful adjustment is delayed, the greater the disruption will be. Climate risks differ from conventional risks in several critical respects, including: Their unprecedented nature. Past experience and historical data are not good predictors of the probabilities in the future. Indeed, as the insurance industry has learned, yesterday’s tail event is becoming today’s central scenario. Their breadth and magnitude . They will affect every customer, in every sec- tor in every country. Their impact will likely be correlated, non-linear, irreversible, and subject to tipping points. They will therefore occur on a much greater scale than the other risks financial institutions are used to managing. That they are both foreseeable , in the sense that we know some combination of physical and transition risk will occur, and uncertain , in that the timing and scale is path dependent. Although the time horizons for physical risks are long - not the usual 3-5-year business planning horizon, but over decades— addressing major climate risks tomorrow requires action today . Indeed, actions over the next decade—prob- ably in the next three to five years—will be critical to determining the size and balance of future risks (1). It is self-evident that the financial system cannot diversify its way out of this risk. As the pandemic has revealed, the interconnections between the real economy and the financial system run deep. And just like Covid-19, climate change is a far-reaching, system-wide risk that affects the whole economy, from which the financial system is not immune and indeed cannot hide. As the CEO of Morgan Stanley remarked to Congress, “It’s hard to have financial stability if you don’t have a planet.” So if financial risk is to be reduced, then the underlying climate risks in the real economy must be managed. And fixing this collective action problem is a shared responsibility across financial institutions and regulators. The public and private sectors need to work together to solve it, and that means developing the necessary risk management expertise rapidly. That expertise is needed because it is challenging to assess financial risks in the normal way. As emphasised by the TCFD, it means that disclosures need to go beyond the static (what a company’s emissions are today) to the strategic (what their plans are for their emissions tomorrow). That means assessing the resilience of firms’ strategies to transition risks. This will be the principle focus of the new climate stress testing regime of central banks. At present, led by the Banque de France, the Nederlands Bank and the Bank of England, 16 central banks and supervisors will stress test their systems against different climate scenarios for a smooth transition to net zero to business-as-usual hothouse earth. Returns Financial participants increasingly recognise that sustainable investment brings enormous opportunities ranging from transforming energy to reinventing protein. While green investment products, such as green, sustainable and transition bonds are important catalysts to developing a new financial system, they will not be sufficient to finance the transition to a low carbon future. We need to mobilise mainstream finance to help support all companies in the economy to adjust business models to align with net zero pathways. Value will be driven by identifying the leaders and laggards, as well as the most important general-purpose technologies that will overcome choke points in the transition. That means having a more sophisticated understanding of how companies are working to transition from brown to green, not just where they are at a single point in time. Thus far, the approaches to doing so have been inadequate. Scores that combine E, S and G to give a single ESG metric—while worthy—are dominated by the S and the G. Carbon footprints are not forward-looking. And the impact of shareholder engagement is hard to measure. Moreover, a whole economy transition isn’t about funding only deep green activities or blacklisting dark brown ones. We need fifty shades of green to catalyse and support all companies towards net zero and be able to assess collectively whether we’re “Paris aligned.” That means investors must be able to assess the credibility of company transition plans. Transition planning is nascent and of varying quality among companies. Some have a stated net zero objective, but are yet to set out a credible strategy or tactics to achieving it. Others have fully integrated climate strategies, governance and investments. Emerging best practice transition plans include: - Defining net zero objective in terms of Scope 1, 2 and 3 emissions; - Outlining clear short term milestones and metrics that senior management uses to monitor progress and gauge success; - Board level governance; and - Embedding metrics in executive compensation. Schemes such as the Science Based Targets Initiative and Transition Pathway Initiative are already supporting companies to develop transition plans and certifying them when they meet appropriate thresholds. An emerging differentiator in the investment community will need to make these critical judgments. Over time, investors will not just judge company transition plans, they too shall be judged. Investors should be obliged to alignment of their portfolios with the transition and disclose their position in a readily understandable and impactful manner. There are several ways to do this. At the