Month: June 2008

Rodrik on Foreigners

Rodrik writes:

So the "us" and "them" characterization that Tyler attributes to irrational nativism perhaps has more to do with the absence of a common set of international rules on labor standards, environment, consumer safety, and so on.

Tyler responds ably here, I will add a few more comments.  A testable implication of Rodrik’s hypothesis is that people will be more upset about international trade than immigration since foreigners in foreign countries obey different rules but immigrants obey the same rule as us.  In reality, people are more upset by immigration than by trade and as a result we are much closer to free trade than to free immigration.

Rodrik has a very Ivory-tower view of what people care about.  Rodrik may be upset that people in other countries have poor on-the-job safety but (for the most part) workers who lose their jobs to foreigners really don’t give a damn.  What U.S. workers are upset about is losing their job and if asked to name the problem the U.S. worker will almost certainly say it’s the low wages of foreigners not their poor working conditions.  Moreover, the worker’s diagnosis of the problem (problem to him or her that is) is correct and Rodrik’s diagnosis is wrong.  Why?  Because higher safety standards in foreign countries would cause foreign wages to fall and thus would not much reduce competition from abroad, which is what the worker cares about.  I assume that Rodrik knows this even if the worker does not. 

Rodrik’s deeper argument is also peculiar, especially for a liberal economist.  A liberal economist should understand that for the most part labor, environmental and consumer safety standards are chosen not imposed (not always, of course, but for the most part in the long run).  In the United States we have a lot of job safety because we are wealthy and are willing to pay for job safety with a reduction in our (already high) wages.  In other words, Americans buy a lot of on-the-job safety for the same reasons we buy a lot of smoke alarms and DVD players.  (OSHA has very little effect on job safety.)  Job-safety is thus a choice Americans make about what to consume – we use some of our wealth to buy safety both at home and at work and some of our wealth to buy DVD players.  Thus, to argue that we shouldn’t trade with foreigners because they don’t have the same job safety as Americans makes about as much sense as arguing that we shouldn’t trade with foreigners because foreigners don’t buy as many DVD players as Americans. 

Traffic: Why We Drive the Way We Do

And the subtitle is "(and What It Says About Us)".  The author is Tom Vanderbilt and here is the Amazon link.  I wrote the following blurb for it:

"Everyone who drives–and many people who don’t–should read this book. It is a psychology book, a popular science book, and a how-to-save-your-life manual, all rolled into one. I found it gripping and fascinating from the very beginning to the very end."

It’s out in July and so far it is one of the best popular social science books of the year. 

I also liked the article on traffic — John Staddon’s "Distracting Miss Daisy" — in the latest Atlantic Monthly.  It had these two good sentences:

Paradoxically, almost every new sign put up in the U.S. probably makes drivers a little safer on the stretch of road it guards.  But collectively, the forests of signs along American roadways, and the multitude of rules to look out for, are quite deadly.

Food Fight

In a story rich with irony the Senate, led by Democrat Dianne Feinstein, has voted to privatize its restaurants and food services.  The House privatized twenty years ago.  The result?  Sort of like East and West Berlin.

In a masterful bit of understatement, Feinstein blamed [millions of dollars in losses] on "noticeably
subpar" food and service. Foot traffic bears that out. Come lunchtime,
many Senate staffers trudge across the Capitol and down into the
basement cafeteria on the House side. On Wednesdays, the lines can be
30 or 40 people long.

House staffers almost never cross the Capitol to eat in the Senate cafeterias.

Naturally some of Feinstein’s colleagues were not pleased. 

In a closed-door meeting with Democrats in November, she was
practically heckled by her peers for suggesting it, senators and aides

"I know what happens with privatization. Workers lose jobs, and the
next generation of workers make less in wages. These are some of the
lowest-paid workers in our country, and I want to help them," Sen. Sherrod Brown (D-Ohio), a staunch labor union ally, said recently.

The reporter adds without comment, "The wages of the approximately 100 Senate food service workers average $37,000 annually."  Who says we can’t get a better press corps?

