A good rule of thumb is that if a policy is going to happen, it is better to have that policy sooner rather than later.  Here is the latest from the land of fesenjan:

With hopes high that Tehran’s nuclear accord with world powers could lead to the lifting of international sanctions, consumers are holding back on spending in the expectation of price drops and the arrival of better quality imported goods. The motor industry has been badly hit, with sales of domestically produced cars dropping by 15 per cent over the past five months, according to official figures.

Officials warn the carmakers’ crisis is having knock-on effects across the economy, hitting sectors from parts-makers to the critical steel industry, the second-biggest non-oil sector, which is already struggling amid a housing slowdown.


The centrist government of President Hassan Rouhani has managed to cut inflation from about 40 per cent to 12.6 per cent over the past two years and end three successive years of economic contraction, with growth of 3 per cent in the year to March. But economists believe the economy has now stopped growing and may even be contracting.

Of course some of that is an oil price effect.  The full FT story by Najmeh Bozorgmehr is here.

Mas-Colell recuerda que España está obligada a pagar a los pensionistas aunque Catalunya se independice

There is eventually a noisy video at the link, my apologies.  I am not sure what is exactly the best translation of “recuerda” in this context, but the article involves Andreu Mas-Colell asserting that even after Catalonian independence the government in Madrid is obligated to pay for pensions in Catalonia.  That obligation is a legal one which (supposedly) international tribunals will enforce.

The fine points of the conditional and the subjunctive are important for interpreting that article, and perhaps some of those are escaping me.  But I don’t take the journalist to be reporting a prediction that Madrid actually will pay for those pensions, only that they have such a legal obligation, combined with the assumption that this law will reign supreme and the issue therefore won’t be a problem for Catalonia.  There is no mention of the current Spanish law essentially forbidding Catalonian secession or even direct consideration of such.

I have a question.  Of all the economists who have endorsed or indeed fought hard for Catalonian independence (Galí, Mas-Colell, Sala-i-Martí, Antràs, Boix, Ventura, etc.), who offers the best and clearest account of what the associated costs would be?  Please leave your answer in the comments, or if you wish email me.

Here are photos of Escudella.


For the pointer I thank Gerardo Gonzalez.

I found this a fascinating book, in spite of some over-generalizations.  We all know that something is wrong with Europe, and with France in particular, but what?  The argument starts with this:

We need to take religion seriously, especially when it starts to disappear.

It continues:

…we gave the name ‘zombie Catholicism’ to the anthropological and social force that emerged from the final disintegration of the Church in its traditional bastions…This cultural survival is probably the most important social phenomenon of the years from 1965 to 2015.  It eventually led France into a multifaceted ideological venture, including the rise of a new kind of socialism, decentralization, a surge of pro-European feeling, a masochistic monetary policy, a deformation of the nature of the Republic, and, as we shall later see, a particularly shifty form of Islamophobia and, probably, of anti-Semitism.

It’s hard to unpack this following sentence in a blog post, but it gives you an indication of where the book is heading:

The demonization of Islam is a response to the intrinsic need of a completely de-Christianized society.

Todd notes that the vote share of the National Front is higher in “egalitarian territory” than in inegalitarian territory (pp.125-126).  And yet there is more:

We have been obliged to admit that there is a zombie Catholicism, and a zombie Protestantism too.  We should not shy away from postulating that there is a zombie Islam.

Ross Douthat, telephone!

I ordered my copy from  Here is a useful article on the French controversies surrounding this book.  It’s making my list for one of the most interesting of the year.

Here is Bloomberg on next week’s election:

If separatist parties secure a majority and Madrid refuses to negotiate, Mas says he’ll declare independence unilaterally within 18 months.

I read this earlier in the week:

The gap between Spanish 10-year bond yields and Italian yields has widened to a two-year high as political uncertainty escalates ahead of an election in Catalonia this month and a general election in December.

Spanish 10-year bonds now yield 0.27 percentage points more than Italian bonds. In October 2014 they yielded 0.4 percentage points less. The spread has widened by 0.15 percentage points in the last week alone, indicating a rising risk premium, with the timing of the sell-off coinciding with a major demonstration by Catalonian separatists on Friday.

The EU warns that independence would mean automatic expulsion from the EU.  Various leading banks have warned they would leave an independent Catalonia.  The odds are still against this actually happening, but it’s climbed on the radar screen again.

My position remains that this would be a big mistake.  It would bring significant economic harms.  Furthermore the current notion of “what it means to be Catalan” seems to be as much defined by the union with Spain as it would be realized without such a union.  Voting to leave is like voting to become a very new people, although it is rarely framed that way and more commonly framed as a kind of self-preservation or cultural preservation.  There’s nothing wrong with deciding to become a new people, but that can be done within larger political units as well.

