Sentences to ponder

Oregon lawmakers are considering raising their annual pay by nearly $20,000, a move the sponsors say will attract more diverse candidates to the statehouse.

“We’re a diverse state, we need a diverse legislature,” Senate Majority Leader Ginny Burdick, one of the legislators leading the effort, told Oregon Public Broadcasting. “Because of the low pay, we are automatically screening out people who really should be represented here.”

That may sound cynical, but in fact the case for doing this is not crazy, and in general the U.S. underpays many (not all!) of its public sector employees:

The move comes only a few weeks after a 28 percent legislative pay raise went into effect. Lawmakers were not behind that raise, and the increase was tied to collective bargaining agreements that affected nearly 40,000 state employees.

Legislators now make $31,200, plus an extra $149 a day when the Legislature is in session.

Here is the full story, with further detail of interest, and for the pointer I thank Mark West.

What is wrong with social justice warriors?

Curious if you’ve read this (has a PDF link):
http://libjournal.uncg.edu/ijcp/article/view/249

Is this paper bad? If it is bad, what is bad about it? How would you describe “what is bad about it” in a way that would connect to a college freshman who finds his/her economics and critical race theory classes to be equally interesting and deserving of further study? This extends to broader questions about “what precisely is undesirable about the state of social-justice-oriented academic study?” I have seen a lot of backhanded stuff from you on this topic, but not a centrally articulated, earnest answer.

That is from my email, and I would broaden the question to be about social justice warriors more generally.  Most of all, I would say I am all for social justice warriors!  Properly construed, that is.  But two points must be made:

1. Many of the people who are called social justice warriors I would not put in charge of a candy shop, much less trust them to lead the next jihad.

2. Many social justice warriors seem more concerned with tearing down, blacklisting, and deplatforming others, or even just whining about them, rather than working hard to actually boost social justice, whatever you might take that to mean.  Most of that struggle requires building things in a positive way, I am sorry to say.

That all said, do not waste too much of your own energies countering the not-so-helpful class of social justice warriors.  It is not worth it.  Perhaps someone needs to play such a role, but surely those neuterers are not, or at least should not be, the most talented amongst us.

No matter what your exact view of the world, or what kind of ornery pessimist or determinist or conservative or even reactionary you may be, you should want to be working toward some kind of emancipation in the world.  No, I am not saying there always is a clear “emancipatory” side of a debate, or that most issues are “us vs. them.”  Rather, if you are not sure you are doing the right thing, ask a simple question: am I building something?  Whether it be a structure, an institution, or simply a positive idea, proposal, or method.

The answer to that building question may not always be obvious, but it stands a pretty good chance of getting you to an even better question for your next round of inquiry.

 

The case for real estate as investment

That is the topic of my latest Bloomberg column, here is one bit:

The authors of the aforementioned study — Òscar Jordà, Moritz Schularick and Alan M. Taylor — have constructed a new database for the U.S. and 15 other advanced economies, ranging from 1870 through the present. Their striking finding is that housing returns are about equal to equity returns, and furthermore housing as an investment is significantly less risky than equities.

In their full sample, equities average a 6.7 percent return per annum, and housing 6.9 percent. For the U.S. alone, equities return 8.5 percent and housing 6.1 percent, the latter figure being lower but still quite respectable. The standard deviation of housing returns, one measure of risk, is less than half of that for equities, whether for the cross-country data or for the U.S. alone. Another measure of risk, the covariance of housing returns with private consumption levels, also shows real estate to be a safer investment than equities, again on average.

One obvious implication is that many people should consider investing more in housing. The authors show that the transaction costs of dealing in real estate probably do not erase the gains to be made from investing in real estate, at least for the typical homebuyer.

Furthermore, due to globalization, returns on equities are increasingly correlated across countries, which makes diversification harder to achieve. That is less true with real estate markets, which depend more on local conditions.

Do read the whole piece.

Work as a safe haven (*Big Business*)

Another surprising feature of these results is that the “work as a safe haven” effect was stronger for poorer people. We don’t know if that is true more generally across larger samples of people, but it points to a potentially neglected and egalitarian feature of life in the workplace. In contemporary American society, poorer individuals are more likely to have problems with divorce, spousal abuse, drug addiction in the family, children dropping out of school, and a variety of other fairly common social problems. These problems plague rich and poor alike, but they are more frequent in poorer families and, furthermore, very often wreak greater devastation on poorer families, which have fewer resources to cope with them. The workplace, however, is a partial equalizer here. At least in this sample, the poorer individuals found relatively greater solace in the workplace than did the richer individuals. The poorer individuals, of course, were paid less at work. But in terms of psychological stresses, a lot of corporations are creating “safe spaces” for individuals who otherwise are facing some pretty seriously bad situations.

