Month: March 2016

Not Moving to Opportunity

InterstateMigrationLabor market mobility in the United States has declined. Interstate migration is down (graph at right from Molloy, Smith, Trezzi and Wozniak) and so is in-state-migration, especially for the less well educated. Where once people responded to shocks by moving to opportunity now they are likely to stay put and retire early or take-up disability insurance. Ben Leubsdorf at the WSJ reviews some of the evidence:

“A state typically returns to normal after an adverse shock not because employment picks up, but because workers leave the state,” economists Olivier Blanchard and Lawrence Katz wrote in a 1992 paper.

This time might be different in some ways. Three economists wrote in a National Bureau of Economic Research working paper last year that compared with the prerecession years, mass layoffs after 2007 prompted a “muted” migration response and many workers instead dropped out of the labor force.

In a new paper, also cited by Leubsdorf, Danny Yagan at Berkeley suggests that reduced migration is only part of the problem. What has made the aftermath to the 2008-2009 recession so bad is that migration is low at the same time that it has become more necessary than ever. The 2008-2009 recession was especially localized, it hit some places harder than others and in a way that appears to be permanent. But migration has been too slow to solve the problem.

The usual story is that in-and-out migration equalizes wage, unemployment and employment rates across the nation. Some places may be harder hit than others but movement quickly makes the US into one labor market. In the aftermath of this recession, however, that isn’t happening for employment rates. Using a clever research design that looks at workers with similar education and skills doing the same jobs at the same large firms but in different locations, Yagan finds that location continues to matter years after the recession has ended. Workers who worked in the places hardest hit in the 2007-2009 recession have employment rates today that are 1% lower than similar workers in regions that were less hard hit. Convergence has been unusually slow:

I conclude that living in a hard-hit area has caused enduring joblessness and exacerbated inequality. If the latest convergence speed continues, employment differences across the United States are estimated to return to normal in the 2020s—more than a decade after the great recession.

Miami markets in everything

It was bound to happen eventually. The fact that it took Miami this long to invent a champagne machine gun is actually quite surprising considering that both items played an essential role in the formation of this great city. But it’s finally here. And it can be yours for only $459.

Jeremy Touitou is the man behind the invention, which, he says, is “the world’s first champagne gun.”

The full story is here, via Daniel Lippman, noting that here is Daniel’s recent piece on fact-checking you-know-who.

champagnegun

What I’ve been reading

1. Ronald Bailey, The End of Doom: Environmental Renewal in the Twenty-First Century.  Good arguments all around, and he covers climate change too.  My worry is a political economy one: if we can’t handle small amounts of immigration or trade competition from China without flipping out, how will we fare with forthcoming environmental problems?

2. John Gimlette, Elephant Complex: Travels in Sri Lanka.  An informative and entertaining look at an under-covered country.  (If you’d like a critical review instead, try this one, but I followed up on some of the criticisms and was not persuaded by the attempted takedown.)  This NYT article suggests (correctly) that now is the time to visit Sri Lanka.

3. Sally Denton, The Profiteers: Bechtel and the Men Who Built the World.  A good history of one epicenter of crony capitalism.  I had not known what an important role Bechtel played in the early construction of nuclear power plants.  Here is a good T.J. Stiles NYT review of the book.

4. Joanna Masel, Bypass Wall St.: A Biologist’s Guide to the Rat Race.  Darwin plus Fred Hirsch on positional goods as applied to finance and portfolios.  Unorthodox, interesting.

5. Stephen Stigler, The Seven Pillars of Statistical Wisdom.  What are the seven foundational pillars of statistics?  Beautifully written.

And:

Peter McPhee, Liberty or Death: The French Revolution.  More of a browse so far, but I have positive impressions of this new Yale University Press book.

Jeff Gramm’s Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism is a very useful and well-researched book, focusing on shareholder rights and control issues in the earlier history of corporate America.

Cecil E. Bohanon and Michelle Albert Vachris, Pride and Profit: The Intersection of Jane Austen and Adam Smith, my blurb refers to it as a “tour de force [which] ties the worlds of economics and literature together, leaving the reader delighted and informed along the way.”

