Month: June 2014

Assorted links

Lee Ohanian on the real wage premium for public sector workers

For the case of the public sector, the probability of involuntary separation is just 1.3 percent, which is one-third as high as the probability in the private sector case. I then calculate the difference in compensation between the public sector (low unemployment case) and the private sector, such that a worker would be indifferent between working in either sector. I find that workers would be willing to work for about 10 percent less compensation in the public sector, given the additional benefit of much higher job security. This estimate is conservative in terms of considering today’s labor market, as average unemployment duration today is much higher than its historical average.

This analysis suggests the possibility that public sector compensation may be significantly higher than competitive levels. Moreover, the fact that public sector workers are only about one-third as likely to voluntarily leave their job as private sector workers is consistent with the conclusion that average public sector compensation rates are in excess of competitive levels, indicating that there are relatively few external employment opportunities that dominate public sector workers’ jobs. The fact that average public compensation is higher than average private sector compensation suggests that public sector worker compensation may be well above competitive levels and indicates that public sector wages could be reduced without significantly impacting public sector employment. For example, I’ve calculated the impact of a 5 percent wage reduction for all public employees in California, a state with one of the most severe fiscal crises in the country. A 5 percent wage cut would reduce state spending by $1.33 billion, which would reduce California’s 2011 state budget deficit by nearly 15 percent.

There is more here, interesting throughout.  There is further relevant information here.  Here is the news on today’s Supreme Court decision on public sector unions: “Supreme Court drastically curtails public sector unions.”

The Great Portuguese factor price equalization reset

Portugal may have 15 percent unemployment, but that does not mean that Reiter Affiliated Companies, an American fruit producer, can find local people to pick berries on its 76-hectare farm here.

Last year, the company, also known as RAC, began a nationwide recruitment campaign and hired 40 Portuguese. Half quit after the first day. By the end of the week, not a single one was left.

“They wanted a job, but this wasn’t what they were looking for, because it was basically too hard for too little money,” said Arnulfo Murillo, the farm’s production manager. “Farming here isn’t harder than in America, but the big difference is that being unemployed in the U.S. is a lot harder and in no way an attractive alternative.”

Instead, the farm has imported a third of its labor force all the way from Thailand — 160 of 450 employees — a more expensive alternative, but one that has filled its ranks.

Please note people, this is not (mainly) a post about immigration, which is only one possible channel for factor price equalization.  The full story is here.

*The Social Order of the Underworld*

The author of this new and excellent book is David Skarbek and the subtitle is How Prison Gangs Govern the American Penal System.  It carries rave blurbs from Thomas Schelling and also Philip Keefer.  My favorite section was the discussion of how the rate of gang formation in prisons depends on how the prisons are governed (start at p.65).  For instance when prison officials cannot reliably protect prison inhabitants, gang membership is especially likely.  Gangs rarely operate in UK prisons and when they are do they are usually far less powerful.  Some observers believe that indeterminate sentences increase inmate frustration and stimulate gang formation within prisons.  Female prisoners in many states, such as California, also do not have gangs in the traditional sense, although they may form into “small families.”  Gangs are also more likely in large prisons with many inmates than in small prisons.

A very interesting book, which should be read by anyone with an interest in this topic.

Blackwater in Iraq, and the loyalties of the American Embassy

Everyone else is covering this, still it seems worthy of mention in this space too:

Just weeks before Blackwater guards fatally shot 17 civilians at Baghdad’s Nisour Square in 2007, the State Department began investigating the security contractor’s operations in Iraq. But the inquiry was abandoned after Blackwater’s top manager there issued a threat: “that he could kill” the government’s chief investigator and “no one could or would do anything about it as we were in Iraq,” according to department reports.

American Embassy officials in Baghdad sided with Blackwater rather than the State Department investigators as a dispute over the probe escalated in August 2007, the previously undisclosed documents show.

