Month: February 2014

Is Islamic political control bad for women’s empowerment?

Maybe not, once we control properly for endogeneity:

Islamic Rule and the Empowerment of the Poor and Pious

Erik Meyersson
Econometrica, January 2014, Pages 229–269

Does Islamic political control affect women’s empowerment? Several countries have recently experienced Islamic parties coming to power through democratic elections. Due to strong support among religious conservatives, constituencies with Islamic rule often tend to exhibit poor women’s rights. Whether this reflects a causal relationship or a spurious one has so far gone unexplored. I provide the first piece of evidence using a new and unique data set of Turkish municipalities. In 1994, an Islamic party won multiple municipal mayor seats across the country. Using a regression discontinuity (RD) design, I compare municipalities where this Islamic party barely won or lost elections. Despite negative raw correlations, the RD results reveal that, over a period of six years, Islamic rule increased female secular high school education. Corresponding effects for men are systematically smaller and less precise. In the longer run, the effect on female education remained persistent up to 17 years after, and also reduced adolescent marriages. An analysis of long-run political effects of Islamic rule shows increased female political participation and an overall decrease in Islamic political preferences. The results are consistent with an explanation that emphasizes the Islamic party’s effectiveness in overcoming barriers to female entry for the poor and pious.

There are ungated versions here.  That is via Kevin Lewis, who surveys other interesting papers on religion here.

What would Fedcoin look like?

JW,  a loyal MR reader, writes to me:

It’s 2018, Janet Yellen has been renominated to be Fed Chair by President Walker having served a successful first term of solid growth and low inflation.  However, to achieve such growth Yellen has had to maintain very low interest rates.  Then, disaster strikes.  France leaves the Euro unexpectedly and causes a world wide credit crunch.  It’s 2008 all over again.  President Walker is unwilling to do any stimulus.  Yellen decides that a regime change is necessary at the Fed.

Taking to heart MMT, Keynes, Bernanke, Yellen merges Keynes’ idea of burying money in jars with Helicopter Ben’s idea of dropping money from the sky.  The Fed announces that the United States is going to create its own cryptocurrency, which can be exchanged for US dollars at any US regulated depository institution.  No or minimal fees can be charged by the banks for this exchange.  They will be created just like Bitcoin, decentralized and according to a mining algorithm.  American citizens can mine them, create businesses to do so, and put people to work.  Unlike Bitcoin, the supply of DollarCoin will not be finite, capped at 21 million.  Instead, DollarCoin will be targeted to grow at an inflation rate consistent with an NGDPLT of 20 trillion US dollars.  Liquidity is restored.  No QE is necessary.  CNBC starts cheerfully referring to DollarCoin as YellenCoin.

Meanwhile, Bitcoin plummets in value.  With the US Government now accepting a cryptocurrency, its advantages vanish.  People’s belief in its value goes away, and looking down, it crashes.  Remittances are now sent to relatives in Africa and Latin America by YellenCoin, just as people once did briefly in Bitcoin.

It is interesting to think about why this is so implausible.  There are a few reasons:

1. YellenCoin would be a means of payment but not the medium of account.  This would move the economy into a currency substitution model, a’la Girton and Roper, but would not have the effects of a straightforward monetary expansion.

2. Cryptocurrencies are much more likely to be used for some kinds of transactions than others.  So this act of “monetary policy” would be very much non-neutral.

3. Central banks are not supposed to be seen as taking major risks or overturning the established order of things.  They are highly risk-averse when it comes to their public reputations, and their very much prefer sins of omission to sins of commission.  If the Fed established Fedcoin and something went wrong with the idea, they would be subject to especially heavy blame.  In the meantime, few people (are there exceptions?) are blaming them for not establishing a cryptocurrency.

Childhood obesity is falling

Federal health authorities on Tuesday reported a stunning 43 percent drop in the obesity rate among 2- to 5-year-old children over the past decade, the first broad decline in an epidemic that often leads to lifelong struggles with weight and higher risks for cancer, heart disease and stroke.

The drop emerged from a major federal health survey that experts say is the gold standard for evidence on what Americans weigh. The trend came as a welcome surprise to researchers. New evidence has shown that obesity takes hold young: Children who are overweight or obese between age 3 and 5 are five times as likely to be overweight or obese as adults.

