Results for “latvia”
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Edward Lucas defends Latvia

Here is one part of a longer essay:

The IMF thought the new Latvian government should respond to the crisis by devaluing the currency, the lat, which is pegged to the euro. Supposedly that would have restored competitiveness and growth. Staying on the peg would be costly and futile (Krugman said devaluation was a case of when, not if).

Almost the entire Latvian political class thought otherwise. Devaluation would bankrupt the many households who had borrowed in foreign currency. It would devastate the country’s reputation. It would actually do little for exports. Whether that was right or wrong, it was not a case of the IMF forcing medicine on an unwilling patient. (The IMF’s chief economist, Olivier Blanchard, now says that Latvia was right to shun devaluation.)

Good points, and on top of that I would stress a different angle.  Latvia needs to prevent itself from being reincorporated into the Russian colossus.  That is priority #1 by a long mile.  That means doing everything possible to attach itself to the EU and eurozone, even if those policies might not otherwise be economically efficient.  Iceland does not have a comparable problem, as it is nestled quite nicely in the north Atlantic and protected by the United States.

Criticizing Latvian economic policy without mentioning this constraint is missing the point, and recognizing that constraint makes their recovery performance look better.

Similarly, I am puzzled by the reports that Angela Merkel got “rolled” at the recent summit.  My read was that she sees the current governments of Spain and Italy as the best working partners she is likely to get.  They were offered benefits to take home to their electorates, while at the same time receiving a more subtle message that if they truly jump on board with cost internalization, as Ireland has done, they will be rewarded.  (And yet, by the way, Germany still retains a future veto on how all that money gets spent, so no conditionality really has been relaxed, rather perhaps some power over conditionality was redistributed from the Troika to Germany, funny that.)  Ireland of course was the big winner from the summit, as Irish bond yields plunged and the country’s situation suddenly looks much more tolerable.  Ireland, like Latvia, is balancing both economic and foreign policy constraints.

I still doubt this new rescue plan can work, but at least it is more realistic than the “super fiscal policy” talk from various commentators.  It does at least signal that new forms of aid will separate banks and sovereigns, though probably this is too little too late.  And don’t expect the new euro bank regulator to be better than the old one, at least not anytime soon.

On Latvia, hat tip goes to Gideon Rachman on Twitter.  On the summit, I also recommend this piece by Wolfgang Münchau, “The real victor in Brussels was Merkel.”

A Theory for Why Latvian Women are Beautiful

Recently a colleague returned from a trip to Latvia and remarked on how beautiful the women were.  A discussion ensued at which it was agreed that women in a number of other countries were also very beautiful but markedly less outgoing than the Latvians.  As you may recall, beautiful Latvian women like to parade their beauty. My colleague further informed us that the latter event was not unique, having witnessed something similar himself.

Is my colleague's observation a mere statement of prurient preference?  Does this kind of thing belong in a family blog?  Don't worry, at Marginal Revolution we never serve our prurience without a little theory. 

Sociosexuality is a concept in social psychology that refers to how favorable people are to sex outside of commitment.  It can be measured by answers to questions such as "I can
imagine myself being comfortable and enjoying "casual" sex with
different partners" (agree strongly to disagree strongly) or "Sex without love is ok," as well as with objective measures such as the number of sexual partners a person has had.  A low score indicates subjects who favor monogamous, long-term, high-investment relationships.  A high score indicates subjects more favorable to sex for pleasure's sake alone. with less regard to commitment.  On average, males have higher sociosexuality scores than females but sociosexuality scores for females vary widely across countries.

Why might female sociosexuality scores vary?  One hypothesis is that in cultures with low operational sex ratios (the number of marriageable men/number of marriageable women) female sociosexuality will be higher.  The argument is that when the relative supply of males is low, competition for mates encourages females to shift towards the male ideal, i.e. when supply is scarce the demanders must pay more. (Note that this theory can also explain trends over time, e.g. Pedersen 1991).

Ok, where does this get us?  Well in Sociosexuality from Argentina to Zimbabwe, Schmitt (2005) surveyed some 14,000 people on sociosexuality and he correlated female sociosexuality with the operational sex ratio.  Here are the results:

Sociosexuality

Notice that Latvia has one of the highest rates of female sociosexuality in the 48 nations surveyed and the lowest sex ratio.

Thus, the theory is that Latvian women appeal more strongly to the male ideal because the number of marriageable men in Latvia is low relative to the number of women.  Is it any wonder that my colleague found the Latvian women beautiful?

