He is an economics professor at Berkeley and he recently gave a talk there on “Ukraine: A Battle for the Future of Europe?”
The pointer is from @MatiasBusso.
For most academics not in China, it is difficult for them to understand the level of scrutiny and monitoring we face on regular basis. Most professors have students assigned to monitor them and security officials approaching many people to report on our behavior. Our email is widely acknowledged, even by students, as being read. While there are some overt obvious forms of intimidation as I have detailed, much of it is also the “deal you can’t refuse” variety. There are no overt threats but the message is clear.
Argentina had become rich by making a triple bet on agriculture, open markets and Britain, then the world’s pre-eminent power and its biggest trading partner. If that bet turned sour, it would require a severe adjustment. External shocks duly materialised, which leads to the second theory for Argentine decline: trade policy.
The first world war delivered the initial blow to trade. It also put a lasting dent in levels of investment. In a foreshadowing of the 2007-08 global financial crisis, foreign capital headed for home and local banks struggled to fill the gap. Next came the Depression, which crushed the open trading system on which Argentina depended; Argentina raised import tariffs from an average of 16.7% in 1930 to 28.7% in 1933. Reliance on Britain, another country in decline, backfired as Argentina’s favoured export market signed preferential deals with Commonwealth countries.
Indeed, one way to think about Argentina in the 20th century is as being out of sync with the rest of the world. It was the model for export-led growth when the open trading system collapsed. After the second world war, when the rich world began its slow return to free trade with the negotiation of the General Agreement on Tariffs and Trade in 1947, Argentina had become a more closed economy—and it kept moving in that direction under Perón. An institution to control foreign trade was created in 1946; an existing policy of import substitution deepened; the share of trade as a percentage of GDP continued to fall.
Yes of course there was bad policy, but how did the country get into such a bad idea trap to begin with? The entire piece, from The Economist, is of interest.
From a new working paper by Stefano Della Vigna, Ruben Durante, Brian Knight, and Eliana La Ferrara
We examine the evolution of advertising spending by firms over the period 1994 to 2009, during which Silvio Berlusconi was prime minister on and off three times, while maintaining control of Italy’s major private television network, Mediaset. We predict that firms attempting to curry favor with the government shift their advertising budget towards Berlusconi’s channels when Berlusconi is in power. Indeed, we document a significant pro-Mediaset bias in the allocation of advertising spending during Berlusconi’s political tenure. This pattern is especially pronounced for companies operating in more regulated sectors…
In the United States, Lyndon Johnson made his fortune, working through Lady Bird, in similar ways. As Robert Caro wrote in Means of Ascent:
As one businessman puts it: “Everyone knew that a good way to get Lyndon to help you with government contracts was to advertise over his radio station.”
Jack Shafer, drawing on Caro, summarizes the details in The Honest Graft of Lady Bird Johnson.
Hat tip: John van Reenen.
After reading Alex’s post I was a bit worried I would wake up this morning and find the blog retitled, maybe with a new subtitle too. Just a few quick points:
1. There is a clear utilitarian case against open borders, namely that it will — in some but not all cases — lower the quality of governance and destroy the goose that lays the golden eggs. The world’s poor would end up worse off too. I wonder if Alex will apply his absolutist idea on fully open borders to say Taiwan.
2. Alex’s examples don’t support his case as much as he suggests. The American Revolution compromised drastically on slavery, among other matters. (And does Alex even favor that revolution? Should he? Can you be a moral absolutist on both that revolution and on slavery?) American slavery ended through a brutal war, not through the persuasiveness of moral absolutists per se. The British abolished slavery for off-shore islands, but they were very slow to dismantle colonialism, and would have been slower yet if not for two World Wars and fiscal collapse. Should the British anti-slavery movement have insisted that all oppressive British colonialism be ended at the same time? You may argue this one as you wish, but the point is one of empirics, not that the morally absolutist position is generally better.
3. Gay marriage is like “open borders for Canadians.” I’m for both, but I don’t see many people succeeding with the “let’s privatize marriage” or “let’s allow any consensual marriage” arguments, no matter what their moral or practical merits may be. Gay marriage advocates were wise to stick with the more practical case, again choosing an interior solution. Often the crusades which succeed are those which feel morally absolute to their advocates and which also seem like practically-minded compromises to moderates and the undecided.
