That is my new Bloomberg View column, here are some excerpts:

Enter Richard von Glahn’s “The Economic History of China: From Antiquity to the Nineteenth Century,” a book likely to go down as one of the year’s best. Over the last 15 years, the economics profession has gone from a poor understanding of China’s economic history to knowing quite a bit. Von Glahn’s exhaustive but readable book is the best guide to this rapidly growing body of knowledge.

…a lot of autocratic Chinese regimes in history have proven stable even in periods of fairly slow economic growth. It can take them centuries to fall and be replaced, and even then a foreign invasion, like ones by the Mongols or Manchus, may be required.

From today’s media, one sometimes receives the impression that a Chinese growth rate below 4 or 6 percent could mean radical instability and a rapid fall of the government, but Chinese history does not show this pattern. That is hardly proof of how things will run in the future, but it should shift our expectations in the direction of greater Chinese political stability.

Other times, Chinese regimes can fall for what might at first appear to be relatively arbitrary reasons.  And the key point is this:

If there is a single common theme running through the many centuries covered by this book, it is the never-fully-successful quest of the Chinese state for revenue and fiscal stability. One reason China fell behind Western Europe in the 18th century is simply that the Chinese state spent less on creating valuable public goods and infrastructure.

In 1993, 15 years after it began making market-oriented reforms, the Chinese central government’s direct revenue was only 3 percent  of gross domestic product, with the usual caveat that no Chinese numbers should be taken as exact measures. Only in the last 10 years has that revenue share exceeded 10 percent of GDP; by comparison, in the U.S. in normal times that number sits in the range of 17 to 18 percent. For all the images Americans might have of China’s government as a communist behemoth, the country’s political order is better understood as still somewhat immature.

Do read the whole thing.  You can order Glahn’s book here, it is one of my favorites of the year so far.

Land use regulations raise prices, reduce mobility and increase income inequality in the United States. In many parts of the developing world, however, the situation is worse, much worse.

In an excellent piece Shanu Athiparambath writes:

Land is not scarce in Delhi, as I learned in one of those days, when a friend drove me around the city. There is enough land for everybody to live in a mansion. Delhi has nearly 20,000 parks and gardens. Large tracts of land remain idle or underutilized, either because the government owns it, or because property titles are weak. Politicians and senior bureaucrats live in mansions with vast, manicured lawns in the core of the city. Some of these political eminentoes farm on valuable urban land while firms and households move to the periphery or satellite cities where real estate prices are lower. So the average commute is long, roads are too congested, and Delhi is one of the most polluted cities in the world.

Zoning regulations inflict great harm. But it is difficult for Americans to imagine the cost of zoning in Indian cities. Delhi is one of the most crowded cities in the world, and there is great demand for floor space. But real estate developers are not allowed to build tall buildings. In Delhi, for apartment buildings, the regulated Floor Area Ratio (FAR) is usually 2. FAR, an urban planning concept, is the ratio of built-out floor space to the area of the plot.

This means, in Delhi, developers are not allowed to build more than 2,000 square feet of floor space on a 1,000 square feet plot. If a building stands on the whole plot, this would be a two-storey building.

To understand the harm this inflicts on the world’s second-most populous city, remember that in Midtown Manhattan, FAR can go up to 15. In Los Angeles, it can get as high as 13, and in Chicago, up to 12. In Hong Kong’s downtown, the highest FAR is 12, in Bahrain it is 17, and in Singapore it can get as high as 25. Not surprisingly, office space in Delhi’s downtown is among the most expensive in the world. It is impossible to profitably redevelop these crumbling buildings in Delhi’s downtown because they are under rent control.

You might expect the capital city to be especially restrictive, just as is Washington, DC, but in Mumbai, the densest major city in the world, the downtown FAR is an absurdly low 1.33.

Think about it like this: A FAR is like a tax on manufacturing land. Why would you impose prohibitive taxes in places where land is most desperately needed?

