Many theories of democratization suggest that extending the right to vote will lead to increased government expenditure (e.g. Meltzer and Richard, 1981; Lizzeri and Persico, 2004; Acemoglu and Robinson, 2000). However, these models frequently assume that government can engage in transfer expenditure, which is often not true for local governments. This paper presents and tests a model in which government expenditure is limited to the provision of public goods. The model predicts that the poor and the rich desire lower public goods expenditure than the middle class: the rich because of the relatively high tax burden, and the poor because of a high marginal utility of consumption. Consequently extensions of the franchise to the poor can be associated with declines in government expenditure on public goods. This prediction is tested using a new dataset of local government financial accounts in England between 1867 and 1900, which captures government expenditure on key infrastructure projects that are not included in many studies of national democratic reform. The empirical analysis exploits plausibly exogenous variation in the extent of the franchise to identify the effects of extending voting rights to the poor. The results show strong support for the theoretical prediction: expenditure increased following relatively small extensions of the franchise, but fell following extensions of the franchise beyond around 50% of the adult male population.
It is perhaps too quick a jump from 19th century England to contemporary advanced economies. Still, it is an interesting hypothesis that the current thinning out of the middle class will decrease the political support for infrastructure investment.
5. The most extreme commute (New Zealand to Iceland).
Here is one version of the latest report, here is another. People, don’t be surprised by this bad news. Unemployment in Japan already had fallen to about three and a half percent. So how much of a miracle could Abenomics accomplish in the first place? Not much, not even for committed Keynesians. Commentators have grown to expect so much of the Phillips curve these days, but still a mechanism for the output boost is required and the Phillips curve (at best) holds only in some contexts. Japan simply hasn’t had that many laborers to put back to work. Getting more women in the workforce, as Abe has tried to do, is a positive development, but that is not mainly about macro policy nor is it mainly about the short run.
Some of you might be thinking “well, won’t inflation cause some kind of output rise, if only by stimulating demand?” People, there is still no mechanism specified in that sentence. And you may recall, the 1970s and early 80s saw the rise of a bunch of “monetary misperceptions” theories, often stemming from the work of Bob Lucas, postulating something to that effect. It was the Keynesians who slapped them down on both empirical and theoretical grounds, as intertemporal elasticities of substitution are simply not high enough to support this as a major channel of output determination. There has been no reason since then to think those theories deserve to make a major comeback.
I noticed a comment by Alen Mattich on Twitter:
If a mere 3 percentage point increase in taxes kills Japan’s economy, got to wonder about how that 230% of GDP debt will ever be resolved.
I’m not sure 230% is the best number there, but still that is the question of the day. With the continuing circulation of what I call “the Venceremos mentality,” the limits of economic policy remain underappreciated, and the recent news from Japan should provide a sobering lesson for us all.
This passage is from Gao Wenqian’s Zhou Enlai: The Last Perfect Revolutionary:
Doctors in China could not conduct major medical procedures on top leaders without the approval of the Politburo Standing Committee. Such was the long-standing rule. Thus, in 1975, Deng Ziaoping and Marshal Ye Jianying, leaders among the old CCP cadres who had generally despised the Cultural Revolution and had shown little enthusiasm for the political style of the mercurial Jiang Qing, now had to negotiate emergency surgery for Zhou Enlai with her allies Wang Hongwen and Zhang Chunqiao. For once, these tough political adversaries managed to see eye-to-eye. They all gave their consent to surgery and sent their decision to Mao, who always had the final say.
Zhou Enlai had four operations before dying of cancer. For the last two operations, however, Mao instructed the doctors to tell Zhou that in fact he was being cured and the tumors were removed. He ceased to believe that when the unbearable pain arrived.
Asaf Zussman has a 2013 Economic Journal paper on this topic (pdf, gated), here is the abstract:
Using a combination of randomised field experiments, follow-up telephone surveys and other data collection efforts, this article studies the extent and the sources of ethnic discrimination in the Israeli online market for used cars. We find robust evidence of discrimination against Arab buyers and sellers which, the analysis suggests, is motivated by “statistical” rather than “taste” considerations. We additionall find the Arab sellers manipulate their identity in the market by leaving the name field in their advertisements blank.
That abstract could be more informative, here are some concrete results from the paper, noting that market participants do not wish to start a transaction which will then later end up cancelled:
1. Both questionnaire answers and market behavior show discrimination towards Arabs.
2. “The overall [seller] response rate to emails is 22% higher for the Jewish than for the Arab buyer.”
3. An Arab buyer offering a car’s posted price receives the same amount of response as a Jewish buyer requesting a 5-10% discount off the posted price.