Feinstein had an ace in her sleeve, however, and when push came to shove she unleashed her threat.  Feinstein warned "that if they did not agree to turn over the operation to a private
contractor, prices would be increased 25 percent across the board."  Well that was it – the Senate voted to privatize.

Where is inequality greater?

Bryan Caplan writes:

In the U.S., we have low gas taxes, low car taxes, few tolls, strict zoning that leads developers to provide lots of free parking, low speed limits, lots of traffic enforcement, and lots of congestion.

In Europe (France and Germany specifically), they have high gas
taxes, high car taxes, lots of tolls, almost no free parking, high
speed limits (often none at all), little traffic enforcement, and very
little congestion. (The only real traffic jam I endured in Europe was
trying to get into Paris during rush hour. I was delayed about 30
minutes total).

If you had to pick one of these two systems, which would you prefer?
Or to make the question a little cleaner, if there were two otherwise
identical countries, but one had the U.S. system and the other had the
Euro system, where would you decide to live?

Much as it pains me to admit, I would choose to live in the country
with the Euro system. If you’re at least upper-middle class, the
convenience is worth the price. Yes, this is another secret way that
Europe is better for the rich, and the U.S. for everyone else.

I wonder sometimes whether inequality of status — as opposed to wealth — is greater in Western Europe or in the United States.  In this country you can love NASCAR and be proud of it.  Millionaires won’t look down on you much for that taste.  In Europe you are expected to dress well and be educated and not watch too much TV.  So the egalitarian left is in an odd position here.  On one hand it wishes to elevate the European system over the United States.  Furthermore it also wishes to claim that wealth isn’t a final determinant of happiness (i.e., Europe is worthy), while at the same time circling back to emphasize inequality of wealth as a prima facie fault of the American system. 

Tighter social networks, by inducing conformity, make a society more egalitarian along both political and economic dimensions.  Yet those same networks place especially high "taxes" on those who don’t follow the norms, thus creating another kind of inequality.

Happiness studies are highly imperfect but the inequality of measured happiness doesn’t seem to be any higher in the United States than in Western Europe.  Oddly that result doesn’t seem to get a lot of attention.

What I’ve Been Reading

1. My Stroke of Insight: A Brain Scientist’s Personal Journey, by Jill Bolte Taylor.  What’s it like to lose half your brain in a stroke, be aware of the entire process, be unable to reason coherently, and then recover your faculties over the course of years?  This first person account is written by a Harvard neuroscientist.

2. Netherland, by Joseph O’Neill.  Many critics are claiming this is the first great 9-11 novel.  It grips your attention immediately and has a strong craft but philosophically does it have anywhere to go?  It is rare that I put a book down after the halfway mark but that was the case here.  Some of you will like this but I look for something more exotic from my fiction.

3. Mirroring People: The New Science of How We Connect With Others, by Marco Iacoboni.  This is now the go-to popular science book on mirror neutrons.  I especially liked the discussion of why we find conversation easier than giving monologues (well, not everyone does), even though a priori you might expect the opposite.

4. Now the Hell Will Start: One Soldier’s Flight From the Greatest Manhunt of World War II, by Brendan I. Koerner.  The story of a black WWII GI who goes AWOL and marries into a Burmese hill tribe.  This could have been a great book but as it stands it is a "good enough to read" book.  The digressions are often more interesting than the main story.

5. Hedge Funds: An Analytic Perspective, by Andrew Lo.  Finally a serious book on hedge funds based on real data, written by a leading financial economist, and covering August 2007.  I’ve only browsed the book but it is a must for anyone who follows this area.

6. Jonathan Swift, Gulliver’s Travels.  I read this (yet again) on the flight back from Japan, it is still one of the best books and one of the most important books for aspiring social scientists.  A must-read if you don’t already know it.

