Year: 2012

Trade between belligerents

by  Tyler Cowen in

I have been enjoying Adam Hochschild’s To End All Wars: A Story of Loyalty and Rebellion, 1914-1918, which covers the British role in World War I.  My favorite section details how the British responded when it turned out they had a drastic shortage of binoculars, which at that time were very important for fighting the war.  They turned to the world’s leading manufacturer of “precision optics,” namely Germany.  The German War Office immediately supplied 8,000 to 10,000 binoculars to Britain, directly intended and designed for military use.  Further orders consisted of many thousands more and the Germans told the British to examine the equipment they had been capturing, to figure out which orders they wished to place.

The Germans in turn demanded rubber from the British, which was needed for their war effort.  It was delivered to Germany at the Swiss border.

What are the possible theories?

1. It was a two-front war, and thus the British could offer the Germans a deal, knowing part of the costs of the rubber supply would fall on the combatants at the Eastern front, or perhaps even other combatants at the Western front.

2. The deal may have appealed to commercial interests in each country.

3. Politicians may have expected to survive the war, and to have their country survive the war, and in the meantime they wanted the war for their side to go better rather than worse, for reasons of public relations or to appeal to their military lobbies.

4. The traders may have disagreed about the relative merits of what they were exchanging, as is the case on Wall Street every day.

What else?

Scott Winship on mobility in America

by  Tyler Cowen in

On net, it seems it is not going down and may be rising:

…consider what we know from previous studies of trends in intergenerational income mobility. The bulk of the existing research shows either that mobility has increased over the long run or that it has changed little in either direction. That includes both studies that I know of examining changes in upward mobility from the bottom. It also includes six studies using measures of mobility not confined to movement up from the bottom; these find either no change or rising mobility. In contrast, only two papers find a fall in mobility, each using non-directional measures. Notably, one of them shows an uptick in the mobility of the most recent two birth cohorts it examined, leaving in doubt the question of whether the longer-term decline it found would have persisted had the authors had more recent data. The other study finds somewhat mixed evidence, depending on the data source and whether children of single parents are included.

Of course this doesn’t mean mobility is “high enough.”  Scott also will be publishing a more detailed explication of these results with Brookings.

Might schooling raise IQ?

by  Tyler Cowen in

Children who have more schooling may see their IQ improve, Norwegian researchers have found.

Although time spent in school has been linked with IQ, earlier studies did not rule out the possibility that people with higher IQs might simply be likelier to get more education than others, the researchers noted.

Now, however, “there is good evidence to support the notion that schooling does make you ‘smarter’ in some general relevant way as measured by IQ tests,” said study author Taryn Galloway, a researcher at Statistics Norway in Oslo.

Findings from the large-scale study appear in this week’s online edition of the Proceedings of the National Academy of Sciences.

…In 1955, Norway began extending compulsory middle school education by two years. Galloway and her colleague Christian Brinch, from the department of economics at the University of Oslo, analyzed how this additional schooling might affect IQ.

Using data on men born between 1950 and 1958, the researchers looked at the level of schooling by age 30. They also looked at IQ scores of the men when they were 19.

“The size of the effect was quite large,” she said. Comparing IQ scores before and after the education reform, the average increased by 0.6 points, which correlated with an increase in IQ of 3.7 points for an addition year of schooling, Galloway said.

The summary is here, the paper is here, and for the pointer I thank Michelle Dawson.

Krugman v. Krugman

by  Alex Tabarrok in

Paul Krugman (Jan 1, 2012):

People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!

…while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.

…nations with stable, responsible governments — that is, governments that are willing to impose modestly higher taxes when the situation warrants it — have historically been able to live with much higher levels of debt than today’s conventional wisdom would lead you to believe.

Paul Krugman (March 11, 2003):

…last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.

…we’re looking at a fiscal crisis that will drive interest rates sky-high….But what’s really scary — what makes a fixed-rate mortgage seem like such a good idea — is the looming threat to the federal government’s solvency.

…How will the train wreck play itself out? ….my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. And as that temptation becomes obvious, interest rates will soar.

Now to be fair, Krugman covered himself in 2003 in a credible way he said “unless we slide into Japanese-style deflation, there are much higher interest rates in our future.” Thus, I do not fault Krugman’s forecasting ability. What I do fault is that despite a 180 degree about-face, one thing remains constant in all of Krugman’s writings, anyone who disagrees with him is portrayed as a mendacious idiot. In truth, Heritage today and Krugman 2003 both have legitimate concerns about the long-term debt situation of the United States and it would have been to the credit of Krugman 2012 had he acknowledged that point more fairly.

Addendum: Krugman responds pointing out that he has acknowledged this mistake. Fair enough, although I remain puzzled as to whether we did or did not owe the debt to ourselves in 2003.

The life and times of Gordon Tullock

by  Tyler Cowen

Here is a new paper by Daniel Houser and Charles K. Rowley (pdf):

Gordon Tullock is a founding father of public choice. In an academic career that has spanned 50 years, he forged much of the research agenda of the public choice program and he founded and edited Public Choice, the key journal of public choice scholarship. Tullock, however did much more than this. This Special Issue of Public Choice honors Gordon Tullock in precisely the manner that he most values: the creation of new ideas across the vast range of his own scholarly interests.

The paper gives a better sense of Tullock the individual than the abstract alone indicates.  Hat tip goes to Andres Marroquin, who all development economists should be following on Twitter.

