Month: September 2015

Neil Irwin on the rise of Stanford economics

But the recent recruiting success of Stanford shows something broader about how the economics profession is changing. The specialties of the new recruits vary, but they are all examples of how the momentum in economics has shifted away from theoretical modeling and toward “empirical microeconomics,” the analysis of how things work in the real world, often arranging complex experiments or exploiting large sets of data. That kind of work requires lots of research assistants, work across disciplines including fields like sociology and computer science, and the use of advanced computational techniques unavailable a generation ago.

That trend is evident across leading economics departments — the traditional powerhouses have plenty of scholars doing work in the same vein, including work by Esther Duflo at M.I.T. on how to test ways to fight global poverty and by Roland G. Fryer Jr. at Harvard on the roots of racial inequality. But the scholars who have newly signed on with Stanford described a university particularly well suited to research in that vein, with a combination of lab space, strong budgets for research support and proximity to engineering talent.

The article is interesting throughout.

Gun Drop Boxes???

Reporters often call me for insight into various issues or just a quotable comment. Yesterday, however, I had a hard time believing the policy the reporter wanted to talk about was real.

Tacoma, Washington wants to install boxes around the city so people can drop off their guns, no questions asked. But, but, but…seriously?

After the reporter assured me this was real I offered the following:

George Mason University economics professor Alex Tabarrok said [gun buyback] programs have been proven ineffective, and he predicted the same result for a drop box scheme. Anyone in the port city who wants to get rid of a gun discreetly, Tabarrok said, has an easy option: toss it in Puget Sound.

Not really something you need a PhD for but when you are tossed a softball you may as well hit it.

There is something to be said for simply reducing the hassle of disposing a gun for those who don’t want to sell but as a crime control measure this is a bust. Regardless of your views on guns not much will change if you don’t do something nationally about the big boxes where people can buy guns (otherwise known as stores).

Which words in the English language most reliably mean their opposites?

Hugo Lindgren tweeted:

Is there a word in the English language that more reliably means its opposite than ‘amicable’?

Twitter responses included: “moot,” “humbled,” “nice,” “my friend,” “nonplussed,” “cordial,” “priceless,” “tolerance,” “literally,” “spry,” “sincerely,” “honest,” “pal,” “sure,” and “”Fine” particularly when given as a one word answer.”

My favorite was “spry.”  Is there a word for such words?  Are there other examples?

How to be a good professor

Robert J. Bloomfield has a new paper with that title, the abstract is this:

A good Professor achieves a three part mission of research, teaching and service. After elaborating on this mission, I provide some broad strategies for accomplishing it: know when to say no; don’t try to win the measurement game; don’t be a jerk (in the technical sense); “think otherwise”, but judiciously; and be your own adversary. I then spell out specific learning objectives, explain why they matter, and provide advice on how to achieve them. Stated in the language of instructional design, a good Professor will be able to: communicate effectively; craft constructive reviews and effective response memos; put philosophical insights to practical use; motivate students; share in the governance of your institution; and blend work and life so that each enriches the other.

For the pointer I thank…a good professor.

Does legalizing immigrants reduce their lawbreaking?

I reproduce this verbatim from Angus:

Cool study forthcoming in AEJ Applied about how legal immigration status reduced recidivism of foreign prisoners in the EU. Here’s a link to an un-gated version of the paper.

Here’s the abstract:

We exploit exogenous variation in legal status following the January 2007 European Union enlargement to estimate its effect on immigrant crime. We difference out unobserved time-varying factors by i) comparing recidivism rates of immigrants from the “new” and “candidate” member countries; and ii) using arrest data on foreign detainees released upon a mass clemency that occurred in Italy in August 2006. The timing of the two events allows us to setup a difference-in-differences strategy. Legal status leads to a 50 percent reduction in recidivism, and explains one-half to two-thirds of the observed differences in crime rates between legal and illegal immigrants.

So the good news is that the identification scheme here is pretty darn good. The bad news is that to achieve this strong identification, the paper ends up studying a fairly small sample of foreign criminals:

We are left with 725 and 1,622 individuals in the treated and control groups, respectively.

The altruistic logic of Chinese air pollution?

Kai Xue writes:

But I say in plain honesty that terrible air pollution while taken as mandarin indifference to public demands is to the contrary a manifestation of commitment to a mass middle class by the Chinese political system.

Policy deliberately trades off public health for blue collar jobs. Around Beijing are industries including steel mills and cement plants that are major polluters. About 1 in 10 tonnes of the world’s steel output is smelted in Hebei, the province surrounding Beijing. With so much local heavy industry, cleaning the air would start with plant closures that cause concentrated unemployment.

