Month: March 2005

Africa fact of the day

…the four hundred richest U.S. taxpayers had a combined income in 2000 that exceeded the combined incomes of four of the countries of Mr. Bush’s tropical tour.  The difference was astounding: the $57 billion in combined income of Botswana, Nigeria, Senegal, and Uganda [TC: Botswana and Senegal are relative success stories in Africa, and Nigeria has oil] was the income of 161 million people, who average $350 in income per year, whereas the $69 billion was the income of four hundred individuals.

That is from Jeffrey Sachs’s new The End of Poverty: Economic Possibilities for Our Time.  And you got it right, there is no typo, that is 400 people richer than 161 million people.

Left-wingers think: "My goodness, how can so few have so much?  They were lucky anyway.  Let us raise marginal tax rates." 

Randians think: "Hail the productive powers of capitalism!"

Rawlsians think: "They didn’t produce that wealth, we did."

Others think: "My goodness, Africa is screwed up."

The economist?  The economist wonders why there is not more trade between the two groups…

Pierre Boulez turns 80

Today is his eightieth birthday, here are some appreciations and critiques.  I side with George Benjamin:

…a rigorous compositional skill is coupled to an imagination of extraordinary aural refinement. Pli Selon Pli, Eclat/Multiples, the spectacularly inventive orchestral Notations, Explosante-Fixe – these are among the most beautiful works of our time. Boulez’s music has a very distinctive flavour – a love of rare timbres and spicy harmonies, a supreme formal elegance and a passion for virtuosity and vehement energy. The polemics that periodically surround him obscure the intensely poetic source of his musical vision.

Robert Barro agrees with me on Social Security

I once thought personal accounts for Social Security were a good idea but have changed my mind….Overall the accounts are a bad idea…

Contributions that fund just the minimum cannot go into a meaningful personal account.  People would opt for too much risk, knowing they would be bailed out if they fell short.  Also, contributions that cover the minimum provide no individual return and, therefore, amount to a tax that discourages work.

Personal acounts have to supplement the minimum payout.  But then why have a public program at all, rather than relying on individual choices on saving?  I think there is no good reason to go beyond the minimum standard; that is why I view personal accounts as a mistake — they enlarge a Social Security program that already promises too much.

To provide an acceptable standard of living, baseline Social Security benefits should be indexed to prices.  The practice of indexing initial benefits to past wages should be eliminated.

That is from the 4 April Business Week.  Barro also supports raising the retirement age and opposes a boost in the payroll tax.

Addendum: Here is the column.

Blog dare

I dared Bryan Caplan, our resident non-bleeding heart libertarian, to blog today’s lunch conversation.  The result is called Let Them Get Roommates.  His best fact is:

[the] poorest 25% of Americans have more living space than the average European.

His bottom line is:

Before anyone starts collecting welfare, it is more than fair to ask them – for starters – to try to solve their own problem by taking on some roommates. Is it beneath their dignity to live like college students? I think not.

Addendum: Several of you have asked what is my point of view.  I worry about the idea of a welfare bureaucracy "residency police."  And the general cost of welfare — as opposed to broad-based entitelments such as Medicare — is relatively small.  So I would not push the button on this one.  I also would fear the symbolic connection to workhouses and the like.

Will a wealthier China democratize?

Maybe not.  Daron Acemoglu, Simon Johnson, Pierre Robinson, and Pierre Yared report:

We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross-country correlation between income and democracy, but do not typically control for factors that simultaneously affect both variables. We show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and various measures of democracy. We also present instrumental-variables using two different strategies. These estimates also show no causal effect of income on democracy. Furthermore, we reconcile the positive cross-country correlation between income and democracy with the absence of a causal effect of income on democracy by showing that the long-run evolution of income and democracy is related to historical factors. Consistent with this, the positive correlation between income and democracy disappears, even without fixed effects, when we control for the historical determinants of economic and political development in a sample of former European colonies.

Here is the full paper for $5.  Here is a version for free.

Does prekindergarten help kids?

