Colombia extends its wealth tax

by on September 17, 2014 at 11:03 am in Current Affairs, Economics, Law | Permalink

Colombia is one of the world’s most unequal societies. Last week, the government of Juan Manuel Santos, who began his second term as president in August, announced the extension of a wealth tax introduced in 2002 to pay for the mounting costs of the country’s 50 year drug-fuelled guerrilla war.

“In that sense, we are actually ahead of the curve of what Piketty proposes,” says Mr Cárdenas.

…“This touches only 50,000 Colombians out of the entire population” of 48m people, he says, “that is less than 1 per cent of the population.”

President Santos himself is a product of that 1 per cent. A US-educated economist and member of a wealthy family of the Colombian establishment, he heads up a centrist administration, not a Venezuela-style leftist regime.

Mr Santos has increased rates for various tranches of the levy, in some cases by 50 per cent. Those with a net worth of between $510,000 and $1.5m must pay a 0.4 per cent tax. The rate rises to 2.25 per cent for net worth above $4m. That applies to 45,000 businesses and about 1,000 individuals, Mr Cárdenas said.

Only about five percent of Columbians actually pay into the standard income tax system.  The FT piece by Andres Schipani is here.

I remain amazed that we have as much free trade as we do.  Here is from a recent Pew poll:

President Barack Obama and other world leaders are having a tough time selling the benefits of the trade agreements they’re negotiating, in part because much of the public thinks all the talk about trade’s benefits is a bunch of baloney.

Out of 44 nationalities surveyed this year, only one — Israelis — tends to believe the basic tenet of economists that increased trade will foster competition and deliver lower prices for consumers.

On a broader question of whether increasing trade and business ties with other countries is a good thing, only 68% of Americans agree, compared with 76% worldwide, according to the study released Tuesday by the Pew Research Center.

The Pew study itself is here and it is interesting throughout.  It is in Bangladesh, Uganda, and Lebanon that people are most likely to believe trade raises real wages, and Bangladeshis are most sympathetic to foreign direct investment.  Only 28% of Americans believe it is good when foreigners buy up U.S. companies.  58% of Chinese think trade leads to price increases, perhaps a sign of the prevalence of foreign luxury goods in that country.

For the pointer I thank Ray Lopez, who himself benefits from free trade, factor mobility, and foreign direct investment.

Many political unions subsist on creative ambiguity.  That is, if the right question were posed, and the citizenry forced to answer it definitely, political order might spin out of control.

Canada, Belgium, and indeed the entire European Union seem to be organized on this basis.  It’s not quite that everyone thinks they are getting their way, but rather explicit concessions are not demanded for each loss of control embodied in the broader system.  Certain rights are held in reserve, with the expectation that they probably will not be exercised, but they can nonetheless influence the final bargaining equilibrium.

Most international treaties rely on some degree of creative ambiguity, as do most central banks, with their semi-promises of bailouts but “not too much not too certain you know” as the default.  You might like the mandated outcome (or not), but I doubt if it would improve political discourse in the United States to have an explicit thumbs up vs. thumbs down referendum on abortion.

Many partnerships and marriages rely on creative ambiguity too.  Should the Beatles have forced Lennon and McCartney to specify who had the final say over each cut?  That probably would have led to a split in 1968 and there would be no Abbey Road.  Must parties to a marriage specify the entire division of chores and responsibilities in advance?

We find the same in many academic departments.  Things can be going along just fine, but once the department has to write out an explicit plan for future growth and the allocation of slots across different fields or methods, all hell breaks loose.

Question posers and agenda setters have great power.

All praises of democracy must be embedded in a broader understanding that a) formal questions can be destructive, and b) we cannot be allowed to pose questions without limit, at least not questions which require explicit, publicly verifiable, and commonly observed answers.

Once a question is posed very explicitly, and in a manner which requires a clear answer, it is hard to take it off the table.  There is thus an option value to holding these questions in reserve, which means that the expected return from the question has to be pretty high to justify changing the agenda in a hard-to-revoke manner.

I am thus not impressed by claims that a “yes” vote for Scottish independence would represent “the democratic will of the people.”  It might just be a question which should not be asked in such a blatant form.

This article, by the way, argues quite well that the current independence referendum is not really democratic at all.  Who gets to vote, and who not, is quite arbitrary.  Maybe they first should have held a referendum on that?

