Political Science

Roger Barris emails me:

I am not sure that this is a suitable subject for a blog post, probably more a project for an aspiring PhD student, but with all the discussion of conflicts of interest in the Trump cabinet, it strikes me that the most glaring conflict in the public sector is ignored: The CoI between state and local politicians elected with the support of public sector unions who then participate in compensation negotiations for the members of those unions.  Here the temptation of the politicians to buy the support of the unions with public money is overwhelming.  The impact of this is potentially trillions when public pension liabilities are included.

This is such an obvious conflict that I have looked to see if there are laws preventing this, but my initial research shows nothing.

It would be interesting to see if there is a statistical relationship between union support and subsequent pay rises.  I would expect this relationship to be especially strong with deferred compensation (such as pensions) since this is very difficult for voters to monitor and can be easily gamed with unrealistic assumptions about, for example, investment returns.

Are you aware of any work that has been done in this field?  I think that the looming disaster with underfunded public pension funds is one of the biggest financial risks in the economy, with ZIRP making it even worse.

Can any of you direct Roger to the appropriate secondary literature on this question?  A related question is whether this conflict of interest makes you more or less upset than the more corporate-connected conflicts of interest found in the incoming Trump administration.

That is the topic of my latest Bloomberg column, here is one excerpt:

The reports of Boko Haram and terror killings are well known, and they reflect the interlocking and sometimes deadly combinations of regional, religious, sectarian and ethnic identities in the country, not to mention extreme inequalities of income and opportunity. Yet Nigeria has about 180 million people and is larger than Texas. The violence is the most frequently reported story in the West, but the underlying reality is far more complex and shows positive features.

For instance, the city of Lagos is in many regards a marvel of religious tolerance. Nigeria is about 50 percent Muslim and 40 percent Christian, and the area surrounding Lagos is also highly mixed in terms of religion. That may sound like a recipe for trouble, but in matters of religion Lagos is almost entirely peaceful. Religious intermarriage is common and usually not problematic, as is the case in many (not all) other parts of Nigeria as well. Many top Nigerian politicians have married outside their religion, kept two separate religions in the family and enjoyed continued political success.

Consider the scale and speed of this achievement. Lagos, with a population of about 20 million, is larger than many countries. It is the most commercially oriented part of Nigeria, and it grew so large only in the last few decades, as it attracted entrepreneurially minded people from many parts of Nigeria and other African countries. By one estimate, 85 new residents arrive every hour. That may sound chaotic, but in essence Nigeria has in a few decades created an almost entirely new, country-sized city built on the ideals and practice of religious tolerance. The current president, Muhammadu Buhari, is a Muslim who was supported in his election by many Christian leaders, on the grounds that he would fight corruption more effectively. His running mate served as a Pentecostal pastor.

There are several other points, including an assessment of on the ground safety (better than you might think), do read the whole thing.

This was decided earlier in the year:

All computers used officially by public servants in Singapore will be cut off from the Internet from May next year, in an unprecedented move to tighten security.

A memo is going out to all government agencies, ministries and statutory boards here about the Internet blockade a year from now, The Straits Times has learnt.

There are some 100,000 computers in use by the public service and all of them will be affected.

“The Singapore Government regularly reviews our IT measures to make our network more secure,” a spokesman for the Infocomm Development Authority (IDA) said when contacted.

The move is aimed at plugging potential leaks from work e-mail and shared documents amid heightened security threats.

Trials started with some employees within the IDA – the lead agency for this exercise – as early as April. Web surfing can be done only on the employees’ personal tablets or mobile phones as these devices do not have access to government e-mail systems. Dedicated Internet terminals have been issued to those who need them for work.

The Straits Times understands that public servants will be allowed to forward work e-mails to their private accounts, if they need to.

Here is the article.  Here is Catherine Rampell on Trump and cybersecurity, she seems to be critical of what is possibly a Trump idea to have a White House without computers (without internet?).  That to me seems the only good procedural/bureaucratic idea I have heard from the incoming Trump administration.  Note that the government in Singapore is one of the smartest, forward-looking, and sophisticated in the world.  On this they are ahead of the curve (by the way I write more on the broader question here in my forthcoming The Complacent Class).

From the WSJ:

Mr. Lighthizer has three decades of experience arguing for punitive tariffs on overseas companies. Given Mr. Trump’s deep skepticism of trade agreements such as the North American Free Trade Agreement, or Nafta, Mr. Lighthizer probably wouldn’t prioritize major new trade agreements, at least in the early days of the administration, according to people following Mr. Trump’s trade plans.

