Month: December 2016
Ever since busloads of Chinese tourists began arriving in this sleepy, nondescript English village this summer, the 13,723 residents of Kidlington, about five miles north of Oxford, have been variously baffled, annoyed and delighted.
The sudden influx of Chinese has also grabbed headlines and spawned a national mystery.
Why, for example, do the Chinese tourists ignore the village’s handsome 13th-century church and its thatched-roof cottages, preferring instead to peer through windows, film parked cars and traipse on the lawns of Benmead Road, a humdrum and modern residential street? One tourist asked a stunned resident if he could help mow her lawn. (She politely declined.) Another jumped joyously on a child’s trampoline in the front yard.
No one seems to know why, read more by Dan Bilefsky at the NYT.
Addendum: See this possible “limits to arbitrage” explanation.
I liked this recent Tim Duy post, the one that is everyone is talking about. Do read the whole thing, but here is the closing bit:
We don’t have answers for these communities. Rural and semi-rural economic development is hard. Those regions have received only negative shocks for decades; the positive shocks have accrued to the urban regions. Of course, Trump doesn’t have any answers either. But he at least pretends to care.
Just pretending to care is important. At a minimum, the electoral map makes it important.
These issues apply to more than rural and semi-rural areas. Trump’s message – that firms need to consider something more than bottom line – resonates in middle and upper-middle class households as well. They know that their grip on their economic life is tenuous, that they are the future “low-skilled” workers. And they know they will be thrown under the bus for the greater good just like “low-skilled” workers before them.
The dry statistics on trade aren’t working to counter Trump. They make for good policy at one level and terrible policy (and politics) at another. The aggregate gains are irrelevant to someone suffering a personal loss. Critics need to find an effective response to Trump. I don’t think we have it yet. And here is the hardest part: My sense is that Democrats will respond by offering a bigger safety net. But people don’t want a welfare check. They want a job. And this is what Trump, wrongly or rightly, offers.
In part this is a question about helping these communities but if you read the whole post it is also about checking or preventing Trump and Trumpism. My main disagreement is simply with the view that a solution is difficult. It is not, rather most people are unwilling to accept the solutions on the table. In fact I have a more or less bulletproof two-part remedy. I’ll phrase it in backward-looking terms, but it is not hard to divine the forward-looking implications, noting that in the short term we have the president-elect we have no matter what. Here goes:
1. In 2012, have five percent of Democratic voters switch their support to Mitt Romney, so that Romney is elected. You don’t have to think Romney would be a better president than Obama has been, but a Romney election almost certainly would have forestalled the rise of Trump. The worse you think Trump is, the more you should support this kind of “change we can believe in.”
If you don’t favor this retrospective change, you’re not very pragmatic (or you might really like Trump), perhaps preferring to consume your own expressive views than to improve the world. That’s a common enough preference, and maybe it is even morally OK, but let’s recognize it for what it is: a deliberate lack of interest in solving the major problem before us, instead preferring to focus on your own feelings. It’s not that different than the wealthy wishing to keep their tax cuts. And if your response is something like “But the Republicans started this whole mess, why should I reward them?”, well, that is yet another sign you are far from the pragmatic, reality-oriented perspective. At the very least, you should be regretting that you did not vote for Romney. Unless of course you did.
A complement to this strategy, looking forward, is to have the Democrats run more conservative candidates, including those with a more conservative cultural garb. They still can support a social safety net. And, my friend, if you are tempted to suggest that Hillary Clinton was such a candidate, you need to attend Ross Douthat University for remedial lessons.
Another way to put this point is that Democrats (and some others) need to become more like the more sophisticated libertarians, namely to realize you won’t win but need to settle for what you can get. At least increase your “p” that is the case, as the European left is finally starting to do. I know that comes hard, but again our country is at stake. And there is a lesson for libertarians too, more or less in the same direction, namely that potential backlash to libertarian ideas is stronger than we had thought, even for those with a fairly weak libertarian bent, and thus there is less absolute scope for their realization. Sad!
Many progressives and libertarians have one thing in common, namely assuming that human affairs can be more governed by reason than ever will be the case.
2. Support a voluntary temperance movement for zero alcohol, zero drugs. No exceptions. Make these commodities less socially available, less widely advertised, less diverse in supply, and less glamorized on television and in the movies. Take away the demand, and along the way praise Islam and Mormonism for their stances on this.
