Month: December 2012

Assorted links

1. Prizes for Dubai drivers who do not commit traffic infractions, hat tip Yana.

2. The expiration of the US. assault weapons ban increased violence in Mexico.

3. How fragile are we?

4. Illinois re-confronts the Coasian problem.

5. There is structural unemployment in Chennai too, robot fortune teller.  Note the multiplicity of religions in the photo.  And note that Junior Khuppanna has excellent food from the interior of TN.

Does privacy make us productive?

Here is the job market paper and abstract from Ethan Bernstein, who is on the job market from Harvard Business School:

Does Privacy Make Us Productive?

We have grown accustomed to calls for transparency. Transparency, or accurate observability, of an organization’s low-level activities, routines, behaviors, output, and performance provides the foundation for both organizational learning and operational control, and it has an untarnished reputation: rarely does one hear about any negative effects of transparency or problems stemming from too much transparency. Nonetheless, using data from embedded participant-observers and a field experiment at the second largest mobile phone factory in the world, located in China, I introduce the notion of a transparency paradox, whereby maintaining observability of workers may counterintuitively reduce their performance by inducing those being observed to conceal their activities through codes and other costly means; conversely, creating zones of privacy may, under certain conditions, increase performance. This research suggests that careful design and implementation of zones of visual privacy within an organization is an important performance lever but remains generally unrecognized and underutilized. Paradoxically, an organization that fails to design effective zones of privacy may inadvertently undermine its capacity for transparency.


I am sent this information and so I am passing it along.  The venture looks interesting:

AidGrade ( is a new, research-oriented non-profit. It is using crowdsourcing to compile results of impact evaluations of development programs, showing the different programs’ past effectiveness. Many characteristics of each academic paper are coded up, such as where the study took place, what kinds of methods it used, characteristics of the sample, etc. AidGrade also has a “meta-analysis app” which lets users select papers by these filters and get an instant online meta-analysis of the results.

Ideas vs. Interests

My inner sociologist says to me that when a good idea comes up against entrenched interests, the good idea typically fails. But this is going to be a hard thing to suppress. Level playing field forecasting tournaments are going to spread. They’re going to proliferate. They’re fun. They’re informative. They’re useful in both the private and public sector. There’s going to be a movement in that direction.

That is Philip Tetlock in a conversation with Daniel Kahneman on the importance of revolutionizing prediction methods. Is CBO listening? Hat tip: the amazing Giancarlo Ibarguen.

Some links for you

I will spend big chunks of Tuesday and Wednesday driving with my family across the highways of Appalachia and the Great Lakes. So here are some quick links (some of which belong in the category, “in case you missed it”).

1. How can one be British without speaking English?

2. CQ Weekly sizes up the CBO in this even-handed, conventional review.

3. Reducing transactions costs in New York’s taxi market.

4. Keeping transactions costs high in San Francisco’s taxi market.

5. Bruce Schneier reviews Harvey Molotch’s new bookAgainst Security: How We Go Wrong at Airports, Subways, and Other Sites of Ambiguous Danger.

MRU videos on poverty and health

A new set of MRU videos is up.  In these videos, we cover:

·      How the poor spend their money

·      How stress can create a “tax” on the poor’s decision-making, focus, and cognitive abilities

·      Causes of “missing women” in developing countries and what is really the bottom line on this claim

·      The economics of child labor, and what is the nature of the potential market failure when sending children to work

·      How a test involving a pregnant mare’s urine illustrates the value of randomized controlled trials

·      Why private health insurance is relatively rare in poorer developing countries (hint: it’s not adverse selection)

·      Can cash transfers help with low birth weight?

·      How community participation can affect the success of health care programs

·      And finally, the ugly effects of cholera, diarrhea, worms, and HIV/AIDS in developing countries

Click here to get started on these videos, with an introduction to randomized control trials.  Or browse the whole list at, click on the Course section on the right to see the menu.

Elephants engage in Mengerian indirect exchange

At the main Pondicherry temple, an elephant will bless you — by tapping its trunk on your head — if you hand it some money.  Of course this is a temple elephant and it is also a Mengerian elephant.  The elephant has no use for money but understands that it is a general medium of exchange.  The elephant hands the money over to the temple authority and is later rewarded with food.

The elephant is not merely trading, but it is engaged in indirect exchange and thus in monetary economics.

There is in fact a sign up forbidding such Mengerian transactions, but the elephant seems not to notice it.