Still, Mr. Lighthizer has negotiating experience from his time in the Reagan administration, and if confirmed, he would take the lead in talks that could culminate in the bilateral deals that Mr. Trump’s team prefers—a departure, for instance, from President Barack Obama’s focus on a 12-nation Pacific deal.

Mr. Trump’s advisers have said his pick for Commerce secretary—billionaire investor Wilbur Ross—also could play a leading role on trade policy, as well as economist Peter Navarro, who will lead a new trade council at the Trump White House.

Here is Lighthizer’s 2008 NYT Op-Ed criticizing free trade.  None of this is good news.

I’ve been wondering about this question, and the internet isn’t much help (here is background from Jonathan Adler if you are starting from scratch).  Say a foreign power pays money to my publisher, agent, or speaker’s bureau — does that count?  Intuitively, I would think so, even though the income is legally domestic.  But then it seems the clause is very difficult to define.  If I own an overseas business, or receive overseas royalties, or sell intellectual property overseas, must I trace the identity of every customer?  What if Angela Merkel bought a copy of one of my books translated into German?  Am I then, through the medium of royalties, taking money from a foreign power?  What if the Chinese government bought up a million copies of one of my books?  What if it is a Chinese shell company of unknown origins (they are common), which might be either state-owned or private, did so?  Or what the company is private, but itself owned by a state-owned company?  49 percent?  51 percent?  What if a state-owned Chinese company makes a large grant to a private individual, who then buys a million copies of a book?  Don’t library systems buy books, and aren’t most of them state-owned?

This line about China struck me:

Print sales, dominated by the country’s 580 state-owned publishing houses, are now worth 44 billion yuan ($7 billion).

Of course much of the income for the Obamas, during his time in office, came from royalties from book sales, including abroad and also in China.  For instance:

A large portion of the royalties came from sales overseas, an indication of the president’s popularity abroad. The tax return indicates that $1.6 million of the total book income was taxable in “various” foreign countries.

I cannot trace whether Obama’s Chinese publishers are state-owned companies, but most likely they are.  Some of the other Obama foreign publishers might be too.  Does that count as a violation of the clause?  Presumably there are foreign translations of some of Trump’s books too, or there will be.  JFK also had published books before he became president, and likely there were foreign rights sales of those too.

I get that this is a smaller issue, quantitatively speaking, than Trump’s foreign ventures, though foreign income was significant for President Obama in 2009 as a share of the total.  (Not to mention the difference in transparency or other possible differences in administration…I am not not not not not saying this is equivalence, so please don’t throw your weak-minded, question-begging, mood affiliated doctrine of “false equivalence” at me!)  And besides, the constitutional clause doesn’t say the payment has to be a large one.  At the time, I don’t recall anyone, myself included, thinking this was a violation of the emoluments clause, so again I am back to wondering what the clause exactly means.  In any case, you can imagine critics charging, rightly or wrongly, that a president might try too hard to be popular abroad.

Is selling intellectual property somehow different than selling hotel rooms?  Or is the unorthodox, Putin-oriented, “in your face” side of the Trump administration why we are framing the cases so differently?

“To whom” does a payment really go anyway?  And what is a “foreign power”?  What is a “state-owned company”?  The people at the WTO will tell you such questions can make your head spin.

china-books

Is the future equilibrium simply that future American presidents can be bribed through the sale of book and other IP rights, combined with aggressive “marketing” from foreign state-owned companies?  I would gladly learn more about this topic, and I am afraid that this year I am about to.

Professor John Van Reenen, who predicted ahead of the referendum that Brexit would cost up to £1,700 per household per year, has been given an OBE for services to economics and public policy making.

Other academics to receive honours include Professor Paul Cheshire, who has argued that the green belt should be opened up to ease the housing crisis. He will receive a CBE in the honours, which are recognising 1,197 people in total.

Here is information about some of the other picks, indirectly (an induced google) via Diane Coyle.

1. Iran’s presidential race in May.  Iran does run real elections — sort of — but will Rouhani survive?  Or will the hardliners ascend again?  How much is Rouhani a hardliner anyway?  Stay tuned.  I’ll just note a theorem in the margins here: the greater the unpredictability of the American president, the more the identities and decisions of the other world leaders matter.  According to Wikipedia, the only announced reformist candidate is a blogger (not a good sign for him or them).

mehdi_khazali

2. How Nigeria copes with its recession.  This is the one country in sub-Saharan Africa that has the size and talent to make a significant commercial breakthrough.  Now that oil prices are back up a bit, can they dismantle their counterproductive exchange and capital controls, boost FDI, and get to four to six percent growth?  Or will they wallow in the range of one to two percent, which hardly means anything in light of Nigeria’s rising population?