What about the evidence on the economics?:

First, no historical evidence supports this claim [that an independent Catalonia would grow more rapidly]. Andres Rodriguez-Pose from the London School of Economics has studied the economic record of independence, mostly in Eastern Europe and the former Yugoslavia, and finds that countries at best maintain their previous growth paths.

Second, no evidence suggests that institutions in Catalonia perform better than the Spanish average. Anecdotal evidence suggests that corruption is as pervasive in Catalonia as in the rest of Spain. On a more scientific basis, the 2012 European Commission report [pdf] measuring the quality of government in European countries and regions shows Spain ranked 13 out of 27 EU countries, while Catalonia ranked 130 out of 199 EU regions, thus in the bottom third of EU regions. Catalonia also ranked last among Spanish regions.

Third, Catalonia’s potential growth benefited massively from the 1992 Olympic Games, which were financed mostly by the Spanish State and the City of Barcelona, with a minor contribution by the Catalan government, and which opened up new parts of the city with civil infrastructure investments. Research conducted by the University of Barcelona and the City of Barcelona shows that this spending not only boosted the economy before the games but also provided long-lasting benefits. For example, Barcelona moved higher in the “best city to conduct business” ranking.

That all said, Spain and the eurozone are now outside their immediate and dire fiscal and financial crisis, at least compared to say 2011.  So I now think that if a clear majority in Catalonia wants to leave Spain, Spain should let them go.  I wrote a few years ago that would be my stance once the most pressing parts of the financial crisis are past, and it seems to me that is now the case.  Catalonian separatism, while I still think it is imprudent, is no longer morally irresponsible from a broader European point of view.

Good luck, I’ll be watching either way.

Yes, the set up is important, but let’s cut to the chase:

The experimental behaviors of these three subject classes—once again, making real allocations with real money—revealed stark differences between attitudes toward economic justice among ordinary Americans and among the elite. To begin with, the Berkeley and Yale subjects were twice as likely to be selfish as their compatriots in general. In this respect, intermediate and extreme elites stand together with each other, and stand apart from the rest of the country.

What’s more, elite Americans show a far greater commitment to efficiency over equality than ordinary Americans. And this time, the bias toward efficiency increases with each increment of eliteness. The ALP subjects split roughly evenly between focusing on efficiency and focusing on equality; the Berkeley students favored efficiency over equality by a factor of roughly 3-to-2; and the Yale Law students favored efficiency by a factor of 4-to-1.

Yale Law students’ overwhelming, indeed almost eccentric, commitment to efficiency over equality is all the more astonishing given that the students self-identified as Democrats rather than Republicans—and thus sided with the party that claims to represent economic equality in partisan politics—by a factor of more than 10-to-1. An elite constituted by highly partisan Democrats thus showed an immensely greater commitment to efficiency over equality than the bipartisan population at large.

That is from Ray Fisman and Daniel Markowits, do read the whole thing.  I say that is mostly good news, and I disagree with the claim of the authors that a new class war is on its way.

Wanted: One good squatter.

It’s no joke. In a remote pocket of northwest Detroit along the Rouge River, neighbors are so desperate to stop a cycle of abandonment and blight they’re recruiting a squatter to occupy a home whose longtime owners left last weekend.

That’s because neighbors fear the onetime farmhouse on Puritan and Hazelton will be stripped and torched if it remains empty for long. Eight nearby houses burned in the past two years. A few blocks away, there are more weedy lots than homes.

A co-founder of one neighborhood group explained:

“You want someone in the house when it’s still functioning. Otherwise, it will be destroyed in 24 hours.”

In this case the homeowners are asking potential squatters for references, so as to avoid drug dealer squatters.  How about some Syrian squatters?

Technically, squatting in Detroit is against the law but it is often tolerated.  But not all settlement attempts pass legal muster:

“The over-arching theme is that the city of Detroit does nothing, so we’re forced to do our own thing,” said Brown, 34, a Wayne County Community College professor.

Brown also made headlines last year. That’s when she and her husband, David, bought a $2,000 house in the neighborhood in hopes of forming a kibbutz, a Jewish communal settlement. City officials seized backyard goats and charged the couple with violating ordinances.

The full article is here, hat tip goes to a loyal MR reader.

Swiss health insurers could demand higher premiums from customers who live sedentary lifestyles under plans to monitor people’s health through wearable digital fitness devices.

CSS, one of Switzerland’s biggest health insurers, said on Saturday it had received a “very positive” response so far to its pilot project, launched in July, which is monitoring its customers’ daily movements.