That is from my forthcoming book Big Business: A Love Letter to an American Anti-Hero, due out April 9.

The 2019 Public Choice Outreach Conference

It’s time to get your applications in for the 2019 Public Choice Outreach conference, a crash course in public choice for students from all fields and walks of life! Professors, please encourage your students to apply!

When is the Public Choice Outreach Conference?
The 2019 Outreach Conference will be held June 14-16th at the Hyatt Centric Arlington in Rosslyn, VA.

What is the Public Choice Outreach Conference?
The Public Choice Outreach Conference is a compact lecture series designed as a “crash course” in Public Choice for students planning careers in academia, journalism, law, or public policy. Graduate students and advanced undergraduates are eligible to apply. Many past participants of the Outreach seminar have gone on to notable careers in academia, law and business.

What will I learn?
Students are introduced to the history and basic tools of public choice analysis, such as models of voting and elections, and models of government and legislative organization. Students also learn to apply public choice theory to a wide range of relevant issues. Finally, students will be introduced to “constitutional economics” and the economics of rule making.

This is a chance to hear talks from Robin Hanson, Alex Tabarrok, Shruti Rajagopolan, Tyler Cowen and more.

Who can apply?
Graduate students and advanced undergraduates are eligible to apply. Students majoring in economics, history, international studies, law, philosophy political science, psychology, public administration, religious studies, and sociology have attended past conferences. Advanced degree students with a demonstrated interest in political economy or demonstrated interest in political economy are invited to apply. Applicants unfamiliar with Public Choice and students from outside of George Mason University are especially encouraged.

What are the fees involved?
Outreach has no conference fee – it is free to attend. Room and meals are included for all participants. However, ALL travel costs are the responsibility of the participants.

Click here for the 2019 Outreach Application

Thursday assorted links

*The People Next Door*

The author is T.C.A. Raghavan and the subtitle is The Curious History of India’s Relations with Pakistan.  Here is one excerpt:

The massive rigging of the March 1977 election led to a Bhutto majority the size of which stunned even his supporters and, by some accounts, even embarrassed him.  He and his party had been expected to win but the near-total decimation of the opposition made the election results lose credibility.  “Why did you do this to me?” he is widely believed to have rhetorically asked a group of senior civil servants as the results came in.  In any event, the loss of popularity and personal legitimacy was swift.

This book is must reading for these days, and it will be making my 2019 “best of the year” list.  Order from abroad here, or in the U.S. it comes out in July.

FDA Tiered Approval

have an interesting op-ed on a tiered approval regime for the FDA:

Instituting a codified approval paradigm based on four tiered levels of clinical effectiveness (biomarkers, clinical signs and symptoms, disease modification and clinical outcomes) — with evidence regarding clinical utility progressively increasing — would greatly reduce the regulatory uncertainty and subjectivity, as well as the time to approval of innovative medicines.

Moreover, the four tiers, coupled with a commitment to apply state-of-the-art technologies (Apple Watch, telemetry and other health monitoring systems) to obtain clinical evidence would allow for additional learnings from use of drugs by practicing doctors treating real world patients. This knowledge would unearth additional uses, information that can be added to the product label to allow safer and more effective use of drugs and the identification of drug combinations that lead to even greater health benefits.

See also Bartley Madden’s work on Free to Choose Medicine which would similarly create dual tracks, one the standard FDA process and a second observational track that would bring drugs to market more quickly with the tradeoff being fewer clinical trials. As clinical trials rise in expense and more treatments are targeted towards smaller patients groups (i.e. personalized medicine) and as statistical techniques improve, we will need and can benefit from reforms to the FDA process along these lines.

*Dark Shadows: Inside the Secret World of Kazakhstan*

The demographic legacy of four centuries of Slavic settlement is striking along Kazakhstan’s 6,846-kilometre frontier with Russia, the world’s second longest land border.  In 2014, when the conflict erupted in Ukraine, Russians formed 22 per cent of Kazakhstan’s population nationwide (by 2018, that figure had fallen to just below 20 per cent), but in many places in the borderlands they were in large majorities: in Ust-Kamenogorsk, 67 per cent of people were Russians, while in the town of Ridder, further north towards the frontier, the figure was 85 per cent…

By 2018, the share of Kazakhs in the population had risen from 40 per cent to 67.5 percent and the share of the other largest ethnic group, Russians, had fallen from 37 per cent to 19.8 percent.  Kazakhstan’s two main cities used to be predominantly Russians; now Kazakhs dominate.  Astana’s Kazakh population hit 78 per cent in 2018, up from 17 per cent at independence (when it was still a backwater called Akmola and not yet Kazakhstan’s capital); Almaty’s Kazakh population had risen from 22 per cent to 60 per cent.

