Political Science

Here is one summary of the latest:

The nation’s biggest life insurance company isn’t “too big to fail” after all — at least in the eyes of a federal judge, said Renae Merle in The Washington Post. In a “significant setback” for the Obama administration’s financial reform efforts, MetLife last week won a landmark lawsuit over its designation as a “systemically important financial institution.” Prior to the 2008 crash, large, non-bank financial firms were subject to little oversight, but after the near collapse of insurance giant AIG, federal regulators decided tougher rules were necessary. So the government labeled MetLife, which has 100 million customers worldwide, and three other non-banks — AIG, Prudential, and General Electric’s financing arm — as too big to fail, requiring them to set aside bigger financial cushions to ward off collapse. But MetLife challenged the label in court, and to the surprise of many, it won.

That’s four non-banks, identified in discretionary fashion by the regulators without a cost-benefit analysis or fully objective standards for such a designation.  Not three, not five, rather four.  And with exactly what standards of regulatory appeal?  A thirty day appeal process?  Once you are on that list, I believe it is politically very difficult for the Financial Stability Oversight Council to take you off.  The regulators are not required to spell out any clear “exit strategy” for leaving the list.

Is this such a good idea?  You don’t have to favor “doing nothing” to think this idea of a “tag, you’re it” game might be counterproductive.  I am reminded of the wise words of Paul Krugman that a lot of crises can come from surprise corners and bring higher contagion costs than you might have expected.  And the whole point of systemic risk and mispriced asset classes is that such problems can affect the entire market, or an entire sector of the market, all at once.  Big firms or not.  (It is weird for regulators to simultaneously believe that breaking up big institutions would increase market risk, and then focus their monitoring on…the biggest institutions.)  What about money market funds, while we are on the topic?  It’s not about the size of the biggest one.

That all suggests it is better to build safeguards into the system at a general level, rather than playing the tag game.  Those safeguards can include corporate governance reform, better Fed monitoring of credit markets, better stress tests, better overall money market infrastructure and crisis procedures, and better monetary policy in downturns, among other ideas.

If you impose higher capital requirements on four relatively well-observed firms, you might just be pushing risk into other and less well-observed corners of the financial system.

On Twitter, Austan Goolsbee is very upset about this ruling.  Jack Lew has been described as “furious.”

I say it’s a blessing in disguise.  Any regulatory system whose success relies on singling out four firms is a system bound to fail.

snoopy

Addendum: Here is a relevant article by Cass Sunstein.

Here is Ann Althouse on Rhode Island:

I had to make a new tag for Rhode Island. I think it’s the very last state I’ve blogged about — I’d thought I already had a tag for every state — and it’s a story of it not getting respect. Oh, Rhode Island. You can use that previous sentence as your slogan if you want.

Or remember the old saying “Nothing but for Providence”?

It’s not even an island.  How is this for a relevant update?:

The idea was simple enough — to create a logo and slogan that cast the long-struggling state of Rhode Island in a fresh, more optimistic light to help attract tourists and businesses. A world-renowned designer was hired. Market research was conducted. A $5 million marketing campaign was set. What could go wrong?

Everything, it turns out.

The slogan that emerged — “Rhode Island: Cooler and Warmer” — left people confused and spawned lampoons along the lines of “Dumb and Dumber.” A video accompanying the marketing campaign, meant to show all the fun things to do in the state, included a scene shot not in Rhode Island but in Iceland. The website featured restaurants in Massachusetts.

By the way, they hired a New Yorker to do the campaign.

And yet, as a native northeaster who spent three years of his early life in Fall River (southern Massachusetts), I cannot bring myself to name Rhode Island the nation’s most obscure state.  It just doesn’t seem far away enough.  Brown University is world famous, and most people who go from New York to Boston come in contact with the state in some way.  It can count Gilbert Stuart and Cormac McCarthy and H.P. Lovecraft, and the film Dumb and Dumber starts off there, so probably it is no worse (better?) than the nation’s second most obscure state.

In 2013, after all 25,000 high school students sitting state university entrance exams failed, Liberian President Ellen Johnson Sirleaf admitted that the education system was “a mess” and called for a complete overhaul.

Now it seems Sirleaf’s government has decided that rather than overhauling the education system themselves, they’re going to pay someone else to do it for them. Under a pilot program called “Partnership Schools for Liberia,” the Liberian government will outsource some of its primary and early childhood educational system to private companies over the next five years.

