Month: November 2014

All of a sudden, Asian-Americans are voting more Republican

by  Tyler Cowen in

Philip Bump reports:

Note the big swing in the Asian voting bloc, too. In 2012, strong support for the president among Asian-American voters was a surprise. Asian voters preferred the president by 47 points. In 2014, the (low turnout) group split about evenly. It was a 46-point swing.

The full account is here, via Megan McArdle.

Building the Voluntary City: Lessons from Gurgaon and Jamshedpur

by  Alex Tabarrok in

The world’s urban population is growing very rapidly, especially in the developing world. The McKinsey Global Institute estimates that in India alone such an expansion will require the building of, in essence, a new Chicago every year for the next several decades. The problem with these numbers is not the expense. The problem is political and organizational. Many currently less-developed countries, including India, remain high in corruption and low in efficiency, especially in the administration of their towns and cities. It would be wonderful if foresighted and public-spirited government planners would provide India and other developing nations with wise urban planning but it seems unwise to rely on what has historically been rare for this massive transformation. Is there an alternative?

In Lessons from Gurgaon, India’s private city (working paper) found in a new book Cities and Private Planning  Shruti Rajagopolan and I explore this question. Gurgaon, which I have written about before, shows both the successes and failures of private development. On the surface, Gurgaon is a gleaming, modern city built nearly overnight on wasteland. Gurgaon was built, however, without benefit of planning and its failures–most notably poor and inefficient provision of  water, sewage, and electricity–are a warning. The failures all stem from high transaction costs, Gurgaon’s private developers have simply not managed to Coasean bargain and internalize externalities. It’s clear from Gurgaon that cities need advance planning–a reservation of rights of way for water, sewage and electricity at the very minimum–but does the planning have to be provided by government which is often incapable of such foresight?

The lessons of Jamshedpur, India, suggest another approach. Jamshedpur is a private township, planned from the beginning by visionary businessman Jamshetji Nusserwanji Tata, who, after travelling to the United States to see Pittsburgh, returned to India to found Tata Iron and Steel. Jamshedpur has been run by a single, integrated entity for over 100 years and as it is integrated it has internalized externalities. As a result, Jamshedpur, India’s other private city, has some of the best urban infrastructure in all of India.

Gurgaon shows the benefits of competition. Jamshedpur the benefits of integration. Can we get the best of both worlds?

If the rights to develop Gurgaon had originally been sold in very large packages, some five to seven proprietary but competitive cities could have been created in that region. Within this system the role of the state is to make it possible to auction large parcels of land. Once such parcels and associated rights to develop the land are created, private developers will provision public goods and services up to the edge of their property.

As proprietary communities, the competitive cities would have every incentive to invest in and especially to plan for appropriate infrastructure. Moreover, with five to seven communities in the same region, competitive pressures would keep rents low and at efficient levels for maximizing net benefits (Buchanan and Goetz 1972, Sonstelie and Portney 1978). Within the larger city, subdivisions on the order of neighbourhoods and business districts could be sublet and run by competitive firms with the overarching city establishing rules to internalize externalities. Competitive private governments would also generate experimentation and innovation in new rules that would then spread through intercity learning (Romer 2010).

Thus, Rajagopolan and I conclude:

In the next five decades many entirely new cities with populations in the millions will be built in places where today there is little or no population or infrastructure. Most of the urban development will occur in the developing world where government resources are stretched thin and planning is in short supply. Gurgaon illustrates the scope and the limits of private sector provisioning when the state machinery fails to provide essential public goods. The lesson of Gurgaon, Walt Disney World, and Jamshedpur is that a system of proprietary, competitive cities can combine the initiative and drive of private development with the planning and foresight characteristic of the best urban planning. A proprietary city will build infrastructure to attract residents and revenues. A handful of proprietary cities built within a single region will create a competitive system of proprietary cities that build, compete, innovate, and experiment.