The government is also working hard to “Kazakhify” towns along the Russian border.

That is all from the new and excellent book by Joanna Lillis.  You may also have read that Nazerbayev, who has held power in Kazakhstan since 1991, announced yesterday that he is stepping down, hoping to take on more of a Lee Kuan Yew role in the country.

Who is most receptive to pseudo-profound bullshit?

This research systematically mapped the relationship between political ideology and receptivity to pseudo-profound bullshit—that is, obscure sentences constructed to impress others rather than convey truth. Among Swedish adults (N = 985), bullshit receptivity was (a) robustly positively associated with socially conservative (vs. liberal) self-placement, resistance to change, and particularly binding moral intuitions (loyalty, authority, purity); (b) associated with centrism on preference for equality and even leftism (when controlling for other aspects of ideology) on economic ideology self-placement; and (c) lowest among right-of-center social liberal voters and highest among left-wing green voters [emphasis added]. Most of the results held up when we controlled for the perceived profundity of genuine aphorisms, cognitive reflection, numeracy, information processing bias, gender, age, education, religiosity, and spirituality. The results are supportive of theoretical accounts that posit ideological asymmetries in cognitive orientation, while also pointing to the existence of bullshit receptivity among both right- and left-wingers.

Here is the piece, by, and Via the excellent Kevin Lewis.

Tuesday assorted links

1. Minimum wage hikes increase property crime.

2. Your memory influences the rent you end up with.

3. An alert whenever “danger” is nearby, a really bad idea (NYT).

4. “Women with a male twin were 15 percent less likely to graduate from high school than women with a female twin, and those who went to college were 4 percent less likely to finish it. They had a 12 percent lower probability of being married, and a 6 percent lower probability ofhaving children.”  Link here (NYT).

5. Peter Thiel and Cornel West speaking at Harvard.

6. The psychology of elite sports.

7. “Armando, the ‘Lewis Hamilton of pigeons’ sells for record €1.25m.

Amazon bans some anti-vaccine books

Amazon has now joined other companies navigating the line between doing business and censoring it, in an age when, experts say, misleading claims about health and science have a real impact on public health.

NBC News recently reported that Amazon was pulling books touting false information about autism “cures” and vaccines. The e-commerce giant confirmed Monday to The Washington Post that several books are no longer available, but it would not release more specific information.

I cannot say I am entirely happy about that (grossly underreported) development.  Here is the full WaPo story by Lindsey Beyer.

Has the Labor Share Declined? Maybe, maybe not.

In a 2017 post Asher Schechter correctly noted:

Of the various ills that currently plague the American economy, one that has economists particularly worried is the decline in the labor share—that is, the part of national income that’s allocated to wages.

Lots of theories have been proposed to explain the decline in labor share including automation, globalization and increased markups. In a big if true paper, Koh, Santaeulalia-Llopis and Zheng argue that all of these theories are wrong because there has been no decline in labor share once we take into account that the BEA changed how intellectual property was treated in the national accounts.

The lack of attention to measurement can severely misguide economic theory. We demonstrated that the change in the accounting treatment of IPP—from expensed to capitalized—gradually implemented by the BEA since 1999 is the sole driver of the decline of the accounting LS. Furthermore, our examination of the accounting assumptions behind the capitalization of IPP—mainly that all IPP investment rents are attributed to capital—indicates that less arbitrary and extreme assumptions on the factor distribution of IPP rents yield a trendless accounting LS. In other words, the LS decline is an artifact of the change in the accounting treatment of IPP in national accounts, and this is at odds with current macroeconomic theory that considers the accounting decline as an economic phenomenon at face value.

Labor share appears to have declined globally. Have most countries changed their accounting practices? Quite possibly, but more investigation is needed. Many of the theories are also quite plausible which perhaps explains the reluctance of theorists to give up on the “fact”. The Koh et al. paper has been circulating for a few years but most seem to brush it off. Autor, Dorn, Katz, Patterson and Van Reenen, for example, say:

Although there is controversy over the degree to which the fall in the labor share of GDP is due to measurement issues such as the treatment of capital depreciation (Bridgman, 2014), housing (Rognlie, 2015), self-employment and proprietor’s income (Elsby, Hobjin, and Sahin, 2013; Gollin, 2002) and intangible capital (Koh, Santaeulalia-Lopis and Zheng, 2016), there is a general consensus that the fall is real and significant.

Wait and see is probably rational at this stage. If the paper makes it through peer-review at the JPE, it will be more difficult to ignore.

It is arresting how many facts are in fact open to question. Maybe.

Hat tip: David Andalfatto somewhere on twitter.