That’s so simple, isn’t it? No one argues that the Rust Belt communities and the like are unacceptably “income poor” by global standards, rather they have wrenching social problems. A temperance movement, insofar as it succeeds, would eliminate a significant share of those tragedies. It would mean less alcoholism, fewer opioid addictions, less crime and spouse beating, and so on. Consider the impact of this on America’s inner cities as well. It’s hard to estimate how many of the problem users would stop if say 70 percent of America went “cold turkey,” but surely we should give this a try. For instance, even less educated Americans smoke at much lower rates than they used to.
Do you really care about suffering Americans? The answer is staring you right in the face, but are you brave enough, altruistic enough, and contrary enough to embrace it? Again, you might like your evening glass of wine, or joint, but that is also like the wealthy seeking to keep their tax cuts. It really is the same logic, like it or not.
From another direction, here are comments from Paul Krugman. I agree with most of what he says, though I would stress the points above.
Yes, I absolutely favor enforcing clear commercial conflict of interest regulations on any president, if only for reasons of perception and legitimacy. But may I quote Alex T. from way back when (2010, the rest of the passage is him note I am not double indenting)?
Bloomberg: Your senator learns that a much- maligned weapons system now has enough votes for funding. Before the news gets to a reporter, he buys shares in the arms manufacturer for a quick, handsome profit.
What’s wrong with this picture? Nothing, according to the law…
U.S. senators, representatives and congressional staffers routinely attend high level, closed briefings or engage in conversations where secrets are disclosed that might send shares climbing or slumping if widely known.
That access lets them buy low and sell high based on material, non-public information, and they can do it without concern that their remarkable prescience will alert federal investigators of possible wrong doing.
Insider trading in Congress is not new. In 2004, I wrote about a study showing that the portfolios of US Senators “outperformed the market by an average of 12 per cent a year in the five years to 1998.” [TC: this result of superior returns doesn’t seem to have held up.]
Hat tip: The Browser.
TC again: From me, here is a 2013 update:
The Senate has severely scaled back the Stock Act, the law to stop members of Congress and their staff from trading on insider information, in an under-the-radar vote that has been sharply criticised by advocates of political transparency.
The changes, if they become law, will exclude Congressional and White House staff members from having to post details of their shareholdings online. They will also make online filing optional for the president, vice-president, members of Congress and congressional candidates.
The House was expected to pass a similar bill on Friday.
Current TC again: And here is Alex’s update from 2011. And here is a 2015 update: “Congress tells court that Congress can’t be investigated for insider trading.” I am not sure where such cases stand as of December 2016, please tell us if you know.
On this whole matter, please don’t accuse me of asserting “false equivalence,” (one of the weakest charges you hear in current debates and usually a sign of sloppy thinking), I am not saying all these practices are equivalent. But neither a comparison nor an analogy requires equivalence. I find it striking how many people are discussing this issue, and treating the administration-to-come as the end of democracy and the onset of rampant corruption, without noticing…etc.
File under: Conflicts of interest for me, but not for thee…
In an important paper in the latest AER, Das, Holla, Mohpal and the excellent Karthik Muralidharan compare private and public health care in India. (I once asked, “Is any economist doing more important work with greater potential for real improvement in the lives of millions than Karthik Muralidharan?” See previous posts on Karthik’s work for the answer.)
The AER paper examines health care in villages in Madhya Pradesh, one of the poorer states in India (GDP per capita of $1,500 PPP). In India, primary health care is ostensibly available for free from public health clinics and hospitals manned by professionally trained nurses and physicians. As with teachers at public schools, however, it’s very common for doctors at public clinics to be absent on any given day (40% were absent on a given day in 2010) and public clinics are not highly regarded. As a result, some 70% percent of primary care visits nationally–and an even higher percentage in Madhya Pradesh–are to private, fee-charging health-care providers. Most of the private providers do not have a license or medical degree although they may have some health-care training.
The authors sent trained actors, “standardized patients” to public and private clinics to evaluate provider effort and accuracy in response to the presentation of textbook symptoms of common illnesses (angina, asthma, and dysentery in a child at home). Standardized patients are used to train medical students in the United States and in India and the Indian SPs were trained by professionals including medical doctors, and a medical anthropologist familiar with local forms of presenting illnesses and symptoms.
The first result is that the provision of health care is uniformly and distressingly poor. Overall, only 2.6% of patients received a correct treatment (and nothing unnecessary or harmful). The private providers, however, exert much more effort than do the public providers. The private providers, for example, perform more items on a standard checklist and they spend more time with patients. But the private providers are no better than the public providers at giving a correct treatment. Why not?