Claims about theoretical physics I wish I understood

by  Tyler Cowen in

Because they sound mighty interesting:

Bousso is not interested in what goes on outside the causal diamond, where infinitely variable, endlessly recursive events are unknowable, in the same way that information about what goes on outside a black hole cannot be accessed by the poor soul trapped inside. If one accepts that the finite diamond, “being all anyone can ever measure, is also all there is,” Bousso said, “then there is indeed no longer a measure problem.”

In 2006, Bousso realized that his causal-diamond measure lent itself to an evenhanded way of predicting the expected value of the cosmological constant. Causal diamonds with smaller values of Λ would produce more entropy — a quantity related to disorder, or degradation of energy — and Bousso postulated that entropy could serve as a proxy for complexity and thus for the presence of observers. Unlike other ways of counting observers, entropy can be calculated using trusted thermodynamic equations. With this approach, Bousso said, “comparing universes is no more exotic than comparing pools of water to roomfuls of air.”

The article, by Natalie Wolchover and Peter Byrne, is interesting throughout.  I do sort of understand this sentence:

But as attempts to paint our universe as an inevitable, self-contained structure falter, the multiverse camp is growing.

The pointer is from the esteemed David Levey.

Gordon Tullock has passed away at age 92

by  Tyler Cowen in

It is hard to know what to say — Gordon was a colleague of ours for many years and we all were very fond of him.  He was one of the most creative thinkers of his time.  His contributions include not just the seminal chapters of Calculus of Consent, but a wide range of ideas ranging from law and economics to monetary theory to the economics of insect societies.  Many of Gordon’s best ideas remain somewhat unmined, such as his analyses of jury trials, or his question why there is so little money in politics, relative to what is at stake.  Almost everything Gordon wrote was worth reading and he was also a wonderful critic of the work of others.  He knew a remarkable amount about history, including Chinese history, and was one of the quickest people I ever have met.  Just about everyone has his or her favorite Gordon Tullock story.  Gordon, by the way, took only one class in economics in his life, from Henry Simons, he was otherwise entirely self-taught.

Older articles are growing in impact

by  Tyler Cowen in

That is the conclusion from Alex Verstak et.al., here are some sentences to ponder:

…the impact of older articles has grown substantially over 1990-2013. In 2013, 36% of citations were to articles that are at least 10 years old; this fraction has grown 28% since 1990. The fraction of older citations increased over 1990-2013 for 7 out of 9 broad areas and 231 out of 261 subject categories. Second, the increase over the second half (2002-2013) was double the increase in the first half (1990-2001).

The full abstract and article is here.  For the pointer I thank Dan Getz.

Intimate Partner Violence in the Great Recession

by  Tyler Cowen in

Daniel Schneider, Kristen Harknett, and Sara McLanahan have been working on this topic.  The result is not surprising, but nonetheless worthy of note:

In the United States, the Great Recession has been marked by severe negative shocks to market conditions. In this study, we combine longitudinal data from the Fragile Families and Child Wellbeing Study with Bureau of Labor Statistics data on local area unemployment rates to examine the relationship between adverse labor market conditions and intimate partner violence between 1999 and 2010. We find that rapidly worsening labor market conditions are associated with the prevalence of violent controlling behavior in marriage. These effects are most pronounced among whites and those with at least some secondary education. [emphasis added]  Worsening economic conditions significantly increase the risk that white mothers and more educated mothers will be in violent/controlling marriages rather than high quality marital unions.

The working paper is here (pdf).

A Rare (Earth) Case of Wisdom

by  Alex Tabarrok in

Four years ago we were being warned that China’s monopoly on rare earths was a threat to the United States. Since rare earths are key resources for both national defense and green technology, the crisis united right and left in fear and anger.

Paul Krugman titled his column Rare and Foolish and he was hardly alone when he wrote:

You really have to wonder why nobody raised an alarm while this was happening, if only on national security grounds. But policy makers simply stood by as the U.S. rare earth industry shut down….The result was a monopoly position exceeding the wildest dreams of Middle Eastern oil-fueled tyrants.