most basic end of the spectrum, investors could calculate the percentage of assets that have a net zero target. However, as disclosures improve in the real economy, a more sophisticated option is to calculate the degree warming potential of assets in a portfolio. A “warming potential” calculation – or Implied Temperature Rise – estimates the global temperature rise associated with emissions by the companies in an investment portfolio. For example, one of the world’s largest insurers, AXA, estimates that its assets are currently consistent with a 3.1 degree path, and it has developed an innovative climate Value-at-Risk model to measure the opportunities as well as risks from the climate-related exposures of its investments. Rating the warming potential of assets and portfolios has a number of ancillary benefits, including signaling to governments the transition path of the economy, and therefore the effectiveness of their policies; and empowering consumers to give them more choice in how to invest to support the transition. After all, with our citizens, particularly the young, demanding climate action, it is becoming essential for asset owners to disclose the extent to which their clients’ money is being invest- ed in line with their values. Conclusion A financial market in the transition to a 1.5 degree world is being built, but we need to accelerate the pace on the road to Glasgow. Now is the time for a step change to bring the reporting, risk management and return optimisation of sustainable finance into everyday financial decision making. This will require new data sets from scope 3 emissions to exposures to climate transition risk, and new financial skills from scenario analysis to assessing implied temperature warming. The common theme will be determining who is on the right and wrong side of climate history. In that way, private finance can bend the arc of that history towards climate justice. Endnote 1 UNEP Emissions Gap Report, 2019. Previous Next

The Brown University Journal of Philosophy, Politics, and Economics (JPPE) is a peer reviewed academic journal for undergraduate and graduate students that is sponsored by the Political Theory Project and the Philosophy, Politics, and Economics Society Program at Brown University. The Brown Journal of Philosophy, Politics, and Economics Volume III, Issue I scroll to view articles Current Issue Philosophy A Gravity Model of Civic Deviance: Justice, Natural Duties, and Reparative Responsibilities Woojin Lim Can You Rationally Disagree with a Prediction Market? Nick Whitaker The Panacea Problem: Indifference, Servility, and Kantian Beneficence Benjamin Eneman Read More Politics We the Prisoners: Considering the Anti Drug Act of 1986, the War on Drugs and Mass Incarceration in the United States Sophia Scaglion Read More Economics Read More State-Owned Banks and the Promise of an Equitable Financial Sector Elias van Emmerick No Place Like Home: Extending the Equity Home Bias Theory to Foreign Portfolio Investment in Emerging Markets Qiyuan Zheng Applications for JPPE Now open! See Available Positions

The Brown University Journal of Philosophy, Politics, and Economics (JPPE) is a peer reviewed academic journal for undergraduate and graduate students that is sponsored by the Political Theory Project and the Philosophy, Politics, and Economics Society Program at Brown University. The Brown Journal of Philosophy, Politics & Economics Volume IV, Issue I scroll to view articles Volume IV Issue I Philosophy Authenticating Authenticity Authenticity as Commitment, Temporally Extended Agency, and Practical Identity Kimberly Ramos Can Pascal Convert the Libertine? An Analysis of the Evaluative Commitment Entailed by Pascal’s Wager Neti Linzer The Growing Incoherence of Our Higher Values Aash Mukerji The Necessity of Perspective A Nietzschean Critique of Historical Materialism and Political Meta-Narratives Oliver Hicks Read More Politics The Unchurching of Black Lives Matter The Evolving Role of Faith in The Fight for Racial Justice Anna Savo-Matthews From Bowers to Obergefell The US Supreme Court’s Erratic, Yet Correct, Jurisprudence on Gay Rights Sydney White Predictive Algorithms in the Criminal Justice System Evaluating the Racial Bias Objection Rebecca Berman Read More Economics God Save the Fish The Abyss of Electoral Politics in Trade Talks––a Brexit Case Study Eleanor Ruscitti The Black Bourgeoisie The Chief Propagators of “Buy Black” and Black Capitalism Noah Tesfaye Breaking Big Ag Examining the Non-Consolidation of China’s Farms Noah Cohen Read More Applications for JPPE Now open! See Available Positions

A Death Sentence Beyond Death Row: Helling v. McKinney and the Constitutionality of Solitary Confinement Hallie Sternblitz Author Lachlan Edwards Aditi Bhattacharjya Editors Originally written for U.S. Magistrate Judge Zia M. Faruqui & Assistant U.S. Attorney Olivia B. Hinerfeld Abstract On any given day, there are 80,000 to 120,000 Americans living in solitary confinement. Restricted to their cells for twenty-two to twenty-four hours a day, these inmates are deprived of human interaction for days, weeks, years, or even decades. While the practice is intended as a means of protection for the general prison population or vulnerable inmates, researchers have found extreme and irreversible psychological damage in inmates who were placed in an isolated unit for both short and long periods of time. In fact, Dr. Grassian, a