There is more here, via Charles C. Mann.

Why many government jobs are a bad idea for many academics

When the Obama White House requested that I serve on the National Council on the Humanities, I agreed to have my name put forward. I went through the lengthy FBI check, including repeated probing of friends about my nonexistent drug use.

But in the end the White House decided not to move my nomination forward. There were two reasons. First, taxes. In 2009 and 2010, the years of my divorce, I filed my taxes late — four weeks and 10 days, respectively. Second, I was not willing to commit to never criticizing the administration, nor to restricting my publishing agenda to topics that were unlikely to be controversial. There is just no point trying to be a public intellectual if you can’t speak your mind. This requirement was conveyed and discussed through phone calls; I have no written record to prove it. But that was how it went.

Why did the White House want such restrictions? Lawyers told me that the administration didn’t want to have to deal with even one news cycle being overtaken by media frenzy about something some low-level official had said. The administration was trying to survive in our 21st-century media environment.

That is from Danielle Allen.

Assorted links

1. Todd Kashdan reconsiders some of his own work.

2. Are small companies the future of medical innovation?

3. “The publishers Springer and IEEE are removing more than 120 papers from their subscription services after a French researcher discovered that the works were computer-generated nonsense.

4. Axolotl found.

5. New report on financial crisis in Ukraine.

6. Roger Farmer’s quiz for Keynesians.

Markets in Everything: Protest Rights

At the Olympics if you want to protest a decision, you must have cash:

The reason that Mathieu — and many other coaches across most Olympic sports — make certain they always have a specific amount of cash on hand is that if they want to protest an official decision during competition, they need more than just a strong opinion and an angry yell.

They also need money.

…Depending on the sport, the fee varies: for luge, it is 50 euros (about $67). Cross-country skiing, like snowboard and Alpine skiing, demands 100 Swiss francs (about $112) but stipulates that all protests must be submitted in English. Bobsled and skeleton are among the most expensive: they require a deposit of 100 euros before any protest will even be considered. If multiple countries want to make a similar protest, sharing the tab is allowed.

Hat tip to the excellent PriorProbability who also points out that if your protest is successful you get your money back so these payments are also protest bets.

Swear words on Twitter

In daily life it is thought that between 0.5% and 0.7% of the words we use are swearwords, but the proportion on the site is roughly twice this, at 1.15%. According to this study, about one in every 13 tweets contains a swearword of some kind.

Intriguingly, swearing also seems to be an early-week thing. Tweets become more and more likely to contain a swearword as the day progresses, perhaps reflecting the accumulation of things we have to swear about, and peak profanity is reached between midnight and 1.30am, suggesting that people who are awake at that time are, let’s say, the least inhibited. Yet Friday, Saturday and Sunday are consistently the least sweary days of the week.

Please note there are specific swear words (with data) at this link.  And there are lulls during lunch time.

For the pointer I thank Michelle Dawson.

When was money less important than we thought?

ModeledBehavior tweeted:

Name the period or event in economic history where we looked backed and said “hmm, money was less important than we thought at the time

I would nominate much of the 19th century.  To be sure, distribution in those times really did matter, more so than today because overall levels of income and wealth were much lower.  And monetary policy redistributes wealth.  But the overall story of the century is one of European peace (mostly but not entirely), economic growth, and the unfolding of various industrial revolutions.  Yet monetary policy was very much in the public eye, including in the United States.  Monetary economics develops much more rapidly than does, say, law and economics or the economics of how to boost innovation.  By the time you reach 1820, monetary economics in Great Britain is quite sophisticated, even though they lacked good data.

In the 1920s and 30s, monetary economics mattered an enormous amount — a world changing, World War-creating amount, I would say.  That alone makes it worthy of very very serious study.  But most important economic stories are about the long run, and if anything the human tendency is to fixate on the short run too much.

Monetary policy also did not matter so much for the East Asian economic revolutions of the postwar era.  No one looks back and worries how often South Korea had double digit inflation, sometimes over twenty percent.  And here is a recent inflation index for some emerging economies.

