Current Affairs

Despite being the richest state in the country, by per-capita income, Connecticut’s budget is a mess. Its pensions are woefully under-funded. Its deficit is projected to surpass $2 billion, or 12 percent of its total annual tax revenue. Hartford is approaching bankruptcy. Conservatives look at Connecticut and see a liberal dystopia, where high taxes have ruined the economy. Liberals, on the other hand, see a capitalist horror show, where the rich dwell in gilded mansions, ensconced in sylvan culs-de-sac, while nearby towns face rising poverty and bankruptcy. Why is America’s richest state floundering?

The first answer is: Corporations are leaving. Aetna, the insurance giant, is leaving Hartford, where it was founded 150 years ago. In early 2016, General Electric announced that it would move its global headquarters from Fairfield, Connecticut, to Boston.*

The second answer is: People are leaving. It’s rare for any state to actually shrink, but Connecticut’s population has been falling for three straight years. Meanwhile, only Michigan, Ohio, and Mississippi had slower job growth than Connecticut did over the last two decades, according to Jed Kolko, the chief economist at Indeed, a job site.

…The richest 0.02 percent of Connecticut households make more money than the bottom 48 percent, according to state reports. This 0.02 percent clusters along the Gold Coast and tends to work in finance.

In the last decade, Connecticut’s millionaires have accounted for as much as 30 percent of the state’s income-tax revenue. This is a problem, because the investment income of financiers is volatile.

That is from Derek Thompson at The Atlantic, interesting throughout.

China’s energy companies will make up nearly half of the new coal generation expected to go online in the next decade.

These Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal, according to tallies compiled by Urgewald, an environmental group based in Berlin. Many of the plants are in China, but by capacity, roughly a fifth of these new coal power stations are in other countries.

Over all, 1,600 coal plants are planned or under construction in 62 countries, according to Urgewald’s tally, which uses data from the Global Coal Plant Tracker portal. The new plants would expand the world’s coal-fired power capacity by 43 percent.

…Of the world’s 20 biggest coal plant developers, 11 are Chinese, according to a database published by Urgewald.

Here is the full NYT piece by Hiroko Tabuchi. Furthermore, China’s electric cars aren’t actually all that clean.

Keep this all in mind the next time you hear someone tout China as the new leader of the global green energy movement.

This is a Bloomberg podcast, here is their summary of the highly intelligent and personable Khanna:

I recently sat down with Representative Ro Khanna of California to talk about technology, jobs and economic lessons from his perspective as Silicon Valley’s congressman. Khanna, who is serving his first term, is vice chair of the Congressional Progressive Caucus and previously taught economics at Stanford University, law at Santa Clara University, and American jurisprudence at San Francisco State University.

We discuss regional visas, EITC, Facebook, manufacturing employment, and much more.

Here is Jonathan on Twitter, and here is the LRB piece by James Meek, “Somerdale to Skarbimierz, James Meek follows Cadbury to Poland.”

The article covers the economic and sociological effects of outsourcing and wage arbitrage, and how it affects communities and politics on both sides of the investment shift.  It is hard to excerpt, but here is one good bit:

Anna Pasternak, who worked at the new chocolate factory in Skarbimierz, noticed the age of the equipment on the production lines. The wear on the metal caused by decades of Somerdale workers’ hands was the only message the British employees sent to their Polish successors. I met Pasternak in her flat in Brzeg, the nearest sizeable town to Skarbimierz. I asked her how she felt about what had happened to the British factory. ‘I never really thought about it,’ she said. ‘We lost so many jobs here in Brzeg … We didn’t feel sorry that others lost theirs … It’s somewhere else in the world. We don’t physically know these people.’

And:

Barbara Kaśnikowska, the shrewd former head of Wałbrzych zone, suggests, persuasively, that Law and Justice benefited from resentment not of the have-nots towards the haves, but between haves; that as Poland boomed, ordinary people didn’t resent those who’d become super-rich so much as people just like them who, for no good reason, earned twice or three times as much as they did. In her view, Poland’s non-voters didn’t despise Civic Platform: they took its achievements for granted. A Pole, on this analysis, is much more likely to vote to say ‘screw you’ when they are angry than ‘thanks!’ when all’s going well. You can see her point. Andrzej Buła, the marshal of Opole and Civic Platform leader in the province, told me that the EU was funding 40 per cent of the provincial budget, while unemployment had dropped from 14 to 8 per cent. In some counties it’s as low as 5 per cent – essentially full employment. Without the Ukrainians, he said, they’d be short-handed. Yet in the 2015 parliamentary elections Civic Platform lost Opole on a swing of 40 per cent to Law and Justice.

