Economics

In my view, the focus of left-wing attention on trade restrictions is due not to the importance of international trade flows in altering income distribution, but rather springs from different motives: from attempts to hook up some of the energy that for two centuries now has been abundantly focused on nation and cross-connect it to class. As Ernst Gellner wrote, leftists have been faced with what they regard as a historical anomaly in the rise of nationalism, and have reacted by embracing:

[Gellner]: The Wrong Address Theory…. Just as extreme Shi’ite Muslims hold that Archangel Gabriel made a mistake, delivering the Message to Mohamed when it was intended for Ali, so Marxists basically like to think that the spirit of history of human consciousness made terrible boob. The awakening message was intended for classes, but by some terrible postal error was delivered to nations. It is now necessary for revolutionary activists to persuade the wrongful recipient to hand over the message, and the zeal it engenders, to the rightful and intended recipient. The unwillingness of both the rightful and the usurping recipient to fall in with this requirement causes the activist great irritation…

That is from Brad DeLong.

Xavier Jaravel now has a paper on this important topic:

Using detailed product-level data in the retail sector in the United States from 2004 to 2013, this paper shows that product innovations disproportionately benefited high-income households due to increasing inequality and the endogenous response of supply to market size. Annualized quality-adjusted inflation was 0.65 percentage points lower for high-income households, relative to low-income households. Using national and local changes in market size driven by demographic trends plausibly exogenous to supply factors, the paper provides causal evidence that a shock to the relative demand for goods (1) affects the direction of product innovations, and (2) leads to a decrease in the relative price of the good for which demand became relatively larger (i.e. the long-term supply curve is downward sloping). A calibration shows that this channel can explain most of the observed difference in quality-adjusted inflation rates across the income distribution.

Also see my old paper with Alex, “Who Benefits from Progress?”

Two days ago I reported on how Italian food was the big winner from culinary globalization.  How are things going in Italy itself?:

Annual spending by Italian families on restaurants and cafes shrank nearly 2% between 2007 and 2014, Eurostat’s latest data show, while consumption of ethnic foods such as Chinese or North African has nearly doubled during that period.

The Masuellis—with a back-of-the-envelope way of running their business—can’t get bank loans to modernize their restaurant. They had to sell a property to fund the restaurant in 2011 and 2012, and have also reached into their own pockets to pay salaries and taxes at times.

Mr. Masuelli considered firing some of his five employees, but the rigid labor laws meant the cost of dismissing them was too high. At the same time, new health and safety regulations have eaten into profit.

More broadly there is this:

Officer Pang is a top supervisor in one of China’s biggest police departments, in the southern metropolis of Guangzhou. But for two weeks, he and three other Chinese police officers are in Italy with strict orders: to protect Chinese tourists.

Of course it is only four officers, but isn’t that what they said at first about RoboCop?  I also enjoyed this paragraph:

“It’s our duty to make Chinese fall in love with Rome and Italy,” said Alessandro Zucconi, the president of the Young Hoteliers Federation in Rome, who agreed that “misunderstandings” sometimes occur between the two cultures. “They are not like the Germans, who mostly come knowing our culture and literature better than we do.”

Developing…

This study examines cultural differences in ordinary dishonesty between Italy and Sweden, two countries with different reputations for trustworthiness and probity. Exploiting a set of cross-cultural tax compliance experiments, we find that the average level of tax evasion (as a measure of ordinary dishonesty) does not differ significantly between Swedes and Italians. However, we also uncover differences in national “styles” of dishonesty. Specifically, while Swedes are more likely to be either completely honest or completely dishonest in their fiscal declarations, Italians are more prone to fudging (i.e., cheating by a small amount). We discuss the implications of these findings for the evolution and enforcement of honesty norms.

Here is the research, by Andrighetto, et.al., via the excellent Kevin Lewis.

Jay McCarthy writes:

I am Mormon. I am from Massachusetts, but lived in Utah for a long time, and have lived in prosperous and not-prosperous Mormon areas.

I don’t think tithing is an effective way to get social status.

Let me explain some mechanics. When I get a paycheck, I got to a Web site the church runs and tell them to transfer 10% from my checking account to their accounts. The new online system lets me do it whenever I want, whereas previously (the online system is about eight months old) I wrote a check and handed it to a local church leader. Even in the old days of physical checks, there was extreme paranoia about keeping this an anonymous process. You would occasionally see people handing their checks, but the only people who could know what the amount was was the local leader (called a bishop) and their one or two clerks. (Aside: this local leader and their clerks are lay people that volunteer on a rotating basis for terms of about three to five years.) In the new system, only the local leader sees your tithing amount and maybe a clerk as they print out reports.