A new instrument suggests that foreign aid boosts growth

There is a new paper by Sebastian Galiani, Stephen Knack, Lixin Colin Xu, and Ben Zou, and the results are intriguing:

The literature on aid and growth has not found a convincing instrumental variable to identify the causal effects of aid. In this paper we exploit an instrumental variable based on the fact that since 1987, a major criterion for IDA (International Development Association) eligibility has been whether or not a country is below a certain threshold of per capita income. This threshold is predetermined and arbitrary, so it is plausibly exogenous to recipient countries in a model that conditions on initial income levels, country and period fixed effects. We find evidence that other donors tend to reinforce rather than compensate for reductions in IDA aid following threshold crossings. Overall, the aid to GNI ratio drops by about 60% on average after countries cross the threshold. Focusing on the 35 countries that have crossed the IDA income threshold from below between 1987 and 2010, we find a positive, statistically significant, and economically sizable effect of aid on growth. A one percentage point increase in the aid to GNI ratio from the sample mean raises annual real per capita GDP growth by approximately 0.6 percentage points. We also demonstrate that an important reason for underestimating aid effects is the attenuation bias associated with measurement errors in aid that the literature has ignored so far. Finally, there is some evidence that our results may apply to the other low-income countries that are still below the threshold.

Have stuff delivered to your car

Via Mark Perry:

In a ground-breaking technology move for the automotive industry, Volvo Cars demonstrates the world’s first delivery of food to the car – a new form of ‘roam delivery’ services. The service will allow consumers to have their shopping delivered straight to their car, no matter where they are. Volvo’s new digital keys technology means that car owners will be able to choose their car as a delivery option when ordering goods online. Via a smartphone or a tablet, the owner will be informed when a delivery company wants to drop off or pick up something from the car.

Having accepted the delivery, he or she then hands out a digital key and can track when the car is opened and then locked again. Once the pick-up or drop-off is completed, the digital key ceases to exist.

For the pointer I thank Samir Varma.

Assorted links

1. What UPS drivers can tell us about the automated future of work.  And using robots to enforce border control.

2. “Try to move from Pollock to Rothko, ok?

3. Scott Sumner on exactly how the Fed could have done better in 2008.  Overall the transcripts strengthen Scott’s claim that the Fed could and should have done more early on.  And here is Scott on the Keynesian information bubble.

4. The marketing ingenuity of one Girl Scout.

5. Robert H. Frank on diversity and creativity.

6. Bryan Caplan on Peter Thiel’s minimum wage argument.

Should we worry that Netflix is buying transit rights from Comcast?

I say no (for background read here, and Dan Rayburn has very useful coverage, dispelling a variety of myths).  To be sure, one may believe there are monopoly problems at the retail level in the cable sector.  We could alleviate those with local loop unbundling and/or deregulation, as I discussed yesterday.  But within that setting, Netflix paying Comcast won’t make that monopoly worse.

In support of this conclusion, I would cite two literatures.  The first is Ronald Coase’s analysis of payola.  If a gatekeeper can extract payments from input suppliers, the end result of that process need not be bad for consumer welfare and very often is positively good for consumers.  In a nutshell, the gatekeeper won’t want to exclude the programs which consumers really want.  Those programs contribute to the profits of the gatekeeper.

The second literature is that on double marginalization.  This literature considers settings where you have a retailer with market power and an input supplier with market power, and the input supplier needs the retailer for access to consumers.  In those cases either integration or Coasean bargaining is usually in the interests of consumers, as it minimizes the double mark-up and thus lowers the costs of the market power.  To put this more concretely, the two parties will deal so that the marginal cost of the input to the monopolist is lowered, the monopolist expands output (and profit), and those gains are shared between the two institutions with market power.

When you put those two theories together, Netflix buying transit rights from Comcast is likely fine.  Don’t translate your opposition to cable monopoly into opposition to this agreement.  Seton Motley asks a good question:

Should we worry Amazon (Prime) buys transit rights from UPS & USPS?

So, if someone criticizes this new deal, but cannot put the argument in Coasean language, they probably have not thought it through carefully enough.