psychiatrist at Harvard Medical School, determined that there was a specific psychiatric disorder associated with solitary confinement, which is now referred to as Special Housing Unit (SHU) Syndrome. Others have since found higher rates of suicide, self-harm, violence, and premature death associated with this form of isolation. Though the practice has become a longstanding custom in American prisons, I argue that solitary confinement is unconstitutional, as it violates the Eighth Amendment’s prohibition of cruel and unusual punishment by subjecting inmates to serious and unreasonable dangers to their future health and safety. Through a two-pronged parallel with Helling v. McKinney , a SCOTUS case in which a former inmate successfully defended his freedom from cruel and unusual punishment after being subjected to secondhand smoke while incarcerated, I demonstrate that there is clear precedent for ruling the practice unconstitutional. Here, I employ the Deliberate Indifference Doctrine as well as the previous rulings that informed it to establish the application of Helling v. McKinney to the case of solitary confinement. Finally, I conclude with alternatives that better achieve solitary confinement’s intended outcomes. A timid Boy Scout with a knack for mathematics and writing, Benjamin van Zandt was sentenced to four years in prison for a property crime at age seventeen. While incarcerated, he sought out counseling, coursework, and several other opportunities to fulfill his intellectual potential. After being named valedictorian of his inmate GED program, he eventually enrolled in the Bard College Prison Initiative to begin his college degree. Despite his model behavior, he was caught bringing a piece of bread from the prison cafeteria back to his cell and was immediately transferred to New York’s Fishkill prison as a consequence. There, he was repeatedly harassed, beaten, and sexually assaulted by inmates twice his age, most of whom were seasoned criminals dominating the prison network. Still a reserved adolescent, Van Zandt was immediately preyed upon and coerced into being a carrier of contraband. As a result, he was placed in solitary confinement. Ten days later, he was found hanging from his sheets and shoelaces. Introduction: What is Solitary Confinement? On any given day, there are 80,000 to 120,000 Americans living in solitary confinement. Restricted to their cells for twenty-two to twenty-four hours a day, these inmates are deprived of human interaction for days, weeks, years, or even decades. They are often denied reading material, natural light, visitation, and participation in group activities. Though originally a pacifist Quaker initiative led by Benjamin Franklin the late 1700s meant to be an opportunity for spiritual reflection and moral contemplation, solitary confinement has quickly been weaponized in the U.S. as a disciplinary act meant to maintain order and deter violence within the general prison population. Today, it is common practice to move inmates to solitary confinement for three primary reasons: (1) discipline for nonviolent transgressions, such as possessing contraband or insolence toward a prison official, (2) protection of others due to an inmate exhibiting violent behavior or the threat of violent behavior, or (3) protection of an inmate who is in danger of being victimized by the violent behavior of inmates in the general prison population. Thus, any inmate regardless of their behavior while incarcerated could be subjected to solitary confinement, which is often the case for LGBTQ+, neurodivergent, or mentally ill inmates, as well as inmates of color. In fact, one study indicates that 11% of all black men born in the late 1980s experienced solitary confinement by their thirty-second birthday. This disproportionality partially stems from the bias of prison officials, who often allow an inmate’s race, mental illness, or other identifying factor to dictate their perception of the events. Despite its protective intent, solitary confinement has been shown to amplify rates of violent recidivism. This is a direct result of the mental health issues caused from extreme solitude. Thus, the motivations for placing inmates in Special Housing Units (SHU), a euphemistic title for solitary confinement, are void. However, in this paper, I will focus not on why the U.S. should terminate all solitary confinement units but why it must . Shown through a parallel analysis with Helling v. McKinney , I argue that solitary confinement is an unconstitutional practice, as it violates the Eighth Amendment’s prohibition of cruel and unusual punishment by subjecting inmates to serious and unreasonable dangers to their future health and safety. To support this argument, I will first provide an overview of the inadequacies of legal action taken against the extreme isolation in prisons thus far. Then, I will dive into the case of Helling v. McKinney and its two-pronged application to the practice of solitary confinement. Finally, I will introduce alternative methods of accomplishing the intended goals of SHUs that will facilitate the realization of ruling solitary confinement unconstitutional. Looking through a Legal Lens: Eighth Amendment Implications The Eighth Amendment to the U.S. Constitution reads, “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” Both the most controversial and most subjective clause, cruel and unusual punishment is at the forefront of