This I found in a Quora forum on prepaid meals in China:

We’ve actually experimented with prepaid vs postpaid meals in our restaurant. The verdict? Upfront payment increased table turnover by over 80%.

The difference is that customers who haven’t paid can justify their occupation of a table. They surf facebook. They chat away for hours on end. They get comfy. It matters not whether they intend to order more stuff, the mere possibility of them ordering more gives them the moral upper hand.

Customers who have paid up on the other hand, do not have moral justification. They could order more food, but diminishing marginal utility and inertia discourages that act. They get edgy. They feel guilty. They leave.

It all depends on the restaurant’s business model. If it’s a low-end restaurant, this tactic will serve it well. If it’s a high end restaurant, paying $150 for that bottle of wine buys you a little more time.

For the pointer I thank Eduardo Pegurier.

Assorted links

by on September 16, 2014 at 12:18 pm in Uncategorized | Permalink

1. First 3-D printed car? (speculative)

2. There is no great stagnation.

3. There is no polenta great stagnation.

4. The Chinese don’t actually want to leave that badly after all.

5. What is network theory teaching us about soccer?

6. Jeff Sachs argues for Scottish independence.  Angus goes further yet.

Here is the latest:

David Cameron faces a “bloodbath” at the hands of Tory MPs after all three parties pledged to continue high levels of funding for Scotland if it rejects independence.

The Prime Minister is facing mounting dissent among English backbenchers after promising that Scotland’s special funding arrangements will continue even when the country is given control over its own taxation and spending.

One Tory MP said the promise to Scottish voters, issued by Mr Cameron, Ed Miliband and Nick Clegg in the Daily Record newspaper, “smacks of desperation”.

Under the Barnett formula, devised in the 1970s by Labour Treasury minister Lord Barnett, spending is allocated according to population size, rather than the amount each country actually needs.

Critics say this gives Scotland an unfair share of government spending and even Lord Barnett has called for it to be replaced.

According to research at Stirling University, England loses around £4.5 billion of public spending every year because the money is handed to Scotland instead

In other words, this story will not end with a “no” vote from Scotland, unless it is strongly decisive.  Regardless of the result, allowing this referendum to go forward likely will go down as one of the greatest unforced errors in recent times.

That is a new paper (pdf) by John Cawley, here is the abstract:

This guide, updated for the 2014-15 job market season, describes the academic market for new Ph.D. economists and offers advice on conducting an academic job search. It reports findings from published papers, describes practical details, and provides links to internet resources. Topics addressed include: preparing to go on the market, applying for academic jobs, the AEA’s new electronic clearinghouse for the job market, signaling, interviewing at the ASSA meetings, campus visits, the secondary market scramble, offers and negotiating, diversity, and dual job searches.

Here is some of the good news from the paper itself:

National Science Foundation data indicate that Ph.D. economists have the lowest unemployment rate (0.9%) of any doctoral field,
as well as one of the highest median salaries of any doctoral field. Finally, the vast majority of people are happy with the outcome of their search. Of the new Ph.D. economists in 2001-02, 94% reported that they liked their jobs very much or fairly well (Siegfried and Stock, 2004).

For the pointer I thank Bruce Bartlett.

Too little, too late on the excess burdens of taxation: Cecil Bohanon, John Horowitz, and James McClure show that public finance textbooks do a very poor job of illuminating the excess burdens of taxation and incorporating such burdens into the analysis of the costs of government spending.

Does occupational licensing deserve our seal of approval? Uwe Reinhardt reviews Morris Kleiner’s work on occupational regulation.

Clashing Northmen: In a previous issue, Arild Sæther and Ib Eriksen interpreted the postwar economic performance of Norway and the role of economists there. Here Olav Bjerkholt strongly objects to their interpretation, and Sæther and Eriksen reply.

Pull over for inspection: Dragan Ilić explores replicability and interpretation problems of a recent American Economic Review article by Shamena Anwar and Hanming Fang on racial prejudice and motor vehicle searches.

Capitalism and the Rule of Love: We reproduce a profound and rich—yet utterly neglected—essay by Clarence Philbrook, first published in 1953.

EJW Audio

The link to the issue is here.