Every paraagraph is excellent, strongly recommended.

I found this intriguing:

According to several years of nationally representative survey data, about two-thirds of Americans believe that elected representatives should “try their hardest to give the people what they want.” Remarkably, however, Republican voters are between 20 and 30 points less likely than their Democratic counterparts to agree. Moreover, people represented by a Republican member of Congress are almost 20 percentage points less likely to perceive their member as behaving that way, regardless of their own party identification.

It’s not as nefarious as it sounds. Republican voters, whether they consciously realize it or not, are more comfortable with what political scientists call “trustee-style representation,” whereby representatives use their own principled judgment when casting votes. In contrast, the “delegate style” binds legislators to constituent demands. Many Republicans — voters and lawmakers alike — cherish their principles more than they do the whims of a mostly uninformed and inattentive mass public.

…members of groups that comprise the Republican base seem especially averse to delegate-style public overtures. Even after taking account of other forces that might shape citizens’ views of lawmakers, we found that traditionalistic Christians are 23 points less likely than seculars to say that representatives should “give the people what they want.” Instead, they should “stick to their principles, no matter what the polls might say.”

…when Republicans think their representatives are getting soft, they try to hold them accountable. In surveys, we asked respondents to tell us not only what kind of representation they wanted but also the kind they thought they were actually getting. Democrats proved 23 points less supportive of their representatives when they perceived them paying too little attention to public opinion. In contrast, Republicans were up to 50 percentage points less supportive when they saw them paying too much attention.

Fourth, judging from legislative roll-call data since 1985, Republicans in Congress have been considerably less likely than Democrats to follow their constituents’ policy preferences — a tendency that has grown over time. We found that the ideological convergence between voters and legislators is more than three times greater among Democratic legislators than among Republicans.

There is yet more of interest at the link, from Monkey Cage, by David C. Barker and Christopher Jan Carman.

Many banks and foreign exchange companies outside of Qatar are now refusing to buy Qatari riyals, Doha News has learned.

The change has caught many people off guard. It comes after rating agencies lowered Qatar’s credit rating and put it on “negative watch” amid an ongoing Gulf dispute.

Several residents traveling in Europe, the US and Asia have contacted Doha News saying they have been unable to exchange Qatari currency in the countries they were visiting.

However, not all banks in all countries are affected. Exchanges in Jordan and Lebanon, for example, are still operating normally.

…When contacted by Doha News, the UK branch of the international exchange firm Travelex and the UK bank Halifax Bank of Scotland (HBOS) both confirmed that they were not buying riyals from customers.

The same is true at some U.S., Indian, and Pakistani banks.  Here is the full story from Doha News.

Ben was wildly charming and charismatic before the crowd.  My questions tried to get at how he thinks rather than the hot button issues of the day.  Here is the transcript, audio, and video.  We covered Kansas vs. Nebraska, famous Nebraskans, Chaucer and Luther, unicameral legislatures, the decline of small towns, Ben’s prize-winning Yale Ph.d thesis on the origins of conservatism,  what he learned as a university president, Stephen Curry, Chevy Chase, Margaret Chase Smith, and much more.

Here is one bit from Ben:

Neverland and Peter Pan is a dystopian hell. Neverland is not a good place. You don’t want to get to the place where you’re physically an adult and you have no moral sense, you have no awareness of history, you have no interest in the future. Peter Pan is killing people, and he doesn’t really care; he doesn’t remember their names. It’s a really dystopian thing. Perpetual adolescence is the bad thing.

Adolescence is special. We need to figure out how to use adolescence; it’s a means to an end. So that’s what the book’s about.

I am an Augustinian in my anthropology, but Rousseau is a romantic. I think he’s wrong about lots and lots and lots of things, but I think he’s really, really smart. You have to engage him, and you have to engage people who have ideas that are different than yours because you may ultimately be converted to their view, and you need to encounter things that are big and challenging and threatening to your worldview. Or you may sometimes come to believe you’re right and be able to respond to the counterarguments, while your argument will be better. You’ll grow through it, and you’ll become more persuasive to others through it.