Assorted links

by  Tyler Cowen

1. Particle physics developments from 2011,  a busy year.

2. Are we reaching “peak text”?

3. chill.com.

4. Why are there no economists who have turned down British honours?

5. What cities do top musical tracks come from?  And is there now an Uighur [Uyghur] restaurant in Anacostia?  Please let me know if you know more about this, in the comments would be fine.

6. Timothy Snyder critique of Pinker.

IP Feudalism and the Shrinking of the Public Domain

by  Alex Tabarrok in

Creators of intellectual property used to be granted up to 56 years of monopoly before their works entered the public domain. Since the 1976 copyright act (which came into effect in 1978) copyright has been progressively lengthened so it now extends to the life of the author plus an additional 70 years, i.e. an author’s heirs now get significantly more monopoly power than an author did prior to 1978, truly a kind of IP feudalism.

It’s hard to believe that the extension of copyright for decades after an author’s death can appreciably increase artistic creation and innovation, thus the public has gained little from copyright extension. What has been lost?

If the pre-1976 law were still in place then as of Jan 1, 2012 the following books, movies and music would have entered the public domain (from the Center for the Study of the Public Domain):

  • J.R.R. Tolkien’s The Return of the King, the final installment in his Lord of Rings trilogy
  • The Family of Man, Edward Steichen’s book of photographs showing the diversity and universality of human experience
  • Michihiko Hachiya’s Hiroshima Diary: The Journal of a Japanese Physician, August 8–September 30, 1945, translated by Warner Wells, md
  • Evelyn Waugh’s Officers and Gentlemen, the second book in his Sword of Honour trilogy
  • C.S. Lewis’ The Magician’s Nephew, the sixth volume his The Chronicles of Narnia
  • Vladimir Nabokov’s Lolita
  • Jerome Lawrence & Robert E. Lee’s play about the Scopes “Monkey Trial,” Inherit the Wind
  • Isaac Asimov’s The End of Eternity.
  • Jack Finney’s The Body Snatchers
  • The Seven Year Itch, directed by Billy Wilder; starring Marilyn Monroe and Tom Ewell
  • Lady and the Tramp, Walt Disney Productions’ classic animation
  • Alfred Hitchcock’s To Catch a Thief, starring Cary Grant and Grace Kelly
  • The thriller The Night of the Hunter, directed by Charles Laughton; starring Robert Mitchum and Shelley Winters
  • Two of James Dean’s three major motion pictures: East of Eden, directed by Elia Kazan and co-starring Raymond Massey and Julie Harris; and Rebel Without a Cause, directed by Nicholas Ray and co-starring Natlie Woods, Sal Mineo, and Jim Backus
  • Hollywood versions of major Broadway musicals such as Oklahoma! and Guys and Dolls
  • Richard III, Laurence Olivier’s film version of the Shakespeare play, co-starring Claire Bloom, Cedric Hardwicke, Nicholas Hannen, Ralph Richardson, and John Gielgud
  • Unchained Melody (Hy Zaret & Alex North)
  • Ain’t That a Shame (Antoine “Fats” Domino and Dave Bartholomew)
  • Blue Suede Shoes (Carl Perkins), Folsom Prison Blues (Johnny Cash)
  • The Great Pretender (Buck Ram)
  • Maybellene (Chuck Berry, Russ Fratto, & Alan Freed),
  • Tutti Frutti (Richard Penniman (aka Little Richard)

Under the old law these works and many others could today have been read, seen and played at low cost throughout the world. Consumers have certainly lost from copyright extension. What about creators?

We typically frame copyright and patent strength as an issue between consumers and creators, with consumers assumed to favor weaker rules and creators stronger. But, as I discuss in Launching the Innovation Renaissance, that is the wrong frame. A vibrant public domain can be good for consumers and for creators.

Under the old law, the above works could not only have been consumed they could also at low cost and without requiring the express permission of the original copyright holder have been remixed, reworked and extended in new directions. Under the new regime, innovators will not be able to easily build on these works until 2051 and it could be well into the 22nd century before we get Star Wars prequels worthy of the name.

How is the U.S. tax system different?

by  Tyler Cowen in

Clive Crook reports:

A new report by the Organization for Economic Cooperation and Development shows that in the middle of the last decade — i.e., after the Bush tax cuts were introduced — the U.S. income tax was about as strongly redistributive as income taxes in Canada, Denmark, Finland, the Netherlands and Sweden. You might have noticed that the CBO report on top incomes was widely quoted, but one finding got less attention: Between 1979 and 2007, “the federal individual income tax became slightly more progressive.”  [TC: note that this last sentence can mean a number of different things/]

The awkward truth is that the U.S. income tax system is anomalous not because it taxes the rich lightly but because it taxes everybody else lightly.

Education in India

by  Tyler Cowen

This is related to our recent discussion of why Indian test scores why so low:

Estimating the precise enrollment of private schools is tricky. Government officials say more than 90 percent of all primary schools are run by or financed by the government. Yet one government survey found that 30 percent of the 187 million students in grades 1 through 8 now attend private schools. Some academic studies have suggested that more than half of all urban students now attend private academies.

In Mumbai, so many parents have pulled their children out of government schools that officials have started renting empty classrooms to charities and labor unions — and even to private schools. In recent years, Indian officials have increased spending on government education, dedicating far more money for new schools, hiring teachers and providing free lunches to students. Still, more and more parents are choosing to go private.

“What does it say about the quality of your product that you can’t even give it away for free?” Mr. Muralidharan said.

Here is much more.