The next step is that each year, around the end of the year (December), you have a meeting with the local leader called “tithing settlement”. Before the meeting, you get a sealed letter from a clerk with a statement of all the money you’ve given. You go to the meeting as an entire family (in my case, my wife and three kids younger than 8). It normally lasts about 30 minutes and you spend the time chatting about how things are going in your life and if you have any needs and what is going on. At the end the bishop remembers, “Oh, it’s tithing settlement.” And says, “Is this amount tithed listed on your report accurate?” then asks “Are you a full tithe payer, a partial tithe payer, or not a tithe payer?”. Whatever you answer, he will have no comment about and then you leave.

The other way that tithing is noticed is that every two years you renewed what is called your “temple recommend”. This is an barcoded ID card that is tied to your membership records in the church database. When you want to go to the temple, you bring this card and they scan it to verify that you are allowed in the temple. (Aside, the temple is not where you go each Sunday. There are about 150 in the world. It is for special occasions and most people that are working try to go monthly, but most retired people try to go daily.) During this renewal process, you have an interview with two local leaders—one that you go to church with and one from the administrative unit above that (called a stake). During this interview, you are asked lots of “Yes” and “No” questions (they are encouraged to not require more than “Yes” or “No” answers, because historically some of these leaders changed the requirements to reflect their own interpretations of the rules.) One of the questions is, “Are you a full tithe payer?”. There is no checking of this answer with the answer you give at tithing settlement.

So, in summary, tithing is such a secretive process that I don’t believe it is a good way to get status.

In the preceding discussion, I always wrote “tithing”, but actually we would say “tithes and offerings” because when you pay you can always give additional money. The additional money can be flagged for certain programs. (The tithing CANNOT be flagged.) For instance, one program is called a “fast offering” and it is used for the poor and needy who are local to you. Others are to sponsor a missionary or help build a temple.

I have never heard a local leader with knowledge of offering matters ever say anything about how much a family gave or if they were giving a lot or being generous or anything like that. I have not been a local leader, but I have been on the executive committee of local congregations and attended all the meetings that the local leader did. If they said anything, it would be considered an incredible violation of protocol.

In my opinion, Mormons gain social status within the group by two major ways. First, by externality conformity to norms, such as dressing modestly, having lots of kids, never cursing, discussing the gospel with each other, and so on. Second, by in kind donation of time. Everything that happens at church is done by volunteers and there are many things that need to happen. Each Sunday, meetings are three hours long and there are many classes and lectures that need to be given. The first hour has about three lectures. The second and third hour each have about fifteen concurrent lessons (for different age groups). So, this means that about 33 people need to volunteer to teach for an hour weekly. On the Wednesdays, all youth from 8 to 18 have their own classes and activities at the church that need to be taught by someone. There’s another program for high school students called Seminary (a dumb name) where they are taught about the scriptures EVERY DAY before school. Outside of Utah, this is a volunteer position typically done by one person and is an immense time commitment. (That’s what I do.)

I think these things are much more expensive than tithing and an academic analysis of Mormonism would get more out of studying their impact than studying tithes and offerings.

— A few small comments.

The tithing settlement form says “The Church provided no goods or services in consideration, in whole or in part, for the contributions detailed below but only intangible religious benefits.” I chuckle every time I see that.

I assume that the details of your tithing are considered if you are considered for prestigious volunteer jobs, like bishop.

In executive meetings, we do hear about what percentage of the local membership paid tithing. In my experience, in Utah, social conformity is high but tithing payment is relatively low, but outside of Utah it is the opposite: there are more diverse Mormons and everyone is paying tithing.

Mormon home production is not caused by tithing. It’s explicit motivation is worry about the millennium (a similar impetus to “preppers”) and getting attacked by the government (as happened in Missouri, Illinois, and Utah in the 1800s.) It’s implicit motivation is to gain social status by conformity to norms.

Here is the original post.

That is David Neumark in the WSJ, here is one excerpt:

Another recent study by Shanshan Liu and Thomas Hyclak of Lehigh University, and Krishna Regmi of Georgia College & State University most directly mimics the Dube et al. approach. But crucially it only uses as control areas parts of states that are classified by the Bureau of Economic Analysis as subject to the same economic shocks as the areas where minimum wages have increased. The resulting estimates point to job loss for the least-skilled workers studied, as do a number of other recent studies that address the Dube et al. criticisms.

The piece is a good brief survey of some of the developments since Card and Krueger.  Here are some alternate links to the piece.

This is an email from Oli Cairns, a loyal MR reader:

I’ve recently been thinking about the role sporting success plays in fostering patriotism.

As a Brit, the only time my cynical friends, colleagues or fellow commuters stop complaining about the country/each other is when our compatriots start winning tennis sets, Olympic medals or football matches (not much of that recently). I used to think this was a good thing, but now I worry that these boosts in patriotism and social capital are not being allocated efficiently.

