Month: August 2015

A too simple theory of China right now

Putting the immediate liquidity, debt, and asset price problems aside (ha), there is significant excess capacity on the real side of the economy.  It will be very hard to fix this problem without letting significant numbers of SOEs go under.  The central government fears the resulting unemployment, plus the SOEs are the Party’s power base.  Yet the leaders know what must be done, and the SOEs have been reformed before.  So the government is tightening the screws with more purges and censorship and power centralization, in part so they can do some SOE reform.  The chance of this working is 30-70.  One danger is that SOE reform leads to a loss of political stability.   A second and more likely danger is that reform is incomplete and China ends up full of zombie companies and banks.

How would America evolve under open borders?

Nathan Smith has a very thoughtful speculative essay on that topic. Here is one interesting bit of many:

I would tentatively envision the US experience under open borders as resembling the British and Roman cases, inasmuch as the protocols and ideals of the US polity, as well as its merely ethnic characteristics, would persist in attenuated form, but governing a much larger population would necessitate improvisational and sometimes authoritarian expedients that would cumulatively transform the polity into something quite different, even as it claimed descent from the historic constitutional polity of the United States as we know it. The illusion of continuity would deceive the subjects of the new polity, native-born and immigrant, to a considerable extent, though on the other hand there would be a good deal of lamentation and triumphalism, and only after several generations would historians be able to look back and assess the bewildering transformation in a sober, balanced way.

Certain American ideals would die of their own increasing impracticality, e.g., “equality of opportunity,” the social safety net, one person, one vote, or non-discrimination in employment. Americans might continue to feel that these ideals were right long after they had ceased to be practiced, as the Romans seemed to feel that Rome ought to be governed by its Senate long after real governance had passed to the emperors. I don’t see how public schools could adapt to a far larger and more diverse student body.

In sum:

I think the most wild-eyed predictions of the open borders optimists will come true, and to spare, but I think a lot of the forebodings of the grimmest open border pessimists will also prove more than justified.

The article is interesting throughout, do read the whole thing.

Saturday assorted links

1. How Ezra Klein reads on the internet.  This is probably good advice for many people, but it is too complicated for me to even read, much less follow.  Maybe with an app I could understand it, though I can’t understand most apps either.

2. Model this.

3. What would Michael Polanyi say? (bicycle video and Boettke bait, all in one link)

4. Upscale goodwill shops (the culture that is Los Angeles).

5. “Intellectual ability may be an endophenotypic marker for bipolar disorder.” (pdf)

6. Freeways no longer define Los Angeles.

7. More on Alice Goffman.

8. Claims about Putin.  And is a slow putsch against Putin underway?

From the comments — on suicide

Switzerland tolerates assisted suicide since 1942 and there are very interesting numbers. A) From 1995 to 2009, assisted suicide cases have grown but the total number of suicides keeps constant. B) Assisted suicide in 2009 accounted for approx 30% of all suicides. C) Women chose assisted suicide more than men, but men use firearms more than women to commit suicide. D) Peak assisted suicide is between 75 and 84 years old. It seems that people that cross the 80+ years old line are not affected by painful or exhausting diseases thus they choose to life until it ends naturally E) Peak suicide is between 45-54 years old, midlife crisis is real, F) Overall suicide rates for women kept constant even if assisted suicide rates increase. G) Overall suicide rates for men are going down and assisted suicide goes up.

The overall suicide rate in Netherlands between 1999 and 2013 has been between 8.3 and 11 per 100K habitats. The lowest rate was just before the crisis.

The WaPo article would lose its killer headline if the total suicide rate is considered when assessing the “exponential” increase of assisted suicide. This seems like another case of double standards. When someone blows their brains with a gun we have to respect the decision and comfort the family, when someone opens the valve of sodium thiopental with their hand…’s just wrong.

That is from Axa.

Friday assorted links

1. iTunes version of my podcast with Erik Torenberg (which many of you have liked, thank you).  With other podcasts too, including Ben Casnocha.

2. Dismaland markets in everything.

3. Troubling signs of minimum wage damage in Los Angeles.

4. The right to be forgotten the right to be forgotten.  Or did I get the punctuation wrong?  And claims about Bitcoin, none of which I understand.