The MyStep project, developed in conjunction with the University of St Gallen and the Federal Institute of Technology (ETH) Zurich, is using digital pedometers to track the number of steps taken by 2,000 volunteers until the end of the year, synchronizing that data with an online portal on the CSS website.

But don’t worry, that is just the pilot program:

Fitness wristbands such as Fitbit are just the beginning of a revolution in healthcare, believes Ohnemus.

“Eventually we will be implanted with a nano-chip which will constantly monitor us and transmit the data to a control centre,” he said.

Obesity in Switzerland now costs the health service eight billion francs a year, according to figures from the Federal Office of Public Health, rising from 2.7 billion in 2002.

There is more here, and for the pointer I thank Axacatl Maqueda.

Here is the latest, I do not know the backstory but this seems to be of interest:

Many social sciences and humanities faculties in Japan are to close after universities were ordered to “serve areas that better meet society’s needs”.

Of the 60 national universities that offer courses in these disciplines, 26 have confirmed that they will either close or scale back their relevant faculties at the behest of Japan’s government.

It follows a letter from education minister Hakuban Shimomura sent to all of Japan’s 86 national universities, which called on them to take “active steps to abolish [social science and humanities] organisations or to convert them to serve areas that better meet society’s needs”.

The ministerial decree has been denounced by one university president as “anti-intellectual”, while the universities of Tokyo and Kyoto, regarded as the country’s most prestigious, have said that they will not comply with the request.

However, 17 national universities will stop recruiting students to humanities and social science courses – including law and economics, according to a survey of university presidents by The Yomiuri Shimbun newspaper, which was reported by the blog Social Science Space.

The article is here, a petition to protest is here.  If you know more about this episode, please inform us in the comments, thanks.

The transcript is here, with a podcast version, and there is also a YouTube version at the link, with cleaned-up audio compared to any earlier link you may have come across.  Luigi was wonderful, and also fantastically witty.  The topics included Italy, Donald Trump, Antonio Gramsci, Google and conglomeration, Luchino Visconti, Starbucks, and the surprisingly high productivity of Italian cafés.

Here is one excerpt:

I don’t understand why in the United States the only thing that is really noncompetitive is sports. In Europe, the only thing that is really competitive is sports.

And another:

COWEN: …Angela Merkel, overrated or underrated?

ZINGALES: I think she’s probably underrated. I’m impressed by her ability to, number one, run Europe for the interest of Germans in a very effective way.

The longest bit from me is where I compare and contrast Luigi with Gramsci, another theorist of hegemony, and try to sum up Luigi’s work; you can find that on the video or in the transcript.

And again from Luigi there is this:

…when I arrived in this country 27 years ago, you were not really drinking coffee. You were drinking a dark thing that tastes like I don’t say what because we’re online. The culture of coffee did not exist here.

The culture of coffee and a café where you seat and drink, et cetera, what Starbucks is, is an Italian or at most French culture. Why were you unable to export this? This is my little explanation. By the way, the only country in the world where Starbucks has not arrived is Italy.

Luigi then considers when Italian coffee is better tasting and better run at the artisan level, yet without the same possibilities for corporate expansion.  I liked this sentence from Luigi:

The extreme agency problems of Italy make it difficult to scale firms.

And finally:

One thing I can predict fairly confidently is that we are not going to pay the debt.

This is also a worthwhile observation:

When you’re down to one or two kids, the chance that one is an idiot is pretty large.

His favorite film is Visconti’s The Leopard, a good pick.  And he was the public choice scholar who forecast the rise of Donald Trump, as we discuss in the chat.  Self-recommending.

The econometrician Henri Theil once said “models are to be used but not to be believed.” I use the rational actor model for thinking about marginal changes but Gary Becker really believed the model. Once, at a dinner with Becker, I remarked that extreme punishment could lead to so much poverty and hatred that it could create blowback. Becker was having none of it. For every example that I raised of blowback, he responded with a demand for yet more punishment. We got into a heated argument. Jim Buchanan and Bryan Caplan approached from the other end of the table and joined in. BeckerIt was a memorable evening.

Becker isn’t here to defend himself on the particulars of that evening but you can see the idea in his great paper, Crime and Punishment: An Economic Approach. In a famous section he argues that an optimal punishment system would combine a low probability of being punished with a high level of punishment if caught:

If the supply of offenses depended only on pf—offenders were risk neutral — a reduction in p “compensated” by an equal percentage increase in f would leave unchanged pf… increased probability of conviction obviously absorbs public and private resources in the form of more policemen, judges, juries, and so forth. Consequently, a “compensated” reduction in this probability obviously reduces expenditures on combating crime, and, since the expected punishment is unchanged, there is no “obvious” offsetting increase in either the amount of damages or the cost of punishments. The result can easily be continuous political pressure to keep police and other expenditures relatively low and to compensate by meting out strong punishments to those convicted.