My proposal would be to alter the structure of global sports to increase the success of poorer nations. Say that 50% of future Football World Cups must take place in Sub-Saharan Africa, 25% of qualification spots are allocated to the region and every top-tier European club is mandated to start 2 of their players per game. At the same time, we could replace most Olympic track-cycling, rowing and horse riding events with the 125m, 250m or a 10k lap elimination.

Do you think this would be welfare improving?

From this perspective, maybe Sep Blatter is transformed from villain to hero!

NBER: We study a unique quasi-experiment in Austria, where compulsory voting laws are changed across Austria’s nine states at different times. Analyzing state and national elections from 1949-2010, we show that compulsory voting laws with weakly enforced fines increase turnout by roughly 10 percentage points. However, we find no evidence that this change in turnout affected government spending patterns (in levels or composition) or electoral outcomes. Individual-level data on turnout and political preferences suggest these results occur because individuals swayed to vote due to compulsory voting are more likely to be non-partisan, have low interest in politics, and be uninformed.

In other words, all mandatory voting did was add noise to the system and as such probably made everyone worse off including the new voters.

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The decline of the American middle class is “a pervasive local phenomenon,” according to Pew, which analyzed census and American Community Survey data in 229 metros across the country, encompassing about three-quarters of the U.S. population. In 203 of those metros, the share of adults in middle-income households fell from 2000 to 2014.

On the average is over front, there is also this:

In total, 172 of these 229 metros saw a growing share of households in the upper-income tier. About as many — 160 — saw a growing share at the bottom. And 108 experienced both: The middle class shrank as the ranks of both the poor and the rich grew.

Here is more from Wonkblog on the new Pew study.  The decline in the middle class is typically strongest in areas where manufacturing used to be strong.

This used to be a debate, but the funny thing is the nomination of Trump has sealed it for the more pessimistic side.  That is unfair, actually, though I think the pessimistic side is correct nonetheless.

The fifth video in the Solow series from our Principles of Macroeconomics course is really the capstone. It explains how ideas drive growth on the cutting edge. A key insight of the model, however–one which many people still don’t really get–is that ideas increase output and by doing so they also drive capital accumulation so both forces are always at play.

That is the new and quite interesting book by Nima Sanandaji.  The main point is that there are plenty of Nordic women in politics, or on company boards, but few CEOs or senior managers.  In fact the OECD country with the highest share of women as senior managers is the United States, coming in at 43 percent compared to 31 percent in the Nordics.  More generally, countries with more equal gender norms do not have a higher share of women in senior management positions.  Within Europe, Bulgaria does best and other than Cyprus, Denmark and Sweden do the worst in this regard.

One reason for the poor Nordic performance at higher corporate levels is high taxes, which limits the amount of household services supplied through markets.  If it is harder to hire someone to do the chores, that makes it harder for women to invest the time to climb the career ladder.  Generous maternity leave policies may encourage women to take off “too much” time, or at least this is suggested by the author.  A history of communism is also strongly correlated with women rising to the top in business and management; this may stem from a mix of relatively egalitarian customs and a more general mixing up of status relations in recent times and a turnover of elites.

I don’t find this book to be the final word, and I would have liked a more formal econometric treatment.  It is nonetheless a consistently interesting take which revises a lot of the stereotypes many people have about the Nordic countries as being so absolutely wonderful for gender egalitarianism in every regard.

Here is the book’s website, from Timbro (a very good group), I don’t yet see it on Amazon.

We have heard a great deal about increases in mortality among white, non-hispanic, middle-aged Americans (especially women) but to state the case is also to note that this is one group among many. In an excellent new paper, Currie and Schwandt discuss the good news overall–life expectancy is up and health inequality is down, in some cases dramatically. Here, for example, is life expectancy at birth by gender and year.

Life expectancy 1Even more impressive is that life expectancy has increased significantly across all poverty groups (as measured by county poverty levels). In the graph below, for example, the blue triangles indicate life expectancy in 1990 (men on the left, women on the right). Note that as the poverty level of the county increases along the horizontal axis life expectancy falls. The green dots are life expectancy in 2010. Once again, as poverty increases, life expectancy falls. What’s remarkable, however, is how much life expectancy increased between 1990 and 2010 in counties of all poverty levels.

The news is good and may get better. Between 1990 and 2010 mortality rates for children ages 0-4 fell especially dramatically and especially so in poor counties. Moreover, since mortality at older ages is often baked in LifeExpectancy 2by poor health at younger ages there is significant opportunity for these gains to persist over time.

The New York Times also reported yesterday on inequality in life expectancy across race. It’s down.