Whether this bargain of clean air for economic growth is a good deal is a fair question but whether it is virtuous public policy depends on the extent decision-makers are subject to or instead insulated from the consequences of self-produced actions.

Beijing is the seat of power in a centralized state. About one third of the thousands who hold junior ministerial rank or higher and many of the very rich reside here.

Regardless of stature, for every Beijing inhabitant air pollution is the most serious public concern.

That is from an Atlantic article by James Fallows.

Wednesday assorted links

1. Reexamining the data on European fiscal adjustment (pdf).

2. This dog will go far.

3. My 2010 remarks on QEII.  I was happy with the notion of getting three percent price inflation, but of course that hasn’t happened…

4. The world’s biggest stock index futures market is now gone.

5. The economics of tuition.  And has extortion become unprofitable for the yakuza?  And travel trips from medieval times.

6. How to eradicate ragweed.

7. As the election approaches, what are many Singaporeans upset about?

United States fact of the day

Nationals of Burma, Bhutan, and Iraq accounted for more than 70 percent of refugee arrivals to the United States in 2012.

In recent years, Burmese have made up the largest share of refugees resettled in the United States.

The link is here, in 2012 more than 87,000 people were granted asylum status in the United States, here is further data on the process and who exactly is let in.

And we cannot manage 20,000 plus Syrians today?  I do not see that we are having major problems from those earlier arrivals and of course many of them, including some of the Burmese, are Muslims.

Does China hitting the wall reflect a deeper reality about emerging economy growth?

It’s easy enough to say the Chinese economy is slowing down and that is creating problems for some other countries around the world.  Never settle for such a comfortable understanding!  Might there be deeper ways to think about the problem?

I am not endorsing any of the following speculative hypotheses, rather they are attempts to imbed the Chinese slowdown into what is possibly a broader framework.  Here are a few possibilities:

1. We’ve been realizing that autocratic government isn’t as effective as we had thought.

2. We’ve been realizing that virtually all of the world’s emerging economies will be hit by “premature deindustrialization,” China included.  China will produce more manufactured goods, but because of automation this will never build a fully-sized middle class in China.  And historically service sector jobs have never had the same kind of oomph at lifting a nation over various development hurdles.  The same limitations may apply to a variety of other countries.

3. Perhaps developing nations have reached “peak stuff”?  That may mean the Chinese manufacturing model, along with the manufacturing models of other nations, will prove less potent than we had thought.

4. Maybe we’ve been learning that a demographic slowdown is harder to reverse, and is more costly for long-run growth, than we had thought.

5. The geopolitical stability of the South China Sea is not as robust as it seemed three or four years ago.

What else?

In each case the relevant realization may be popping China, and some other emerging economies, out of better multiple equilibria and into inferior multiple equilibria (“is Greece a Balkans nation or a European nation?”).

Again, I am not dismissing the highly relevant China-specific factors of excess capacity, high municipal debt, real estate bubble, and so on.  I am simply wondering what other broader trends may be operating here beneath the surface.

Trading down and the business cycle

From the new NBER paper by Nir Jaimovich, Sergio Rebelo, and Arlene Wong:

We document two facts. First, during recessions consumers trade down in the quality of the goods and services they consume. Second, the production of low-quality goods is less labor intensive than that of high-quality goods. So, when households trade down, labor demand falls, increasing the severity of recessions. We find that the trading-down phenomenon accounts for a substantial fraction of the fall in U.S. employment in the recent recession. We study two business cycle models that embed quality choice and find that the presence of quality choice magnifies the response of these economies to real and monetary shocks.

In other words, we should subsidize relatively expensive goods as a downturn approaches…and tax thrift shops at a higher rate…?

Why am I not seeing anyone back out the implied growth rate from these numbers?

The 13.8% decline in imports was significantly worse than consensus expectations for an 8.2% decline, and will only add to concerns over declining Chinese demand.

Under what required assumptions would this translate into a growth rate of say four percent?  Backward-looking?  Forward-looking?  Or is this just a slow structural shift as the Chinese economy gradually moves into services?  Inquiring minds wish to know.

The full report is here.

What Henny Sender says about China

“It is neither the sell-off in Chinese stocks nor weakness in the currency that matters most,” notes George Saravelos, a currency strategist in London with Deutsche Bank. “It is what is happening to China’s FX reserves and what this means for global liquidity. The People’s Bank of China’s actions are equivalent to an unwind of QE or, in other words, Quantitative Tightening.”

The FT story is here.  Another way to put it is that a weaker Chinese currency will mean stronger currencies elsewhere and thus net deflationary pressure.