Month: December 2015
*The Rise and Fall of Violent Crime in America*
That is a forthcoming book by Barry Latzer, it is very clear and well argued and I am happy to recommend it. Here are a few bits from the book:
1. From the 1930s through the 1950s, black cirrhosis death rates were lower than those for whites.
2. For Miami, Haitians were 3.5 percent of the murder suspects when they were 14 percent of the city’s population, from a 1985-1995 study.
3. If you ignore levels, and just look at rates of change, crime rates in Canada track those in the United States to an astonishing degree. How can that be? If demographics or jobs were the main driving force, maybe, but they are not…
4. He criticizes lead-based theories on the grounds that they seem “…unable to explain why the affected populations had relatively high offending rates in the years just prior to the great crime decline.”
You can pre-order it here.
Why did American taxation become less progressive?
That is an underexplored question, and it is considered in the job market paper of Chunzan Wu, from the University of Pennsylvania. Here is the abstract, which will unsettle many people:
Since the 1970s, income inequality in the U.S. has increased sharply. During the same time span, the U.S. federal income tax has become less progressive. Why? I examine this question in a Ramsey optimal tax policy framework. Within this framework, the tax policy is determined by: (1) a set of Pareto weights representing the government’s preference over different households; and (2) household lifetime utilities summarizing the effects of economic fundamentals. I first study the changes in economic fundamentals using an overlapping generations incomplete-markets life-cycle model with heterogeneous households. The model features both endogenous human capital accumulation and household labor supply and is calibrated to the U.S. economy in the 1970s and 2010s. Then I use this economic model to determine whether the change in income tax is the result of an optimal policy response to changing economic fundamentals or the consequence of a change in Pareto weights. I interpret the latter as changes in the political influences of various income groups. I find that: (1) changes in economic fundamentals alone induce a less progressive optimal income tax and can account for 40% of the reduction in progressivity we observe; and (2) the change in Pareto weights required to explain the remaining part of tax policy change favors high-income households and also implies less valued government services. Finally, using a stylized political economy model, I discuss potential explanations for this change in Pareto weights such as the lower cost of conveying information to swing voters and the rising inequality of voter turnout among different socioeconomic groups.
The paper is here (pdf).
Paul Krugman reviews Robert Reich
How much is monopoly power behind inequality? Is the older explanation of skill-biased technical change [SBTC] still in the running? Here is an excerpt from Krugman’s new NYRoB piece:
SBTC has fared very badly over the past quarter-century, to the point where it no longer deserves to be taken seriously as an account of what ails us.
The story fell apart in stages. First, over the course of the 1990s the skill gap stopped growing at the bottom of the scale: real wages of workers near the middle stopped outpacing those near the bottom, and even began to fall a bit behind. Some economists responded by revising the theory, claiming that technology was hollowing out the middle rather than displacing the bottom. But this had the feel of an epicycle added to a troubled theory—and after about 2000 the real wages of college graduates stopped rising as well. Meanwhile, incomes at the very top—the one percent, and even more so a very tiny group within the one percent—continued to soar. And this divergence evidently had little to do with education, since hedge fund managers and high school teachers have similar levels of formal training.
Something else began happening after 2000: labor in general began losing ground relative to capital. After decades of stability, the share of national income going to employee compensation began dropping fairly fast. One could try to explain this, too, with technology—maybe robots were displacing all workers, not just the less educated. But this story ran into multiple problems. For one thing, if we were experiencing a robot-driven technological revolution, why did productivity growth seem to be slowing, not accelerating? For another, if it was getting easier to replace workers with machines, we should have seen a rise in business investment as corporations raced to take advantage of the new opportunities; we didn’t, and in fact corporations have increasingly been parking their profits in banks or using them to buy back stocks.
In short, a technological account of rising inequality is looking ever less plausible, and the notion that increasing workers’ skills can reverse the trend is looking less plausible still. But in that case, what is going on?
Krugman makes many other points in the review, but overall he is sympathetic toward Reich’s view that growing income inequality has a lot to do with growing monopoly power in markets.
In my view, the “epicycles” of technology plus trade with China and the rise of finance and constrained building do explain a good deal of what is going on. I don’t feel bad that this theory has four major variables, five if you wish to throw in education. Besides, the implied boosts in monopoly power sufficient to rationalize the observed increases in income inequality a) are huge, as opposed to the modest changes we have observed, and b) do worse either cross-sectionally, or in the time series, than the tech/trade/finance/land hypotheses. Contra Reich, the “if these seventeen policies were different, income distribution would be very different” claim doesn’t actually count as an explanation of how the income distribution has evolved in a world which has remained within other policy ranges. Land values aside, the world awaits a really good paper on monopoly power and American income inequality. So far we don’t have one, so it is a very speculative hypothesis, with the “glance over the shoulder at the data test” showing mostly negative results.
Tuesday assorted links
1. The amount of rent-seeking over lost treasure is going up (NYT). And thinkers act as validators of policy (very good piece).
2. Ted Gioia’s list of one hundred best albums of the year.
3. Ross Douthat (NYT) on what we fear when we fear terrorism.
4. How are for-profit universities different? (pdf, a Columbia University job market paper). And the predictive power of language in the tax code (pdf, also from Columbia).