Opening Borders

Open borders hasn’t been getting a lot of good press recently but next week Bulgaria and Romania will join the Schengen Area for air and sea travel (road travel will likely follow). No more passports or visa necessary! The Schengen Area is a remarkable achievement for a part of the world once riven by violence and rivalry. Recall:

Created in 1995 with 10 countries, the Schengen Area has since grown to cover more than 1.5 million square miles, allowing almost 420 million people to move freely between 27 countries, currently. It’s important not to confuse the Schengen Area with the European Union—the former is a travel zone where citizens can cross country borders without a passport or visa, whereas the latter is an economic and political union of countries. The Schengen Area currently includes Austria, Belgium, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland.

According to the Council of the European Union, “Each day around 3.5 million people cross internal borders for work or study or to visit families and friends, and almost 1.7 million people reside in one Schengen country while working in another.” Being a part of the zone saves citizens time and hassle from passport checks. It also helps travelers from 59 countries outside the EU, including the United States, as they can travel without visas for up to 90 days within the Schengen Area for tourism and business.

Unfortunately, the European Travel Information and Authorization System (ETIAS) means that US citizens will require a visa to travel to Europe next year–this is a step in the wrong direction. Nevertheless, the entry of Bulgaria and Romania to the Schengen Area is something to celebrate.

It would be great to see a Schengen Area for say the United States, Canada, Australia, the U.K and New Zealand (the US plus the CANZUK countries).

Belief in Luck and Precognition Around the World

Although magical beliefs (such as belief in luck and precognition) are presumably universal, the extent to which such beliefs are embraced likely varies across cultures. We assessed the effect of culture on luck and precognition beliefs in two large-scale multinational studies (Study 1: k = 16, N = 17,664; Study 2: k = 25, N = 4,024). Over and above the effects of demographic factors, culture was a significant predictor of luck and precognition beliefs in both studies. Indeed, when culture was added to demographic models, the variance accounted for in luck and precognition beliefs approximately doubled. Belief in luck and precognition was highest in Latvia and Russia (Study 1) and South Asia (Study 2), and lowest in Protestant Europe (Studies 1 and 2). Thus, beyond the effects of age, gender, education, and religiosity, culture is a significant factor in explaining variance in people’s belief in luck and precognition. Follow-up analyses found a relatively consistent effect of socio-economic development, such that belief in luck and precognition were more prevalent in countries with lower scores on the Human Development Index. There was also some evidence that these beliefs were stronger in more collectivist cultures, but this effect was inconsistent. We discuss the possibility that there are culturally specific historical factors that contribute to relative openness to such beliefs in Russia, Latvia, and South Asia.

That is from a new paper by Emily A. Harris, Taciano L. Milfont, and Matthew J. Hornsey, via the excellent Kevin Lewis.

Saturday assorted links

1. “Each student is allowed to bring only one pet and must pay a $250 cleaning fee for the academic year; emotional support animals are free.

2. Japanese Columbo.

3. “Bar-tailed Godwits regularly travel more than 7,000 miles non-stop.

4. “Latvia bans unvaccinated lawmakers from voting, docks pay.

5. “Millions of people not fully vaccinated against Covid in the regions of Upper Austria and Salzburg will be allowed to leave their homes only for reasons considered essential to life, such as going to work, grocery shopping or visiting the doctor…”  Link here.

6. Those new service sector jobs? And why academics remain in the academy.  And further deflation in the Austrian brothel, including for fourteen-year-olds.

The Ig Nobel Prizes

img-z2-1_357.jpgThe Ig Nobel Prize in Economics this year went to Pavlo Blavatskyy for Obesity of politicians and corruption in post-Soviet countries:

We collected 299 frontal face images of 2017 cabinet ministers from 15 post-Soviet states (Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan). For each image, the minister’s body-mass index is estimated using a computer vision algorithm. The median estimated body-mass index of cabinet ministers is highly correlated with conventional measures of corruption (Transparency International Corruption Perceptions Index, World Bank worldwide governance indicator Control of Corruption, Index of Public Integrity). This result suggests that physical characteristics of politicians such as their body-mass index can be used as proxy variables for political corruption when the latter are not available, for instance at a very local level.

The Transportation prize went to researchers led by Cornell University’s Robin W. Radcliffe for determining that it is safe to transport an airborne rhinoceros upside down.

Other prizes here.

You may laugh but don’t forget that the great Andre Geim won an Ig Nobel prize in 2000 for levitating a frog and then won a Nobel prize in 2010 for graphene. I consider this one of the greatest accomplishments in all of science.

Photo Credit: Journal of Wildlife Diseases.

How to prevent brain drain?

Moldova has a reasonable education system, but per capita income far below that of Mexico.  I don’t see any reason why that ought to change, moving forward.  Insofar as Moldova generates serious entrepreneurial talent, you would expect those individuals to leave for greener pastures, say London or even Vienna or Moscow.

(By the way, I wonder what the “new class of very poor white people” are going to be like in a generation or so, in terms of their political views, as liberalism becomes less internationally dominant.)