And yet this is not the end of the story.  In many parts of Tamil Nadu, temple elephants have attained so much prosperity through Mengerian indirect exchange, and been able to consume so much leisure, that now elephant obesity is a more serious problem than elephant malnutrition.

“The state of intoxication is a house with many mansions.”

So reads the preamble to the Winter 2013 issue of Lapham’s Quarterly, titled merely “Intoxication.” A tribute to tanking oneself, the anthology collects some 60 essays, poems, and stories from across the ages. As though anticipating Alex and Tyler’s trip to the Subcontinent, Lapham’s preamble traces the dignified heritage of the drink to those sacred Hindu texts (page references omitted):

Fourteen centuries before the birth of Christ, the Rigveda … finds Hindu priests chanting hymns to a “drop of soma,” the wise and wisdom-loving plant from which was drawn juices distilled in sheep’s wool that “make us see far; make us richer, better.” Philosophers in ancient Greece … rejoiced in the literal meaning of the word symposium, a “drinking together.” The Roman Stoic Seneca … recommends the judicious embrace of Bacchus as a liberation of the mind “from its slavery to cares, emancipates it, invigorates it, and emboldens it for all its undertakings.”

The litany continues through the Persians, Martin Luther, Samuel Johnson, and Baudelaire. Next to Plymouth and the American experiment.

The spirit of liberty is never far from the hope of metamorphosis or transformation, and the Americans from the beginning were drawn to the possibilities in the having of one more for the road. … The founders of the republic in Philadelphia in 1787 were in the habit of consuming prodigious quantities of liquor as an expression of their faith in their fellow men—pots of ale or cider at midday, two or more bottles of claret at dinner followed by an amiable passing around the table of the Madeira. Among the tobacco planters in Virginia, the money changers in New York, the stalwart yeomen in western Pennsylvania busy at the task of making whiskey, the maintaining of a high blood-alcohol level was the mark of civilized behavior. The lyrics of the Star-Spangled Banner were fitted to the melody of an eighteenth-century British tavern song. The excise taxes collected from the sale of liquor paid for the War of 1812, and by 1830 the tolling of the town bell (at 11 A.M., and again at 4 P.M.) announced the daily pauses for spirited refreshment.

Add in all other intoxicants, and we have some dark comparisons within a realm of human experience that’s about worth Spain’s economy:

If what was at issue was a concern for people trapped in the jail cells of addiction, the keepers of the nation’s conscience would be better advised to address the conditions—poverty, lack of opportunity and education, racial discrimination—from which drugs provide an illusory means of escape. That they are not so advised stands as proven by their fond endorsement of the more expensive ventures into the realms of virtual reality. Our pharmaceutical industries produce a cornucopia of prescription drugs—eye opening, stupefying, mood swinging, game changing, anxiety alleviating, performance enhancing—currently at a global market-value of more than $300 billion. Add the time-honored demand for alcohol, the modernist taste for cocaine, and the uses, as both stimulant and narcotic, of tobacco, coffee, sugar, and pornography, and the annual mustering of consummations devoutly to be wished comes to the cost of more than $1.5 trillion. The taking arms against a sea of troubles is an expenditure that dwarfs the appropriation for the military defense budget.

Words to ponder this holiday season, when more bottoms are up than usual, and as the complex world of 2013 awaits. Cheers, Sarah Skwire, for the pointer.

Do cash transfers reduce domestic violence?

Here is one set of new results from Ecuador, by Hidrobo M and Fernald L.

Violence against women is a major health and human rights problem yet there is little rigorous evidence as to how to reduce it. We take advantage of the randomized roll-out of Ecuador’s cash transfer program to mothers to investigate how an exogenous increase in a woman’s income affects domestic violence. We find that the effect of a cash transfer depends on a woman’s education and on her education relative to her partner’s. Our results show that for women with greater than primary school education a cash transfer significantly decreases psychological violence from her partner. For women with primary school education or less, however, the effect of a cash transfer depends on her education relative to her partner’s. Specifically, the cash transfer significantly increases emotional violence in households where the woman’s education is equal to or more than her partner’s.

Hat tip goes to @vaughnbell, who is excellent to follow on Twitter.

Why Does Government Spending Increase Under Term Limits?

Many thanks to Alex for introducing me yesterday. Having written several papers on term limits, I will use my first post of the week to raise a new question that has emerged from this aging policy intervention: Why does government spending increase under term limits?

Back in the 1990s, when about half the states’ voters slapped term limits on their state legislators, the idea was to rein in government spending and decrease the growth of government. Instead, spending per capita increased in those states relative to states without term limits. See this empirical paper, this survey article, or this book this book for details.