Hong Kong facts of the day, the port is in decline

A little more than a decade ago, Hong Kong was the world’s busiest port. Giant vessels competed to get into the city’s berths, waiting to load and unload containers filled with goods manufactured just over the border in China’s factory towns. Back then, Hong Kong still expected that its freewheeling commercial culture could change China for the better. And trading — accounting for almost 25 percent of the city’s economy — seemed like just the industry to lead the way.

Now those expectations are colliding with reality. Last week, the local government reported that cargo flowing through Hong Kong dropped by 13.8 percent in 2015, capping a dismal year in which the city’s port declined to the world’s fifth-busiest, dropping behind one-time also-rans Shanghai and Shenzhen. It’s likely to get worse: Last year, Deutsche Bank predicted that the volume of cargo moving through Hong Kong will decline by as much as 50 percent over the next decade.

That is from Adam Minter.

*Engineers of Jihad*

The authors are Diego Gambetta and Steffen Hertog and the subtitle is The Curious Connection between Violent Extremism and Education.  This is an interesting and important book, and the core message is pretty simple:

In the Islamist sample [of terrorists] we were able to find the discipline of study for 207 of the 231 individuals who at some point had full or partial exposure to higher education…Unsurprisingly, the second most numerous group comprises 38 individuals who pursued Islamic studies.  But the largest group among the Islamist extremists is that of the engineers: 93 out of 207 individuals, or 44.9 percent of those whose type of degree we know, studied this subject.

And here is from the book’s conclusion:

Our findings about disciplines, personality traits, and political preferences are remarkably consistent.  The outstanding result we obtained is that the distribution of traits across disciplines mirrors almost exactly the distribution of disciplines across militant groups…engineers are present in groups in which social scientists, humanities graduates, and women are absent, and engineers possess traits — proneness to disgust, need for closure, in-group bias, and (at least tentatively) simplism…

Definitely recommended.

Branko Milanovic’s *Global Inequality*

That is his new book and the subtitle is A New Approach for the Age of Globalization.

To be sure, this is an interesting work and it does go beyond the published articles by Milanovic many of you already are familiar with.  It is the best source on whether global inequality has gone up or down.  The chapter on the Kuznets curve –which considers whether there are general time series patterns in the historical evolution of inequality — will help you see that question in a new light, even though the final answer is the expected inconclusive one.

But ultimately the book is too sprawling and the conceptual discussions are not enlightening or sometimes they are absent altogether.  Not all inequalities are created alike, but we are offered insufficient tools for sorting out which inequalities might matter and whether those are what the data are picking up.  For one example of where this book goes wrong, Milanovic writes “It is the fundamentally ambivalent nature of globalization that I hope to bring out in this book.”  Yet almost all of the historical data involve examples where living standards have been going up because of globalization.  You might plausibly think “inequality on average is bad,” but that doesn’t mean you have to think that the Pareto-improving wealth boosts from globalization, even if they raise measured inequality, are ambiguous in normative terms.  They aren’t, they are strongly positive.

Or to cite another point, the author argues that “income and wealth inequality” are “the root cause” of prostitution.  A significant cause to be sure, but are not other inequalities — non-pecuniary inequalities for instance — relevant here?  I predict there would be plenty of prostitution in a society with full income equality or more realistically a guaranteed annual income.

There is plenty of talk of how plutocracy and rising inequality have an inexorable stranglehold on the American landscape, but very little consideration of whether inequality of happiness has gone up, or what kind of future technologies might lead to more equal real wage distributions.

Overall this book is worth reading, but still it is an example of how the economics profession emphasizes one kind of rigor and almost completely neglects rigor in argumentation and the application of concepts.

University of Chicago summer institute for field experiments

The Summer Institute on Field Experiments (SIFE) is a highly selective and innovative program at the University of Chicago that brings together the brightest young economists in the world and companies interested in using rigorous field experiment methods and behavioral economics to revolutionize the way they do business. The Institute seeks organization partners who are willing to be “matched” to the most promising of the Institute’s participants to work together and design solutions to problems they face. Organization partners will share their business challenges, and the Institute’s academics help them to scientifically test new ideas and solutions.

Run by John List, here is full information.