…early education does increase reading and mathematics skills at school entry, but it also boosts children’s classroom behavioral problems and reduces their self-control. Further, for most children the positive effects of pre-kindergarten on skills largely dissipate by the spring of first grade, although the negative behavioral effects continue. In the study, the authors take account of many factors affecting a child, including family background and neighborhood characteristics. These factors include race/ethnicity, age, health status at birth, height, weight, and gender, family income related to need, language spoken in the home, and so on.

In other words, you learn both how to read and how to raise hell, but a head start is useful only for the latter talent.  Here is the link to the summary and study.

Junk mail

I’m reading Adam Hochschild’s excellent history of the abolition movement, Bury the Chains.  I’ll post more in the future but there are lots of interesting tidbits on people, institutions and economic history.  Debates about who should pay for incoming cell phone calls, for example, are nothing new. 

Reverend James Ramsay was an outspoken critic of the slave system and was attacked in a variety of ways by the sugar plantation owners, including this:

His enemies sent him packages of stones from the West Indies, because under the prevailing postal system, charges were paid by the recipient.

Is blackmail coercive?

On some level, I do believe blackmail is a kind of coercion, but I fear my structuralist explanations for this view would be deeply upsetting to the average libertarian Joe, so I will keep my dirty little Foucault-inspired secrets to myself.

Here is more from Alina Stefanescu.

And how about the economics of blackmail?  If blackmail victims are bad guys, why not allow a horde of potential bounty hunters to profit from uncovering their wrongdoing?  We can keep "false blackmail" illegal, while allowing blackmail based on truth, no?  We likely underinvest in the gathering of such information, and the profit incentives of blackmail would help correct (and overshoot?) this institutional failure.

Yet I remain convinced there is, somewhere, a sound economic and utilitarian case against blackmail.  But what is that case?

My favorite exotic explanation (it is not quite sound) is that legal blackmail would lead to inefficient blackmail.  Perhaps the ones who should blackmail you are your family and close friends.  That is when transaction costs are low and both parties strike a good deal, often based on an implicit rather than explicit blackmail.  ("If you run off with that floozy…")  The wrongdoer pays a penalty, and the would-be wrongdoer remains deterred.  Nothing gets too messy.  But if you open up this business to outsiders, well…trust breaks down.  Blackmailers fabricate stories, they send weird threatening letters, and they cause extreme anxiety.  Outsiders don’t even know when they should believe the word of a blackmailer, which limits blackmail possibilities from those in the know.  Under this hypothesis, we keep blackmail illegal to keep blackmailers we can trust.

Addendum: I have turned on the comments function, in case you have good ideas on this topic.

Guero and Crunchy Frog

Amazon.com lists Beck’s new album —Guero — as coming out next week, but today I found copies in my local Starbucks, bless their hearts.  The sound is muddier and murkier than usual, with plenty of rhythm changes and scratching. On first listening it is at least as good as Odelay (and similar in style), but not quite up to my favorite, Mutations.  But then again, I’ve underrated every other Beck album on first listening, so why should this one be any different?

While we are off the topic of economics, Entertainment Weekly lists the 20 Best Monty Python sketches.  Most of the picks are on target but "Miss Anne Elk" and "Summarize Proust" are conspicuous for their absence.  And "The Argument Clinic" (the original inspiration for "Markets in Everything," I might add) deserves to be way higher than #20.

China fact of the day

Two weeks ago, the government announced that 58,000 people had been punished for misappropriating money or making unauthorized loans at just two of the big four state-owned banks. In 2003 alone, officials said that the equivalent of nearly $8 billion was pilfered from state-owned enterprises.

Here is the full story.  OK, they have more than a billion people, but that is from only two banks.  And let us not forget:

In the last four years, at least 25 government officials have been sentenced to death for accepting bribes and kickbacks. Hundreds more are serving lengthy prison terms.

Who commits suicide?

In one of the largest studies on suicide ever conducted, researchers found that men with especially low scores on intelligence tests are two to three times more likely than others to kill themselves. Men with low IQ scores and only a primary education were no more likely to kill themselves than men with high IQ scores and a higher level of education. But men with low IQ scores and higher education were at a greater risk of suicide. And men with low IQ scores and highly educated parents were at the highest risk of all.

Could the problem be the high expectations of parents?  Or is this proxying for some other relevant variable?  Here is the story.