Political Science

Putin’s Plan A: Long game, squeeze Ukraine, force deep federation, formalize Russian influence & primacy in SE

Plan B: Invade

The link to that tweet is here.  There is more from Ian here.

I find it worrying that Putin is suspending food imports from parts of the West.  (Note that the text of the ban may be deliberately ambiguous.)  Commentators are criticizing the economics of such a move, but I think of this more in terms of Bayesian inference.  Long-term elasticities are greater than short.  Under the more pessimistic reading of the action, Putin is signaling to the Russian economy that it needs to get used to some fairly serious conditions of siege, and food is of course the most important of all commodities.  Why initiate such a move now if you are expecting decades of peace and harmony?  Or is Putin instead trying to signal to the outside world that he is signaling “siege” to his own economy?  Then it may all just be part of a larger bluff.  In any case, Eastern Europeans do not take food supply for granted.

That campaign is one of the more notable events going on in a busy and event-rich world, so it feels remiss not to cover it at all.  Here is John Minnich:

The anti-corruption campaign is one of those steps. It serves many overlapping functions: to clear out potential opponents, ideological or otherwise; to consolidate executive power and reduce bureaucratic red tape so as to ease the implementation of reform; to remind the Chinese people that the Communist Party has their best interests at heart; and to make it easier to make tough decisions.

Underlying and encompassing these, we see the specter of something else. The consensus-based model of politics that Deng built in order to regularize decision-making and bolster political stability during times of high growth and that effectively guided China throughout the post-Deng era is breaking down. It can no longer hold in the face of China’s transformation and the crises this will bring. Simply put, now that its post-1978 contract with Chinese society — a social contract grounded in the exchange of growth for stability — is up, the Party risks losing the public support and political legitimacy that this contract undergirded. A new and more adaptive but potentially much less stable model is being erected, or resurrected, from within the old. This model is grounded more firmly in the personality and prestige of the president and more capable, or so Chinese leaders seem to hope, of harnessing and managing the Chinese nation through what could well be a period of turmoil.

This does not necessarily mean a return to Imperial China, nor does it mean a return to the days and methods of the Great Helmsman, Mao. It doesn’t even mean the new model will succeed, even remotely. What it means will be decided only by the specific interplay of structure and contingency in the unfolding of history. But it is this transformation that serves as the fundamental, if latent, purpose for Xi’s anti-corruption campaign.

The full piece is here, and for the pointer I thank Jim Olds.  “Be careful what kind of anti-corruption campaign you wish for…”

There is a new paper by Helios Herrera, Guillermo Ordoñez, and Christoph Trebesch and it has a striking result:

We show that political booms, measured by the rise in governments’ popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging economies are more concerned about their reputation and tend to ride the short-term popularity benefits of weak credit booms rather than implementing politically costly corrective policies that would help prevent potential crises. We provide evidence of the relevance of this reputation mechanism.

The NBER version is here, there are ungated versions here.

Which is to say that while Cowen’s point about the global picture is both interesting and correct, his political stance is backwards. It’s not fans of Capital in the 21st Century who are pushing nationalism as an alternative to plutocracy, but its detractors. And though the recent politics in the US Congress have been driven by the somewhat odd sequence of events around the arrival of unaccompanied minors from Central America, the underlying pattern runs much deeper than that.

I don’t have an “he says exactly that” quotation to pull from Matt’s piece, but I believe he is saying I (or someone?) should be a Progressive instead of a “conservative economist” as he calls me.  The article is interesting throughout.

My framing of course is different.  It is not about who are the best people, but rather which are the best set of positions.  Just to summarize, I generally favor much more immigration but not open borders, I am a liberal on most but not all social issues, and I am market-oriented on economic issues.  On most current foreign policy issues I am genuinely agnostic as to what exactly we should do but skeptical that we are doing the right thing at the moment.  I don’t like voting for either party or for third parties.

Shares in Gazprom, a company that made $32bn in net income last year, trade at only 2.6 times forward earnings.