The culture that is Paris Japan

Also known as markets in everything:

Paris is so filthy that Japanese tour guides have started cleaning the streets themselves.

A group of nine guides, funded by the Paris Tourism Association, dispersed throughout the City of Lights Sunday to begin their cleaning mission in hopes of bringing more Japanese visitors to town.

The story is here, noting that I do not myself find Paris to be so dirty.

For the pointer I thank Scott Wessman.

Hayek and Freud, *The Viennese Students of Civilization*

Erwin Dekker’s The Viennese Students of Civilization: The Meaning and Context of Austrian Economics Reconsidered is an original and interesting look at the foundations of the Austrian School of Economics, properly situating it in the context of its time.  Here is one bit:

In the “Civilization and its Discontents” — as Rosten attempts to point out to Hayek — Freud argues that civilization means constraining ourselves. Freud argues that morality works through a sense of guilt, and that restraint and hence civilization is created and upheld by this sense of guilt.  As civilization progresses, this sense of guilt has to be intensified or heightened.  This is in line with Hayek’s ideas, as we will see later, but Hayek refuses to acknowledge this.

Dekker also discusses the relevance of Nietzsche, Hermann Broch, and Peter Drucker for the Austrian school, and goes beyond the usual hagiography.

Thursday assorted links

Do America’s poor move around enough?

Eric Chyn, from the University of Michigan, has an interesting job market paper on this topic., which suddenly is being debated again.  The title is “Moved to Opportunity: The Long-Run Effect of Public Housing Demolition on Labor Market Outcomes of Children.” Here is the abstract:

This paper provides new evidence on the effects of moving out of disadvantaged neighborhoods on the long-run economic outcomes of children. My empirical strategy is based on public housing demolitions in Chicago which forced households to relocate to private market housing using vouchers. Specifically, I compare adult outcomes of children displaced by demolition to their peers who lived in nearby public housing that was not demolished. Displaced children are 9 percent more likely to be employed and earn 16 percent more as adults. These results contrast with the Moving-to-Opportunity (MTO) relocation study, which detected effects only for children who were young when their families moved. To explore this discrepancy, this paper also examines a housing voucher lottery program (similar to MTO) conducted in Chicago. I find no measurable impact on labor market outcomes for children in households that won vouchers. The contrast between the lottery and demolition estimates remains even after re-weighting the demolition sample to adjust for differences in observed characteristics. Overall, this evidence suggests lottery volunteers are negatively selected on the magnitude of their children’s gains from relocation. This implies that moving from disadvantaged neighborhoods may have substantially larger impact on children than what is suggested by results from voucher experiments where parents elect to participate.

Justin Fox argues that moving is hard, but basically more of the poor should move, at least using standard economic metrics for family well-being.  Results from the Katrina natural experiment indicate the same.  Ultimately we wish to protect people, not places per se.

Is culture or economy behind the rise of Donald Trump?

Trump performed no better in states where the economy was the biggest issue than in other states. In the ten states where the economy was the top issue, Trump won eight, or 80 percent. In the five states where the economy was second, Trump won four . . . or 80 percent. His average margin of victory was 7.8 points in states where the economy ranked second but just 6.9 points in states where the economy was the top issue.

Trump also did worse among voters for whom the economy was a top issue than among other voters. He won voters who chose the economy as their top issue in 10 of 15 states, worse than his showing among voters over all, which he carried in 12 of 15. While he won jobs-and-economy voters in ten states, he won immigration voters in twelve, and terrorism voters in twelve. In all 15 states, Trump’s margin of victory was higher among at least one other category of voters than it was among jobs-and-economy voters. In eight states, Trump’s margins were greater on at least two other issues, and in two states his margins were lowest among jobs-and-economy voters.

…I believe that Trumpism is being driven primarily by cultural anxiety — by dissatisfaction with cultural change and perceived cultural decline.

Here is the Scott Winship NR piece.

I have been seeing so many pieces about how GOP elites are responsible for the rise of Trump.  These pieces offer many valid criticisms, but I have an alternative or should I say complementary theory: the people who have voted for Trump are responsible for the rise of Trump.  How is that for a complex account of causation and individual responsibility?