5. Irish critics respond to the Guardian one hundred best novels list.

6. What makes Canadian English unique?

7. How much of those Chinese reserves can be used anyway?

8. The Economist: “test drives are less important than ever…

9. Warner Brothers to adapt Dante’s Inferno.

The growing importance of social skills in the labor market

That is a new NBER paper from David J. Deming:

The slow growth of high-paying jobs in the U.S. since 2000 and rapid advances in computer technology have sparked fears that human labor will eventually be rendered obsolete. Yet while computers perform cognitive tasks of rapidly increasing complexity, simple human interaction has proven difficult to automate. In this paper, I show that the labor market increasingly rewards social skills. Since 1980, jobs with high social skill requirements have experienced greater relative growth throughout the wage distribution. Moreover, employment and wage growth has been strongest in jobs that require high levels of both cognitive skill and social skill. To understand these patterns, I develop a model of team production where workers “trade tasks” to exploit their comparative advantage. In the model, social skills reduce coordination costs, allowing workers to specialize and trade more efficiently. The model generates predictions about sorting and the relative returns to skill across occupations, which I test and confirm using data from the NLSY79. The female advantage in social skills may have played some role in the narrowing of gender gaps in labor market outcomes since 1980.

There is an ungated copy here.

The culture that is Dutch fact of the day

In 2013, euthanasia accounted for one of every 28 deaths in the Netherlands, three times the rate of 2002. In the Dutch-speaking part of Belgium, one of every 22 deaths was due to euthanasia in 2013, a 142 percent increase since 2007. Belgium has legalized euthanasia for children under 12, though only for terminal physical illness; no child has yet been put to death.

That is from Charles Lane.

The great biomedical stagnation?

Bowen and Casadevall have a new PNAS paper on this question:

The general public funds the vast majority of biomedical research and is also the major intended beneficiary of biomedical breakthroughs. We show that increasing research investments, resulting in an increasing knowledge base, have not yielded comparative gains in certain health outcomes over the last five decades. We demonstrate that monitoring scientific inputs, outputs, and outcomes can be used to estimate the productivity of the biomedical research enterprise and may be useful in assessing future reforms and policy changes. A wide variety of negative pressures on the scientific enterprise may be contributing to a relative slowing of biomedical therapeutic innovation. Slowed biomedical research outcomes have the potential to undermine confidence in science, with widespread implications for research funding and public health.

Carolyn Johnson summarizes the results of the paper:

Casadevall and graduate student Anthony Bowen used a pretty straightforward technique to try and answer the question. They compared the NIH budget, adjusted for inflation, with the number of new drugs approved by the Food and Drug Administration and the increases in life expectancy in the U.S. population over the same time period.

Those crude health measures didn’t keep pace with the research investment. Funding increased four-fold since 1965, but the number of drugs only doubled. Life expectancy increased steadily, by two months per year.

Johnson also covers some useful responses from the critics.  The result also may say more about the NIH than about progress per se.  And here is a more optimistic take from Allison Schraeger.

Thursday assorted links

1. China markets in everything, gift edition.

2. “I do not normally buy foals, let alone embryos.

3. The plurality of obesity epidemics.

4. Mexico hands out ten million flat screen TVs.  Finland will experiment with a guaranteed annual income.

5. Susan Woodward on Armen Alchian.

6. An actual “rock star” professor, or at least he tries.

7. The slowdown in Israeli economic growth.  And what’s up with BelgiumMacedonia is mobilizing its army against immigrants.  “Separately, Slovakia announced yesterday that it will only accept Christian refugees to the country.

Do fiscal transfers or markets contribute more to stabilization?

Martin Sandbu reports from the FT:

IMF research shows there is indeed more risk-sharing in federal countries such as the US and Germany. Eighty per cent of local economic fluctuations are smoothed in those countries, against 40 per cent between eurozone countries. In other words local consumption suffers only 20 per cent of any hit to local GDP (against 60 per cent for eurozone countries). Most of this smoothing, however, happens through private channels. Banks, credit markets and investments insulate disposable resources. Fiscal insurance, in contrast, only compensates for 15 per cent of local downturns in the US, and just 10 per cent in Germany. Daniel Gros has concluded that achieving US-style fiscal risk-sharing “would be of very limited usefulness” to absorb shocks in the eurozone.

The (gated) article is of interest more generally.  I look forward to Sandbu’s new book, Europe’s Orphan: The Future of the Euro and the Politics of Debt, forthcoming from Princeton University Press this October.