Sometimes I wonder which features of a country encourage the very smart people to stay there.

One possible candidate would be “very large and messy countries but with a unique ethos,” such as India or Nigeria.  If you are born in Latvia, having to migrate to and live in say Frankfurt or London just isn’t that much of a life disruption from the point of view of culture, and you can be at peace with what your breakfast likely will be.  It is perhaps harder to leave fufu or chapati behind.

Alternatively, Mexico would seem to be an example of a country where the most talented usually do not leave, and indeed we observe that Mexican migration to the United States is only of “average” human capital quality.  Many of the most talented Mexicans are keen to stay in Mexico, where they can earn relatively high incomes, have lots of servants, pursue a variety of life styles with impunity, and enjoy higher social status than they would receive in the States.  Yet perhaps those overall features — which induce the talented to stay — are also correlated with the economic, political, and social environment being somewhat dysfunctional?

Footnote: There are numerous very talented Mexican migrants from poor or possibly indigenous backgrounds.  But often they do not have the core educational conditions in their upbringing to be able to mobilize their ambitions to achieve maximum productivity potential.

The Nordic glass ceiling?

Iceland in particular stands out among the Nordic states, since it has a smaller welfare state than its larger Nordic cousins and also ranks among the highest share of female managers in the world. On the other hand, Denmark has the highest tax rate among all the nations in the Organisation for Economic Co-operation and Development and ranks at the bottom in terms of its proportion of female managers.

In the dataset for developed economies, there are three countries with equal or higher rates of female managers than Iceland: New Zealand, the United States, and Latvia. These countries have relatively low tax rates: 26.4 percent in the United States, 29.0 percent in Latvia, and 32.8 percent in New Zealand.

That is from a new Cato study by Nima Sanandaji.

The euro isn’t as bad as we all thought

It still was a mistake, most of all for Greece and Cyprus.  Yet overall its prospects are looking up, as I argue in my most recent Bloomberg column.  Here is the most revisionist passage:

I now think of the 2008-2012 period as unwinding a long-term bubble of overinvestment in the EU periphery, and thus those were special circumstances when virtually all economic policies were radically underperforming. Given that a recurrence of such conditions is unlikely, the euro will do much better in the future.

Along related lines, compare the performance of fiscal austerity now with that earlier period. Greece has been going through an unprecedented fiscal adjustment, with a primary surplus running at 3.9 percent of gross domestic product; yet Greek output, while ailing, has remained roughly stable. Portugal has been cutting back drastically on public sector investment, dropping its public sector deficit from 4.4 percent of GDP to 2.1 percent. Rather than imploding, the economy grew by 1.4 percent.

Of course, fiscal austerity didn’t perform nearly as well in the earlier part of this decade, and neither did the euro. The economic implosion from the unwinding of the bubble was simply too strong, so we should not overgeneralize from the very negative performance during those years.

Here is the most important passage:

One of the original goals of the euro was to tie countries to the European Union and its rules for free trade and free migration. The major EU country that eschewed euro adoption, the U.K., has now voted itself out the union altogether, to its detriment. Estonia and Latvia, which adopted the euro in part for political reasons to tighten their bonds with the EU, still seem secure against potential Russian aggression. The biggest political trouble spots seem to be Hungary and Poland, neither of which are euro members. That may be a coincidence, but it may also reflect a very real psychological tie resulting from the currency adoption.

Do read the whole thing, there are several other arguments at the link.

Saturday assorted links

1. Mark Zuckerberg at the Ford Rouge Plant.  It is one of America’s great sights.

2. Jacques Derrida interviews Ornette Coleman (pdf).

3. Profile of the new AfD leader.

4. Jill Lepore and writing.

5. Massive wind tunnel for Shaolin monks to do their exercises there is no great Shaolin stagnation.  Designed by Latvian architects.

6. “Low wage workers responded by commuting out of states that increased their minimum wage.

7. Was Erdogan an authoritarian all along?

Monday assorted links

1. The beer pipe conditional public goods assurance game culture that is Belgium (NYT).

2. How meaning varies between speech and its typed transcript.

3. Dani Rodrik Op-Ed on how to do globalization right (NYT).

4. The classic books are making a commercial comeback.

5. $30 markets in everything.

6. Who favors free movement of labor within the EU?  This tweet and graph makes a good point, but given status quo bias I don’t find the numbers as overwhelming as does O’Rourke.  p.s. Luxembourg and Latvia are the top two in support.

Where is freedom in the world contracting? Advancing?