3. Whether the Democratic Republic of the Congo remains stable. Joseph Kabila is staying past the end of his second presidential term.  Will this lead to renewed instability and conflict, beyond what is already the case?  “Africa’s World War” ended in 2003, not long ago, and it is not impossible to imagine it resuming.

4. African fertility ratesThey’re high.  In most other parts of the world, including Latin America and the Middle East, fertility has fallen much faster than most commentators had expected.  That is not yet the case for Africa, but will it be?

5. Modi’s India and where it it headed: Maybe the demonetisation was an unforced error, but it seems increasingly likely it was part of a broader strategy to push India into a semi-cashless, biometrically marked, income tax-paying society.  I’ll be curious to see how that goes.

6. Economic growth in Pakistan and Bangladesh.  Pakistan grew 4.7 percent last year and Bangladesh has averaged about six percent for the last decade.  Is all that (relative) good news going to continue?  If so, the world will be in much better shape than otherwise.

7. Will Xi Jinping overturn Chinese political conventions?  His term is supposed to end in 2022, but for a while he has been sending signals he might try to stay on as leader for much longer.  That could bring a new round of political instability to the Middle Kingdom.  Or a new round of stability.  Depending how you look at it.

8. Chinese capital flight and the currency peg.  This one seems to be heating to a boil.  Capital flight continues to rise, using every technique known to mankind including Bitcoin and e-purchases of Singaporean gambling tokens.  The government says that the sporadic reports of USD trades at 7-1 are nonsense, so they must be right.  When will it snap?  And when it does, will it be a non-event or a big deal?

9. American institutions: Will the United States Congress and courts continue to secure some version of rule of law in this country?  And will we agree on what that means?

10. What is the Latin American middle class good for?  Many Latin economies now have built a reasonably-sized middle class, but commodity prices are not in general favoring those economies.  Will those middle classes push their countries into better policies and educational systems?  Slowly but surely, I believe the answer is yes.

There is a chance the French or German elections make this list, but right now the best forecasts are for “business as usual” in both cases.  Brexit will continue to torture us with its drawn-out agony.  And remember — your emotional guide as to what is an important issue often reflects your own selfish concerns about the status of you and your preferred groups.  Do keep that in mind throughout this year.

If you’re looking for a few sleeper issues, I’ll cite Russia-Israel tensions over control of Middle Eastern airspace, economic and institutional recovery in Ukraine combined with sabotage potential from you-know-where, the political economy and geopolitics of aging in Japan, the rise of a Trump-like populist in Mexico, and the potential failure of the Saudi reform process as a few more to keep your eye on.  Climate change and the destroyed parts of the Middle East bear watching too, along with ongoing collapse in Yemen, for water supplies too.

A French town is to christen one of its streets “rue du Brexit” in a move its far-Right Front National mayor says is to “pay tribute to the sovereign British people” who chose to leave the European Union.

Critics point out that the road is in an ugly industrial zone and “goes nowhere” as it is circular.

In a highly symbolic move, Julien Sanchez, FN mayor of Beaucaire in the southern Gard département (county), chose to place Brexit street next to “rue Robert Schumann” and “rue Jean Monnet” – streets named after two of the founding fathers of a post-war European Union.

Here is the link, via the excellent Samir Varma.

Or at least part of it:

Consistent with those points, I would say the road widening is wonderful for boosting throughput — that is, it gets more people and cars onto the road. Yet it’s mediocre or worse for improving the quality of life of the typical resident. An economist, engineer or technocrat typically believes that boosting throughput is important, but voters usually are less impressed.

Western democracies are encountering more problems that have this logical structure and bring an analogous clash of values…

It’s no accident that so many of the gains available today involve throughput. If you widen a road, more people will drive on it. If you open up a border, more foreigners will come. If you build more in a well-to-do city, new residents will pour in and make it more crowded. These days there is always someone knocking at the gates because of all of the global talent that has been mobilized.

And that is part of the logic that elected Donald Trump and drove Britons to vote to leave the European Union. It’s well known in economics that when prices and opportunities change, it is the elastic factors of production (those that can change their plans readily) that gain the most, and the inelastic factors that are most likely to bear losses. Insiders and long-term residents are so often the inelastic ones while outsiders and newcomers have the greater willingness or ability to adjust.

