Month: November 2013

Assorted links

Why is there superior economic performance under Democratic Presidents?

James Hamilton directs our attention to a useful new paper on this topic by Alan Blinder and Mark Watson (pdf).  Blinder and Watson conclude:

Democrats would no doubt like to attribute the large D-R growth gap to better macroeconomic policies, but the data do not support such a claim….It seems we must look instead to several variables that are mostly “good luck.” Specifically, Democratic presidents have experienced, on average, better oil shocks than Republicans, a better legacy of (utilization-adjusted) productivity shocks, and more optimistic consumer expectations (as measured by the Michigan ICE).

Perhaps one could attribute some of the “confidence gap” to policy differences, though the authors point out “…direct measures showing increasing optimism after Democrats are elected are hard to find.”  In any case this paper is a useful corrective to some common claims about superior economic performance under Democratic Presidents.  Invoking the partisan composition of Congress also does not seem to explain the observed patterns.

Since we are sometimes told that macroeconomic problems dwarf micro in importance (not a division of categories I would support, but you hear this often), well…draw your own conclusions.

Blinder and Watson also debunk a myth you commonly hear from conservatives:

In sum, with the exception of the Greenbook forecasts for the early part of the first Reagan administration, forecasts suggest little reason to believe that Democrats inherited more favorable initial conditions (in terms of likely future growth) from Republicans than Republicans did from Democrats.

This is interesting too:

There is, however, a slight tendency for both the nominal and real Federal funds rate to trend upward during Democratic presidencies and downward during Republican presidencies, suggesting that the Fed normally tightens under Democrats and eases under Republicans. Of course, such an empirical finding does not imply that the Fed is “playing politics” to favor Republicans. Rather, it is just what you would expect if the economy grows faster (with rising inflation) under Democrats and slower (with falling inflation) under Republicans—as it does.

In the UK, economic performance is overall better under the conservatives, although the difference is not statistically significant.

On the history and resurgence of British servants

After World War II, commentators predicted that the welfare state would conspire with electric appliances to kill off domestic service. By 1947, 94 percent of households surveyed employed no help, and between 1951 and 1961 the number of domestic servants halved. However, Leth­bridge’s story ends with a twist. Since 1978, household expenditure on domestic service has quadrupled, bringing the absolute number of domestics in London back to Victorian levels, according to some estimates.

That passage is from a Leah Price review of Lucy Lethbridge’s new book Servants: A Downstairs History of Britain From the Nineteenth Century to Modern Times.

A new Google patent and a Turing test for social media

Here is the latest:

It’s unlikely the majority of us are so overwhelmed with tweets, Facebook posts, emails and texts that we need someone – or something – to reply on our behalf.

However, this hasn’t stopped Google filing a patent for a system that would do just that.

According to the details of the latest patent filed by a software engineer at the firm, Google’s automated system would work like a social media bot and submit posts on a user’s behalf.

It would do this by scanning that user’s previous posts and replies on sites such as Facebook, Google+ and LinkedIn, as well as their emails and texts messages, to learn how that person writes.

The bot would then write replies and responses to future posts in a way that mimics that person’s usual language and tone.

The more a person uses the system, the more the bot can learn the type of responses they write and this would make the suggestions sound more human and realistic.

The full story is here.  Some of you will recall that I discuss this possibility in Average is Over, and consider an equilibrium where many people secede from email altogether and the value of face time rises.

For the pointer I thank the excellent Mark Thorson.

Raise revenue and penalize protest, all in one Spanish policy

Spain’s conservative government agreed on Friday to toughen penalties for unauthorized street protests up to a possible 600,000 euro ($816,000) fine, a crackdown that belies the peaceful record of the anti-austerity protests of recent years.

Leftists and civil rights activists have labeled the bill the “Kick in the teeth law” because it penalizes a battery of protest measures in what they say is a disregard for democracy in a country that only emerged from right-wing dictatorship in the late 1970s.

But Prime Minister Mariano Rajoy, whose People’s Party (PP) has an absolute majority in parliament, has said the Citizens’ Security Law guarantees freedom and will have the support of a majority of Spaniards.