Arbitrage!

by on July 26, 2016 at 3:35 am in Economics, Law, Television, Travel | Permalink

Man faces prison for scheme inspired by Seinfeld plot where he ‘brought 10,000 cans from out of state to take advantage of Michigan’s higher deposit rates’

That is the headline, here is the story via the excellent Mark Thorson.  For the under-informed amongst us:

In Michigan you can get 10c for every bottle you give back – whereas places such as New York will only give you 5c.
But it is illegal for someone to knowingly bring them from somewhere else in order to get cash.

I see a number of proposals for inducing less well informed voters to make better choices:

1. Educating them better.

2. Boosting the rate of sustainable economic growth, which tends to persuade people to support better policies.

3. “Buying” voters with one-off transfers, in the hope they will show more support for the better sides of the system.

4. Shaming voters away from making mistakes.

5. Actually giving them control over electoral outcomes, say by having the elites copy the voting choices of the less informed.

Most of us prefer the first two options, but they are relatively hard to accomplish.  What is striking is how much attention #3 gets relative to #4 and #5.

It all depends on the margin, but my view of human nature makes me relatively skeptical of #3.  It is either ignored, or viewed as a kind of insult, or it induces people to simply up their demands and expectations.  That is especially likely to happen for voters who express potentially “nasty” electoral preferences.  I think it is less of a problem for say how a single mother responds to food stamps for her kids, but of course we could debate that.  (By the way, if you are wondering, the main difference between Brazil and Denmark boils down to #2, not #3.)

I can’t recall anyone endorsing #5, yet of course the elites recommend an inverse version of #5 for the less informed voters, namely they should copy the elites.  Hmm.  The version of #3 we offer is actually more like “#3 but no way #5,” and I believe it is processed and understood as such, no matter how “under-informed” those voters may be.  They’re not under-informed about that!

#4 is under-discussed.  Take the less informed voters who voted for the better candidates in the 1960s.  Why did they do that?  Note that many of those people believed some pretty terrible things, including about race and about the suitability of George Wallace for higher office.  I believe shame is part of the answer — they did not want to feel the shame of deviating from the preferences the elites wanted them to express.

Perhaps it is hard to re-bottle that genie, but there are plenty of historical examples where shame cultures go away and then return, consider for instance the United States after the 1920s.

There is a literature on shame and voting behavior, though from what I can tell most of it concerns participation per se rather than the quality of electoral choice.  Here is one striking sentence:

Pride motivates compliance with voting norms only amongst high-propensity voters, while shame mobilizes both high- and low-propensity voters.

Hmm.

I believe in the last two years I have read at least five hundred times that elites should somehow do more for less informed voters, not only for efficiency or distribution reasons but also to improve the quality of our democracy.  The efficiency and distribution claims are at least defensible, maybe more, but the electoral claims are remarkably unsupported.  At the same time, shame barely comes up and I take that to be a reflection of the myopic nature of contemporary times.

Now, maybe elites think there is something wrong with shaming.  But when I watch what elites do, including but not only on Twitter, they spend a great deal of time and effort trying to shame each other.  If anything, that seems to drive them further apart and make a good solution less likely.

It might have been a better situation when the elites, acting with some joint collective force, directed more of their energies to shaming the less elite voters than to shaming each other.

And with that claim I am seeking to shame…the elites.

We should give more thought as to how we can get the advantages of shame cultures, without also taking on all of their disadvantages.  Is it good or bad that shame, like many other aspects of American life, seems to be more income-segregated than before?

Chinese scientists are on the verge of being first in the world to inject people with cells modified using the CRISPR–Cas9 gene-editing technique.

A team led by Lu You, an oncologist at Sichuan University’s West China Hospital in Chengdu, plans to start testing such cells in people with lung cancer next month. The clinical trial received ethical approval from the hospital’s review board on 6 July.