modern debates on penitentiary justice. Originally, the phrase was intended to prevent torture as a technique of coerced confession or simply as a punishment. It was also meant to outlaw the use of barbaric instruments and public humiliation in formal sentencing. Today, the amendment is commonly employed for criminal defendants facing excessive bail or lengthy sentences at a young age. However, its use as a preventative measure against torture is often overlooked due to the lack of resources provided to victims subjected to torture during incarceration. However, the tide of Eighth Amendment cases may be shifting towards an inter-prison perspective, which has the potential to include solitary confinement. In the 2012 class action suit Ashker v. Governor of California , thousands of plaintiffs subjected to long periods of isolation in SHUs across the state due to alleged gang membership, 78 of whom spent over 20 years in solitude, sued the governor for violating their Eighth Amendment freedom from cruel and unusual punishment. They eventually agreed to a settlement that required the state to reduce their SHU population both by capacity and maximum sentence length, remove gang membership as a qualification to be placed there, and provide alternatives for those unable to serve their sentence in the general prison population. However, since this settlement, the state of California has repeatedly violated the terms and minimal change has emerged. Similarly, in Jensen v. Thornell (2012), Arizona inmates in isolation units sued for changes to the prison healthcare system, agreeing to a settlement by which the Arizona government had no intention of abiding. As such, the District Court judge rescinded approval of the settlement, bringing the parties back to trial in 2021 with new guidelines for managing medical care and health-related conditions in the state’s isolation units. Along with a handful of others, these two cases show the inadequacy of litigation over the constitutionality of solitary confinement in civil court. Though the plaintiffs may have won their cases, little has been done to reform SHUs, and tens of thousands of people remain subject to these abusive conditions daily. According to UN Special Reporter on Torture Juan Mendez, any time in forced isolation longer than fifteen days is considered abusive by UN standards. Thus, torture and abuse are commonplace within American prisons, as the average SHU inmate spends one to three months in solitude, with the longest remaining there for over forty years. As such, I argue that reform is insufficient; solitary confinement is unconstitutional and must be outlawed. Helling v. McKinney : A Potential Path Forward The Supreme Court has already laid the groundwork for ruling that solitary confinement is an unconstitutional practice under the cruel and unusual punishment clause of the Eighth Amendment. Helling v. McKinney questions whether future health risks imposed by prison officials is a form of cruel and unusual punishment, and thus a violation of an inmate’s Eighth Amendment rights. In a Nevada state prison, William McKinney was placed in a cell with an inmate who smoked five packs of cigarettes each day. As a result, McKinney inhaled unhealthy levels of second-hand smoke, which he argued posed a serious risk to his current and future health. He sued the warden of the prison as well as several other prison officials for violating his Eighth Amendment freedom from cruel and unusual punishment. The federal Magistrate Judge ruled that the Eighth Amendment did not guarantee McKinney’s right to a smoke-free environment, arguing that McKinney failed to prove any serious medical needs that the prison neglected to address. However, the Ninth Circuit Court of Appeals reversed the federal Magistrate Judge’s decision, holding that McKinney should be given a second opportunity to prove that the levels of second-hand smoke constituted an unreasonable danger to his future health. Yet, during the litigation of Helling v. McKinney , SCOTUS ruled on Wilson v. Seiter , a case in which a formerly incarcerated individual claimed he experienced cruel and unusual punishment and sought financial reparations from two prison officials but lost the case because he did not prove the officials had a “culpable state of mind.” The justices held that conditions of incarceration or confinement that are not explicitly outlined in an inmate’s sentencing require a subjective component that comes from the Deliberate Indifference Doctrine. This doctrine was created in Estelle v. Gamble in 1974 in which SCOTUS held, “Deliberate indifference by prison personnel to a prisoner's serious illness or injury constitutes cruel and unusual punishment contravening the Eighth Amendment.” Exerting “deliberate indifference” has been characterized by SCOTUS as a transgression greater than negligence but less than omission with malintent. Thus, the doctrine is rather subjective in application. Nonetheless, a new dimension was added to McKinney’s case. Now, prison officials could be held accountable for a lack of adequate action with knowledge of a serious health or safety risk to an inmate. Appealing all the way to the Supreme Court, McKinney found himself in a battle with the government over whether the Deliberate Indifference Doctrine applied only to current health and safety risks or future risks alike, as his case emphasized the future health issues resulting from