Max Beauvoir, RIP

by on September 14, 2015 at 1:53 pm in Current Affairs, Economics, History, Religion | Permalink

The man who was arguably Haiti’s religious leader has passed away.  His story is fascinating:

Max Beauvoir was a middle-aged businessman with little interest in the occult. The son of a doctor and a scientist himself, he boasted degrees from schools in New York and Paris and a burgeoning career as a biochemist in the U.S. He was not the kind of man who went about seeking spiritual encounters.

So no one was more shocked than he was when his nonagenarian grandfather, lying on his deathbed in Haiti surrounded by more than a dozen descendants, lifted a single, unsteady finger and pointed it at Beauvoir.

”Grandfather turned to me and said, ‘You will carry on the tradition,’” Beauvoir recalled in 1983, 10 years after the moment that changed his life. “It was not the sort of thing you could refuse.”

“The tradition” was voodoo…

By the way, when people refer to “voodoo economics” it is a sign of how selective a lot of our political correctness still is.  Would anyone dream of criticizing a political candidate for his or her “[fill in the blank with some other historically persecuted religion] economics”?

And on the substance of the matter, voodoo is arguably less prone to “free lunch thinking” than say, many Protestant forms of Christianity.  It’s just an easier target because most people don’t know much about it and they see like-minded others taking a poke at it.  The believers and practitioners of the religion seem remarkably distant, but they are not.  They are real people, and they take their beliefs seriously.  Why should we turn the name of their religion into an insulting epithet?

It’s worth reflecting on this usage any time you wonder how some of the “other people out there” still can say racist things.

They are solving for the equilibrium, so to speak:

Germany is reinstating controls at its borders with Austria as Europe’s top economy struggles to cope with a record influx of refugees, according to media reports.

Passport checks had been abolished for countries within Europe’s Schengen zone, but the decision to bring back controls is expected to be announced by Interior Minister Thomas de Maiziere at a press conference on Sunday evening.

Bild newspaper cited security sources as saying that the state government in Bavaria had asked the federal police to help deal with the task. The newspaper said the federal police would send 2,100 officers to Bavaria to help it secure its borders.

Here is the technological shock.  Here is my earlier post on Germany and the backlash.  Here is my earlier post on the moral regression of Syria.  Put those all together and mix…

One reason the Chilean reforms went well was that the state had nationalized the copper mines.  That provided a steady flow of money, thus minimizing the need for revenue-raising distorting policies elsewhere.  More generally the revenues helped build a stable state backed by a secure coalition, which in turn liberalized much of the rest of the economy.  For all the talk about laissez-faire and the Chicago boys, the Chilean privatizers never gave up their hold on those mines.  And the mines proved easy enough to run and convert into revenue…and they are still a lucrative source of foreign exchange.

One reason the Chinese reforms went well was that the state had nationalized the SOEs.  That provided a steady flow of money, thus minimizing the need for revenue-raising distorting policies elsewhere.  More generally that ownership helped build a stable state backed by a secure coalition, which in turn liberalized much of the rest of the economy.  For all the talk about dismantling communism, the Chinese reformers never gave up their hold on those SOEs.  And the companies proved easy enough to run and convert into revenue, at least until the low-hanging fruit was plucked…and they are still…?

The problem of course is that privatizing the SOEs is the economic reform China needs over the medium term, yet it may not be consistent with their political economy in support of broader market forces.

*Good Profit* by Charles G.Koch

by on September 12, 2015 at 12:31 am in Books, Economics, History, Philosophy | Permalink

I am pleased to have received an advance review copy.  The subtitle is How Creating Value for Others Built One of the World’s Most Successful Companies, and here are three excerpts:

One of the many schools I attended was a Catholic school, to which I was sent at age five for a couple of years.  But I was a skeptic even at that young age.  I rejected the nuns’ claim — which I took literally — that Jesus was behind the altar.  They offered graham crackers and milk as reward for good behavior, but the incentive wasn’t strong enough for me.


…Barbara Walters included David [Koch] on her television special The 10 Most Fascinating People of 2014.

His selection highlights the difference in our lifestyles.  His is interesting; mine is not.  When I am not in the office, I’m either studying praxeology, working out in our basement gym, analyzing the twenty-four components of the golf swing, enjoying one of Liz’s “heart-healthy” meals in our kitchen, or trying to understand what my toddler grandsons are saying when we FaceTime.


