Month: November 2016

My Bloomberg column on Trumponomics

Read it here, here is just one bit:

If there is any common theme to my predictions, it stems from Trump’s history in franchising his name and putting relatively little capital into many of his business deals. I think his natural instinct will be to look for some quick symbolic victories to satisfy supporters, and then pursue mass popularity with a lot of government benefits, debt and free-lunch thinking. I don’t think the Trump presidency will be recognizable as traditionally conservative or right-wing.

I do wish to stress this is all speculative and I expect there will be many more surprises to come.

World of Trump assorted links

1. “If Trump wins, what is the best theory of why?”

2. “What the hell is going on?

3. “What is neo-reaction?

4. “What are the core differences between Republicans and Democrats?

Those are my main earlier posts on the Trump phenomenon and related matters of relevance.  By the way, I say Trump and the stock market still is not a clear story.  See this too, barely down at the open compared to the close.

Trump winning: who rises and falls in status?

This is not who you may think should rise or fall in status, but rather who will:

Rise

Peter Thiel

Scott Adams

Steve Sailer

Nate Silver

Critics of Obamacare, especially those such as Megan McArdle who said it was a huge mistake to proceed with zero Republican votes

Brexiters and Ukip

Ray Fair

Jonathan Haidt

Baskets

Those who pushed for market circuit-breakers

Martin Gurri

Donald Trump

Fall

Most intellectuals and academics

Pollsters

Economists

Progressives who suggested Hillary Clinton shouldn’t compromise with Republicans or reach out to them with significant policy concessions

Lots of other people too

People who denied the “backlash” worry about high levels of immigration

Ruth Ginsburg

The media, in multiple ways

Yet even more people

People

Addendum: Scott Sumner adds comment.

What I’ve been reading

1. Ronald C. White, American Ulysses: A Life of Ulysses S. Grant.  Grant is still underrated, this book is highly readable and to the point and not to fusty.  Someone should get Paul Krugman (a Grant fan) to review this book.

2. Jeffrey Edward Green, The Shadow of Unfairness: A Plebeian Theory of Liberal Democracy.  “There will always be some plutocracy, don’t get bent out of shape too badly” is my brief summary of this one.  This book could be more readable, but it is highly intelligent.

3. Esther Schor, Bridge of Words: Esperanto and the Dream of a Universal Language.  I hadn’t known that almost all Esperanto words are accented on the penultimate syllable (bad for poetry), the system of correlatives and “table words” can be quite difficult (“It also has nine groups of word endings, not only for place but also for time, quantity, manner, possession, entity, etc.”), and how much the entire movement was influenced by the intellectual climate of late 19th century Russian Jewish thought.  Recommended.

4. Elena Ferrante, Frantumaglia.  A revealing look into the mind of the author, but this one works only if you know and love her novels already.  Ferrante’s “children’s” story The Beach at Night is worthwhile, very dark, you can read it in a small number of minutes.  Here is a good NYT review.

5. Cao Xueqin, The Story of the Stone [Dream of the Red Chamber], Penguin edition, vol.I.  I am not confident of my ability to follow along all of the longer plot lines, but it is more absorbing and readable than I had recalled from a much earlier attempt to read it.  And overall it does make upper middle class life in 18th century China seem more civilized than its counterpart in Europe.

India Surprises with a Wealth Tax on the Black Market

TheEconomicTimes: In a move to curb the black money menace, PM Narendra Modi declared that from midnight currency notes of Rs 1000 and Rs 500 denomination will not be legal tender.

In his 40-minute address, first in Hindi and later in English, the Prime Minister said the notes of Rs 500 and Rs 1000 “will not be legal tender from midnight tonight” and these will be “just worthless piece of paper.”

This is a big deal as these notes account for at least 80% of all cash in circulation! Ken Rogoff has argued for eliminating cash but this doesn’t seem to be a move in that direction since the notes will be replaced with new Rs 500 and Rs 2000 notes. Rather it seems to be a wealth tax on the black market. Old notes can be turned into a bank for replacement so ordinary people won’t lose money. People in the black market, however, probably have a lot of cash that they are unwilling to turn into a bank because they don’t want to reveal their wealth. Imagine walking into a bank and depositing a million dollars in cash–that is going to create a record that the tax authorities can follow. The wealth tax on the black market interpretation is consistent with the surprise–if people knew that this was coming they could have laundered the money but that is going to be more difficult and costly now.