The full story is here, and also it seems the U.S. government is trying to put that reporter in jail for his work.  And here is my 2007 column on Blackwater: “Private contractors may not respect virtue for its own sake, but like most businesses, they will respect the wishes of their most powerful customers, in this case governments. What is wrong with Blackwater may, most of all, mirror what is wrong with Uncle Sam.”

Addendum: The documents by the way are here.  Check out p.6, it reads to me a bit less threatening, and more commentary on the chaos of Iraq, than some accounts are making it out to be.

Should we care that Facebook is manipulating us?

Facebook manipulated the emotions of hundreds of thousands of its users, and found that they would pass on happy or sad emotions, it has said. The experiment, for which researchers did not gain specific consent, has provoked criticism from users with privacy and ethical concerns.

For one week in 2012, Facebook skewed nearly 700,000 users’ news feeds to either be happier or sadder than normal. The experiment found that after the experiment was over users’ tended to post positive or negative comments according to the skew that was given to their newsfeed.

The research has provoked distress because of the manipulation involved.

Clearly plenty of ads try to manipulative us with positive emotions, and without telling us.  There are also plenty of sad songs, or for that matter sad movies and sad advertisements, again running an agenda for their own manipulative purposes.  Is the problem with Facebook its market power?  Or is the the sheer and unavoidable transparency of the notion that Facebook is inducing us to pass along similar emotions to our network of contacts, thus making us manipulators too, and in a way which is hard to us to avoid thinking about?  What would Robin Hanson say?

Note by the way that “The effect the study documents is very small, as little as one-tenth of a percent of an observed change.”  How much that eventually dwindles, explodes, or dampens out in the longer run I would say is still not known to us.  My intuition however is that we see a lot of longer-run dampening and also intertemporal substitution of emotions, meaning this is pretty close to a non-event.

The initial link is here.  The underlying study is here.  Other readings on the topic are here.

I hope you’re not too sad about this post [smiley face]!

A few thoughts on Transformers 4 (minor spoilers)

I like to experience aesthetic extremes, so it is appropriate I ended up sitting through this one.  It is perhaps the most beautifully choreographed movie I have seen — ever — with one perfectly arranged ninety second sequence after another, in seamless fashion yet summed into something quite incoherent and meaningless and indeed even obnoxious at times.  But did L’Avventura make much sense either?  (And like L’Avventura, Transformers 4 is way too long.)  Michael Nielsen was correct in his advice to view this new release as an art film.

The movie poses the question of how the world would look if technologies of defense were no longer clearly superior to technologies of offense.  The public choice answer seems to be that power shifts away from the Presidency, to the intelligence agencies, and to intellectual property holders, at least as first order effects.  Output is reallocated toward rural areas.

The political subtext of the movie is indicated rather clearly by the eventual military alliance of the red, white, and blue-wearing Optimus Prime with the Chinese dragons, consummated in China of course.  Unlike with the recent Godzilla movie, Japan is not the main intended Asian audience.  The Hong Kong scenes are spectacular, but the film reaffirms the importance of “central government” (i.e., Beijing) control over Hong Kong in rather heavy-handed fashion.  (This is done so transparently you could call it an anti-Straussian move — “hey, let’s make sure we get those shooting rights in Hong Kong again!”)  You also get to see a Chinese guy beat up on the CIA, gratuitously, using some kind of traditional Chinese boxing technique.

I am still fond of this this review and this one too of an earlier installment.  If you are tempted, you probably should see this movie, but I am not sure you should feel tempted to feel tempted.

The FT summer book reading list

War: What is it Good for? The Role of Conflict in Civilisation, from Primates to Robots, by Ian Morris, Profile, RRP£25/ Farrar, Straus and Giroux, RRP$30

In this remarkable book, historian Morris argues not only that war is a source of technological advance but that it brings peace. Through war, more powerful and effective states emerge and these in turn do not merely offer the blessings of peace, but impose it. The thesis is disturbingly persuasive. But, in a nuclear age, the great powers will have to try something else.

The full list is here, possibly gated.  They also recommend the Adam Tooze book on the post WWI era, which I now have finished and really like and also find to be quite Sumnerian.  Adam Minter’s Junkyard Planet is an excellent read as well.