One huge contract has gone to a private company called Bridge International Academies — reportedly to the tune of $65 million. And it’s causing some real controversy.

The United Nations’ Special Rapporteur for the right to education, Kishore Singh, has denounced the plan as “completely unacceptable” and “a blatant violation of Liberia’s international obligations under the right to education.” A coalition of teachers unions and civil society groups in Liberia issued an open letter announcing their opposition. Education International, an international federation of unions, has warned that “privatisation vultures” involved in the plan “pose [a] serious threat to Liberia’s public education system.”

…Bridge’s “academy in a box” model has attracted investment from Facebook’s Mark Zuckerberg and the World Bank Group’s International Finance Corporation, which invested $10 million each. Bill Gates and the UK government’s Department for International Development are also investors.

Here is the Vox story.   As they say, big steps toward a much better world…

Here is coverage from prior efforts in Kenya, hat tips go to Dani Rodrik and Alex T.

From Christopher Ingraham:

The top five most-searched states are, in order, California, Texas, Florida, Illinois and Pennsylvania. And to answer Tyler Cowen’s original question, the bottom five states, in descending order, are Idaho, Vermont, North Dakota, South Dakota, and, at the absolute bottom of the 50-state barrel: Wyoming.

And searches relative to population?:

You can see that the biggest overperformer is, oddly enough, Alabama — it’s the 24th most populous state, but the 15th most frequently-searched state. It’s hard to say what’s driving the discrepancy, but Google’s data offer some clues. For instance, Google’s nifty Correlate tool shows that many Alabama-related searches have to do with sports scores and events — perhaps tied to the popularity of college sports at the University of Alabama. Or, there may be something unique about the state the causes its residents to use the state’s name in Google searches more often — searching for rules and regulations on things like drivers’ licenses and the like.

Other big overperformers include Hawaii and Alaska, Colorado and Connecticut.

On the other side of the ledger, the state that appears to generate the lowest amount of search interest relative to its size is Indiana.

…Louisiana, West Virginia, New Mexico and Idaho also are considerably under-searched compared to their population.

Separately, I received this email from a loyal MR reader:

I am following your most-obscure-state series with some fascination. However, I think the approach is a bit off, because in many cases small states are less obscure than larger ones. Rhode Island is not obscure precisely because most know of it as the smallest state. And even small states produce outlier individuals that elevate their states’ prominence. Rather, I think you should look at obscurity on a per-capita basis — that is, what state is disproportionately obscure compared to its population, economic footprint, &c.
I would suggest Indiana. Our 16th-most-populous state, Indiana is nonetheless relatively obscure for its size.
Consider:
  • Indiana is overshadowed by many of its larger neighbors; northwestern Indiana is part of Chicagoland; southeast Indiana is tied to the Cincinnati and Louisville areas.
  • The best-known historical political figures identified with Indiana are Benjamin Harrison and Dan Quayle — neither well-known.
  • Indiana has far fewer Fortune 500 companies based there than any neighbor except Kentucky (and only one more than Kentucky). Indiana’s big firms tend to be major industrial companies like Eli Lilly and Cummins, important but not consumer-facing and thus contributing to obscurity.
  • Indiana is a major producer of many products, agricultural commodities and mineral resources, but it is the top producer of few, and so doesn’t gain prominence for them (in the way that people associate dairy with Wisconsin or cars with Michigan).
  • Indiana has only one large city, and it’s the 34th-largest U.S. metro area with about 2 million people. States of similar size tend either have much larger metro areas or they have multiple Indianapolis-sized metros.
  • Indiana is not especially diverse — 85% white, and few prominent foreign ethnic minorities concentrated there.
  • In education, Indiana’s best known big school is Notre Dame, which due to its Catholic heritage is not especially associated in the public mind with the state. Purdue is a strong school but ranked 61 by US News — lower than you might expect for a flagship in a state Indiana’s size.
  • Indiana is a place where a lot of notable people are from but where few stay. Think John Roberts, Allan Bloom, Sydney Pollack, Steve McQueen, Kurt Vonnegut, Joseph Stiglitz, Paul Samuelson. (Indiana’s proximity to Chicago contributes to its obscurity by sucking away some of its greatest talents.)

Sports and culture are probably the only arena in which Indiana escape obscurity In sports, this is due to the Hoosier basketball tradition, Larry Bird, Bob Knight, John Wooden, and the Indy 500.