…Koch [Industries] has enjoyed better results hiring from Wichita State or Kansas State than from Harvard.  (The four employees who have succeeded me as president of Koch Industries hailed from the Murray State University School of Agriculture, Texas A&M, the University of Tulsa, and Emporia State University.)

This is no dull, ghost-written tome, rather it is interesting throughout.  You can pre-order the book here.

*Black Earth*

by on September 11, 2015 at 7:38 am in Books, History, Law, Political Science | Permalink

The author is Timothy Snyder and the subtitle is The Holocaust as History and Warning.  Here is one bit:

The Germans had come to understand that pogroms were not an effective way to eliminate Jews, but that the production of lawlessness was an appropriate way to find murderers who could be recruited for organized actions.  Within weeks they grasped that people liberated from Soviet rule could be drawn into violence for psychological, material, and political reasons.

In per capita terms more Jews from Estonia died than from any other country at the time.  As of 1944 there were still three-quarters of a million Jews in Hungary and ultimately more than half of Hungary’s Jews survived the Second World War, even though Hungary was both a German ally and it was later invaded by Germany.  More generally:

Jews who were citizens of Germany’s allies lived or died according to certain general rules.  Jews who maintained their prewar citizenship usually lived, and those who did not usually died…Jews from territories that changed hands were usually murdered.  Jews almost never survived if they remained on territories where the Soviet Union had been exercising power when German or Romanian forces arrived…In all, about seven hundred thousand Jews who were citizens of Germany’s allies were killed.  Yet a higher number survived.  This is a dramatic contrast to the lands where the state was destroyed, where almost all Jews were killed.

Recommended, interesting throughout, and gripping throughout, including the discussions of agricultural productivity and of Hitler as a non-nationalist who saw race as the primary category of human existence.  It’s not easy to write an original and readable book on the Holocaust these days, but Snyder seems to have done it.  You can read some reviews here.

It’s easy enough to say the Chinese economy is slowing down and that is creating problems for some other countries around the world.  Never settle for such a comfortable understanding!  Might there be deeper ways to think about the problem?

I am not endorsing any of the following speculative hypotheses, rather they are attempts to imbed the Chinese slowdown into what is possibly a broader framework.  Here are a few possibilities:

1. We’ve been realizing that autocratic government isn’t as effective as we had thought.

2. We’ve been realizing that virtually all of the world’s emerging economies will be hit by “premature deindustrialization,” China included.  China will produce more manufactured goods, but because of automation this will never build a fully-sized middle class in China.  And historically service sector jobs have never had the same kind of oomph at lifting a nation over various development hurdles.  The same limitations may apply to a variety of other countries.

3. Perhaps developing nations have reached “peak stuff”?  That may mean the Chinese manufacturing model, along with the manufacturing models of other nations, will prove less potent than we had thought.

4. Maybe we’ve been learning that a demographic slowdown is harder to reverse, and is more costly for long-run growth, than we had thought.

5. The geopolitical stability of the South China Sea is not as robust as it seemed three or four years ago.

What else?

In each case the relevant realization may be popping China, and some other emerging economies, out of better multiple equilibria and into inferior multiple equilibria (“is Greece a Balkans nation or a European nation?”).

Again, I am not dismissing the highly relevant China-specific factors of excess capacity, high municipal debt, real estate bubble, and so on.  I am simply wondering what other broader trends may be operating here beneath the surface.

The Syrian-Lebanese have a long history in Haiti, and in fact they account for most of Haiti’s very wealthiest families.  They are also sometimes resented by the other Haitians for their extreme commercial success.  Here is one illustrative but not fully objective account from Wikipedia:

Since the early twentieth century there was a Syrian community in Haiti. This consisted of roughly 500 people, mainly engaged in trade and many of them were Syrian Americans. The entire business community of Syrians, however, tended to sell their products to the United States. Over time, the importance of these merchant foreigners grew, reaching positions in the political order of the country. It is of enormous importance to the country, that surpassing most of the Haitians in government (one that was formed by the social elite of Haiti, against a poor majority), caused major uprisings against the Syrians and the idea widespread among Haitians was that they should be deported. Therefore, the Syrian American club sent a letter to the U.S. State Department of Washington D.C., explaining the reasons why the island was purchased for trade with the U.S. and asked for help and advice from the U.S. Federal Government. At that time the Syrians had also addressed the majority of imports of goods to Haiti, both in the field of provisions as in beverages. Syrian traders also were, at present, the only foreign traders willing to work under native conditions than other groups of traders that were rejected. So, they sold wholesale. However, these traders were occupied all trades with the country, which made them gain rejection of a significant part of the population. Thus, the Haitian government launched a new political program that limited the Syrian trade in the country.