5. Interview with Tino Sanandaji, on Sweden.
The coffee-machine bacteriome
From a new paper in Nature, Scientific Reports:
Microbial communities are ubiquitous in both natural and artificial environments. However, microbial diversity is usually reduced under strong selection pressures, such as those present in habitats rich in recalcitrant or toxic compounds displaying antimicrobial properties. Caffeine is a natural alkaloid present in coffee, tea and soft drinks with well-known antibacterial properties. Here we present the first systematic analysis of coffee machine-associated bacteria. We sampled the coffee waste reservoir of ten different Nespresso machines and conducted a dynamic monitoring of the colonization process in a new machine. Our results reveal the existence of a varied bacterial community in all the machines sampled, and a rapid colonisation process of the coffee leach. The community developed from a pioneering pool of enterobacteria and other opportunistic taxa to a mature but still highly variable microbiome rich in coffee-adapted bacteria. The bacterial communities described here, for the first time, are potential drivers of biotechnologically relevant processes including decaffeination and bioremediation.
The authors note:
The presence of bacterial genera with pathogenic properties and the fast recovery of the communities after rinsing the capsule container, strongly suggest the need for frequent maintenance of the capsule container of these machines.
In related news from a few years ago, scientists in the US have genetically modified an E.coli strain so that it is ‘addicted’ to caffeine. Yes, but will E. coli prove theorems?
Hat tip: Paul Kedrosky.
*Why Muslim Integration Fails in Christian-Heritage Societies*
That is the new book by Claire Adida, David Laitin, and Marie-Anne Valfort. Some parts are interesting, especially those showing both statistical and taste-based discrimination against Muslims in France. But most of the book — above all the title — makes claims which are far too strong. A better description would have been “Why France Has Not Integrated Its Muslims.”
To cite one obvious problem, the book only offers four pages of text on Muslim integration in America, a relatively successful venture. And most of those four pages deal with Detroit. The authors’ own evidence just doesn’t seem so damning, for instance when it comes to “Proud to be an American,” on a scale of one to four, Arab Christians come in at 3.67 for the first generation, and 3.75 for the second or third generation. Arab Muslims come in at 3.47 for the first generation, and 3.52 for the second or third generation. Not perfect to be sure, but is that evidence of a massive problem?
There is no talk of Pakistanis in America, a highly successful group with a median income higher than for America as a whole. Nor is there a peep about Bosnian-Americans, who are mostly Muslim and fairly well integrated. How about Iranians, a very successful group in America?
The word “Canada” does not appear in the index of this book.
I could go on. C’mon people, you can do better than this…
W.E.B. Du Bois on Woodrow Wilson
It is worth reading what one of the African-American civil rights leaders, and a brilliant man, thought of Woodrow Wilson at the time of his candidacy:
As to Mr. Wilson, there are, one must confess, disquieting facts; he was born in Virginia, and he was long president of a college which did not admit Negro students…On the whole, we do not believe that Woodrow Wilson admires Negroes…Notwithstanding such possible preferences, Woodrow Wilson is a cultivated scholar and he has brains…We have, therefore, a conviction that Mr. Wilson will treat black men and their interests with farsighted fairness. He will not be our friend, but he will not belong to the gang of which Tillman, Vardaman, Hoke Smith and Blease are the brilliant expositors. He will not advance the cause of an oligarchy in the South, he will not seek further means of “jim crow” insult, he will not dismiss black men wholesale from office, and he will remember that the Negro…has a right to be heard and considered, and if he becomes President by the grace of the black man’s vote, his Democratic successors may be more willing to pay the black man’s price of decent travel, free labor, votes and education.
That is from pp.187-188 of August Meier, Negro Thought in America 1880-1915: Racial Ideologies in the Age of Booker T. Washington. You can see that Du Bois did not “have it in” for Wilson.
And here is a letter from September 1913, from Dubois to Wilson, after Wilson had been in office for but half a year:
Sir, you have now been President of the United States for six months and what is the result? It is no exaggeration to say that every enemy of the Negro race is greatly encouraged; that every man who dreams of making the Negro race a group of menials and pariahs is alert and hopeful. Vardaman, Tillman, Hoke Smith, Cole Blease, and Burleson are evidently assuming that their theory of the place and destiny of the Negro race is the theory of your administration, They and others are assuming this because not a single act and not a single word of yours since election has given anyone reason to infer that you have the slightest interest in the colored people or desire to alleviate their intolerable position, A dozen worthy Negro officials have been removed from office, and you have nominated but one black man for office, and he such a contemptible cur, that his very nomination was an insult to every Negro in the land.
To this negative appearance of indifference has been added positive action on the part of your advisers, with or without your knowledge, which constitutes the gravest attack on the liberties of our people since emancipation, Public segregation of civil servants in government employ, necessarily involving personal insult and humiliation, has for the first time in history been made the policy of the United States government.
By the way, I’ve also learned that Du Bois, despite his Marxist sympathies, studied economics with Taussig at Harvard, had well-worked out views on Mill and Ricardo, and once wrote a paper defending the economics of the gold standard. He also studied with Gustav Schmoller at what was then the University of Berlin, now Humboldt University.