Starting over from Katrina

One of the tragedies of Katrina was that so many of New Orleans’ residents were forced to move. But the severity of that tragedy is a function of where they were forced to move to. Was it somewhere on the Salt Lake City end of the continuum? Or was it a place like Fayetteville? The best answer we have is from the work of the sociologist Corina Graif, who tracked down the new addresses of seven hundred women displaced by Katrina—most of them lower-income and black. By virtually every measure, their new neighborhoods were better than the ones they had left behind in New Orleans. Median family income was forty-four hundred dollars higher. Ethnic diversity was greater. More people had jobs. Their exposure to “concentrated disadvantage”—an index that factors in several measures of poverty—fell by half a standard deviation.

That is from Malcolm Gladwell, interesting throughout.

Germany fact of the day, will support for immigration collapse?

Berlin has said it expects to receive a record 800,000 asylum seekers this year, more than the entire EU combined in 2014, laying bare the scale of the biggest refugee crisis to face the continent since the second world war.

Whether you consider this “good news” depends on what you are comparing it to.  Most of all, we would prefer a situation where not so many people wanted asylum.  In the meantime, my fear is that this immigration will not proceed in an orderly manner, and the backlash against immigration will grow stronger yet.  I do not expect 2017 to resemble 2015; “unorthodox arrivals” to Europe were three times higher this July than last and at some point that process will be stopped, no matter what our moral judgment of the situation.

Note this:

Interior minister Thomas de Maizière warned that the Schengen zone, which allows passport-free travel across much of mainland Europe, could not be maintained unless EU states agreed to share asylum seekers.

The Schengen agreement of course has been the best achievement of immigration policy in a long time.  But can the European Union agree on a coherent asylum policy, and furthermore one which removes some of the relative burden from Germany and the UK?  Keeping relatively free immigration does in fact require a good deal of regulation, most of all in Europe, but those same governments are not always good at regulating.

Here is some bad polling news from Sweden.   Trouble is afoot in other corners too:

Authorities in Hungary said this week they would dispatch thousands of “border hunters” to arrest migrants entering the country from Serbia.

The forces, drawn from the Hungary’s police, will patrol the 175km long border with Serbia, where soldiers and labourers are building a 4m high razor-wire fence to keep out an estimated 300,000 migrants expected to arrive in the country this year.

I think of these developments as a good illustration of why an attempt at truly, fully open borders probably would, due to backlash, result in a lower level of immigration than the pro-immigration, immigration-increasing, low-skilled immigration increasing policies I favor.  But the idea of maximizing subject to a backlash constraint is unpopular in libertarian circles, let me tell you, including at GMU lunch table.  Nonetheless we are learning, I am sorry to say, that the backlash constraint is more binding than many of us had thought.

This all remains an under-reported story in many American newspapers,  Even with Donald Trump still leading in the polls, it is not understood what a prominent role images of Calais are playing in British national debate.  I don’t see all this as leading to anything good.

The cultural apocalypse that wasn’t

According to the O.E.S., songwriters and music directors saw their average income rise by nearly 60 percent since 1999. The census version of the story, which includes self-­employed musicians, is less stellar: In 2012, musical groups and artists reported only 25 percent more in revenue than they did in 2002, which is basically treading water when you factor in inflation. And yet collectively, the figures seem to suggest that music, the creative field that has been most threatened by technological change, has become more profitable in the post-­Napster era — not for the music industry, of course, but for musicians themselves.

That is from Steven Johnson, the piece is excellent throughout.  And note this:

The new environment may well select for artists who are particularly adept at inventing new career paths rather than single-­mindedly focusing on their craft.

Are tenure track professors better teachers?

At least at Northwestern University, the answer seems to be no.  Figlio, Schapiro, and Soter report:

This study makes use of detailed student-level data from eight cohorts of first-year students at Northwestern University to investigate the relative effects of tenure track/tenured versus contingent faculty on student learning. We focus on classes taken during a student’s first term at Northwestern and employ an identification strategy in which we control for both student-level fixed effects and next-class-taken fixed effects to measure the degree to which contingent faculty contribute more or less to lasting student learning than do other faculty. We find consistent evidence that students learn relatively more from contingent faculty in their first-term courses. This result is driven by the fact that the bottom quarter of tenure track/tenured faculty (as indicted by our measure of teaching effectiveness) has lower “value added” than their contingent counterparts. Differences between contingent and tenure track/tenured faculty are present across a wide variety of subject areas and are particularly pronounced for Northwestern’s averages and less-qualified students.

Emphasis is added by me.  I wonder how much of the problem is that the bottom quarter of the tenure track instructors are more likely not to have English as a first language?

The pointer is from Ben Southwood.