…The Chinese trial will enroll patients who have metastatic non-small cell lung cancer and for whom chemotherapy, radiation therapy and other treatments have failed. “Treatment options are very limited,” says Lu. “This technique is of great promise in bringing benefits to patients, especially the cancer patients whom we treat every day.”

On this one, they’re ahead of us.  There is much more information at the link, including a discussion of where the U.S. is at and also the FDA.

China’s “augmented fiscal deficit” (i.e. off-budget items included) has climbed to nearly 15% of GDP

deficit

That is from Goldman Sachs, via Simon Rabinowitz.

Monday assorted links

by on July 25, 2016 at 5:40 pm in Uncategorized | Permalink

That is my next book, now finished, due out February 2017 from St. Martin’s Press.  You can pre-order it from Amazon or Barnes&Noble.  Recommended!

Very little of the content of this book has appeared on Marginal Revolution.  It contains my thoughts on the death of American restlessness, what is happening with segregation by race and income, how we have become a nation of “matchers,” why crime rates will move up, the ultimate sociological roots of the economic great stagnation, why Steven Pinker is probably wrong about world peace, what we can learn from the riots and violence of the 1960s, why the bureaucratization of protest matters, marijuana vs. cocaine vs. heroin, in which significant way gdp statistics really do under-measure productivity, the importance of cyclical theories of history, and what Tocqueville got right and wrong about America.

And much more!  Most of all it is about why the future will be a scary place.

I also am making a special offer for those who pre-order the work.  Just send me an email to tcowen@gmu.edu (or my gmail), and tell me you have pre-ordered The Complacent Class, and I’ll send you a free copy of another work by me — about 45,000 words — on the foundations of a free society.

I have been revising this second one for over fifteen years, and it is called Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals.  It is finally ready.

You will receive links to an on-line version with images, a pdf with images, and a plain vanilla pdf for Kindle.

In that work, I outline a true and objectively valid case for a free and prosperous society, and consider the importance of economic growth for political philosophy, how and why the political spectrum should be reconfigured, how we should think about existential risk, what is right and wrong in Parfit and Nozick and Singer and effective altruism, how to get around the Arrow Impossibility Theorem, to what extent individual rights can be absolute, how much to discount the future, when redistribution is justified, whether we must be agnostic about the distant future, and most of all why we need to “think big.”

These are my final thoughts on those topics.  And to be fair, this is likely to come out someday as a more traditional book, but that will not happen soon as I have not shopped it around to any publisher.  So if you pre-order The Complacent Class, you’ll get what is an advance and also free copy of Stubborn Attachments.

Are you feeling down because of the political conventions?  Or maybe you’re feeling down because of me?  This is exactly the bracing and optimistic tonic you need.  These two works, taken as a whole, cover where we are at and also where we need to go.

Addendum: If you are a member of the media and would like to receive a review copy of THE COMPLACENT CLASS (St. Martin’s Press; On-sale: February 28, 2017), please contact Gabrielle Gantz: gabrielle.gantz@stmartins.com; or 646-307-5698.

Three new books on Europe

by on July 24, 2016 at 9:32 pm in Books, Economics, History | Permalink

Markus K. Brunnermeier, Harold James, and Jean-Pierre Landau, The Euro and the Battle of Ideas.

Larry Elliott and Dan Atkinson, Europe Isn’t Working.

Philipp Ther, Europe Since 1989.

All three appear to be useful…

Sunday assorted links

by on July 24, 2016 at 1:09 pm in Uncategorized | Permalink

Metro Station Smoke

WTOP: A Metro worker blamed for falsifying records about the tunnel fans that failed during last year’s deadly smoke incident near L’Enfant Plaza has been granted his job back by an arbitration panel — and Metro’s largest union has just filed a lawsuit against Metro because the worker hasn’t been reinstated yet.

The union’s defense is that everyone was doing it so no one is to blame. The Union is probably right that the WMTA suffers from a culture of poor safety and responsibility but you can’t fix that culture without clear signals that the incentives have changed.