That is from FTAlphaville.

Sober Look has the numbers, for instance:

The area’s CPI is now below 0.5% on a year-over-year basis. Yesterday we saw German CPI hit new lows (see chart) and Italy’s inflation rate is now hovering just above zero.

What is the most economical model here?  The ECB invested in building up a lot of credibility in some areas, such as price level stability, but that means less credibility when it comes to pushing higher inflation.  So to get two percent inflation, perhaps the ECB has to genuinely and truly seek four percent inflation, because a big chunk of the market won’t believe they really want four percent.  Four will get them to two.

The ECB in fact may be wishing for two percent price inflation and getting…less than that.  Which in turn conditions market participants to doubt the commitment of the ECB to the rates of price inflation which it claims to be seeking.  The ECB and the citizenry can get stuck in a self-fulfilling prophecies equilibrium, yet without requiring a standard liquidity trap.

I don’t by the way think of this as a time consistency problem.  The ECB doesn’t want to be in a position where it is genuinely shooting for four percent inflation, even if that means it will end up imposing only two percent on the Germans.  They are still caught with their proverbial pants down and their internal culture of inflation love would be seen as unacceptable and illegal too.  Yes, the ECB is selfish, and law-abiding as well, as its charter mandates price stability as the goal.

And you know what?  When “selfish” and “law-abiding” point in the same direction, that is very often what you will get.

Eduardo Porter interviewed me in addition to his column, here is one excerpt:

What about other consequences of inequality? There is evidence that it hurts mobility, sapping young men’s incentives to succeed. Some have suggested it corrupts our political system and could fuel social unrest.

We know very little about what income inequality tends to cause in politics. We do see that income inequality is up considerably and crime is down considerably. We do know that older societies, as we are becoming, tend to be more peaceful and stable. We also see that a rising middle class often leads to political instability, such as in Thailand or Turkey or Brazil or for that matter the United States in the 1960s. Many young American men may be experiencing a crisis of confidence these days, but the problem lies in the absolute quality of their opportunities, not the gap between them and Bill Gates.

And this:

If we are looking for a remedy, a greater interest in strict religions would help many of the poor a lot — how about Mormonism for a start? Just look at the data. Many other religions prohibit or severely limit alcohol, drugs and gambling. That said, this has to happen privately rather than as a matter of state policy.

Here is the whole thing.

David Brooks writes:

But when the Muslim Brotherhood government fell, the military leaders cracked down. They sentenced hundreds of the Brotherhood’s leadership class to death. They also closed roughly 95 percent of the tunnels that connected Egypt to Gaza, where the Brotherhood’s offshoot, Hamas, had gained power.

As intended, the Egyptian move was economically devastating to Hamas. Hamas derived 40 percent of its tax revenue from tariffs on goods that flowed through those tunnels. One economist estimated the economic losses at $460 million a year, nearly a fifth of the Gazan G.D.P.

Hamas needed to end that blockade, but it couldn’t strike Egypt, so it struck Israel. If Hamas could emerge as the heroic fighter in a death match against the Jewish state, if Arab TV screens were filled with dead Palestinian civilians, then public outrage would force Egypt to lift the blockade. Civilian casualties were part of the point. When Mousa Abu Marzook, the deputy chief of the Hamas political bureau, dismissed a plea for a cease-fire, he asked a rhetorical question, “What are 200 martyrs compared with lifting the siege?”

The eminent Israeli journalist Avi Issacharoff summarized the strategy in The Times of Israel, “Make no mistake, Hamas remains committed to the destruction of Israel. But Hamas is firing rockets at Tel Aviv and sending terrorists through tunnels into southern Israel while aiming, in essence, at Cairo.”

The full column is here.

While European governments deny paying ransoms, an investigation by The New York Times found that Al Qaeda and its direct affiliates have earned at least $125 million in revenue from kidnappings since 2008, of which $66 million was paid just in the past year.

In various news releases and statements, the United States Treasury Department has cited ransom amounts that, taken together, put the total at around $165 million over the same period.