Of course Haiti could take in more “Syrian-Lebanese” too, but this would be unpopular in some circles because…the previously Syrian-Lebanese have been…too successful.

I learned a good deal reading Ramon H. Myers’s essay “The World Depression and the Chinese Economy 1930-6” in Ian Brown’s The Economies of Africa and Asia in the Inter-war Depression.  Here are a few of his points:

1. In the 1920s, per capita growth in China was probably around 0.33 percent a year, one percent a year in absolute terms.  I would add the notion that the country already was on an explosive growth path does not seem borne out by these estimates.

2. The Chinese financial system at the time was quite free-wheeling and money flowed into China to facilitate the country’s 1915-1930 growth.

3. By the late 1920s, China’s exports were only about 2 to 3 percent of gdp.

4. The Japanese seized Manchuria 1931-32, and the region had been accounting for a significant portion of China’s industrial growth.

5. The loss of Manchuria excepted, Chinese internal growth rose about 11.6 percent a year across 1930-36.  It seems the country just wasn’t hit that hard by the global Great Depression.

6. There was sustained deflation during 1931-1935; some of this ties in to complex developments in the silver market, as China was on a silver standard.  Yet economic activity still expanded.  Silver flowed out of the country, but there was a big boost in credit and “inside money.”

7. As an aside, had I mentioned that the Nanjing government only firmly controlled two provinces of the country as of 1935, with “minimal control” in eight others?

8. Shanghai grew throughout most of the 1930s, with exceptions for the Japanese attack and the Yangtse flood of 1931.

Myers’s conclusion that the Great Depression did not hit China so hard has been challenged (pdf), but so far his account is the most convincing I have found.  China during the Great Depression remains an understudied topic.

Kathy and Carol Fata

by on September 5, 2015 at 12:55 am in History, Law, Uncategorized | Permalink

From ages four to seven we lived in Fall River, Massachusetts.  A few houses up the block lived Kathy and Carol Fata, who were a year or two older than I was.  They were nonetheless friends with my sister and me.  In fact they were probably the first real friends I ever had.  They were consistently nice to me, and they liked to play with our dog.

They also were Syrian, or so I heard at the time.  No one thought this was objectionable and all of us were very fond of them, their parents too.

Here is a short history of the Syrian-Lebanese in Fall River (pdf).

Some sources indicate the term “Syrian-Lebanese” was crafted by the Middle Easterners themselves, most of all in Brazil.  When a lot of the Syrian-Lebanese migration to the New World occurred, the modern states of Syria and Lebanon, as we know them (knew them?), did not exist.

Wikipedia suggests:

The first Syrian immigrants arrived in the United States from Ottoman Syria. Most of them came from Christian villages around Mount Lebanon (before the creation of Republic of Lebanon), while around 5-10% were Muslims of different sects. A small number were also Palestinians.

So it once was called Syria.  In the 1920s, these immigrants switched from calling themselves “Syrians” to “Lebanese,” and given the location of Mount Lebanon today they would be Lebanese by nationality.

According to the 2000 Census, there are 142,897 Americans of Syrian ancestry living in the United States.  These individuals include or have included Steve Jobs, Paula Abdul, Paul Anka, Mitch Daniels, and Yasser Seirawan.  Jerry Seinfeld’s mother is of Syrian Jewish descent.  Overall Arab-Americans have a higher than average per capita income in the United States and I suspect lower than average crime rates.

It seems downright bizarre to me to think we cannot take in 20,000 Syrian refugees or, heaven forbid, a greater number yet.  There are right now children in Syria who could have lives comparable to those of Kathy and Carol Fata.  Or not.


Of course the United States should take in more Syrians, but we are not the only laggard:

Of the 4 million Syrians who have fled their country since the war began, including hundreds of thousands who have poured into Europe, the number who have been resettled in Britain could fit on a single London Underground train — with plenty of seats to spare.

Just 216 Syrian refugees have qualified for the government’s official relocation program, according to data released last week.