Culturally, Indiana has produced several highlights. In music, the Jackson 5 are indelibly associated with Indiana. The novels of Booth Tarkington stand out. Cole Porter was born and raised there. The Gaither gospel singers are from and based in Indiana. Vonnegut’s God Bless You, Mr. Rosewater, a minor classic, is set there. Ben-Hur author Lew Wallace was a lifelong Indianan. Indiana has produced some strong comics — Red Skelton, David Letterman, Jim Gaffigan — although they are not popularly associated with Indiana. Jim Davis of Garfield is from there. Films and TV shows set there? HoosiersBreaking Away, Rudy, Parks and Recreation.
…Despite these strong points, the relatively large size of Indiana weighs against them and leaves Indiana the most obscure state on a per-capita basis.
Thanks — I continue to enjoy this series and am looking forward to your posts on Rhode Island and Delaware.
TC again: Here is my earlier post My favorite things Indiana.  But I think we have a winner in the per capita sweepstakes.

Kasich supporters are in a league of their own. They have by far the best credit ratings, on average. Some 86% have “excellent” or “good” scores. No other candidate’s supporters even breaks 70%. Kasich’s supporters are half as likely to have bad or fair ratings as anyone else.

The second is that Donald Trump supporters are the least likely to have “good” scores. Only half of them do (49.8%), slightly behind Hillary Clinton supporters (50.7%) and Sanders supporters (51%) and well behind the supporters of the other Republicans. Trump supporters are also far more likely to have “bad” scores than supporters of the other Republican candidates.

Here is the Brett Arends article, via George Chen.

A splendid book, here is Kate Kellaway at The Guardian:

There are two things this book requires. First, it is best read aloud – it comes thrillingly to life – it sounds tremendous. Second, it repays close reading. Studying it is to listen in on a poet with perfect pitch. Getting the diction right – so that the ancient is neither modern nor archaic – is the challenge. And Heaney shows that plain words are stormproofed. It is about more than George Orwell’s tired prescription: “Never use a long word where a short one will do.” It is about how plain language, like plain speaking, has integrity. And it is weight-bearing. It carries. When he introduces uncommon, eye-catching (sometimes longer) words – scaresome, asperging, hotbloods – they stand out but work harder against their plain backgrounds. Take the sighting of the golden bough. The word “refulgent” is strikingly charged, surrounded by “clear”, “green-leafed” and “cold”. Refulgent breaks Orwell’s rule and stands out like the golden branch itself. Or consider the description of Aeneas’s father, Anchises: “A man in old age, worn out, not meant for duress.” “Duress” is the pleasing surprise here (so much better than everyday “hardship”) seizing attention while “old age” and “worn out” do their unobtrusive work.

I will reread it shortly, you can buy it here.

There is a new NBER paper on this topic, by Victoria Y. Fan, Dean T. Jamison, and Lawrence H. Summers, here is the abstract:

Estimates of the long-term annual cost of global warming lie in the range of 0.2-2% of global income. This high cost has generated widespread political concern and commitment as manifested in the Paris agreements of December, 2015. Analyses in this paper suggest that the expected annual cost of pandemic influenza falls in the same range as does that of climate change although toward the low end. In any given year a small likelihood exists that the world will again suffer a very severe flu pandemic akin to the one of 1918. Even a moderately severe pandemic, of which at least 6 have occurred since 1700, could lead to 2 million or more excess deaths. World Bank and other work has assessed the probable income loss from a severe pandemic at 4-5% of global GNI. The economics literature points to a very high intrinsic value of mortality risk, a value that GNI fails to capture. In this paper we use findings from that literature to generate an estimate of pandemic cost that is inclusive of both income loss and the cost of elevated mortality. We present results on an expected annual basis using reasonable (although highly uncertain) estimates of the annual probabilities of pandemics in two bands of severity. We find:

1. Expected pandemic deaths exceed 700,000 per year worldwide with an associated annual mortality cost of estimated at $490 billion. We use published figures to estimate expected income loss at $80 billion per year and hence the inclusive cost to be $570 billion per year or 0.7% of global income (range: 0.4-1.0%).

2. For moderately severe pandemics about 40% of inclusive cost results from income loss. For severe pandemics this fraction declines to 12%: the intrinsic cost of elevated mortality becomes completely dominant.

3. The estimates of mortality cost as a % of GNI range from around 1.6% in lower-middle income countries down to 0.3% in high-income countries, mostly as a result of much higher pandemic death rates in lower-income environments.

4. The distribution of pandemic severity has an exceptionally fat tail: about 95% of the expected cost results from pandemics that would be expected to kill over 7 million people worldwide.