These payments were made almost exclusively by European governments, who funnel the money through a network of proxies, sometimes masking it as development aid, according to interviews conducted for this article with former hostages, negotiators, diplomats and government officials in 10 countries in Europe, Africa and the Middle East. The inner workings of the kidnapping business were also revealed in thousands of pages of internal Qaeda documents found by this reporter while on assignment for The Associated Press in northern Mali last year.

In its early years Al Qaeda received most of its money from deep-pocketed donors, but counterterrorism officials now believe the group finances the bulk of its recruitment, training and arms purchases from ransoms paid to free Europeans.

The full story is here. by Rukmini Callimachi.  Oh, and don’t forget this:

Negotiators take a reported 10 percent of the ransom, creating an incentive on both sides of the Mediterranean to increase the overall payout, according to former hostages and senior counterterrorism officials.

It turns out that Al Qaeda hardly ever executes prisoners any more.

For the pointer I thank Michael Rosenwald.

Israel’s major problem is that circumstances always change. Predicting the military capabilities of the Arab and Islamic worlds in 50 years is difficult. Most likely, they will not be weaker than they are today, and a strong argument can be made that at least several of their constituents will be stronger. If in 50 years some or all assume a hostile posture against Israel, Israel will be in trouble.

Time is not on Israel’s side. At some point, something will likely happen to weaken its position, while it is unlikely that anything will happen to strengthen its position. That normally would be an argument for entering negotiations, but the Palestinians will not negotiate a deal that would leave them weak and divided, and any deal that Israel could live with would do just that.

What we are seeing in Gaza is merely housekeeping, that is, each side trying to maintain its position. The Palestinians need to maintain solidarity for the long haul. The Israelis need to hold their strategic superiority as long as they can. But nothing lasts forever, and over time, the relative strength of Israel will decline. Meanwhile, the relative strength of the Palestinians may increase, though this isn’t certain.

Looking at the relative risks, making a high-risk deal with the Palestinians would seem prudent in the long run. But nations do not make decisions on such abstract calculations. Israel will bet on its ability to stay strong. From a political standpoint, it has no choice. The Palestinians will bet on the long game. They have no choice. And in the meantime, blood will periodically flow.

There is more here, of interest throughout, via Eric Reguly.

Alan S. Blinder and Mark W. Watson have a useful unpacking of this question, here is the abstract summarizing their conclusions:

The U.S. economy has grown faster—and scored higher on many other macroeconomic metrics—when the President of the United States is a Democrat rather than a Republican. For many measures, including real GDP growth (on which we concentrate), the performance gap is both large and statistically significant, despite the fact that postwar history includes only 16 complete presidential terms. This paper asks why. The answer is not found in technical time series matters (such as differential trends or mean reversion), nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior TFP performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future. Many other potential explanations are examined but fail to explain the partisan growth gap.

The NBER paper is here, an ungated version is here (pdf).

SES [socio-economic status] correlates to willingness to use military force, but not one’s assessment of the need for it.

That is from a fascinating and just-released book I have been reading from Jonathan D. Caverley, A Theory of Democratic Militarism: Voting, Wealth, and War.

Now seems like an apposite time to remember, Congress intends no more than Congress smiles. As Ken Shepsle put it in his classic paper Congress is a “They,” not an “It”:

Legislative intent is an internally inconsistent, self-contradictory expression. Therefore, it has no meaning. To claim otherwise is to entertain a myth (the existence of a Rousseauian great law giver) or commit a fallacy (the false personification of a collectivity). In either instance, it provides a very insecure foundation for statutory interpretation.

Shepsle’s point is that Arrow’s impossibility theorem shows that not only do collectives not have preferences they can’t even be understood as if they had preferences. As I wrote earlier:

Suppose that a person is rational and that we observe their choices. After some time we will come to understand their choices in terms of their underlying preferences (assume stability–this is a thought experiment).  We will be able to say, “Ah, I see what this person wants. I understand now why they are choosing in the way that they do.  If I were them, I would choose in the same way.”