So I think Rousseau’s fundamental anthropological understanding of why we feel that things are broken in our soul is, he’s got a reason to blame society for everything we feel is wrong in the world, and I think there’s a lot of brokenness deep inside all of us, and so, that’s the Augustinian versus Rousseauvian sense of what’s wrong.

But I think the Emile is brilliant, both because it forces me to wrestle with ideas that I don’t agree with, or mostly don’t agree with, but I think it’s also just an incredibly good read.

Then there was this:

COWEN: …Might one argue that the more one thinks and writes about sex, the more you’re led to Rousseauian conclusions that a certain kind of constraint will prove impossible, and then one is pulled away further from Ben Sasse–like conclusions.

SASSE: That’s a really fair question. I wanted to stay away from sex 100 percent, and then ultimately I couldn’t do it.

COWEN: There’s three pages in your book about sex.

SASSE: Yeah.

COWEN: And page 33 mentions it once.

You’ll have to read the whole thing to see where Ben took that line of inquiry, his answer was excellent.

That is the topic of my latest Bloomberg column, more or less, here is one bit from it:

That leaving is so difficult, however, may in part explain the desire to leave. In the most sophisticated cases for Brexit, there is no acceptable resolution to the negotiating dilemmas. Rather many Brexiteers think their nation’s culture and legal system need to take their own courses. For better or worse, they think England in particular simply can’t become that much more “continental.” What appeared to be a wonderful deal — free trade but no euro — actually was viewed as a Trojan horse for the disappearance of British uniqueness. Over time the encroachments of EU law and governance will clash more and more with the underlying institutions and culture of the U.K., and something will have to give. Law and culture eventually must prove congruent, but EU legal and bureaucratic powers will inevitably grow, ultimately clashing with the notion of Britain as an idiosyncratic and independent nation. Culture and law cannot remain so separate forever.

I have myself been strongly pro-Remain, but I don’t dismiss the Leavers as a bunch of ill-informed voters or hapless victims of globalization. Counterintuitively, it is the supposedly undereducated Leavers who have the more theoretical and historical perspective. It doesn’t help that they initially were promised a much weaker set of ties with the EU, and so mistrust makes all of the complaints more potent.

On top of all this, many Brexiteers suspect there won’t be any better time to leave than now, and so “Remain” is for them an impossible stance over the longer run. Returning to history, ejecting James II seemed risky and destabilizing at the time, but for the most part the decision wasn’t regretted and it was better not to have hesitated.

Do read the whole thing.

That is a forthcoming volume edited by Cass Sunstein.  The contributors include Cass, myself, Timur Kuran, Duncan Watts, Martha Minow, Bruce Ackerman, Jack Goldsmith, Geoffrey Stone, and Noah Feldman, among others.  Self-recommending, if anything ever was…

My essay, by the way, says no, it cannot happen here.  Counterintuitively, American government is too bureaucratized and too feminized to be captured and turned toward old-style fascism.  I encourage you to pre-order.

The Seattle Minimum Wage Study, a study supported and funded in part by the Seattle city government, is out with a new NBER paper evaluating Seattle’s minimum wage increase to $13 an hour and it finds significant dis-employment effects that on net reduce the incomes of minimum wage workers. I farm this one out to Jonathan Meer on FB.

This is the official study that was commissioned several years ago by the city of Seattle to study the impacts of raising the minimum wage, in a move that I applauded at the time as an honest and transparent attempt towards self-examination of a bold policy. It is the first study of a very high city-level minimum wage, with administrative data that has much more detail than is usually available. The first wave (examining the increase to $11/hr) last year was a mixed bag, with fairly imprecise estimates.

These findings, examining another year of data and including the increase to $13/hr, are unequivocal: the policy is an unmitigated disaster. The main findings:

– The numbers of hours worked by low-wage workers fell by *3.5 million hours per quarter*. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.

– The losses were so dramatic that this increase “reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.” On average, low-wage workers *lost* $125 per month. The minimum wage has always been a lousy income transfer program, but at this level you’d come out ahead just setting a hundred million dollars a year on fire. And that’s before we get into who kept vs lost their jobs.