I had to take the Metro to DC earlier this week and due to track closings for safety improvements it was miserable, at least 45 minutes of delays for the roundtrip. Some 700,000 people ride the metro every day and if each is delayed by just 15 minutes total (7.5 minutes each way) then at $15 an hour that’s 2.6 million dollars worth of delay every day.

This is remarkable:

Now scientists have determined that humans and their honeyguides [a kind of bird] communicate with each other through an extraordinary exchange of sounds and gestures, which are used only for honey hunting and serve to convey enthusiasm, trustworthiness and a commitment to the dangerous business of separating bees from their hives.

The findings cast fresh light on one of only a few known examples of cooperation between humans and free-living wild animals, a partnership that may well predate the love affair between people and their domesticated dogs by hundreds of thousands of years.

Claire N. Spottiswoode, a behavioral ecologist at Cambridge University, and her colleagues reported in the journal Science that honeyguides advertise their scout readiness to the Yao people of northern Mozambique by flying up close while emitting a loud chattering cry.

For their part, the Yao seek to recruit and retain honeyguides with a distinctive vocalization, a firmly trilled “brrr” followed by a grunted “hmm.” In a series of careful experiments, the researchers then showed that honeyguides take the meaning of the familiar ahoy seriously.

…Researchers have identified a couple of other examples of human-wild animal cooperation: fishermen in Brazil who work with bottlenose dolphins to maximize the number of mullets swept into nets or snatched up by dolphin mouths, and orcas that helped whalers finish off harpooned baleen giants by pulling down the cables and drowning the whales, all for the reward from the humans of a massive whale tongue.

But for the clarity of reciprocity, nothing can match the relationship between honeyguide and honey hunter. “Honeyguides provide the information and get the wax,” Dr. Spottiswoode said. “Humans provide the skills and get the honey.”

Here is the full NYT story.

Here is perhaps the least analytical paragraph in what is mostly an analytical piece by Gideon Lewis-Kraus (NYT).  It is however the paragraph easiest to excerpt:

Joseph Stiglitz is a short, oracular man with gray hair and gray stubble trimmed to equal length, which gives his head the round softness of a late-stage dandelion. His minimal-cognitive-load uniform is a blue sportcoat, an open-necked blue dress shirt and roomy gray trousers over thick-soled black sneakers; I saw him wear this unvarying attire to work in his vast personal complex at Columbia University, meetings at the Ford Foundation, a public Roosevelt colloquy with the Black Lives Matter activist Alicia Garza and Hill briefings. His clothes, along with his trundling gait, give him the appearance of a curmudgeonly but twinkle-eyed shtetl tailor, come to dispense wisdom about structures of international trade-dispute arbitration as he fits the bar mitzvah boy for a suit. He has a dry wit but seems not entirely sure when jokes have been received as such, and so, as if someone once told him that he should soften his fearsome intellect by smiling more, he punctuates his speech with a randomized distribution of grins.

There is much on the Roosevelt Institute, Mike Konczal, and how the Left tries to copy the Right, among other topics, recommended.

Here is one bit, there is more analytical political science at the link:

5. Trump’s foreign policy advisor on Russia and Europe is Carter Page, a man whose entire professional career has revolved around investments in Russia and who has deep and continuing financial and employment ties to Gazprom. If you’re not familiar with Gazprom, imagine if most or all of the US energy industry were rolled up into a single company and it were personally controlled by the President who used it as a source of revenue and patronage. That is Gazprom’s role in the Russia political and economic system. It is no exaggeration to say that you cannot be involved with Gazprom at the very high level which Page has been without being wholly in alignment with Putin’s policies. Those ties also allow Putin to put Page out of business at any time.

Recommended reading for your final exams in public choice.  Do read it all.

Saturday assorted links

by on July 23, 2016 at 2:52 pm in Uncategorized | Permalink