4. Large numbers of important changes have come quite gradually, including women’s rights, protection against child abuse, and environmentalism, among others. I don’t for instance think parents should ever hit their children, but trying to make further progress on children’s rights by stressing this principle is probably a big mistake and counterproductive.
5. The strength of tribalist intuitions suggests that the moral arguments for fully open borders will have a tough time succeeding or even gaining basic traction in a world where tribalist sentiments have very often been injected into the level of national politics and where, nationalism, at least in the wealthier countries, is perceived as working pretty well. The EU is by far the biggest pro-immigration step we’ve seen, which is great, but we’re seeing the limits of how far that can be pushed. My original post gave some good evidence that a number of countries — though not the United States — are pretty close to the point of backlash from further immigration. Rather than engaging such evidence, I see many open boarders supporters moving further away from it.
6. In the blogosphere, is moralizing really that which needs to be raised in relative status?
Addendum: Robin Hanson adds comment.
And: Alex responds in the comments:
Some good points but only point number #5 actually addresses my argument. I argued that strong, principled moral arguments are most likely to succeed. Point #5 rests on mood affiliation. I know because having a different mood I read the facts in that point in entirely the opposite way. Namely that it’s amazing that although our moral instincts were built on the tribe we have managed to expand the moral circle far beyond the tribe. Having come so far I see no reason why we can’t continue to expand the moral circle to include all human beings. The open borders of the EU is indeed a triumph. Let’s create the same thing with Canada and then lets join with the EU.
Do not make the mistake (as in point #2) of thinking that the moral argument only succeeds when we make fully moral choices. It also succeeds by pushing people to move in the right direction when other arguments would not do that at all.
Tyler concedes the moral high ground to advocates of open borders but argues that the proposal is “doomed to fail and probably also to backfire in destructive ways.” In contrast, I argue that the moral high ground is tactically the best ground from which to launch a revolution. In Entrepreneurial Economics I wrote:
No one goes to the barricades for efficiency. For liberty, equality or fraternity, perhaps, but never for efficiency.
Contra Tyler, the lesson of history is that few things are as effective at launching a revolution as is moral argument. Without the firebrand Thomas “We have it in our power to begin the world over again“ Paine, the American Revolution would probably never have happened. Paine’s Common Sense, the most widely read book of its time, is about as far from Tyler’s synthetic, marginalist argument as one can imagine and it was effective.
When in 1787 Thomas Clarkson founded The Society for the Abolition of the Slave Trade a majority of the world’s people were held in slavery or serfdom and slavery was considered by almost everyone as normal, as it had been considered for thousands of years and across many nations and cultures. Slavery was also immensely profitable and woven into the fabric of the times. Yet within Clarkson’s lifetime slavery would be abolished within the British Empire. Whatever one may say about this revolution one can certainly say that it was not brought about by a “synthetic and marginalist” approach. If instead of abolition, Clarkson had settled on the goal of providing for better living conditions for slaves on the voyage from Africa it seems quite possible that slavery would still be with us today.
In more recent times, civil unions have gone nowhere while equality of marriage has succeeded beyond all expectation. The problem with civil unions, and with the synthetic and marginalist approach more generally, is that even though it offers everyone something that they want, it concedes the moral high ground–perhaps there is something different about gay marriage which makes it ok to treat it differently–and for that reason it attracts few adherents. Moreover, the argument for civil unions doesn’t force the opposition to enunciate the moral arguments for their opposition and when the moral ground of the opposition is weak that is a strategic failure.
The moral argument for open borders is powerful. How can it be moral that through the mere accident of birth some people are imprisoned in countries where their political or geographic institutions prevent them from making a living? Indeed, most moral frameworks (libertarian, utilitarian, egalitarian, and others) strongly favor open borders or find it difficult to justify restrictions on freedom of movement. As a result, people who openly defend closed borders sound evil, even when they are simply defending what most people implicitly accept. When your opponents occupy ground that they cannot–even on their own moral premises–defend then it is time to attack.
That is the new banking book by Charles W. Calomiris and Stephen H. Haber and the subtitle is The Political Origins of Banking Crises & Scarce Credit. I went to review it, but came back to the thought that I liked Arnold Kling’s review better than what I was coming up with, here goes:
I am now reading Fragile by Design by Charles Calomiris and Stephen Haber. I posted a few months ago on an essay they wrote based on the book. I also attended yesterday an “econtalk live,” where Russ Roberts interviewed the authors in front of live audience for a forthcoming podcast. You might look forward to listening–the authors are very articulate and they speak colorfully, e.g. describing the United States as being “founded by troublemakers” who achieved independence through violence, as opposed to the more boring Canadians.