– Estimates of the response of labor demand are substantially higher than much of the previous research, which may have been expected given how much higher (and how localized) this minimum wage is relative to previously-studied ones.

– The impacts took some time to be reflected in the level of employment, as predicted by Meer and West (2016).

– The authors are able to replicate the results of other papers that find no impact on the restaurant industry with their own data by imposing the same limitations that other researchers have faced. This shows that those papers’ findings were likely driven by their data limitations. This is an important thing to remember as you see knee-jerk responses coming from the usual corners.

– You may also hear that the construction of the comparison group was flawed somehow, and that’s driving the results. I believe that the research team did as good of a job as possible, trying several approaches and presenting all of their findings extensively. There is no cherry-picking here. But more importantly, without getting too deep into the econometric weeds, my sense is that, given the evolution of the Seattle economy over the past two years, these results – if anything – *understate* the extent of the job losses.

This paper not only makes numerous valuable contributions to the economics literature, but should give serious pause to minimum wage advocates. Of course, that’s not what’s happening, to the extent that the mayor of Seattle commissioned *another* study, by an advocacy group at Berkeley whose previous work on the minimum wage is so consistently one-sided that you can set your watch by it, that unsurprisingly finds no effect. They deliberately timed its release for several days before this paper came out, and I find that whole affair abhorrent. Seattle politicians are so unwilling to accept reality that they’ll undermine their own researchers and waste taxpayer dollars on what is barely a cut above propaganda.

I don’t envy the backlash this team is going to face for daring to present results that will be seen as heresy. I know that so many people just desperately want to believe that the minimum wage is a free lunch. It’s not. These job losses will only get worse as the minimum wage climbs higher, and this team is working on linking to demographic data to examine who the losers from this policy are. I fully expect that these losses are borne most heavily by low-income and minority households.

In the past few months, China has announced two new crackdowns on research misconduct — one of which could lead to executions for scientists who doctor their data.

Scientists have been sounding alarms for years about the integrity of research in China. One recent survey estimated that 40 percent of biomedical papers by Chinese scholars were tainted by misconduct. Funding bodies there have in the past announced efforts to crack down on fraud, including clawing back money from scientists who cheat on their grants.

This month, in the wake of a fake peer review scandal that claimed 107 papers by Chinese scholars, the country’s Ministry of Science and Technology proclaimed a “no tolerance” policy for research misconduct — although it’s not clear what that might look like. According to the Financial Times, the ministry said the mass retractions “seriously harmed the international reputation of our country’s scientific research and the dignity of Chinese scientists at large.”

But a prior court decision in the country threatened the equivalent of the nuclear option. In April courts approved a new policy calling for stiff prison sentences for researchers who fabricate data in studies that lead to drug approvals. If the misconduct ends up harming people, then the punishment on the table even includes the death penalty. The move, as Nature explained, groups clinical trial data fraud with counterfeiting so that “if the approved drug causes health problems, it can result in a 10-year prison term or the death penalty, in the case of severe or fatal consequences.”

Here is the story, via the excellent Mark Thorson.

Here is a good summary and analysis from Megan McArdle, here is one key part:

But while there are a few things to like in this bill, overall, it’s a mess.  All of the problems created by Obamacare’s architecture remain, and some of the problems will get worse, because lower subsidies, higher deductibles and no mandate penalty probably means that a lot of people will exit the exchanges.  Those people are likely to be the folks we most need to stabilize those exchanges: healthy youngsters who don’t use much health care.  Which means that the exchanges will be at further risk from the death spirals we’ve already seen in some states.

I agree the bill is a bad idea.  That said, I do hope you keep in perspective some of the more, um, lurid critiques running around, including from health care economists (the Great Firewall won’t let me link to Twitter, and right now VPN is down).  You can read them as sociology, however, with a rather chilling effect.

The orcas will wait all day for a fisher to accumulate a catch of halibut, and then deftly rob them blind. They will relentlessly stalk individual fishing boats, sometimes forcing them back into port.

Most chilling of all, this is new: After decades of relatively peaceful coexistence with cod and halibut fishers off the coast of Alaska, the region’s orcas appear to be turning on them in greater numbers.