extreme inhalation of second-hand smoke. SCOTUS sided with McKinney, affirming his right to sue under the cruel and unusual punishment clause of the Eighth Amendment and the Deliberate Indifference Doctrine. In the majority opinion, Justice Byron White argued that the doctrine in no way specified that it only applied to current health risks and should thus include future health and safety risks as well. As such, McKinney, despite not being sick at the time, successfully demonstrated a violation of his Eighth Amendment freedom from cruel and unusual punishment, as prison officials acted indifferently to his future health. Drawing a Parallel: Helling v. McKinney and Solitary Confinement Helling v. McKinney greatly expanded the rights of vulnerable inmates, as they can now sue for damages that they are likely to experience post-release. When considering the constitutionality of solitary confinement, one can clearly draw a parallel between second-hand smoke and the mental illnesses that directly result from isolation. For one, solitary confinement aligns with the qualifications to employ the Deliberate Indifference Doctrine stated in Wilson v. Seiter ; it is a condition of incarceration not explicitly stated in judicial sentencing. Once eligibility has been established, there are two axioms of Helling v. McKinney that solitary confinement must satisfy in order to prove that victims of SHUs have a reasonable case to sue prison officials for violating their Eighth Amendment freedom from cruel and unusual punishment: (1) solitary confinement poses a serious and unreasonable danger to the future health of inmates and (2) those overseeing SHUs exhibit deliberate indifference to said danger. Future Health Effects of Solitary Confinement Initial research on the psychological dangers of extreme isolation was funded by the Canadian Defense Research Board and eventually the U.S.’s Central Intelligence Agency in the early 1950s to harness a psychological warfare defense to combat the Soviets, who were brainwashing prisoners of war. Led by Dr. Donald Hebb at McGill University, student volunteers were placed in isolation boxes meant to deprive them of all their senses. Each student was to remain in the box for as long as they felt they could, only leaving to use the restroom and eat meals, during which a facilitator of the experiment would guide them. Dr. Hebb expected to observe changes in their behavior over the course of six weeks; however, the experiment only lasted six days. The results were jarring: the students complained of vivid hallucinations, “blank” periods in their minds, inability to write or solve a basic math problem, hyperrealism of external stimuli, new fears, separation of mind and body, and even the sensation of being hit with pellets. Dr. Hebb’s findings have since been weaponized as a punitive practice for convicted criminals. Though, opponents of solitary confinement have reclaimed his work and used it to demonstrate that solitary confinement is in fact cruel and unusual punishment. Since then, more research has emerged specifically studying the correlation between solitary confinement in prisons and mental illness. For instance, a study on incarceration in New York found that inmates in solitary confinement for any length of time were five times more likely to die by suicide and 3.2 times more likely to self-harm than an inmate in the general prison population. Similarly, a California study found that hypertension was three times more common among SHU inmates. Across the U.S., those subjected to solitary confinement for any length of time were 24% more likely to die within the first year after release, including 78% more likely by suicide and 54% more likely by homicide, demonstrating an increase in violence as a result of the very practice that was meant to curb it. Furthermore, they were 127% more likely to fatally overdose on opioids in the first two weeks following release. Similar research has been conducted to determine if short stays in solitary confinement would fulfill the intended purposes while avoiding the detrimental effects; however, this was not the case. One study only included subjects that had spent less than a week in solitary confinement, yet this group had significantly higher death rates from unnatural causes such as suicide, violence, and vehicular accidents than those who had only spent time in the general prison population. Dr. Stuart Grassian, a psychiatrist at Harvard Medical School, concentrated his research on the set of traits emerging in formerly solitarily-confined inmates post-release. After conducting several series of interviews and experiments, Dr. Grassian determined that there was a specific psychiatric disorder associated with solitary confinement, which is now referred to as SHU Syndrome. In a 2006 publication, he outlines the seven key symptoms consistent among nearly every inmate he studied: (1) hyperresponsivity to external stimuli, (2) perceptual distortions, illusions, and hallucinations, (3) panic attacks, (4) difficulties with thinking, concentration, and memory, (5) intrusive obsessional thoughts, (6) overt paranoia, and (7) impulse control. These symptoms are remarkably similar to those found in Dr. Hebb’s isolation experiment in 1951. Moreover, Dr. Grassian notes that this combination of reactions is unique to SHU Syndrome and cannot be found in nearly any other psychiatric disorder. He characterizes the condition