It’s impressive that a government could pull off this level of secrecy. Good for Modi’s image as competent, uncorrupt and technocratic. Indians are calling it a “surgical strike on black money” which is the imagery Modi wants. But what will happen tomorrow when people don’t have enough cash to buy goods and services?

And there is another issue. Why is the black market so large to begin with? The wealth tax will punish current holders of cash but if the policies that generate the black market aren’t addressed the black market will grow again perhaps using gold, USD or bitcoin (see my addendum). It would be better to reduce barriers to entry and encourage more economic activity to move out of the black market and into the formal sector.

Hat tip on twitter to Evan Soltas and Kevin Grier for some discussion.

Addendum: Bitcoin up today.

Matt Levine wrote the best paragraph I read today

The 18th Brumaire of Donald Trump.

Is it really possible that today is the 18th of Brumaire in the French Republican calendar? (Apparently yes!) That’s a little on the nose. The date gives its name to Napoleon’s coup of 18 Brumaire, in which he seized power and ended the French Revolution. It also gives its name to Marx’s essay “The Eighteenth Brumaire of Louis Napoleon,” which famously opens: “Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce.” Hegel of course usually worked in threes, and if tragedy is the thesis and farce the antithesis, then surely the synthesis is Trump, who is at every point a perfect superposition of tragedy and farce. Anyway! It will all be over soon, maybe.

Here is the link, the pointer is from @PEG.

Will there be violence if Trump loses?

I say probably not.  Leonid Bershidsky writes:

Although some of these groups have made headlines with their gun-toting antics, the militiamen I met in Florida were more afraid and disoriented than fearsome…It’s hard to imagine [those] people…taking up arms for Trump if he loses and refuses to concede defeat. One reason is that they are not die-hard Trump fans. Another is that they’re realistic about how much power they have.

I think it is far more likely there is some additional violence if Trump wins.  Does “emboldening” or “disillusionment” encourage more aggression?  I am more afraid of too much enthusiasm for how much “change” is possible, then leading to overreaching among some of the less salubrious followers, backed by a belief that “now everything is permitted.”

In the meantime, it’s 1968, and Eddie Brinkman is stepping up to the plate to bat

Advertisers capture: Evidence from Hong Kong

I am impressed by how many very good job market papers are coming out of UCSD this year.  This work, by Onyi Lam, I expect will be some of my favorite of the entire job market season.  The underlying theme is how effectively propaganda and censorship often work through incentives and political culture, rather than outright coercion.  Here is one of the papers:

Advertisers Capture: Evidence from Hong Kong

This paper provides evidence that non-coercive political pressure on the media can be substantial. It shows that advertisers in Hong Kong engage in politically-induced advertising boycott on media that adopts a political stance which is against the mainland Chinese government policy. Using daily advertising data between 2010 and 2014, I exploit the exogenous variation of the occurrence of political events and their intensity to examine to what degree political salience affects firms’ decisions to place ads in a pro-Democracy (as opposed to pro-Beijing) newspaper, particularly so among Beijing-friendly firms. I estimate that the pro-Democracy newspaper suffered from an ad revenue loss equivalent to 21.9% of its total advertising revenue in 2014 due to political reasons.

Here is a very recent Guardian story about how the Hong Kong publishing industry is shrinking under pressure from China.  Hong Kong of course is heating up again, as China blocked two elected members from the legislature.

Here is another paper by Lam, this one being work in progress:

Measuring Subjectivity in History Textbooks (with Eddie Lin (University of Chicago))

History textbooks provide a lens through which students view the nation’s past. Government, especially that of authoritarian regime, has an incentive to present biased content in the history textbook to influence students’ political views. This paper considers the problem of measuring subjectivity history textbooks in China, Hong Kong and Taiwan. Using sentiment analysis, I find empirical evidence that history textbooks in mainland China exhibit stronger degree of subjectivity than history textbooks used in Hong Kong and Taiwan. Specifically, the paper measures the adjective content in the textbook, the ratio of positive to negative words in specific time periods and employs word embedding method that measures distance from entities of interest such as the Chinese Communist Party.