I think it is an outstanding book, although in my opinion it is marred by their focus on CRA lending as a cause of the recent financial crisis. This is a flaw because (a) they might be wrong and (b) even if they are right, they will turn off many potential readers who might otherwise find much to appreciate in the book. Everyone, regardless of ideology, should read the book. It offers a lot of food for thought.
I am only part-way through it. The story as far as I can tell is this:
1. There is a lot of overlap between government and banking. Governments, particularly as territories coalesced into nation states, needed to raise funds for speculative enterprises, such as wars and trading empires. Banks need to enforce contracts, e.g., by taking possession of collateral in the case of a defaulted loan. Government needs the banks, and the banks need government.
2. If the rulers are too powerful, they may not be able to credibly commit to leaving banks assets alone, so it may be hard for banks to form. But if the government is not powerful enough, it cannot credibly commit to enforcing debt contracts, so that it may be hard for banks to form.
3. Think of democracies as leaning either toward liberal or populist. By liberal, the authors mean Madisonian in design, to curb power in all forms. By populist, the authors mean responsive to the will of popular coalitions of what Madison called factions.
4. If you are lucky (as in Canada), your banking policies are grounded in a liberal version of democracy, meaning that the popular will is checked, and regulation serves to implement a stable banking system. If you are unlucky (as in the U.S.), your banking policies are grounded in the populist version of democracy. Banking policy reflects a combination of debtor-friendly interventionism and regulations that favor rent-seeking coalitions who shift burdens to taxpayers. The result is an unstable system.
I may not be stating point 4 in the most persuasive way. I am not yet persuaded by it. In fact, I think libertarians will be at least as troubled as progressives are by some of the theses that the authors promulgate.
As indicated by words on blogs: red is high neurotic, blue is low. Highly speculative of course:
The main hurdle to further immigration is insufficient immigration. If countries could just get over the hump of status quo bias, anti-immigration attitudes would become as socially unacceptable as domestic racism. Instead of coddling nativism with gradualism, we can, should, and must peacefully destroy nativism with abolitionism.
In other words, we should keep on letting more people in until nativist bias dwindles away into the dustbin of history. I say backlash will set in first, as I have never met a truly cosmopolitan Volk, the cosmopolitanites least of all. I would say Bryan has the moral high ground but not a practicable proposal. Nonetheless we can and should favor less nativism and more immigration at the margin.
Steve Sailer of course is far more skeptical about immigration and he serves up — repeatedly I might add — general strictures in favor of a particularist approach to policy and to immigration in particular. Try this bit from his discussion of Switzerland:
The Swiss, in contrast, put much value on what I call Citizenism. A Swiss Italian is expected to value the welfare of his fellow Swiss citizens more highly than his fellow Italian co-ethnics. And they do.
He expresses related ideas in other posts as well.
My perspective is a synthetic one. Citizenries will in fact always be Citizenist (surprise) and to some extent this is needed to encourage the production of public goods. Caplanian proposals to make citizens otherwise are doomed to fail and probably also to backfire in destructive ways.
Now enter the intellectuals, whom I call The False Cosmopolitanites. The intellectuals, for all of their failings, nonetheless see many of the defects and costs of Citizenism as we find it in the world. The intellectuals therefore should push for marginal moves toward a stronger cosmopolitanism, even though in a deconstructionist sense their inflated sense of superiority and smugness, while doing so, is its own form of non-cosmopolitanism. Sailer’s failing is to think or imply that the costs of The False Cosmopolitanites are higher, or more worthy of scorn, than the costs of Citizenism, and also the costs of other particularist doctrines, some of which are less savory than Citizenism by some degree. The comparison of where the major injustices are generated is not even close.
Both the Caplan memes and the Sailer memes can generate an unending supply of entertaining and indeed edifying blog posts. Caplan can point to the fallacies of the Citizenists, which are numerous, extreme, and which create high humanitarian costs, including through war and unnecessary immigration restrictions. Sailer can skewer The False Cosmopolitanites, who serve up a highly elastic and never-ending supply of objectionable, fact-denying, self-righteous nonsense. Blog post by blog post, either approach will appear to “work” in its own terms. And blog post by blog post, either approach will be susceptible to attack by outsiders who insist on the opposing perspective.