“Offensive” slogans against Spain will be eligible for fines up to 30,000 euros.  There is more here, via Pol Antras.

Markets in everything

Reverse shoplifting edition, the link is from Japan by the way.   As it is explained to me in an email:

Value_Added #240950
(Del Monte whole kernel corn no salt added)

2012-
Canned corn and receipts
Dimensions variable
The artist takes one canned good to multiple supermarkets and re-buys it. This single can of corn has been re-bought from 105 supermarkets for a total of $113.07. ( as of June1, 2013 )
This procedure is possible because the stores have no way to identify individual items: the barcode printed on my can’s label, #240950, refers to its contents, and not to that particular can.
I suppose in expected value terms this is more rational and more profitable than non-reverse shoplifting, also known as shoplifting.  For the pointer I thank Pamela Regis.

Debt should be compared to wealth, not just to gdp

Here is a good point about Japan:

If there’s one asterisk to put after the shocking comparative figures, it’s that the debt-to-GDP ratios don’t take into account Japan’s huge asset holdings. At the end of March 2012, Japan’s central government had assets totaling some Y600 trillion, roughly half of its total liabilities projected for next March, separate MOF data show. And those assets include Y250 trillion in cash, securities and loans. Critics often say Japan’s fiscal health could quickly improve if the government sells some of those assets, a step the MOF is reluctant to take partly on worries that doing so could deprive lawmakers of incentives to improve government finances.

Here is my July NYT column on related matters.

Assorted links

1. Using electronic medical records to correlate genes with illnesses.

2. It’s not always easy to retract a paper.

3. What is the best year for movies ever?

4. My 2011 post on the economics of Black Friday.

5. Are locality-backed minimum wage hikes the new trend?  Keep in mind that unless you have the Sea-Tac airport or some comparably immobile resource in your district, it is harder to make them work if the wage change is local only.  This is a classic instance of expressive voting at the expense of good economic policy.

Net immigration into the UK, recent trends

This picture clarifies a few neglected points:

UKnet-immigration2

Since 2010 there has been a marked decline in non-EU net immigration. As a proportion of non-British immigration to the UK, it has dropped from 73% in June 2010 to 57% in June 2013. In the last year alone, it has fallen from 172,000 to 140,000.

Meanwhile, this year, net migration from the EU has gone up by 72,000 to 106,000.

But, as the chart above shows, the recent increase in net EU migration has come from the older, more established (and traditionally more wealthy) EU member states (the EU15), not the new member states from central and eastern Europe that joined in 2004 (the EU8).

That is from Open Europe Blog.

Which characteristics of economics departments predict productivity of publications?

In some recent work, Bosquet and Combes look at French data (only) and correlate the quality of economics departments with some of their underlying features. Why did they chose France?: “The most frequent way of becoming a full professor is via a national contest that allocates winners to departments in a largely random way.”

So what do we learn?  First, large departments are in per capita terms not so much more productive and not at all doing better in terms of quality.  Proximity to other economics departments also does not matter.

And then:

Heterogeneity among researchers in terms of publication performance has a large, negative explanatory power.

I suspect some of this is causal.  It is good for departments to get rid of their dead wood and good when departments insist that everyone produce.

There is also this:

The second department characteristic that has the highest explanatory power of individual publication performance is the diversity of the department in terms of research fields (within economics).

I wonder there how much the allocation of researchers is truly random.  I find the reverse causality story more plausible, namely that the strongest departments have the resources and heft to cover a larger number of fields, as it is less likely that having people scattered across many fields makes the department as a whole more productive.

In your spare time, you might also ponder this:

Finally, other department characteristics have interesting properties.

  • Contrary to common intuition, more students per academic do not reduce publication performance.

  • Women, older academics, stars in the department and co-authors in foreign institutions all have a positive externality impact on each academic’s individual outcome.

For the pointer I thank Mills Kelly.