Moving beyond that, can we think of reasons why the basic Coasean results may not hold?

1. Expected joint profit doesn’t map perfectly well into consumer surplus.

2. The status quo ex ante was based on some amount of queuing of Netflix access, rather than a dollar-based marginal cost for selling the input, as in basic Coasean models.

3. None of these transactions are purely Coasean when regulatory threats beckon and thus a wider range of outcomes is possible.

4. Comcast has read Doug Bernheim and can now construct a scheme to preempt Netflix from this market altogether,

I’ve pondered those long and hard, but the standard Coasean results still seem reasonably likely.  And if they are not, it would be for reasons so convoluted it is unlikely to represent anyone’s actual worry.  From that list only #4 seems to have any bite, but I don’t see that #4 applies empirically.  Netflix has risen greatly in value over the last year, this new development is hardly a surprise, and the fees to Comcast, while secret, have been described as “de minimis.”  There is quite a good chance that Netflix benefits from this deal and this is more of a “we are here for good” statement than Netflix falling off a cliff.

You also could try this argument:

5. By agreeing to pay a price for transit rights, Netflix imposes a negative pecuniary externality on smaller streaming services and content providers, which in the longer run will mean a negative non-pecuniary externality for variety-seeking consumers.

Maybe, maybe so.  I do take that argument seriously.  But it’s also unconfirmed, Coase on payola implies it won’t be so bad, and furthermore the Netflix transaction, in stand-alone terms, still would seem to be welfare-improving.  Besides, what happens if Netflix expands by 5x or 10x, should the company never have to pay anything?  Is it so terrible if tomorrow’s necessary equilibrium shows up today?

Addendum: Timothy Lee offers a different perspective.  Perhaps I am failing to understand his argument, but I don’t see why having a cluster of mid-level intermediaries should make the market as a whole more competitive.

Or you may be tempted to write a screed about the dangers of moving away from net neutrality, and associate this development with that movement.  I say you would do better to stick to the specific economics of this particular issue and explain, in terms related to the Coasean model, exactly what will go wrong.

Further addendum: Joshua Gans offers comment.

What does an economist at Facebook do?

Michael Bailey, who is an economist at Facebook, reports on Quora:

I currently (Feb 2014) manage the economics research group on the Core Data Science team. We are a small group of engineer researchers (all PhDs) who study economics, business, and operations problems. As Eric Mayefsky mentioned, there are various folks with formal economics training spread across the company, usually in quantitative or product management roles.

The economics research group focuses on four research areas:

Core Economics – modeling supply and demand, operations research, pricing, forecasting, macroeconomics, econometrics, structural modeling.

Market Design – ad auctions, algorithmic game theory, mechanism design, simulation modeling, crowdsourcing.

Ads and Monetization – ads product and frontend research, advertiser experimentation, social advertising, new products and data, advertising effectiveness, marketing.

Behavioral Economics – user and advertiser behavior, economic networks, incentives, externalities, and decision making under risk and uncertainty.

I think a more interesting question is “what *could* an economist at Facebook do?” because there is a LOT of opportunity. There are incredibly important problems that only people who think carefully about causal analysis and model selection could tackle.  Facebook’s engineer to economist ratio is enormous. Software engineers are great at typical machine learning problems (given a set of parameters and data, make a prediction), but notoriously bad at answering questions out of sample or for which there’s no data. Economists spend a lot of time with observational data since we often don’t have the luxury of running experiments and we’ve honed our tools and techniques for that environment (instrumental variables for example). The most important strategic and business questions often rely on counterfactuals which require some sort of model (structural or otherwise) and that is where the economists step in.

tl;dr economists at Facebook compute counterfactuals.

Assorted links

1. Do some of Baltimore’s homeless people feel safer in the woods?

2. My dialogue with Megan McArdle is rescheduled for this Wednesday at AEI.

3. In which way should we recognize Japanese kamikaze pilots?  And the new Murakami novel will be in English this August.

4.  “And there are no good guys in the Argentine story.”

5. The East-West divide in Ukraine politics may be overstated.  And why has political stability been lower than predicted (until very recent times perhaps)?

6. Greg Clark on how social mobility is slower than we think.