Following ONS definitions, the official Scottish Executive figures give public sector employment in Scotland as 580,000 in 2012, having fallen slightly from its peak of 600,000 in 2009 (see Table 1). The 2012 figure represents 23.5 per cent of the total employed population. But there is good reason to suppose that these figures are a considerable underestimate given the amount of out-sourcing and publicly-funded but ‘non-state’ employment. Buchanan et al. suggest that adjusting for these boundary problems would inflate the figure for Scotland (for 2007) by almost a third, from the official figure of 580,000 (including financial institutions) to 772,000. As it happens, the official 2012 figure is the same as the official figure for 2007,  so adjusting the later figure in the same proportion would suggest again a total of 772,000, 31 per cent of the total in employment. These figures seem broadly compatible with those provided by the Centre for Cities on a city basis, which give the Dundee figure as 38 per cent and that for Glasgow as 30 per cent.

This growth of public sector employment is part of the process of de-globalisation evident in Scotland as an accompaniment to de-industrialisation.

That is from Jim Tomlinson, there is more here, via www.macrodigest.com.

Sentences to ponder

by on September 15, 2014 at 1:27 pm in Education | Permalink

…the relation between the strength of constitutional educational rights and the quality of education is negative and statistically significant.

That is from Sebastian Edwards and Alvaro Garcia Marin, the paper is here.

Assorted links

by on September 15, 2014 at 12:48 pm in Uncategorized | Permalink

1. Daniel Drezner on the history of the gold standard.

2. Comparing the mental abilities of Scrabble and crossword champions.

3. Shabbat plus cell phones: “In the future I would definitely like a day of rest without technology,” said the teenager

4. “full rationality dictates that people must “anti-imitate” some of those they observe…

5. Income inequality and stagnation are hurting state tax revenue.

6. The Great Unraveling.

The Case for Open Borders

by on September 15, 2014 at 7:20 am in Uncategorized | Permalink

Dylan Matthews summarizes the The Case for Open Borders drawing on an excellent interview with Bryan Caplan. Here is one bit from the interview:

Letting someone get a job is not a kind of charity. It’s not a welfare program. It’s just the government leaving people alone to go and make something out of their lives. When most people are on earth are dealt such a bad hand, to try to stop them from bettering their condition seems a very cruel thing to do to someone.

My elevator pitch has no economics in it, because the economics is actually too subtle to really explain in an elevator pitch. If I had a little bit more time, I would say, “What do you think the effects for men have been of more women in the workforce?”

Are there some men who are worse off? Sure. But would we really be a richer society if we kept half the population stuck at home? Isn’t it better to take people who have useful skills and let them do something with it, than to just keep them locked up someplace where their skills go to waste?

Isn’t that not just better for them, but better for people in general, if we allow people to use their skills to contribute to the world instead of keeping them shut up someplace where they just twiddle their thumbs or do subsistence agriculture or whatever?

On the economics, David Roodman has a characteristically careful and comprehensive review written for Givewell of the evidence on the effect of immigration on native wages. He writes, “the available evidence paints a fairly consistent and plausible picture”:

  • There is almost no evidence of anything close to one-to-one crowding out by new immigrant arrivals to the job market in industrial countries. Most studies find that 10% growth in the immigrant “stock” changes natives’ earnings by between –2% and +2% (@Longhi, Nijkamp, and Poot 2005@, Fig 1; @Peri 2014@, Pg 1). Although serious questions can be raised about the reliability of most studies, the scarcity of evidence for great pessimism stands as a fact (emphasis added, AT)….
  • One factor dampening the economic side effects of immigration is that immigrants are consumers as well as producers. They increase domestic demand for goods and services, perhaps even more quickly than they increase domestic production (@Hercowitz and Yashiv 2002@), since they must consume as soon as they arrive. They expand the economic pie even as they compete for a slice. This is not to suggest that the market mechanism is perfect—adjustment to new arrivals is not instantaneous and may be incomplete—but the mechanism does operate.
  • A second dampener is that in industrial economies, the capital supply tends to expand along with the workforce. More workers leads to more offices and more factories. Were receiving economies not flexible in this way, they would not be rich. This mechanism too may not be complete or immediate, but it is substantial in the long run: since the industrial revolution, population has doubled many times in the US and other now-wealthy nations, and the capital stock has kept pace, so that today there is more capital per worker than 200 years ago.
  • A third dampener is that while workers who are similar compete, ones who are different complement. An expansion in the diligent manual labor available to the home renovation business can spur that industry to grow, which will increase its demand for other kinds of workers, from skilled general contractors who can manage complex projects for English-speaking clients to scientists who develop new materials for home building. Symmetrically, an influx of high-skill workers can increase demand for low-skill ones. More computer programmers means more tech businesses, which means more need for janitors and security guards. Again, the effect is certain, though its speed and size are not.
  • …one way to cushion the impact of low-skill migration on low-skill workers already present is to increase skilled immigration in tandem.