as a form of an acute organic brain syndrome. Confirming this research, neuroscientist Huda Akil suggests that solitary confinement can permanently alter the structure of an inmate’s brain, as the functioning and structure of the human brain changes in response to environmental stimuli. As such, solitary confinement for any length of time can cause a distinct health defect that often permanently affects the inmate, even after release. Therefore, solitary confinement fulfills the first axiom presented in Helling v. McKinney , as it poses a significant and unreasonable danger to the future health of inmates. Deliberate Indifference in the Case of Solitary Confinement Wilson v. Seiter , which established that the Deliberate Indifference Doctrine in Estelle v. Gamble applies to conditions of prison confinement, cites Whitley v. Albers in its holding, stating “the ‘wantonness’ of conduct depends not on its effect on the prisoner, but on the constraints facing the official.” Therefore, the second axiom of applying the Helling v. McKinney precedent to the case of solitary confinement, which requires deliberate indifference on the part of prison officials, relies on the ability of prison officials to inhibit the placement of inmates in solitary confinement, which, as shown, is a grave danger to their future health. This proposition is fulfilled in two parts: (1) by demonstrating that prison officials have the capability to terminate or avoid placements in solitary confinement but deliberately choose to place inmates in SHUs and (2) by demonstrating that prison officials are likely aware of the health effects of extreme isolation but choose to exercise indifference. The decision to place an inmate in solitary confinement is almost entirely up to the discretion of guards and prison officials. As stated previously, inmates are sent into SHUs for a vast range of reasons, including for unprohibited behavior like talking back to a guard. As a result, a large portion of inmates in solitary confinement were placed there at the subjective discretion of a prison employee, despite never engaging in malicious behavior that would make them a danger to the general prison population. Instead, many inmates in SHUs are victims rather than perpetrators and are thus subjected to the rights violations of solitary confinement due to no actions of their own. This issue has been especially rampant in New York state prisons, where investigations show that much of the SHU population is constituted by victims of prison guard abuse, which can either be physical abuse or a guard’s abuse of power over the inmate. In fact, one investigation found 160 lawsuits of inmates who were sentenced to solitary confinement by guards who fabricated assault allegations. Often, these inmates were subjected to physical abuse at the hands of prison guards, some even resulting in permanent injury or death. However, this abusive network of guards is largely protected by their membership in an officers’ union, with which the state signed an agreement to allow arbitrators from the union to be the final determinator of an officer’s employment status. This means that when an inmate accuses a guard of abuse or misplacement in solitary confinement, the guard’s peers have the right to reinstate them in their position even if higher prison officials chose to terminate their employment. Consequently, 88% of the guards accused of fabricating reports to conceal abuse in the 160 lawsuits were reinstated in their roles, as only a court can overrule the decision of the arbitrators. This leads to a demoralizing cycle in which inmates are subjected to abuse, isolated from the general prison population, and then denied the ability to hold their abuser accountable, often leading to further abuse if they try. Once a guard places their victim in an SHU, they are usually the only form of human contact the inmate receives, thus leaving the inmate in an increasingly vulnerable position with no resource but their abuser for help. As such, a prison official can exploit their position of authority over inmates and send anyone who threatens that authority, whether it be their victims or someone who simply verbally offended them, to solitary confinement. This is not to say that all guards or prison officials have malintent in their discretion over SHU placement; yet enough are malicious and are protected by the system that the issue must be addressed. Due to the structural nature of SHUs, inmates’ placement in solitary confinement and thus their future health is often in the hands of prison guards who are neither trained mental health professionals nor judges determining the inmate’s sentence. Nonetheless, they are left to use their discretion in a life-or-death matter. As a result, placements in solitary confinement are the deliberate decision of prison officials, satisfying the first criteria of exercising deliberate indifference: the ability to terminate or avoid placing an inmate in a SHU but instead choosing to send or keep them there. Secondly, prison officials must have the knowledge that an inmate’s health will suffer as a result of placing them in solitary confinement in order to show culpability of indifference. This can be addressed by providing evidence that a prison official was aware of a health or safety risk but failed to act to resolve it. As previously stated, every prison official is in the position to act, which in the case of