We have now tried that experiment and it didn’t work. Beginning in the 1980s we dramatically increased the punishment for crime in the United States but we did so more by increasing sentence length than by increasing the probability of being punished. In theory, this should have reduced crime, reduced the costs of crime control and led to fewer people in prison. In practice, crime rose and then fell mostly for reasons other than imprisonment. Most spectacularly, the experiment with greater punishment led to more spending on crime control and many more people in prison.

Why did the experiment fail? Longer sentences didn’t reduce crime as much as expected because criminals aren’t good at thinking about the future; criminal types have problems forecasting and they have difficulty regulating their emotions and controlling their impulses. In the heat of the moment, the threat of future punishment vanishes from the calculus of decision. Thus, rather than deterring (much) crime, longer sentences simply filled the prisons. As if that weren’t bad enough, by exposing more people to criminal peers and by making it increasingly difficult for felons to reintegrate into civil society, longer sentences increased recidivism.

Instead of thinking about criminals as rational actors, we should think about criminals as children. In this light, consider the “Becker approach” to parenting. Punishing children is costly so to reduce that cost, ignore a child’s bad behavior most of the time but when it’s most convenient give the kid a really good spanking or put them in time out for a very long time. Of course, this approach leads to disaster–indeed, it’s precisely this approach that leads to criminality in later life.

So what is the recommended parenting approach? I don’t want to get into a debate over spanking, timeouts, and reasoning but one thing all recommendations have in common is that the consequences for inappropriate behavior should be be quick, clear, and consistent. Quick responses help not just because children have “high discount rates” (better thought of as difficulty integrating their future selves into a consistent whole but “high discount rates” will do as short hand) but even more importantly because a quick response helps children to understand the relationship between behavior and consequence. Prior to Becker there was Becaaria and in Beccarian theory, people must learn to associate crime with punishment. When responses aren’t quick, children, just like scientists, have difficulty learning cause and effect. Quick is thus one way of lowering cognitive demands and making consequences clear.

Animals can learn via conditioning but people can do much better. If you punish the child who steals cookies you get less cookie stealing but what about donuts or cake? The child who understands the why of punishment can forecast consequences in novel circumstances. Thus, consequences can also be made clear with explanation and reasoning. Finally, consistent punishment, like quick punishment, improves learning and understanding by reducing cognitive load.

Quick, clear and consistent also works in controlling crime. It’s not a coincidence that the same approach works for parenting and crime control because the problems are largely the same. Moreover, in both domains quick, clear and consistent punishment need not be severe.

In the economic theory, crime is in a criminal’s interest. Both conservatives and liberals accepted this premise. Conservatives argued that we needed more punishment to raise the cost so high that crime was no longer in a criminal’s interest. Liberals argued that we needed more jobs to raise the opportunity cost so high that crime was no longer in a criminal’s interest. But is crime always done out of interest? The rational actor model fits burglary, pick-pocketing and insider trading but lots of crime–including vandalism, arson, bar fights and many assaults–aren’t motivated by economic gain and perhaps not by any rational interest.

Here’s a simple test for whether crime is in a person’s rational interest. In the economic theory if you give people more time to think carefully about their actions you will on average get no change in crime (sometimes careful thinking will cause people to do less crime but sometimes it will cause them to do more). In the criminal as poorly-socialized-child theory, in contrast, crime is often not in a person’s interest but instead is a spur of the moment mistake. Thus, even a small opportunity to reflect and consider will result in less crime. As one counselor at a juvenile detention center put it:

20 percent of our residents are criminals, they just need to be locked up. But the other 80 percent, I always tell them – if I could give them back just ten minutes of their lives, most of them wouldn’t be here.

ThinkingProblemsCognitive behavioral therapy teaches people how to act in those 10 minutes–CBT is not quite as simple as teaching people to count to ten before lashing out but it’s similar in spirit, basically teaching people to think before acting and to revise some of their assumptions to be more appropriate to the situation. Randomized controlled trials and meta-studies demonstrate that CBT can dramatically reduce crime.