Contracting:

America, China, Hong Kong, Russia, Ukraine, Austria, Hungary, Poland, Slovakia, Turkey, Syria, Libya, Iraq, Yemen, Kosovo, Afghanistan, Philippines, Venezuela, Nigeria, South Africa, Malaysia, and Brazil, though the latter may be in flux.  Tunisia and Iran are problematic, but arguably hard to call.  Saudi may be headed toward collapse, but I don’t think you can say they are less free just yet.  Ethiopia is losing more political freedom, though still making very real economic progress.

Advancing:

Mexico and Colombia, if only by consolidating previous gains, and still there is a chance of a turnaround in Argentina at some point.  Latvia?  Where else?  You could make a (modest) case for India and some of the smaller African countries.

Neutral:

Japan, South Korea, Canada, and much of Western Europe though many of these cases appear fragile to me.

Overall this is not a thrilling ledger.  I haven’t listed most of the smaller countries, but in the longer run they often follow the lead of their larger neighbors.

File under Not Good.

The view from Vilnius, part II

When Greece’s finance minister, Yanis Varoufakis, in an early round of negotiations in Brussels, complained that Greek pensions could not be cut any further, he was reminded bluntly by his colleague from Lithuania that pensioners there have survived on far less. Lithuania, according to the most recent figures issued by Eurostat, the European statistics agency, spends 472 euros, about $598, per capita on pensions, less than a third of the 1,625 euros spent by Greece. Bulgaria spends just 257 euros. This data refers to 2012 and Greek pensions have since been cut, but they still remain higher than those in Bulgaria, Lithuania, Latvia, Croatia and nearly all other states in eastern, central and southeastern Europe.

There is more from Andrew Higgins in the NYT here.

Did Iceland reject fiscal austerity?

Scott Sumner serves up the appropriate links.  He cites Mark Sadowski, who tells us:

…Iceland’s general government budget ran a surplus equal to 1.8% of GDP in 2014, or a change in fiscal stance since 2009 equal to 11.5% of GDP. This can be found on Table A1 of the April 2015 IMF fiscal Monitor.

…Table A3 shows that Iceland’s general government cyclically adjusted balance rose from a deficit of 10.0% of potential GDP in 2009 to a surplus of 2.7% of potential GDP in 2014, or a change of 12.7% of potential GDP…

But even this tends to understate the amount of fiscal austerity that Iceland has engaged in. This is because it includes the increase in spending attributable to rising interest payments on the national debt. To get a proper idea of the amount of fiscal austerity that Iceland has engaged in (i.e. cuts in direct spending and increases in taxes) one has to look at the general government cyclically adjusted primary balance which can be found in Table A4.  Iceland’s general government cyclically adjusted primary balance rose from a deficit of 6.9% of potential GDP in 2009 to a surplus of 6.2% of potential GDP in 2014, or a change of 13.1% of potential GDP.

…By this standard Iceland has done about 30% more austerity than Ireland, over double that of the UK, roughly two and a half times as much as the US, and approximately five and a half times as much as Latvia. The only country that has done more fiscal austerity is Greece.

None of this should come as a surprise. When nearly all the other OECD members were busy implementing fiscal stimuli in early 2009, Iceland (joined only by Ireland) was engaged in a massive fiscal consolidation.

Scream it from the rooftops: massive fiscal austerity in Iceland.  (Or should that be something like “gegnheill ríkisfjármálum austerity á Íslandi!”)  There is plenty more detail and argumentation in Mark’s post.  Here is my previous post on Iceland.

Ricardo Hausmann on Greece and austerity

So the problem is not that austerity was tried and failed in Greece. It is that, despite unprecedented international generosity, fiscal policy was completely out of control and needed major adjustments. Insufficient spending was never an issue. From 1998 to 2007, Greece’s annual per capita GDP growth averaged 3.8%, the second fastest in Western Europe, behind only Ireland.

…Unsustainable growth paths often end in a sudden stop of capital inflows, forcing countries to bring their spending back in line with production. In Greece, however, official lenders’ unprecedented munificence made the adjustment more gradual than in, say, Latvia or Ireland.

There are many other good points at the link.  Hausmann makes this point:

Greece never had the productive structure to be as rich as it was: its income was inflated by massive amounts of borrowed money that was not used to upgrade its productive capacity.

And then the closer can only be described as an “ouch”!:

Unfortunately, this is not what many Greeks (or Spaniards) believe. A large plurality of them voted for Syriza, which wants to reallocate resources to wage increases and subsidies and does not even mention exports in its growth strategy. They would be wise to remember that having Stiglitz as a cheerleader and Podemos as advisers did not save Venezuela from its current hyper-inflationary catastrophe.

As I’ve said before, that out of control Greek government spending and borrowing has been converted into a (supposed) cautionary tale about the dangers of fiscal conservatism is one of the greatest (and most unfortunate) public relations triumphs of modern times.  That said, I would have preferred it if Hausmann had paid more attention to monetary policy.