By the way, not long ago there were over 1.2 million Iraqi refugees in Syria (pdf), I wonder how they figure in all the recent numbers we are seeing.

Before the 1920s, large numbers of Syrians (Syrian-Lebanese) emigrated to Brazil, most of all to Sao Paulo, with a second and smaller wave coming in the 1950s.  As of March:

Since 2013 when Brazil opened its doors, 1,740 Syrian refugees have been registered in the country – far more than in the US.

But still that is not many compared to the preexisting total.  According to the above link, Brazil has about 15 million Arabs and about three million people of Syrian descent, and by virtually all accounts this connection has benefited the rest of Brazil too, not just the migrants.

Here is my earlier post Will Latin America Stay Underpopulated for Another Century?  And can you guess where that top photo is from?

From the FT:

The likes of Zambia, Ethiopia, Rwanda, Kenya, Ghana, Senegal, and Ivory Coast have all issued foreign currency dominated sovereign bonds in recent years.

Ghana is one African nation with a history of debt crises (pdf), and also dating back to the 1980s (pdf).  Tanzania was another offender, both current and past (pdf), and for a while a lot of lending to Africa dried up and that limited the number of possible debt crises.  But now…?

Here is Amadou Sy at Brookings, telling us it is not yet time to worry.  Here is the African Development Bank worrying a bit more than that:

Today, a third of African countries have debt to GDP ratios in excess of 40 percent. The outstanding sovereign debt for Africa as a whole increased 2.6 times between 2009Q2 and 2015Q2. In contrast, total debt in developing countries rose 2.3 times over the same period. The appreciation of the dollar has raised the nominal currency values of dollar denominated debts. Thus Africa’s outstanding bond debt is already 29 percent higher today in real terms than it would have been had the dollar remained at its March 2011 level…

Here is Andrew England at the FT:

A recent note by Fathom Consulting highlighted a 40 per cent year-on-year dip in Chinese imports from Africa for July. Martyn Davies, chief executive of Frontier Advisory, a group that specialises in Africa-China investment, says there is anecdotal evidence of an easing in Chinese activity on the continent. “The hurdle rates of Chinese sovereign wealth investment, or part sovereign wealth fund invested projects in Africa have been raised so the capital is more discerning and seeks greater profitability,” he says.

Here is my previous post on which countries are most likely to experience the next financial crises.

Here is the academic paper, by William Easterly, and Laura Freschi, and Steven Pennings:

Economic development is usually analyzed at the national level, but the literature on creative destruction and misallocation suggests the importance of understanding what is happening at much smaller units. This paper does a development case study at an extreme micro level (one city block in New York City), but over a long period of time (four centuries). We find that (i) development involves many changes in production as comparative advantage evolves and (ii) most of these changes were unexpected (“surprises”). As one episode from the block’s history illustrates, it is difficult for prescriptive planners to anticipate changes in comparative advantage, and it is easy for regulations to stifle creative destruction and to create misallocation. If economic growth indeed has a large component for increases in productivity through reallocation and innovation, we argue that the micro-level is important for understanding development at the national level.

It is a block on Greene St., near NYU, and so a section of this paper focuses on whorehouses.  History made them do it.  Here is the interactive site.  I am in general a big believer in this kind of micro-history, which remains undervalued in the economics profession.

The pointer is from Kottke.

This is from a recent working paper (pdf) by Miguel Morin:

When the adoption of a new labor-saving technology increases labor productivity, it is an open question whether the economy adjusts in the medium-term by decreasing employment or increasing output. This paper studies the effects of cheaper electricity on the labor market during the Great Depression. The first-stage of the identification strategy uses geography as an instrument for changes in the price of electricity and the second-stage uses labor market outcomes from the concrete industry—a non-traded industry whose location decisions are independent of the instrument. The paper finds that electricity was an important labor-saving technology and caused an increase in capital intensity and labor productivity, as well as a decrease in the labor share of income. The paper also finds that firms adjusted to higher labor productivity by decreasing employment instead of increasing output, which supports the theory of technological unemployment.

You will note of course that the short-, medium- and long-run effects here are quite different, and of course electricity is a major boon to mankind.  Still, technological unemployment is not just the fantasy of people who have failed to study Ricardo.

Here is a short summary of the paper, via Romesh Vaitilingam.