…, the affair highlights the fecklessness of U.S. policy makers, who did nothing while an unreliable regime acquired a stranglehold on key materials.

Yet you probably haven’t heard much about this crisis recently. Why not? Ans: The crisis was exaggerated and what wasn’t exaggerated the market alleviated. Eugene Gholz of CFR has a balanced examination of what happened. I summarize:

  • The Chinese government might or might not have wanted to take advantage of their temporary monopoly power (it’s still unclear what the fishing incident was all about) but Chinese producers did a lot to evade export bans both legally and illegally.
  • Firms that had been using rare earths when they were cheap decided they didn’t really need them when they were expensive.
  • New suppliers came on line as prices rose.
  • Innovations created substitutes and ways to get more from using less.

Even the government did some good by funding competitions to support basic and applied research in substitute products and processes. Gholz draws a simple lesson:

…policymakers should not succumb to pressure to act too quickly or too expansively in the face of raw materials threats.

I agree but would add that at the time it was almost surreal how quickly nominal free traders and internationalists merged into war hawks. We did surprisingly well to not overreact politically and instead let market forces solve the problem. A disruption in our trade partnership with China would have been far more dangerous to our national security than a dispute over rare earths. I’d say that’s a rare earth case of wisdom.

Addendum: Bonus points to Tim Worstall, economist blogger and rare earth dealer, who in 2010 at the height of the crisis pointed out that rare earths were neither rare nor earths and China’s monopoly had been won only by low prices that accrued to our benefit. “If Beijing wants to raise its prices and start using supplies as geopolitical bargaining chips,” he wrote, “so what? The rest of the world will simply roll up its sleeves and ramp up production, and the monopoly will be broken.” Nailed it.

When do economists laugh and what does it mean?

by  Tyler Cowen in

Here is the new paper by Michael Reay in Social Forces:

Analyses of the multiple cognitive structures and social effects of humor seldom look at why these tend to center on particular topics. The puzzle of how humor can be highly varied yet somehow constrained by its source “material” is explored using a corpus of over 600 incidents, not of deliberate jokes, but of the “wilder,” unplanned laughter that occurred during a set of interviews with economists—professionals who at the time (1999–2000) enjoyed an unprecedented degree of status and influence. The analysis finds that the source material for this laughter typically involved three kinds of socially structured contradiction: between ideals and reality, between different socially situated viewpoints, and between experiences occurring at different times. This illustrates how particular kinds of content can have a special laughter-inducing potential, and it suggests that wild laughter may at root be an interactional mechanism for dealing with social incongruity—even for members of relatively powerful groups. It is argued that this could not only help solve the larger puzzle of simultaneous variety and constraint in deliberate comedy, but also explain why the characteristic structures of humor are associated with a particular range of social effects in the first place.

Reading that abstract caused me to engage in some unplanned (silent) laughter.

For the pointer I thank the excellent Kevin Lewis.

Charter schools get better over time

by  Tyler Cowen in

There is a new NBER paper by Patrick L. Baude, Marcus Casey, Eric A. Hanushek, and Steven G. Rivkin, the abstract is no surprise but it is nice to see common sense intuition confirmed:

Studies of the charter school sector typically focus on head-to-head comparisons of charter and traditional schools at a point in time, but the expansion of parental choice and relaxation of constraints on school operations is unlikely to raise school quality overnight. Rather, the success of the reform depends in large part on whether parental choices induce improvements in the charter sector. We study quality changes among Texas charter schools between 2001 and 2011. Our results suggest that the charter sector was initially characterized by schools whose quality was highly variable and, on average, less effective than traditional public schools. However, exits from the sector, improvement of existing charter schools, and positive selection of charter management organizations that open additional schools raised average charter school effectiveness over time relative to traditional public schools. Moreover, the evidence is consistent with the belief that a reduction in student turnover as the sector matures, expansion of the share of charters that adhere to a No Excuses philosophy, and increasingly positive student selection at the times of both entry and reenrollment all contribute to the improvement of the charter sector.