solitary confinement means removing an inmate from an SHU or avoiding placing them there in the first place. However, their knowledge of the risks involved is somewhat more difficult to prove. One way to establish their awareness of the practice’s dangers is through their direct experience working in a correctional facility. Research shows that prison officials are also physically and mentally affected by working in a solitary confinement unit. One study found that SHU correctional staff witness “intense human suffering” such as “smearing feces, ingesting objects, self-injury, violent outbursts” which causes “vicarious trauma” to the official. As a firsthand witness to the deterioration of inmates subjected to solitary confinement, any competent prison guard can recognize that the health and safety of the inmate are in danger as a result of extreme isolation. Furthermore, reports show that prison officials experience significantly increased stress levels when working in solitary confinement, providing them with empirical indicators of the mental risks associated with spending time in an SHU. Additionally, corrections officials assigned to solitary confinement units are at higher risk of heart disease, hypertension, PTSD, and suicide, which are some of the same health risks for isolated inmates. These rates were found to be significantly higher than both the national average and among individuals with other stressful jobs, such as the military or police force. Thus, knowledge of these personal health effects coupled with the visual sight of inmates suffering from the seven symptoms outlined in Dr. Grassian’s research of SHU Syndrome are clear indicators to prison officials of the dangerous consequences of solitary confinement. Moreover, there is a consensus among the American public that extreme isolation can be a danger to one’s health, as 86% of voters support removing inmates from solitary confinement at the first sign of an adverse health effect. This demonstrates that knowledge of the risks of solitary confinement is prevalent throughout the nation’s people, who are largely in consensus about the dangers of the practice. The deliberate indifference doctrine requires that prison officials deliberately choose to place inmates in solitary confinement over other alternatives, which has already been established, and also requires that the officials know that placing an inmate in solitary confinement will have negative health effects. Thus, this common knowledge paired with being a firsthand witness to symptoms of SHU Syndrome establishes that prison officials know the health and safety risks associated with solitary confinement, are indifferent to them, and deliberately choose to not prevent them, therefore satisfying the Deliberate Indifference Doctrine. Motivations to Outlaw Solitary Confinement As shown, solitary confinement poses a serious and unreasonable danger to the mental health of inmates and is a practice in which a prison official must exercise deliberate indifference, thus making it unconstitutional under the cruel and unusual punishment clause of the Eighth Amendment. Helling v. McKinney implies that any condition of confinement that puts the future health and safety of an inmate at risk and that a prison official knowingly ignores is a violation of the rights of the inmate guaranteed by the Constitution of the United States. Helling v. McKinney set an important precedent in the litigation of prisoners’ rights; however, solitary confinement remains a common practice in each of the fifty states despite the parallel that has been established. Moreover, based on the research provided, the future health risks of solitary confinement are arguably much more extreme than those of second-hand smoke inhalation, with a disturbing portion of inmates like Ben van Zandt not even surviving their sentence. Yet, being subjected to second-hand smoke has been regarded as a violation of the Eighth Amendment for nearly three decades, and solitary confinement remains commonplace. As such, it is time that SHUs across the nation are put on the stand and examined for their compliance with the Constitution of this country. As Helling v. McKinney stands, solitary confinement should be unconstitutional and must be outlawed. Moreover, solitary confinement is not currently adding any benefit to the functioning of American prisons or the rehabilitation of subjected inmates. The practice is employed to protect the general prison population from violent inmates, protect vulnerable inmates who are common targets among others, or discipline inmates who disrespect the rules or officials that govern the prison. However, solitary confinement does not actually achieve any of its intended goals. Rather, it has been found to exacerbate the very issues it sets out to solve. The vast majority of studies on the effects of solitary confinement on future inmate behavior and inter-inmate violence within the general prison population has reached a consensus that there is no statistically significant correlation. This is true for both crime frequency and intensity. In fact, one study found that solitary confinement increased rates of recidivism post-release. An even stronger correlation was found between time spent in solitary confinement and violent re-offenses, indicating that the community was less safe than it would have been in the absence of the practice. As such, SHUs are not fulfilling their