Assorted links

What I’ve been reading

1. The Great Mirror of Folly: Finance, Culture, and the Crash of 1720, edited by William N. Goetzmann, Catherine Labio, K. Geert Rouwenhorst, and Timothy G. Young, with a foreword by Robert J. Shiller.  A beautiful full-size book with amazing plates as well as text.  Think of this as a book about a book, focusing on a Dutch publication around the time of the bubble called The Great Mirror of Folly, “a unique and splendid record of the financial crisis and its cultural dimensions.”  Recommended to anyone with an interest in the economic history of bubbles.

2. Catherine Hall, Macaulay and Son: Architects of Imperial Britain.  An engaging and well written book about Thomas Macaulay’s father Zachary and then Thomas himself, focusing on themes of slavery, cosmopolitanism, liberalism, and empire, not to mention the education of children.  A good read on why some strands of liberalism hit such a dead end when confronted with the realities of the British empire.

3. Iain MacDaniel, Adam Ferguson in the Scottish Enlightenment: The Roman Past and Europe’s Future.  A clear and conceptually argued account of Ferguson’s thought, which will convince you he is not the lightweight of the Scottish Enlightenment.  Starting with a comparison with Montesquieu, MacDaniel emphasizes Ferguson as a critic of the idea of progress and a historical pessimist, focusing on issues of war and martial virtue.  This book is also useful for understanding the subtleties of Smith on the ancients vs. the moderns and why he was more sanguine about Britain than about the Romans (no slavery, for one thing).

4. John Eliot Gardiner, Bach: Music in the Castle of Heaven.  One of the world’s greatest Bach conductors is also one of the greatest Bach writers, with an emphasis on the vocal music and also what we know about Bach’s life.  Especially noteworthy is the lengthy case for the John Passion and the discussion of the B Minor Mass.  Definitely worthy of the “best books of the year” list and perhaps in the top tier too.  I’m not going to liberate this volume, I am going to keep it.

The economic gains from a better allocation of talent

Michael Clemens directs our attention to a February 2013 paper by Chang-Tai Hsieh, Erik Hurst, Charles I. Jones, and Peter J. Klenow, here is the abstract:

In 1960, 94 percent of doctors and lawyers were white men. By 2008, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational  distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage. This paper measures the macroeconomic consequences of the remarkable convergence in the occupational distribution between 1960 and 2008 through the prism of a Roy model. We find that 15 to 20 percent of growth in aggregate output per worker over this period may be explained by the improved allocation of talent.
The pdf is hereAddendum: I am informed Alex mention this piece in an earlier post.

The Betrayers Banquet

Here is something for you to try out tomorrow with the family, well some families. The Betrayers’ Banquet is a dinner party/event that ingeniously combines the iterated prisoner’s dilemma with good food, bad food and entertainment. Here is their description:

The event works as follows:

A banqueting table is set with 48 chairs, 24 on each side, at which players are seated at random. For a period of two hours, the food is served in small portions every fifteen minutes, and varies in quality; at the top end of the table, it is exquisite – food you could expect at a fancy restaurant. At the bottom end, the food is charitably described as unpalatable. In between, it is a spectrum between these two extremes.

At regular intervals, pairs of opposing diners are invited to play a round of the prisoner’s dilemma with each other; They are each provided with a small wooden coin with symbols on each side representing cooperation and betrayal, which they place on the table concealed under their palms, and then simultaneously reveal:

  •  If they both cooperate, then they are both moved up five seats towards the good food.
  •  If they both betray, they are both moved five seats down towards the worse food.
  •  If one betrays and one cooperates, the betrayer moves up ten seats, and other down ten seats.

The event is presented as an initiation ritual of a freemason–esque secret society; service is run by servers in hooded robes and the game is arbitrated by a dour, unsympathetic master of ceremony, who punctuate the courses with grave speeches describing the discovery of the game in the court of Charlemagne in the eighth century.

From the participant’s point of view, aside from getting to play a game and try a variety of different foods, the main attraction is that they get to move around the table and talk to a variety of people throughout dinner. The iterated prisoner’s dilemma is famous for creating very complex social dynamics, which keeps conversation lively and generates a high eagerness to continue playing.