There are ungated copies here.

The world’s biggest and most important ideological battle

by  Tyler Cowen in

Religion in China.  That was the topic of a recent excellent Economist article.  Here is one good excerpt:

It is hard even to guess at the number of Christians in China. Official surveys seek to play down the figures, ignoring the large number who worship in house churches. By contrast, overseas Christian groups often inflate them. There were perhaps 3m Catholics and 1m Protestants when the party came to power in 1949. Officials now say there are between 23m and 40m, all told. In 2010 the Pew Research Centre, an American polling organisation, estimated there were 58m Protestants and 9m Catholics. Many experts, foreign and Chinese, now accept that there are probably more Christians than there are members of the 87m-strong Communist Party. Most are evangelical Protestants.

Predicting Christianity’s growth is even harder. Yang Fenggang of Purdue University, in Indiana, says the Christian church in China has grown by an average of 10% a year since 1980. He reckons that on current trends there will be 250m Christians by around 2030, making China’s Christian population the largest in the world. Mr Yang says this speed of growth is similar to that seen in fourth-century Rome just before the conversion of Constantine, which paved the way for Christianity to become the religion of his empire.

In the 1980s the faith grew most quickly in the countryside, stimulated by the collapse of local health care and a belief that Christianity could heal instead. In recent years it has been burgeoning in cities.

Read the whole thing.  You will note that when individuals engage in a “portfolio” approach to religion, social evolution can occur much more rapidly.  Not everyone has to fully convert to Christianity, or to embrace Confucianism wholeheartedly, for those approaches to suddenly acquire much more influence.

Is it harder for high-caste men to coordinate?

by  Tyler Cowen in

A new paper (pdf) by Benjamin A. Brooks, Karla Hoff, Priyanka Pandey runs at least one set of tests suggesting the answer is yes:

In an experiment in India, high-caste and low-caste men repeatedly played the Stag Hunt coordination game. This game has two equilibria, only one of which is efficient. Compared to low-caste men, high-caste men were significantly less likely to coordinate on the efficient equilibrium, and they were also 29 percentage points less likely to keep trying for efficient coordination after getting the “loser’s payoff”—the payoff to a player who attempts efficient coordination when his partner does not. We explain both findings in a model of learning where high-caste, but not low-caste men, see the loser’s payoff as an insult rather than an accident. These findings provide evidence that cultural construals can impede efficient coordination, which is a key component of economic development.

I find the distinction here between “low payoffs as insult” and “low payoffs as accident” to be especially interesting and in the broader literature underexplored.

A very good sentence (Arnold Kling policy theater)

by  Tyler Cowen in

Afterward, I found myself with a lot of negative feelings.

The first act of the (short) tale can be found here.  Here is one bit:

I asked Baily, as an expert on productivity statistics, whether he thought that any economist would claim to have a reliable measure of bank output. “Of course not,” he replied, nearly breaking into a laugh. I was glad to hear that response, because it reinforced my view that econometric estimates of scale economies in banking are not reliable. When you measure economies of scale, you are comparing the ratio of output to inputs at different-sized firms. It’s rather difficult to do that if you cannot measure the numerator.

The substantive upshot was this:

The panel was called to discuss a research paper commissioned for the Center and written by Martin Baily, Doug Elliot, and Phillip Swagel. The paper says that (a) we have little reason to worry about too-big-to-fail, because the FDIC is on its way to having enough authority to resolve big bank failures, (b) there are economies of scale in banking at the very highest levels, (c) there are transition costs to breaking up big banks, in that employees and customers would be left hanging waiting to see how the re-org falls out, and (d) breaking up big banks would not get rid of systemic risk, anyway.

I agree entirely with (d). I thought that (c) was a fair point, but there is such a thing in the corporate world as a spin-off, and it can be done. I disagreed with (a) and I was unpersuaded by (b).

Recommended, and here is more from Arnold on the same topic.