In other words, in expected value terms an influenza pandemic is a big problem indeed.  But since, unlike global warming, it does not fit conveniently into the usual social status battles which define our politics, it receives far less attention.

The authors are Jon A. Shields and Joshua M. Dunn Sr. and the subtitle is Conservative Professors in the Progressive University.  I found this book subtle and thought-provoking throughout.  Here is one good bit:

In fact, many conservative academics feel more at home in the progressive academy than in the Republican Party.  This alienation is not because most conservative academics we interviewed are Rockefeller Republicans. In some respects, they are more conservative than self-identified Republicans in the general population.  Instead, the Republican Party tends to trouble even the most conservative professors because they share with the American founders a small-c conservatism that is sensitized to the dangers of democratic movements.  This political orientation inclines conservative professors to look askance at the populism that has shaken up the Republican Party in recent years…

What also comes through in this book is the remarkable diversity of thought among the so-called “intellectual right.”  And I enjoyed this anecdote:

A professor of history at an elite university, meanwhile, turned right after taking a course with the Marxist historian Arno Mayer.  This admiring historian recalled Mayer announcing to his class, “I’m going to assign the book I most disagree with in the twentieth century, and I’m going to ask you not to critique it, but to recreate its arguments with intellectual empathy.”  The book was Hayek’s Road to Serfdom.

If only the blogosphere was always so tolerant.  I feared I would be bored by this book, but I found it a work of quality scholarship, yet highly readable too.  Here is a Jonathan Marks WSJ review.  And here is a relevant column by Virginia Postrel.

It is well written and consists mostly of reasoned economic arguments about the unworkability of various aspects of EU and eurozone affairs.  It is not a kiss and tell memoir about what really happened or did not happen in Greece in the critical months of last year.

Here is a good FT Martin Sandbu review of the book, excerpt:

He [Varoufakis] clearly, and correctly, thinks Greece should have defaulted on its sovereign debt and Ireland should have restructured its banks in 2010. But if alternative policies did in fact exist, which leaders could have pursued but chose not to, then a fatalistic monetary theory that blames everything on the euro’s design serves, paradoxically, to exonerate the mistakes of those leaders. That may not be his intention, but Varoufakis glosses over why national governments repeatedly declined to restructure debt before it was refinanced by the rescue funds. Above all he does not mention why he, as finance minister, did not restructure Greece’s banks early in his tenure, so as to undo their dependence on the European Central Bank, which last summer forced Athens to accept a third bailout by shutting down banking liquidity. This very partial focus is why Varoufakis’s literary references are so telling. The rage expressed by Thomas and Thucydides’ Melians is not a constructive anger but a cover for helplessness. Neither death nor the Athenians are moved by their rage. Nor, I suspect, will eurozone decision makers be moved by Varoufakis’s.

You can order the book here, it is titled And the Weak Suffer What They Must?: Europe’s Crisis and America’s Future.

Plenty of American films had Soviet or Soviet-linked villains, but the opposite was not true.  Here is one excerpt from Ignatiy Vishnevetsky:

The Soviet and American mainstreams expressed themselves in radically different ways, with different fears. Being a single party state, the Soviet Union was always factionalist and unsustainable, and could only perpetuate itself through cycles of repression and repudiation. Its anxieties were mostly directed toward itself; as the Americans made fantasies of threat, the USSR made fantasies of stability and global standing. The Soviet Union was also dominated by Russian culture, and inherited its taste for oblique metaphor and indirect address. (It should be noted that the three greatest filmmakers to come out of the Soviet Union—Sergei Eisenstein, Andrei Tarkovsky, and Aleksei German—never completed a film set in the present day.)

Simply put, it wasn’t an environment that was primed to depict the Cold War directly. But it was also an environment with a Cold War mythos that was very different from that of the West. The Soviets did have a “worthy villain,” whom they beat year after year on the big screen: the Nazis. The Soviet Union was the hero who slew the dragon; defeating the Third Reich was a point of national pride. There would never be a more important opponent. The Soviets couldn’t reasonably elevate the Americans to the same status, or even to the status of the White Guard of the bloody Russian Civil War—the USSR’s origin-story villains, in a way.