It is only the synthetic and marginalist cosmopolitan approach which sees its way through this thicket.
Embedded in all of this, Caplan is more particularistic than he lets on, embodying and glorifying a form of upper-middle class U.S. suburban culture of which I am personally quite fond. Sailer is de facto less on his actual professed side than his own writings will admit, and in fact a group of ardent Citizenists, if they were informed enough to apply their doctrines consistently, might cut him down some notches as a non-conformist and smart aleck who plays at the status games of The False Cosmopolitanites. Sailer insists on relativizing and deconstructing The False Cosmopolitanites, which is fine by me, but at the same time he overestimates their power and influence and thus he falsely imagines a need to take up common cause with the Citizenists, a group it seems he enjoys more from a distance.
You will find related ideas in my book Creative Destruction: How Globalization is Changing the World’s Cultures. And here are by the way are my previous posts on horse nationalism.
A loyal MR reader, with expertise in this area, writes to me:
But this suggests an interesting thought experiment (regardless of the legality of OMT): suppose an ECB central banker were to overstep her/his legal authority and in doing so created all sorts of cross-border obligations. Would we have to `undo’ this policy? How is this individual to be policed?
In the US, the Fed is accountable to Congress. If ever the Fed overstepped its mandate, in theory, Congress could pass laws, subpoena officials, etc. to reign them in. In the Eurozone, the ECB was created without political overseers. Neither the Commission nor the European Parliament can change the ECB’s mandate; only a treaty change can do that. So if the ECB oversteps its mandate, this is a much more serious issue than if the Fed misbehaves.
If treaty law, the ultimate form of legal pre-commitment in the EU, governing the ECB can simply be cast aside whenever it is time-inconsistent, how should EU nations approach future treaty negotiations? Ignoring the treaty law could be very detrimental for the long-run institutional evolution of the EU. Few economists are willing to publicly entertain this prospect.
Lottery winners tend to switch towards support for a right-wing political party and to become less egalitarian, according to new research on UK data by Professor Andrew Oswald of the University of Warwick and Professor Nattavudh Powdthavee of the London School of Economic and the Melbourne Institute of Applied Economic and Social Research, University of Melbourne.
Their study, published as a new University of Warwick working paper under the title “Does Money Make People Right-Wing and Inegalitarian: A Longitudinal Study of Lottery Wins”, shows that the larger the win, the more people tilt to the right. The study uses information on thousands of people and on lottery wins up to 200,000 pounds sterling. The authors say it is the first research of its kind.
The article is here, via Charles Klingman.
This is from Yana and by Yana, and she passed it along to me just after returning from India, though she wrote it in Singapore:
So I’m in Singapore this week and it’s always been my dream to come here. I love their health care system. I love their food. I love that it came out of left field (here is Singapore 50 years ago, and here’s Singapore today). But the underlying question I love is “why?”
Many people point out that there’s plenty not to love about Singapore, like their mandatory military service and capital punishment for drug users. But these critiques rely on the assumption that democracy and negative liberty are necessary conditions for economic flourishing. Once you’re Singapore everything gets a lot fuzzier. While complaining about Singapore’s autocratic management and lack of freedoms, nobody is asking whether Singapore might be a place we want. Namely, an apolitical society by design, great to live in by global standards but emerging due to strong, and sometimes strong-handed, public policy.
People run in circles discussing whether Singapore is replicable based on its public and economic policies. It seems to me that a third set of institutions running in parallel is what actually makes Singapore so unique and probably impossible (or at least very difficult) to replicate: the Peranakan culture and its predilection for commerce and trade.
Peranakan culture is a pan-Asian blend of descendants of merchants and traders from China, Malaysia, Indonesia and India. It is the culture both of Lee Kwan Yew’s family as well as that of a sizeable percentage of Singaporeans. This culture is a very powerful conduit for passing down a relatively rare trait: a positive view of commercial activity as the machine of wealth creation and basis of improving one’s life. We see this in a rare few historical settings, including the Industrial Revolution in Scotland as well as the American founding. It comes through in Singapore’s public policy, casual discussions with cab drivers (one volunteered to me that “Singapore is the best managed city in Asia”), in the museums, and in daily interaction with a wide variety of merchants. Young Singoporeans love to complain that Singapore is too boring, too orderly, and too strict on personal freedoms, but I’ve yet to hear any complaints about commercial society.