That is from my Bloomberg column, there is much more at the link.

“The convulsions of a civilized state usually compose the most instructive and most interesting part of its history”

That is from Hume’s History of England, via Dan Klein and also Andrew Sabl.

In 1987, Trump made his goal of Russian collaboration on nuclear power explicit: The Soviet Union and the US should partner to form a nuclear superpower with the intention of intimidating other countries into dropping their own nuclear plans.

“Most of those [pre-nuclear] countries are in one form or another dominated by the US and the Soviet Union,” Trump told journalist Roy Rosenbaum. “Between those two nations you have the power to dominate any of those countries. So we should use our power of economic retaliation and they use their powers of retaliation, and between the two of us we will prevent the problem from happening. It would have been better having done something five years ago. But I believe even a country such as Pakistan would have to do something now. Five years from now they’ll laugh.”

Nuclear-related sanctions, from the two major powers, were to be applied to both Pakistan and France [sic].  Here is the full article, I cannot vouch for this account or any particular interpretation of it, but the hypothesis is new to me and so I present it to you as well.

The White House opposed a Republican-led push earlier this year to create an executive-branch task force to battle Russia’s covert information operations, according to a document obtained by POLITICO.

Sen. Tom Cotton, a leading GOP defense hawk who has long urged President Barack Obama to take a harder line on Russia, sought to force the White House to create a panel with representatives from a number of government agencies to counter Russian efforts “to exert covert influence,” including by exposing Russian “falsehoods, agents of influence, corruption, human rights abuses, terrorism, and assassinations.”

But the administration rejected the call, saying in a letter to Congress that hasn’t been released publicly that the panel would duplicate existing efforts to battle Russian influence operations — an argument Cotton rejects.

…The panel would not have been set up in time to have had an impact on Russia’s role in last month’s presidential election — even if the intelligence bill had become law. But the Arkansas senator said in an interview the White House’s dismissal of his proposal is symptomatic of the administration’s lax pre-election attitude toward Russia.

Here is the full story.  Here is my earlier post on this and related issues.

That is the title and topic of my latest Bloomberg column.

Here are Ross Douthat’s reading suggestions for the Trump years (NYT), I ordered what I haven’t already read.  And here is Ray Dalio on the Trump administration, better than most of what you will read on the topic.  Here is a short excerpt:

The question is whether this administration will be a) aggressive and thoughtful or b) aggressive and reckless. The interactions between Trump, his heavy-weight advisors, and them with each other will likely determine the answer to this question. For example, on the foreign policy front, what Trump, Flynn, Tillerson, and Mattis (and others) are individually and collectively like will probably determine how much the new administration’s policies will be a) aggressive and thoughtful versus b) aggressive and reckless. We are pretty sure that it won’t take long to find out.

The piece also offers data on Trump’s appointees, hard to excerpt but worth going through.

You don’t have to be a supporter (Dalio sees big risks, as I do, and Douthat has been a consistent opponent) to feel that so much of the discourse has become remarkably uninteresting, mostly because of a preponderance of self-righteousness over analysis.  America’s intellectual class is failing us, with these two gentlemen being notable exceptions to that generality.

There are now pollution red alerts in at least 24 cities in north China, so are things really hopeless in the Middle Kingdom?  I say no.  That is the topic of my latest Bloomberg column, here are some excerpts:

One famous paper, by economists Gene M. Grossman and Alan Krueger, found that (in current dollars) the turning point for environmental improvement comes in “almost every case” when countries reach the range of $17,000 to $18,000 in per capita annual income. Current Chinese per capita income can be plausibly estimated at over $14,000 per year. That means China may not be far from starting to clean up its air, and indeed air quality is already one of the major political issues in China.

The Chinese government already responds to pollution problems with factory closings and automobile restrictions more quickly than it used to, and in general there is better data and more transparency from policymakers.  The U.S. Embassy in Beijing reports pollution improvements for particulate matter over the last year. Over the last two years, there have been suggestions, admittedly debatable ones, that China’s evolution into a service-sector economy means that the turning point already has been reached.

What about the U.S. and its history of fighting air pollution?

By my estimates (see the column), the United States started cleaning up at a per capita income of at least 28k (in current dollars), in the mid-1960s, arguably later than that date.  In other words, if the Chinese waited to start cleaning up their air until they were about twice as rich as is currently the case, they still would be matching the pace of America.