Arrow showed that when a group chooses, there are no underlying preferences to uncover–not even in theory. In one sense, the theorem is trivial. We know or should always have known that a group doesn’t have preferences anymore than a group smiles. What Arrow showed, however, is that without invoking special cases we can’t even rationalize group choices as if leviathan had preferences.

Put differently, if we do try to rationalize a leviathan with preferences and intention we will find that such a leviathian has the preferences and intention of a madman. Quoting Shepsle again:

…the Hart and Sacks (1958) notion that legislation should be treated as the result of “reasonable people pursuing reasonable purposes reasonably” is insufficient. Even if we do adopt this posture, even if legislators are the kinds
of reasonable people Hart and Sacks envision, it is still fruitless to attribute intent to
the product of their collective efforts. Individual intents, even if they are unambiguous,
do not add up like vectors. That is the content of Arrow; that is the malady of
majority rule….

…The courts cannot defer to something that is nonsense.

By the way, if legislative intent was nonsense in 1992 when Shepsle wrote, then today, when Congress is more divided than ever, it is nonsense on stilts.

Addendum: Zywicki and Stearn’s excellent book, Public Choice Concepts and Applications in Law has a good discussion of the issue and some of the alternative methods of interpreting a statute. One might begin with Holmes statement, “We do not inquire what the legislature meant; we ask only what the statutes mean.”

The Ryan plan is here (pdf), an NYT summary is here. Overall it’s pretty good.  It attacks excess incarceration and occupational licensing and regressive regulations, three issues where a serious dialogue is badly needed.  It makes a good attempt to limit the incentives for lower-income people not to work.  It’s better than what the Left is turning out for the first time in…how long?

I’m not crazy about the complicated plan to monitor the lives of the poor in more detail (“…work with families to design a customized life plan to provide a structured roadmap out of poverty.”)  And my biggest conceptual objection is the heavy stress on block grants and letting the states figure things out.  I’m not opposed to that in principle, and I might even favor it, but I think it’s often the lazy man’s way of avoiding talk about difficult trade-offs.  I’d like to see a possible plan for just a single state, or better yet two or three, that is supposed to represent an improvement.  That shouldn’t be too hard to do, or if it is maybe the states can’t do it either.  It’s not as if fifty states are giving us a market-based discovery process, as the rhetoric sometimes implies.  Furthermore we have a bunch of large states with ongoing bad governance, such as CA, NY, and IL, and maybe the federal government really can do better for those places.

Here is Vox on the regulation side of the plan.  Kevin Drum offers comment.  Ross Douthat mostly likes it.  Jared Bernstein doesn’t like it.  Robert Greenstein is critical.  Here is Neil Irwin.  And Annie Lowrey.  And Josh Barro.  And Yuval Levin.  And Ezra Klein.  Other people have opinions about it, too.  Or so I am led to believe.

There is a new piece of interest in Technology Review, here is one excerpt:

Psychologists have always assumed that patterns of behavior change more quickly in countries that emphasize collectivism. Once an idea has taken hold, the pressure to conform means it spreads rapidly. “It has previously been argued that social support mechanisms in collectivistic societies make it more likely that a person will stop smoking,” say Lang and co.

And conversely, in countries that emphasize individualism, patterns of behavior must change more slowly because there is less social pressure to conform.

The puzzle is that the data on smoking shows exactly the reverse. Sweden was much slower to adopt smoking and much slower to stop.

Now Lang and co think they know why. They’ve created a mathematical model that includes the effects of social pressure allowing them to simulate the way behavior spreads through societies with different levels of individualism.

The model reveals why Sweden stopped smoking more slowly. “Our model suggests that … social inertia will inhibit decisions to stop smoking more strongly in collectivistic societies than in individualistic societies,” say Lang and co.

The original research, by Lang, Abrams, and De Sterck is here.  Their results do not rest on Sweden alone, but for the record I consider the Swedes to be relatively individualistic by most metrics, most of all when it comes to atomization.