So when Peranakan culture was combined with the British Enlightenment model of governance in the 19th century, the result was truly unique. A set of cultural institutions characterized by positive attitudes towards commerce, innovation and globalization was combined with robust political economy in the form of strong rule of law, property rights and free trade.
Yet unlike so many other former colonies (my current home of India comes to mind), Singapore did not reject these values during its transition to independence. Most other colonies reacted intellectually, if not downright violently, against many of the values promoted by the British. But in Singapore, the continuity of broadly liberal attitudes toward trade and commercial society following independence was supported by continuity in liberal economic policy and enforced by deep-seated cultural attitudes.
To put it bluntly: Singaporeans more or less went along with the policies laid before them. Today that means a thriving economy in Asia with population growth of over 200% since the 1960s, the world’s second largest port, and a significantly more human flourishing than for many people in surrounding countries that didn’t take this leap. I just hope it can last.
The German court left no doubt that the Bundesbank and other German institutions were bound by the constitution. They also made clear they were not letting go of this case. The ruling gives the distinct impression that the judges are referring the case not up to a higher court but down to a lower court…
So what would happen if the ECB wanted to trigger the scheme? Following this ruling, I am not sure the Bundesbank could participate. That would be an inconvenience, no more. I would also expect, though with less certainty, that the German government would torpedo OMT through a technical lever. The scheme requires potential beneficiaries first to apply for a conditional credit line from the European Stability Mechanism. This is where the governments come in: they have to approve any ESM programme by unanimity.
What if the government and parliament voted in favour of a credit line? You could count on an immediate legal challenge at the constitutional court. This is the point when the ruling will matter. The court would then either eat its words or trigger a crisis. It will not refer another case to the ECJ.
The FT piece is here. Developing…
Addendum: Here is commentary from Hans-Werner Sinn.
That is the title of my latest New York Times column, here is one excerpt:
In recent weeks, Argentina, Turkey, Ukraine and Thailand have endured plunging currencies, capital flight and political disruptions in varying combinations. While they have all been affected by global economic tides, these nations are facing crises because of problems in their national governance. And if we look elsewhere around the world, we find that governance has been re-emerging as a major factor behind success or failure in many emerging nations.
It’s not that macroeconomic quandaries have gone away in all of those countries. There are still many such issues: how to deal with current account deficits, for example, or how to face the consequences of tighter monetary policy in the United States. But these concerns were foreseeable, and some countries have been meeting them, if imperfectly, while others are letting these problems push them over the precipice. In this context, good governance means directing political energies at strengthening the economy rather than trying to cement power and keep down the opposition.
This new world contrasts with two earlier waves of change. The first started in the 1990s, when a rising China bought and invested in raw materials at an unheard-of pace. That flow of purchasing power was so strong that it brought better times to other emerging nations, including many in South America and Africa, regardless of whether the individual countries had good governance in place.
The second major wave was the recent global recession, which damaged the commercial prospects of many nations. For instance, in the first quarter of 2009, the gross domestic product of Singapore fell at an annualized rate of 8.9 percent. That wasn’t because Singapore had bad economic policy, but because exports were hit by a global downturn beyond the country’s control.
The two waves have had such noticeable effects that we’ve become unaccustomed to evaluating political fundamentals in individual nations. But these waves, though not quite over, have slowed.
Some of the likely losers are Argentina, Thailand, Turkey, and Ukraine. Chile, Malaysia, and Mexico are likely to come out of the turmoil in OK shape, to cite some examples on the other side. As for China…?
Do read the whole thing.
Abstract Although previous research has indicated that Facebook users, especially young adults, can cultivate their civic values by talking about public matters with their Facebook friends, little research has examined the predictors of political discussion on Facebook. Using survey data from 442 college students in the United States, this study finds that individual characteristics and network size influence college students’ expressive behavior on Facebook related to two controversial topics: gay rights issues and politics. In line with previous studies about offline political discussion, the results show that conflict avoidance and ambivalence about target issues are negatively associated with Facebook discussions. Perhaps the most interesting finding is that users who have a large number of Facebook friends are less likely to talk about politics and gay rights issues on Facebook despite having access to increasing human and information resources. Theoretical implications of these findings and future directions are addressed.
The link to the paper is here. Of course one possibility is that popular people do not want to endanger their popularity with controversial discussions. Another is that non-controversial people are simply more popular to begin with.
Hat tip goes to @Neuroskeptic.