Cognitive behavioral therapy runs the risk of being labeled a soft, liberal approach but it can also be thought of as remedial parenting which should improve understanding and appreciation among conservatives. More generally, it’s important that crime policy not be forced into a single dimension running from liberal to conservative, soft to tough. Policing and prisons, for example, are often lumped together and placed on this single, soft to tough dimension when in fact the two policies are different. I favor more police on the street to make punishment more quick, clear, and consistent. I would be much happier with more police on the street, however, if that policy was combined with an end to the “war on drugs”, shorter sentences, and an end to brutal post-prison policies that exclude millions of citizens from voting, housing, and jobs.

Let’s give Becker and the rational choice theory its due. When Becker first wrote many criminologists were flat out denying that punishment deterred. As late as 1994, for example, the noted criminologist David Bayley could write:

The police do not prevent crime. This is one of the best kept secrets of modern life. Experts know it, the police know it, but the public does not know it. Yet the police pretend that they are society’s best defense against crime. This is a myth

Inspired by Becker, a large, credible, empirical literature–including my own work on police (and prisons)–has demonstrated that this is no myth, the police deter. Score one for rational choice theory. It’s a far cry, however, from police deter to twenty years in prison deters twice as much as ten years in prison. The rational choice theory was pushed beyond its limits and in so doing not only was punishment pushed too far we also lost sight of alternative policies that could reduce crime without the social disruption and injustice caused by mass incarceration.

By William H. Overholt, here is one wee bit:

Hu Jintao and Wen Jiabao reversed much of this. With the population weary of market-oriented reforms, having seen over 50 million SOE jobs evaporate, market reforms ceased or receded. To cope with the global financial crisis, they poured money into the only institutions that could create rapid increases of production: big SOEs. The government and party bureaucracies nearly doubled. SOEs revived their pre-eminence. The 1990s campaign to increase competition dissipated. Senior military officers reverted to managing lucrative side businesses. Some top leaders and their families began making huge fortunes. The scale of graft became astronomic.

That is one way of thinking about why one should be worried about the economy of China.  That is via Bill Bishop.  The longer version of the piece, starting on p.22 here is interesting throughout.

Japan is liberalizing its approval process for regenerative medicine:

…Regenerative medicines in Japan can now get conditional marketing approval based on results from mid-stage, or Phase II, human trials that demonstrate safety and probable efficacy. Once lagging behind the United States and the European Union on approval times, there is now an approximately three-year trajectory for approvals, according to Frost’s Kumar. That compares with seven to 10 years before.

…Around the world, companies have also faced setbacks while pushing such treatments. In the U.S., Geron Corp., which started the first nation-approved trial of human embryonic stem cells, ended the program in 2011, citing research costs and regulatory complexities.

…While scientists globally have worked for years in this field, treatments have been slow to come to market. But there is hope in Japan that without the political red tape, promising therapies will emerge faster and there will be speedier rewards.

Japan is liberalizing because with their aging population treatments for diseases like Alzheimer’s and Parkinson’s disease are in high demand. Under the new system, a firm with a gene or regenerative therapy (e.g. stem cells) can get conditional approval with a small trial. Conditional approval means that the firm will be able to sell its procedure while continuing to gather data on efficacy for a period of up to seven years. At the end of the seven year period, the firm must either apply for final marketing approval or withdraw the product. The system is thus similar to what Bart Madden proposed for pharmaceuticals in Free to Choose Medicine.

Due to its size and lack of price controls, the US pharmaceutical market is the most lucrative pharmaceutical market in the world. Unfortunately, this also means that the US FDA has an outsize influence on total world investment. The Japanese market is large enough, however, that a liberalized approval process if combined with a liberalized payment model could increase total world R&D.

Breakthroughs made in Japan will be available for the entire world so we should all applaud this important liberalization.

Hat tip: Michael Mandel.

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…

*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.

I reproduce this verbatim from Angus:

Cool study forthcoming in AEJ Applied about how legal immigration status reduced recidivism of foreign prisoners in the EU. Here’s a link to an un-gated version of the paper.

Here’s the abstract:

We exploit exogenous variation in legal status following the January 2007 European Union enlargement to estimate its effect on immigrant crime. We difference out unobserved time-varying factors by i) comparing recidivism rates of immigrants from the “new” and “candidate” member countries; and ii) using arrest data on foreign detainees released upon a mass clemency that occurred in Italy in August 2006. The timing of the two events allows us to setup a difference-in-differences strategy. Legal status leads to a 50 percent reduction in recidivism, and explains one-half to two-thirds of the observed differences in crime rates between legal and illegal immigrants.

So the good news is that the identification scheme here is pretty darn good. The bad news is that to achieve this strong identification, the paper ends up studying a fairly small sample of foreign criminals:

We are left with 725 and 1,622 individuals in the treated and control groups, respectively.