intended goals of reducing inter-prison violence. Instead, they are subjecting up to 120,000 people to irreversible psychological damage on any given day. Alternative Solutions to Solitary Confinement Rather than continue this practice, the precedent set by Helling v. McKinney must be employed to rule solitary confinement unconstitutional under the cruel and unusual punishment clause of the Eighth Amendment. However, I acknowledge that inter-prison violence and rule violations must be addressed. I propose three alternatives: specialized units for inmates with mental illnesses, de-escalation training for prison staff, and increased programming. The state of New York has already begun implementing these practices through its Humane Alternatives to Long-Term (HALT) Solitary Confinement Act, which was passed in 2021 and went into full effect in 2022. Prior to the ratification of this bill, the state began to reform its solitary confinement units by introducing the Clinical Alternative to Punitive Segregation, or CAPS, program. Instead of being punished for violating prison rules with isolation, inmates who exhibit serious mental illnesses are directed to the CAPS program where they receive in depth counseling, treatment, and rehabilitative intervention. As a result, the rates of self-harm for inmates who otherwise would have been sent to SHUs decreased drastically. Hence, specialized units, whether it be for inmates with mental illnesses or other groups that may be targets in the general prison population and thus require isolation, provide a realistic alternative to solitary confinement that maintains an inmate’s humanity and sociability while providing them the rehabilitative resources necessary to reenter society. Secondly, Crisis Intervention Training (CIT) for prison staff is a crucial method for creating safer communities within correctional facilities. One study found that prison officials who were trained in crisis management had a significantly decreased bias in the distribution of reported incidents. Furthermore, CIT officials were more likely to seek out less common and less severe alternative punishments rather than choose to send an inmate into isolation. As a result, less inmates were subjected to the cruel and unusual punishment of solitary confinement and were instead given the opportunity to rehabilitate themselves and discuss their actions. As such, de-escalation training for prison staff has the ability to change both the inequitable discrepancies and frequency of use that are associated with placement in SHUs. Finally, educational and transitional programming is key to the rehabilitation of inmates, especially those who have spent time in isolation. In one Minnesota facility, there has been a transition away from the isolating nature of solitary confinement towards the rehabilitative intention of placing an inmate in an SHU. This was primarily achieved through three programs: the introduction of Prison To Community (PTC) specialists, a companion program, and accessible treatment resources. For instance, an inmate who needed to be placed in an SHU would be assigned a PTC specialist to meet with them and discuss a plan to re-enter both the general prison population and society. Similarly, they would be given a hired companion inmate from the general prison population who would be screened to sit outside of their cell and keep them company while in isolation. This is beneficial for the SHU inmate and provides employment to the general population of inmates. Lastly, the isolated inmate would be given a variety of reading, audiovisual materials, and assignments related to addressing emotional, psychological, or behavioral issues, prompting the inmate to self-rehabilitate throughout their time in an SHU. While these programs are still not ideal in the sense that they do not eliminate the use of solitary confinement completely, they are a valuable step in transitioning prisons across the country from relying heavily on the practice to maintain order as they do now to terminating the practice in its entirety. These three alternatives provide a realistic path forward in the aftermath of ruling solitary confinement unconstitutional. Though it may require a shift in public attitude on the rights of inmates, the road to ending extreme isolation in prisons is clear and necessary. The case of solitary confinement, though more dire, parallels McKinney’s battle for his future health. As shown through its future health effects, the presence of deliberate indifference, and the strong precedent set in Helling v. McKinney , solitary confinement is a clear violation of the Eighth Amendment. The practice has existed unrightfully in this country for far too long, and it is time to rule on it for what it is: it is cruel, it is unusual, it is unconstitutional, and the Supreme Court ought to act accordingly. [Prisoners subject to solitary confinement] fell, after even a short confinement, into a semi-fatuous condition, from which it was next to impossible to arouse them, and others became violently insane; others still, committed suicide; while those who stood the ordeal better were not generally reformed, and in most cases did not recover sufficient mental activity to be of any subsequent service to the community. It became evident that some changes must be made in the system. – SCOTUS, 1890 References ACLU Staff. “Ashker v. 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