Buffett’s Big Bet

Warren Buffett recently bet an ambitious hedge fund operator $1 million that
they won’t beat the returns of S&P 500 after their extremely hefty fees are
accounted for. Buffett claims investors will do as well with a no-load index
fund over the ten years of the bet. He has long been critical of the performance
claims of hedge funds, and his bet is intended to put his money where his mouth

Details here.  Of course, my money is with Buffett.  Even if he doesn’t win the bet he is correct about the advantages of index funds.  The academic research on this topic is voluminous and the lesson is straightforward – mutual fund managers don’t beat the market on average.  Note that this doesn’t mean the market is perfectly efficient but it does mean that *you* are unlikely to beat the market.  For more see my earlier post and also one of Tyler’s.

How long should you wait for an elevator?

Jason, a loyal MR reader, asks:

Google wasn’t able to help me here.

I figure that the longer you wait, the shorter the expected remaining waiting time.

However, in the worse case, if the lift has broken down, the waiting time could be infinite.

For an individual lift, one could, I suppose, collect some stats on average wait times, but I’m interested in the best strategy for an arbitrary lift.

The technical approach is to model the arrival of the elevator as a mathematical process, set up the problem, and solve it.  The seat of the pants approach is to ask about your psychological biases.  Are you, in the first place, more likely to spend too much or too little time waiting for elevators?  In my view standing and waiting isn’t so bad, provided you have something to do or think about.  So my advice is this: once you start waiting for an elevator, begin to think through some interesting problem you face.  The ideal is that when the elevator arrives, you will be disappointed and of course that means you have hedged your risk in the first place.  The question that people screw up is not how long they should wait but what they should do in the meantime.

If you’ve finished thinking about your problem and the elevator still isn’t there, take the stairs.

Readers, what do you advise?  Is there a second best case to be made for "elevator waiting indecisiveness," or should you just have a simple time rule and stick with it?  Is there a formula based upon the number of shafts and number of floors in the building?  The frustrated look of the person standing next to you?

The Wisdom of Whores

She explained, as if to an enthusiastic but slightly dim child, that a waria who is hanging around on a street corner to be interviewed by a research team is a waria who is not with a client.  ‘You are talking to all the dogs, obviously’.

Not something I learned in the lecture halls of London…but Ines is quite right.  Our sample is biased towards the ‘dogs,’ who get picked up less than the cuter girls.  So the study results underestimate the true number of clients per seller…

Ines’s comments…prodded us into changing the sampling strategy…now we work with the powers-that-be (the mami, the pimps, the brothel owners) to arrange off-hours time for data collection.  The principle….is that you are not cutting into people’s work time, so there is less chance of talking only to the remnant sex workers who can’t get a client.


…the modelling, done by the world-renowned Hadley Centre at the Met
Office but using emissions calculated by the Stockholm Network,
highlighted three problems: ‘Current policy comes in too slowly, it
internationalises too slowly and it binds developing countries too

Privately, many climate scientists believe it will be impossible to
meet the 2C target, but they are reluctant to say so because they do
not want to discourage moves to cut emissions.

Here is more and that is from The Guardian not National Review.  I believe that some parts of the world will be in for a very rough ride.

By the way, while I was in Japan I read that a) about half the world’s people are consuming subsidized energy, not taxed energy, and b) Chinese energy-users are typically paying about half of the world price.  Recent energy price increases in India have induced riots.  Those are all signs of the magnitude of the problem.

Hail Will Wilkinson!

I think the “nation state-as-primary-moral-community” assumption at
bottom of most modern liberal arguments for the welfare state (and in
many libertarianism-in-one-country arguments, for that matter) is
morally backward. But I also have a fairly conservative theory of
incremental social change. Whether or not all our institutions are
legitimate – and certainly they are not – they are also very good in relative terms, both historically and contemporaneously. My
immediate interest is in taking steps to make those institutions better
in a way that opens up to the possibility of expanding liberty and
thereby well-being the world over.

He is getting better and better all the time.  The link is here.

The dumbing down of Borders

You leave the country for a few weeks and you come back to ruin.  I’ve visited two Borders stores since my return and both have done away with their new books tables.  In one case the table is still there but has about one-quarter as many books on it if that.  The very best-selling books now get four to six piles on the table — or more — rather than leaving space for a greater number of titles with one stack a piece.  The front of the store offers many more paperback books and many more bestsellers that have been doing well for months.  Many bookshelves are gone altogether and replaced with non-book, non-CD, non-DVD items, such as expensive writing journals and gift cards.  It’s much more like a Barnes and Noble.