4. Based on questionnaires, unfavorable attitudes towards Arabs are positively correlated with Jewish religiosity and negatively correlated with education.
5. Jewish questionnaire responses are correlated with actual marketplace discrimination against Arab transactors. This concordance of words and action is by no means always the case in other studies of discrimination.
6. Arab buyers discriminate against sellers from their own ethnic group, although not as much as Jews discriminate against Arab sellers.
7. The share of used car advertisements without seller name is 10.8% for Jewish sellers, 29.5% for Arab sellers, and 16.7% for sellers with “shared” names.
6. “Already, we are in the midst of what could be the longest streak of consecutive chocolate deficits in more than 50 years.” The link is here, I bet against us being anywhere close to peak chocolate.
We’ve now seen a good twenty-five years of autocrats backing down, ceding power, and refusing to escalate, starting around 1989 if not earlier. Arguably North Korea and Saddam Hussein have been partial exceptions, but even there North Korea has stayed in its shell and Saddam had in fact largely disarmed his WMD. We also see many autocrats — most notably those of China — who pursue remarkably sophisticated courses of action. Just think how much more deftly they handled Occupy Hong Kong than the Ferguson police dealt with their situation. Even the Iranian leaders seem quite sophisticated, even though most of us do not share their goals or endorse their means.
I call it The Great Autocrat Moderation.
If we look back in history, are autocrats generally this rational and conciliatory? I am struck reading the new Andrew Roberts biography of Napoleon how he grew drunk with success and overreached and of course eventually failed (twice). Mussolini, Hitler, Stalin, and Mao are some additional obvious examples of autocrats who, in terms of procedural rationality, simply collapsed at some point and very dramatically overreached.
Of course these are tricky examples. The most famous autocrats are arguably going to be more subject to overreach, which in part drives their fame (infamy), and so if we consult our historical memories we may be selecting for overreach. Your typical earlier autocrat may have been more rational than this list of ambitious tyrants might imply. Was the typical dictator of Paraguay, historically speaking, really so irrational? Still, it does seem that autocrats have been relatively benign as of late.
So how about Putin? Is he like the autocrats of the last twenty-five years, or he is more like Napoleon and Mussolini with regard to his long-term procedural rationality?
I do not myself expect The Great Autocrat Moderation to continue for much longer. Let us not forget that some autocratic “tournaments” select for overreach, namely the autocrat had to think he could, against long odds, rise to the top and stay there.
I am indebted to a conversation with John Nye about the topics of this blog post.
D.C. police have made plans for millions of dollars in anticipated proceeds from future civil seizures of cash and property, even though federal guidelines say “agencies may not commit” to such spending in advance, documents show.
The city’s proposed budget and financial plan for fiscal 2015 includes about $2.7 million for the District police department’s “special purpose fund” through 2018. The fund covers payments for informants and rewards.
As to how the underlying incentives work, this will refresh your memory:
Civil forfeiture laws permit local and state police to take cash, cars, homes and other property from people suspected of involvement in drug trafficking or other wrongdoing without proving a crime has occurred. Police can make seizures under state or federal laws.
Since 2009, D.C. officers have made more than 12,000 seizures under city and federal laws, according to records and data obtained from the city by The Washington Post through the District’s open records law. Half of the more than $5.5 million in cash seizures were for $141 or less, with more than a thousand for less than $20. D.C. police have seized more than 1,000 cars, some for minor offenses allegedly committed by the children or friends of the vehicle owners, documents show.
When D.C. police seize cash or property under District law, the proceeds go into the city’s general fund. But proceeds of seizures made under federal law go directly to the police department through the Justice Department’s Equitable Sharing Program, which allows local departments to join with federal agencies in forfeitures and keep up to 80 percent of the proceeds.
That is all from Robert O’Harrow Jr. and Steve Rich, another installment in their pathbreaking series, scroll down to the bottom of the page for links to the rest.
Abstract: We study an infinite horizon model of political competition where parties face a trade-off between winning today and winning tomorrow. Parties choose between nominating moderates, who are more viable, or partisans, who can energize the base and draw in new voters which helps win future elections. Only moderates can win in equilibrium and so the winning party fails to invest in its base and has a weaker future. Hence the longer a party is in power the more likely they are to lose, a pattern that finds strong support in the data. This dynamic also creates an electoral cycle where parties regularly take turns in power.
The paper is here (pdf), Kai’s job market paper on Tiebout competition and minorities is here (pdf), it covers how mobility can lead to a race to the bottom when it comes to protecting the rights of minority workers.
3. Last year, was Tyrone right about the Republicans?