Plaudits are due to Givewell. While others are focused on giving cows, Givewell is going after the really big gains.

Black ebola markets in everything

by on September 15, 2014 at 2:21 am in Economics, Medicine | Permalink

A black market for an Ebola treatment derived from the blood of survivors is emerging in the West African countries experiencing the worst outbreak of the virus on record, the World Health Organization said.

The United Nations health agency will work with governments to stamp out the illicit trade in convalescent serum, WHO Director-General Margaret Chan told reporters today in Geneva, where the organization is based. There is a danger that such serums could contain other infections and wouldn’t be administered properly, Chan said.

The WHO is encouraging the use of properly obtained serum to treat current patients and said last week it should be a priority. A third U.S. missionary worker who was infected with Ebola in Liberia and flown to the U.S. for medical care was treated with blood transfusions from another American who recovered from the virus last month. Doctors hope the virus-fighting antibodies in the blood help the 51-year-old physician, Rick Sacra.

There is more here, and for the pointer I thank John Chilton.

Chitmahals

by on September 15, 2014 at 1:57 am in Books, History, Law, Uncategorized | Permalink

I had not known of these:

The Indo-Bangladesh enclaves, also known as the chitmahals (Bengali: ছিটমহল chitmôhol), sometimes called pasha enclaves, are the enclaves along the Bangladesh–India border, in Bangladesh and the Indian state of West Bengal.

There are 106 Indian enclaves and 92 Bangladeshi enclaves. Inside the main part of Bangladesh, 102 of these are first-order Indian enclaves, while inside the main part of India, 71 of these are Bangladeshi first-order enclaves. Further inside these enclaves are an additional 24 second order- or counter-enclaves (21 Bangladeshi, 3 Indian) and one Indian counter-counter-enclave, called Dahala Khagrabari #51. They have an estimated combined population between 50,000 and 100,000.

In September 2011, the Prime Ministers of the two countries (Manmohan Singh of India and Sheikh Hasina of Bangladesh) signed an accord on border demarcation and exchange of adversely held enclaves; however, the Indian parliament has yet to ratify it. Under this intended agreement, the enclave residents could continue to reside at their present location or move to the country of their choice.

Here is the Wikipedia entry.  It now seems the ruling BJP party seems to want to take that 2011 agreement back.

Alastair Bonnett, in his new and excellent Unruly Places: Lost Spaces, Secret Cities, and other Inscrutable Geographies, notes that these enclaves are usually not supplied with public goods.  Furthermore:

In order to leave these tiny enclaves, the inhabitants have to obtain a visa to travel through the foreign territory that surrounds them.  But in order to obtain a visa they have to leave their enclave, since visas can only be obtained in cities many miles away.

And:

The Indian Enclave Refugees’ Association has been formed to lobby for the right to “return” to India.

Many of them are denied the right to settle in what is ostensibly their home country, namely India.

A robot to load your dishwasher

by on September 14, 2014 at 4:24 pm in Science | Permalink

A robot unveiled today at the British Science Festival will be loading dishwashers next year, its developers claim.

“Boris” is one of the first robots in the world capable of intelligently manipulating unfamiliar objects with a humanlike grasp.

It was developed by scientists at the University of Birmingham.

The team also work with “Bob”, an autonomous robot who recently completed work experience at security firm G4S.

“This is Boris’ first public outing,” announced Professor Jeremy Wyatt of the School of Computer Science. The robot took five years to develop at a cost of £350,000.

Boris “sees” objects with depth sensors on its face and wrists. In 10 seconds it calculates up to a thousand possible ways to grasp a novel object with its five robotic fingers and plans a path of arm movements to reach its target, avoiding obstructions.

“It’s not been programmed to pick it up – it’s been programmed to learn how to pick it up,” explained Professor Wyatt.

There is more here, including a video.  For the pointer I thank Michelle Dawson.