In sum, the front of a Borders store no longer produces much information about the new titles on the market and it is no longer a good place for the well-informed to browse.  I’ve yet to compare what’s stocked on the shelves but I am not hopeful about the trend.  It’s hard to believe that the front of the store is the only site of ruin.

On the brighter side, maybe Borders Magic Shelf will prove of use.  But check it out here — so far it doesn’t compare to browsing a well-stocked new books table nor for that matter Amazon

This Global Show Must Go On

Here is my NYT column on globalization, excerpt:

Despite all these gains, the prevailing intellectual tendency these
days is to apologize for free trade. A common claim is that trade
liberalization should proceed only if it is accompanied by new policies
to retrain displaced workers or otherwise ameliorate the consequences
of economic volatility.

Yes, the benefits of a good safety net
are well established, but globalization is not the primary source of
trouble for most American workers. Health care problems, bad schools
for our children or, in recent times, bad banking practices have all
produced greater disruptions – and these have been fundamentally
domestic failings.

What’s really happening is that many people,
whether in the United States or abroad, are unduly suspicious about
economic relations with foreigners. These complaints stem from basic
human nature – namely, our tendency to divide people into “in groups”
and “out groups” and to elevate one and to demonize the other.
Americans fear that foreigners will rise at their expense or “control”
some aspects of the economy.

One approach is to appease these
sentiments by backing away from trade just a bit, or by managing it, so
as to limit the backlash. Giving up momentum, however, isn’t
necessarily the right way forward. If we are too apologetic about
globalization, we can feed core irrationalities, instead of taming
them. The risk is that we will frame trade as a fundamental source of
suffering and losses, which would make voters more nervous, not less.

Do read the whole thing.  A few further points of note:

1. Virtually all of the "second best worrying" about trade could be applied also — in fact more so — to technical progress.  Or to trade across the fifty states.  Yet when it comes to foreigners, the worries acquire a more dangerous credibility.  That is the real second best problem, not any theorem you might derive about trade and externalities.

2. I don’t see the evidence that marginal strengthenings of the safety net will diminish anti-foreign statements.  Yet this has become an article of faith among the globalization "middle roaders."  A crude look at the cross-sectional evidence does not indicate a clear pattern.  France and Germany have a strong safety net but they are skeptical about economic globalization; Sweden and the Netherlands are more sympathetic.  Switzerland, with a weaker safety net, is pro-globalization for the most part.  Like Will Wilkinson and unlike Bryan Caplan, I am for a safety net but often a bigger safety net makes people even more fearful of loss and change.  Note it is the Bismarckian welfare state, the world’s most advanced at the time, which turned to The Dark Side during the 1930s.  I’m hardly suggesting causality here but it didn’t halt the process either.

3. Yes I know about Denmark but job retraining programs in the U.S. hardly have a stellar record.

4. When it comes to improving the quality of economic adjustment, the overwhelming priority should be to delink health insurance from having a job.  I doubt if that will decrease skepticism about foreigners, however.

5. Most of the world’s wealthy economies are, if only because they are smaller and less diversified in terms of resources, more open than is the United States.  They do just fine and by no means do they all spend more on social welfare than does the United States.

6. Cite Samuelson and Stolper all you want, here is yet another paper showing that outsourcing has not been placing significant downward pressure on American wages.

7. China is now the world’s leading supplier of photovoltaic cells. 

But it is really the first point that is the key.

Addendum: Brad DeLong comments extensively.

The carbon footprint of food

Ezra reports:

…two Carnegie Mellon researchers recently broke down
the carbon footprint of foods, and their findings were a bit
surprising. 83 percent of emissions came from the growth and production
of the food itself. Only 11 percent came from transportation, and even
then, only 4 percent came from the transportation between grower and
seller (which is the part that eating local helps cut).

In other words, when it comes to food the greenest things you can do, if that is your standard, is to eat less meat and have fewer kids.