This book already has done a good deal to raise the status of autistic people and also studies of autism.  Silberman is to be commended for extensive research into the lives of Hans Asperger and Leo Kanner and into the modern “neurodiversity” movement more broadly.  He has taken on a very difficult topic and turned it into what is likely to prove a commercially successful book.

That said, most reviews of this work, while positive, are not very assured.  It’s as if the reviewers know they are not well-informed about the topic and thus they stick to general praise, without delving into the details.  Or maybe they like the book’s conclusion and are reluctant to criticize the work as a whole.  I, in contrast, have a few more pointed remarks:

1. Leo Kanner, a co-discoverer of autism, is made out to be the bad guy, yet his writings are more subtle than Silberman indicates, even though one can pull some bad phrases and quotations.  Kanner in particular had a much stronger grasp of the diversity within autism (pdf) than Silberman grants.  It is hard, after reading that piece, to see how his conception of autism could be described as monolithic.

The contrast between Kanner and Asperger is much overdrawn.  The truth is closer to “they both had profound early insights and were unjustly neglected” rather than Silberman’s “sadly the Kanner approach to autism at first beat out the Asperger approach.”  The latter narrative is an over-dramatized storytelling convention of a popular book.  The real problem back then was how various minorities and “deviants” were treated, from gay individuals to lobotomized schizophrenics, rather than the dominant influence of Kanner’s ideas.

2. Silberman promotes an “along a spectrum (spectra?) model” rather than an “autistic yes or no” model.  Maybe so, but it is far from obvious that the “yes or no” model is false and in fact it explains some of the data better (pdf).  Silberman offers no scientific reason for his choice, and he doesn’t define the underlying concepts clearly enough to outline exactly what is at stake.  Silberman argues that the spectrum models are ethically superior and more humane, but that is an unjustified presumption and it also does not settle the substantive dispute.  In any case both models are capable of accommodating either respectful or disrespectful attitudes toward autistic people.

3. For a 534-pp.book on autism, there is oddly little discussion of what autism is or might be.  That is author’s prerogative of course, but it means the book doesn’t offer much of a framework for judging the research history of autism, as it attempts to do.

4. Silberman devotes an entire chapter to the movie “Rain Man,” and in part the movie’s main role model, namely Kim Peek.  Yet the text fails to note it eventually turned out that Peek was not in fact autistic but instead probably had FG syndrome.  This is another instance of the book’s tendency to prefer a good story over the facts.  And that Peek was so ingloriously railroaded into the autism category is part of the actual story there (Dustin Hoffman played a role in doing that), yet that is a mistake which Silberman himself essentially repeats.

I hate to rain on the parade of this book because a) I love the topic, b) the author’s research is impressive, and c) the book is genuinely humane and tolerant and it will have an almost entirely positive impact on popular discourse.  Still, I think that the original organizing themes in the work are mostly wrong.

And oddly, for all its praise of autism and autistic ways of thinking, the style of the book is remarkably non-autistic.  It’s full of long stories and blah blah blah, rather than getting to the point.

Here is a review from Nature.  Carl Zimmer interviews Silberman.  Here is The Economist review.  Here is a related podcast.  Here is the Jennifer Senior NYT review.  Here is Silberman’s LATimes piece.  Here is a Morton Ann Gernsbacher review.  Here is The Guardian.  Here is The Atlantic.  Here is a PLOS interview with Silberman.

It’s an interesting read, but I don’t think you can trust what’s in there.

One estimate is that China has been spending about $400 billion to prop up stock and currency prices, but with no success.  Might market-determined, flexible prices have some value today?

Cheng-chung Lai and Joshua Jr-Shiang Gau reiterate a well-known point about the 1930s:

It is often argued that the silver standard insulated the Chinese economy from the Great Depression that prevailed in the gold standard countries during the period 1929–1935. Using econometric testing and counterfactual simulations, this article shows that if China had been on the gold standard (or on the gold-exchange standard), the balance of trade of this semiclosed economy would have been ameliorated, but the general price level would have declined significantly. Due to limited statistics, two important variables (GDP and industrial production) are not included in the analysis, but the general argument that the silver standard was a lifeboat to the Chinese economy remains defensible.

China during the Great Depression remains very much an underexplored research topic.  Here is Loren Brandt and Thomas Sargent on China later going off the silver standard.  Here is Milton Friedman on the same (jstor).  The Chinese were not able to sustain that peg either.  So what should the smart money bet on today?

Here is Lars Christensen on the falling apart of the dollar bloc.