Assorted links

The polity that is China dissident “markets” in everything

Activists tell of ‘being travelled’ – sent on lavish trips, chaperoned by police – to keep them out of the government’s way.

As top Communist leaders gathered in Beijing the veteran Chinese political activist He Depu was obliged to leave town – on an all-expenses-paid holiday to the tropical island of Hainan, complete with police escorts.

It is an unusual method of muzzling dissent, but He is one of dozens of campaigners who rights groups say have been forced to take vacations – sometimes featuring luxurious hotels beside sun-drenched beaches, trips to tourist sites and lavish dinners – courtesy of the authorities.

It happens so often that dissidents have coined a phrase for it: “being travelled”.

He, 57, had not been charged with any crime but officers took him 1,400 miles (2,300km) to Hainan for 10 days to ensure he was not in the capital for this year’s annual meeting of China’s legislature, he said.

Two policemen accompanied him, his wife and another dissident for dips in the ocean and visits to a large Buddha statue, he said.

“We had a pretty good time because a decent amount of money was spent on the trip – the local government paid for everything.”

Altogether eight activists have told Agence France-Presse of being forced on holiday in recent years.

The pointer is from Mark Thorson.

Just a bit more D.C. freedom has arrived on our shores…

Getting paid to tell tourists about D.C. history will no longer involve passing a 100-question test or paying a fee. Anyone can just show up and talk without fear of arrest.

On Friday, the U.S. Court of Appeals for the D.C. Circuit threw out a 108-year-old city code requiring every “sightseeing tour guide” in the city to be licensed after correctly answering 70 out of 100 multiple-choice questions.

The decision is a victory for Tonia Edwards and Bill Main, the married couple who together operate the (illegal, until Friday) Segway tour company Segs in the City and have battled the regulations since 2010.

The $200 cost of the licensing process was too high for many of their guides, they said, often recent college graduates who work in the business for only a few months.

There is more here.  “Small steps toward a much better world,” as they say…

Why Brink Lindsey opposes a guaranteed annual income

…my reading of the available evidence convinces me that a social policy that channels benefits through work and thereby encourages paid employment has important advantages over a UBI [universal basic income] in helping the disadvantaged to live full, happy, productive, and rewarding lives.

What evidence? Let’s start with the well-established finding that unemployment has major negative effects on well-being, including both mental and physical health. And the effects are remarkably persistent. A study using German panel data examined changes in reported life satisfaction after marriage, divorce, birth of a child, death of a spouse, layoff, and unemployment. All had predictable effects in the short term, but for five of the six the effect generally wore off with time: the joy of having a new baby subsided, while the pain of a loved one’s death gradually faded. The exception was unemployment: even after five years, the researchers found little evidence of adaptation.

Evidence even more directly on point comes from the experience of welfare reform – specifically, the imposition of work requirements on recipients of public assistance. Interestingly, studies of the economic consequences of reform showed little or no change in recipients’ material well-being. But a pair of studies found a positive impact on single mothers’ happiness as a result of moving off welfare and finding work.

There is more here.  And Ross Douthat offers related remarks on whether it really is possible to encourage work — how well have previous welfare reforms succeeded in this end?

Assorted links

1. Why does lightning discriminate against men?

2. Comparing the four health care systems of the UK.  And English speed dating with a bag over your head.  And do British women prefer Danish sperm?

3. This seems to be a brilliant review of the new Transformers movie.  It almost makes me want to see the movie to appreciate the review more.  Almost.  And here is another interesting review.

4. Neither Harriet nor Duncan.  The culture that is Iceland.

5. Some people now find it hard to oppose the Ex-Im Bank.  And here is Senator Obama on the Ex-Im Bank.  Is it that hard to accept that some small part of government simply should be sent to oblivion?  I guess so.  As Arnold Kling points out, this is the chance we have.  This AEI piece calls for expanding the Bank.

6. Do criminals have more children?  Data from Sweden seem to say yes.