“We’ve been chased out of the Bering Sea,” said Paul Clampitt, Washington State-based co-owner of the F/V Augustine.

Like many boats, the Augustine has tried electronic noisemakers to ward off the animals, but the orcas simply got used to them.

“It became a dinner bell,” said Clampitt.

John McHenry, owner of the F/V Seymour, described orca pods near Alaska’s Aleutian Islands as being like a “motorcycle gang.”

“You’d see two of them show up, and that’s the end of the trip. Pretty soon all 40 of them would be around you,” he said.

A report this week in the Alaska Dispatch News outlined instances of aggressive orcas harassing boats relentlessly — even refusing to leave after a desperate skipper cut the engine and drifted silently for 18 hours.

These are not Coasean orcas, or are they?  And sperm whales are now in on the act:

Fishing lines are also being pillaged by sperm whales, the large square-headed whale best known as the white whale in Moby Dick.

“Since 1997, reports of depredation have increased dramatically,” noted a report by the Southeast Alaska Sperm Whale Avoidance Project.

A remarkable 2006 video by the Avoidance Project captured one of the 50,000 kg whales delicately shaking fish loose from a line. After a particularly heavy assault by sperm whales, fishers are known to pull up lines in which up to 90 per cent of the catch has disappeared or been mangled.

Here is the full story, with video, and further points of interest.  For the pointer I thank the excellent Mark Thorson.

As organized, multiplayer video game competitions — also known as esports, or electronic sports — continue to gain recognition in China, entertainment giant Tencent Holdings Ltd. has accelerated its esports expansion with the unveiling of a new five-year plan.

The plan, which involves setting up esports leagues, tournaments and associations, nurturing players and constructing esports-themed industrial parks, was published by Tencent E-Sports, a subsidiary established in early December.

Tencent is the world’s largest mobile gaming company by revenue, according to research firm Newzoo. With the new plan, it aims to create a 100-billion-yuan esports industry in China within five years, the company announced on Friday at a press conference.

The plan was based on Tencent’s expectations that China is set to become the world’s largest esports market. Tencent predicted there will be 220 million esports players in China and 335 million globally by the end of this year.

Here is the story.  And:

The number of Chinese “red tourists” who visit Russia to retrace a shared communist history has been soaring in recent years, contributing to the wave of Chinese visitors to Russia that has grown with the help of closer bilateral relations between the countries, according to industry insiders on Tuesday.

“There definitely is growing interest among Chinese tourists for Russia, especially the older generations, who are nostalgic about the history of Russia,” Zeng Qingan, general manager of Beijing Global Travel Ltd, told the Global Times.

Zeng said that since his company started tour groups to Russia nine years ago, the number of participants has increased fast, especially after the company redesigned its tour routes in 2014 to cover historical Soviet Union era sites, including the Red Square and Victory Square in Moscow, the Lenin Memorial Museum in Ulyanovsk and Moscow State University. The travel firm called it the “Red Tourism” package.

Link here.  The revolution not only will be televised, but they will make an e-sports version of it, marketed on WeChat.

That is the topic of my latest Bloomberg column, here is part of the argument:

More generally, the U.S. is an environment where new products — and here I mean of the non-political sort — get started relatively easily. People are willing to take more chances with their consumption, and so this is a fertile environment for startups, which then spread to the broader world.

As for Britain, the traditional aristocracy is remarkably weakened, voting along class lines has disappeared and, most observers agree, if it were really up to the House of Lords, Brexit wouldn’t be happening.

On top of these factors is English, by far the world’s leading language for scientific and philosophic and political discourse, for blogs, for Twitter, and for many other kinds of dialogue. We shouldn’t be surprised if new ideas are more likely to surface and take hold in the English-speaking world.

Here is another bit:

To be sure, some evidence suggests the influence of President Trump is actually causing Western Europe to become more liberal. But don’t confuse style and substance. Another five to 10 years of deindustrialization, terrorist attacks and migrant crises might lead to a “home brew” version of Trumpian ideas in continental Europe, albeit cloaked in a more intellectual and more aristocratic garb. There is a running joke going around along the lines of “If fascist ideas come to [Country X], they will come in the form of anti-fascism.” Once the properly European version of the product comes to the fore, it might do very well indeed.

There is much more at the link.