This entire topic is understudied by economists…

Monday assorted links

Election lesson: humanity needs to catch up to technology

That is the topic of my latest Bloomberg column, here is the introduction:

Each campaign season I ask myself what I have learned, and this cycle has brought more surprises than usual. Still, one theme encompasses many individual lessons, namely that the Internet as a technology has outraced our norms for using it, understanding it and controlling it, most of all in politics.

And later on:

The murkiness of these [internet and legal] issues to most voters makes it easier for the spinmeisters to turn this year’s debate into a fact-free zone. Even the participants in the election often didn’t understand what they were doing.

And:

I am also seeing friends lose control of their moods, obsessively scanning social media for the latest news or maybe hitting “refresh” 20 times a day or more on the prediction markets. We’re not even good at regulating our own use of online media.

And coming into the stretch, who had expected such a strong fear of an electoral hack by Russia, or that more than 100 pro-Trump websites are being run out of one Macedonian town?

Do read the whole thing.

Losers go to jail

That is the title of the job market paper of Mitch Downey, of UCSD, the subtitle is “Congressional Elections and Union Officer Prosecutions,” and here is the abstract:

Democratic societies rely on fair judicial systems and competitive political systems. If politicians can control criminal investigations of influential groups and use them to undermine political opponents and protect supporters, it subverts these systems. I test whether prosecutions of politically active labor unions respond to Congressional election outcomes. I use novel data on federal indictments, campaign contributions to measure support, and a regression discontinuity to recover causal effects. I find that union officers are 67% more likely to be indicted when the candidate their union supported barely loses. These indictments weaken unions’ ability to influence politics, making reelection more difficult for union-supported Representatives and easier for the union-opposed. As such, the discontinuity might reflect reduced indictments to protect election winners’ union supporters or increased indictments to target winners’ union opponents. A series of analyses suggest it includes both. The results show that US politicians manipulate the justice system to maintain power.

His other papers, at the above link, are interesting too, covering voting, labor market frictions, and also the political economy of Afghanistan.

Do voter ID laws matter for outcomes?

Not very much, and maybe not at all.  There are numerous papers on this question, with a variety of results, but this one is perhaps the most thorough and best-specified:

Got ID? The Zero Effects of Voter ID Laws on County-Level Turnout, Vote Shares, and Uncounted Ballots, 1992-2014
Abstract: Abstract Do voter ID laws disenfranchise voters? Despite a ferocious, politically charged debate in the media and public opinion, the scholarly evidence on the effects of voter ID requirements is inconclusive. In this paper, I use county-level administrative data from 1992 to 2014 and a Differences-in-Differences research design to identify and estimate the impact of voter ID laws on turnout, Democratic vote share, and irregular ballots. I find no effect of ID laws on any of these outcomes. All estimates are fairly precise and robust to a number of regression specifications. Estimates of heterogeneous effects by educational attainment, poverty rate and minority presence are similarly supportive of ID laws having no impact on electoral outcomes of any type.

That is from Enrich Cantoni, who is on the job market from MIT this year.  That is not his job market paper, however, that paper considers how much the distance to the poll influences turnout.

The Chinese Keynes vs. Hayek

IT IS not quite Keynes-Hayek, but Lin-Zhang is a marvel in its own right. Perhaps the most famous debate in the history of economics was that between John Maynard Keynes and Friedrich Hayek—a clash over the benefits and perils of government intervention that exploded in the 1930s and still reverberates today. It has echoed around Chinese lecture halls in recent months. Justin Lin, a former chief economist of the World Bank, who leans to Keynesian faith in public spending, has squared off against Zhang Weiying, a self-professed Hayekian who doubts bureaucrats can ever beat the free market.

Like their predecessors, Mr Lin and Mr Zhang have been sparring over two decades. And whereas Keynes and Hayek were down the road from each other (respectively, in Cambridge and London), the Chinese professors are now only a few paces apart, both at the prestigious Peking University. Their latest debate has been one of their fiercest, becoming a talking point for the domestic press, other academics and even officials.

Here is the full story from The Economist.  Now I am waiting for the Russ Roberts Chinese opera video…