Infant mortality is down by more than a fifth among blacks since the late 1990s, double the decline for whites. Births to teenage mothers, which tend to have higher infant mortality rates, have dropped by 64 percent among blacks since 1995, faster than for whites.

Blacks are still at a major health disadvantage compared with whites. But evidence of black gains has been building and has helped push up the ultimate measure — life expectancy. The gap between blacks and whites was seven years in 1990. By 2014, the most recent year on record, it had shrunk to 3.4 years, the smallest in history, with life expectancy at 75.6 years for blacks and 79 years for whites.

Part of the reason has been bad news for whites, namely the opioid crisis. The crisis, which has dominated headlines — some say unfairly, given racial disparities — has hit harder in white communities, bringing down white life expectancy and narrowing the gap.

But there also has been real progress for blacks. The rate of deaths by homicide for blacks decreased by 40 percent from 1995 to 2013, according to Andrew Fenelon, a researcher with the National Center for Health Statistics, compared with a 28 percent drop for whites. The death rate from cancer fell by 29 percent for blacks over that period, compared with 20 percent for whites.

The Currie and Schwandt paper is also very good on describing how these estimates are produced and some of the data issues with making these estimates. It’s a must read for those interested in these issues.

That’s the hullaballoo of the day (NYT here):

Facebook workers routinely suppressed news stories of interest to conservative readers from the social network’s influential “trending” news section, according to a former journalist who worked on the project. This individual says that workers prevented stories about the right-wing CPAC gathering, Mitt Romney, Rand Paul, and other conservative topics from appearing in the highly-influential section, even though they were organically trending among the site’s users.

That’s not exactly what I would have suppressed, but I can’t say I am broken up about this.  Most media bias in journalism is demand-driven, and I suspect this feature of the article selection and elevation “algorithm” is perceived by Facebook as demand-driven as well.  Overall I think of Twitter as radicalizing, and Facebook as calming and connecting.  The “censored” right wing sources don’t fit the chummy, nostalgic socializing mood so well, and therefore Facebook wanted to keep them away.  A clear minority is sufficiently interested in those stories to get them trending initially, but that’s not the overall image Facebook wants to present to either its marginal or median user.

Maybe such algorithms mean that social ideas are too slow to change, because user demand depends in part on what Facebook pushes.  Right now I’m more worried about American ideas getting worse than American ideas getting better, so a status quo, don’t offend anybody bias I can live with.  And frankly, a lot of right-wing news sources just aren’t very good — I suppress them myself, without any aid from Facebook.

There is also this:

“People stopped caring about Syria,” one former curator said. “[And] if it wasn’t trending on Facebook, it would make Facebook look bad.” That same curator said the Black Lives Matter movement was also injected into Facebook’s trending news module. “Facebook got a lot of pressure about not having a trending topic for Black Lives Matter,” the individual said. “They realized it was a problem, and they boosted it in the ordering. They gave it preference over other topics. When we injected it, everyone started saying, ‘Yeah, now I’m seeing it as number one’.” This particular injection is especially noteworthy because the #BlackLivesMatter movement originated on Facebook, and the ensuing media coverage of the movement often noted its powerful social media presence.

In those two cases I see the change in coverage as bringing net content gain rather than loss.  The cynical underlying reality is that Facebook does not wish to appear heartless, but does not (yet) have the more subtle manipulative institutions that newspapers and TV stations have developed over decades or even centuries.  They clumsily act in a politically correct manner, without proper institutional camouflage, and now they are being called on it.  They will refine their bias, and make it subtler and harder to criticize, thereby becoming more like most other media outlets.  Ultimately this is more of a social conformity story than a monopoly power dilemma.  I am more worried about pervasive ennui and complacency than the political bias per se.

Deaths from opioid pain reliever overdose in the United States quadrupled between 1999 and 2013, concurrent with an increase in the use of the drugs. We used data from the Medical Expenditure Panel Survey to examine trends in opioid pain reliever expenditures, financing by various payers, and use from 1999 to 2012. We found major shifts in expenditures by payer type for these drugs, with private and public insurers paying a much larger share than patients in recent years. Consumer out-of-pocket spending on opioids per 100 morphine milligram equivalents (a standard reference measure of strength for various opioids) declined from $4.40 to $0.90 between 2001 and 2012. Since the implementation of Medicare Part D in 2006, Medicare has been the largest payer for opioid pain relievers, covering about 20–30 percent of the cost. Medicare spends considerably more on these drugs for enrollees younger than age sixty-five than it does for any other age group or than Medicaid or private insurance does for any age group. Further research is needed to evaluate whether payer strategies to address the overuse of opioids could reduce avoidable opioid-related mortality.

That is from Zhou, Florence, and Dowell, via the excellent Kevin Lewis.