These results are counterintuitive insofar as we put stock in the intended mechanism, which was simple: As legislators spend more time in office, they tend to vote for more government spending – so if legislators are required by law to spend less time in office, they’ll spend less money.

There are two problems with this. First, the premise that tenure and spending positively correlate has not held up to empirical scrutiny. Most papers found no positive link between tenure and spending, although a few reported small effects.

Besides, even if there were a strong tenure-spending correlation without term limits, that correlation is not likely to hold up once term limits are imposed. This is due to a version of the Lucas Critique (or Goodhart’s Law), which in general argues that observed behavioral patterns are not invariant to policy interventions. In this case, term limits will change the dynamics between voters and politicians in ways that lead to greater spending. More specifically, three explanations seem plausible.

  1. Term limitation exacerbates fiscal commons problems within the legislature. Because term limits decrease the variance of tenure within a legislature, the relative power of party leaders and ranking committee members will decrease. As the distribution of power flattens, this increases the proportion of legislators who possess access rights to budget items, thus decreasing the control rights that a relatively few leaders and committee chairs would otherwise have. When everyone can get their pet project through, more projects get through.
  2. Term limits shorten legislators’ time horizons. If legislators use their time in office to advance their careers, and if the career-value of being in the statehouse increases with the support of more spending, then term limits can impart an incentive to spend more and sooner. For example, rank-and-file legislators support more spending to secure leadership positions, and leaders let more projects through in order to quickly build durable coalitions.
  3. Term limits might lure legislators into very wasteful forms of pork spending, according to this paper by Michael Herron and Kenneth Shotts:

Term limits can, in some cases, inhibit voters from selecting representatives who deliver particularistic benefits, and, in these cases, term limits reduce pork spending. On the other hand, when pork is extremely socially inefficient, representatives who want to deliver pork to their districts have incentives to refrain from doing so to reduce future pork in other districts. In this scenario, term limits actually prevent legislators from promoting future spending moderation and thus paradoxically increase pork spending.

These explanations can, of course, be mutually inclusive. I suspect there is more to #1 and #2, if only because they are more salient.

In general, term limits increase spending because voters and legislators rationally respond to changes in their institutional environment. As this question invites further study, good papers will unpack the specific mechanisms that drive those responses.

— Notes: Since most people seem surprised by the actual effects of term limits, here are pointers to similar findings: Gubernatorial term limits worsen fiscal volatility — this paper (co-authored by my co-author Pete Calcagno) and this paper (by my dissertation advisor Bob Tollison) — because governors invest less in reputation (this paper). States with legislative term limits might also have worse bond ratings (here). Here on MR, neither Alex nor Tyler have put much stock in term limits, though Alex is less skeptical.

Bits of wisdom from the FT

On the new EU banking arrangement, here is Wolfgang Münchau:

If you study the details of what was agreed last week, the substance evaporates. The common supervisory structure will affect only about 100 to 150 banks out of a total of 6,000 – those with assets of more than €30bn. The ECB can usurp supervisory powers from national regulators but the rules of engagement are not clear. Wolfgang Schäuble, the German finance minister, said when he left the meeting that the ECB would need to make a well-argued case. But it is not clear how this would work in practice.

If you can get through the link there is much more, all devastating.  There is of course no banking union whatsoever and no set of mutual guarantees.  And this:

What happened was that the OMT has killed any appetite for a fiscal union, and has turned the banking union into a phantom.

The effect of the OMT will be negative in the long run because it has provided policy makers with a false sense of security. That was not the intention but the effect.

Let’s not leave Larry Summers out of the mix:

…the richest taxpayers actually make relatively little use of deductions and credits.

It is an excellent piece on tax reform.

On the implied theology of Indian hotel butlers

As the eldest of the three-man team, Mr. Guha. 29, said, he is fluent in 22 subjects related to five-star doting, which include in-room dining, knowledge of international customs and, of course, complaint handling. His skills also extend to fixing the remote, getting spots off the carpet and something called “power dressing.” Mr. Guha says that his primary role, however, is to act as a super-efficient liaison between the guest and the hotel staff — part fixer, part personal assistant, and all yes-man.

“I would never consider a request to be bizarre; we always say it’s challenging,” Mr. Guha said. “I have always been taught that guest is god, and god cannot have a bizarre request.”

Of course I interpret this last quotation in entirely Straussian fashion (furthermore he doesn’t say it’s true, only that he has been taught as such, a classic Straussian move).  Here is more, interesting throughout, and for the pointer I thank Apoorv Trivedi.