…Americans couldn’t be expected to kill or die for their cause, because—as the 1965 spy film Game With No Rules, set in Berlin at the start of the Cold War, suggests—they didn’t have a cause to begin with. Instead, the rare American antagonists of popular Soviet film were portrayed as pawns of business interests, military-industrial collusion, or, of course, the Nazis. Portraying a monolithic United States of true believers, focused on the eradication of the USSR, would have gone against two essential aspects of the mythology of Soviet propaganda: the defeat of Nazism, which rid the world of an evil the likes of which it would never see, and the notion of communism as a self-evident ideal.

For decades, Soviet media attacked the United States—with varying degrees of subtlety—as a broken society, its failure obvious. Capitalism and Western democracy weren’t values that could inspire the same kind of commitment as communism, and the only reason anyone would fight for them was because they’d didn’t know better.

Here is the full piece, via someone in my Twitter feed sorry I can no longer find it.

The paper title is Believing there is no free will corrupts intuitive cooperation, and the authors are John Protzko, Brett Ouimette, and Jonathan Schooler.  The abstract is this:

Regardless of whether free will exists, believing that it does affects one’s behavior. When an individual’s belief in free will is challenged, one can become more likely to act in an uncooperative manner. The mechanism behind the relationship between one’s belief in free will and behavior is still debated. The current study uses an economic contribution game under varying time constraints to elucidate whether reducing belief in free will allows one to justify negative behavior or if the effects occur at a more intuitive level of processing. Here we show that although people are intuitively cooperative, challenging their belief in free will corrupts this behavior, leading to impulsive selfishness. If given time to think, however, people are able to override the initial inclination toward self-interest induced by discouraging a belief in free will.

I would say that we need a large swathe of society to believe in ideals of free will and individual responsibility, even though such concepts are not entirely faultless from a metaphysical point of view.  For a given thinker, it is worth asking whether he or she adds to or takes away from that social belief.  For some writers, the concepts of individual blame and responsibility apply only to their intellectual adversaries!

For the pointer I thank Ben Southwood.

Here are some key parts:

This email is to let you know that I’m going back to long-form journalism, as I hoped to, at New York Magazine, edited by the incomparable Adam Moss (with whom I’ve worked, on and off, since the late 1980s). I start today and am already working on an essay on Trump. I’ll also be blogging the Democratic and Republican conventions – two discrete, unmissable moments for bloggery in real time. I know, I know. But if I keep the blogging restricted to two bouts of four days each, I’m hoping I won’t relapse.

My other news is that I’ve also committed to two new books. The first, with the working title of “Keeping Faith,” is a spiritual memoir and theological argument about the future and meaning of Christianity in the 21st Century. The second, called “Thinking Out Loud,” is a collection of my essays and reviews and posts over the last thirty years. I’m excited to be published by Simon and Schuster, with Ben Loehnen as my editor. I’ll keep you posted as these projects unfold.

It is sad to see so many people, including those on the Left or in the Democratic Party, criticize the idea of a Trump presidency without ever uttering the phrase: “No man or woman should have so much political power over others.”  I agree with many of the moral criticisms of Trump as a leader, but don’t let them distract you from this broader truth.

It is strange but instructive how many Democratic criticisms of Trump circle back into criticisms of other, earlier, and now often irrelevant Republicans.  That is simply a language of attack they are more comfortable with.

The good news, if that is what one should call it, is that the best criticisms of Trump involve the concept of individual liberty and freedom from arbitrary legal authority and pure presidential discretion.  The bad news is that so few intellectuals have the relevant ideological vocabulary in that regard.

Ukip-backed Brexit campaign employs EU migrants to rally support

Leave.EU employs four phone bank staff from EU countries including Slovakia. Their job is to rally voters across the UK to back Brexit. The appointments come despite Leave.EU claiming that “as the world’s fifth biggest economy, the UK is well placed to supply its own labour”.

The Twin Cities of Minneapolis and St. Paul have been an epicenter of the U.S. stadium-and-arena boom, rolling out five major sports facilities since 1990 that together cost more than $2 billion.

Now, the neighboring cities are readying for a sixth: a 20,000-seat, $150 million Major League Soccer stadium to be built by 2018 in St. Paul about halfway between the two downtowns.

The St. Paul City Council earlier this month approved $18 million in spending on infrastructure for the stadium, which is meant to spur neighboring real-estate development. The stadium, which is otherwise to be constructed with private dollars, also would be exempt from property taxes.

…The Twin Cities have been particularly zealous. Locals attribute that in part to the unusual political dynamics of having two cities adjacent to one another—with their downtowns just 12 miles apart—and a layering of other different governmental bodies that have given public aid.

Here is the Eliot Brown WSJ story, via Alex Xenopoulos.