Private providers exert more effort but are less knowledgeable. Loosely we might say that Quality=Effort*Knowledge. Private providers put in more effort but have less knowledge and public providers have more knowledge but put in less effort leading to similar quality levels overall.
There is one big difference, however, between the public and private regimes, the private regime is much less socially costly. Since costs are lower and the quality level is the same, the private system is much more productive. The authors note:
…our estimates suggest that the public health care system in India spends at least four times more per patient interaction but does not deliver better outcomes than the private sector
(FYI, this also holds true for public and private schooling in India and around the world. Private schooling is usually somewhat better or about as good as public schooling but much less costly so the productivity of private schooling is much higher.)
To focus on the issue of market incentives rather than knowledge the authors do a second set of remarkable tests. Indian doctors often work in a public and a private practice. Thus, the authors send standardized patients to the same doctors but in one case the patient is treated under the public regime and in other under the private, market regime. Once knowledge is controlled for the results are very clear, private, markets dominate the public regime.
…treatments provided in the private practice strictly dominate those provided in the public practice of the same doctor. The rate of correct treatment is 42 percent higher (16 percentage points on a base of 37 percent), the rate of providing a clinically non-indicated palliative treatment is 20 percent lower (12.7 percentage points on a base of 64 percent), and the rate of antibiotic provision is 28 percent lower (13.9 percentage points on a base of 49 percent) in the private practice relative to the public practice of the same doctor.
The bottom line is that the private market for health care is much bigger and less expensive than the public health regime in rural India and once we control for knowledge it’s of higher quality. These results have important implications for reform. In particular, much more effort should go into improving the knowledge of the private sector.
….the marginal returns to better training and credentialing may be higher for private health care providers who have stronger incentives for exerting effort. Current policy thinking often points in the opposite direction, with a focus on hiring, training, and capacity building in the public sector on one hand (without much attention to their incentives for effort), and considerable resistance to training and providing legitimacy to unqualified private providers on the other.
That is the subject of my new Bloomberg column, here is one bit:
My second recommendation is to restore fully the ability of the NEA to make grants to individual artists, thereby undoing changes that were made in 1994. That would diminish the role of the middlemen and support artists rather than art museums. This too has the potential to boost creativity, as large institutions with overhead tend to be more artistically conservative than individual artists or arts groups. Such a change would take the NEA back to its earliest and arguably most effective period near its origin in 1965, when it supported creators such as Alvin Ailey, Merce Cunningham, George Segal, Ed Ruscha and William Gaddis (all grant recipients in the first year alone), among other luminaries.
You may recall that there is a reason why the NEA moved away from making grants to individual artists. The agency had supported several artists and art projects that displayed nudity or other images that many people considered pornographic or offensive. At the time, Congress did not wish to be affiliated so directly with such expressions of the human creative impulse. Therefore grants were shifted to higher-level arts institutions, with the understanding that the institutions would not embarrass the federal government in this manner.
Is it possible that, under the forthcoming administration, this embarrassment constraint has eased somewhat?
I also call for stopping the transfers of the National Endowment for the Arts to the state arts agencies, on the grounds that federal arts taste usually is superior.
Do read the whole thing.
Happy holidays to all our viewers and readers! Our holiday video covers the economics of gift giving. When is gift giving wasteful? When does gift giving generate value? What are the knowledge problem and the incentive problem and how does this apply to charity? It’s a great conversation starter for economics classes. Enjoy!
P.S. Happy Sinterklaas!
I don’t want to give you spoilers, so I’ll put key points behind links — read them at your peril. The ending of last night’s finale reminded me of this historical episode in 1804. Bernard reminds me of this Haitian figure, this fellow too. Anthony Hopkins is an updated version of the impresario from this 1932 movie. As for the Hosts:
Haitian slaves believed that dying would release them back to lan guinée, literally Guinea, or Africa in general, a kind of afterlife where they could be free. Though suicide was common among slaves, those who took their own lives wouldn’t be allowed to return to lan guinée. Instead, they’d be condemned to skulk the Hispaniola plantations for eternity, an undead slave at once denied their own bodies and yet trapped inside them—a soulless zombie.
Zombies can change their “status” through a number of means. Don’t show them the ocean!
And that symbol everyone is always asking about and trying to discern the meaning of? That is a vevé, obviously.
And to frame the whole thing, here is Hegel on the master-slave dialectic.
2. The forthcoming Parag Khanna book on American democracy. And 80,000 Hours, your career can make the world a better place.
6. The argument that the Italian bank situation is manageable. Brad Setser adds on Twitter: “Challenge for Italy never size of recap. It has been managing politics of retail bail-in required alongside recap by state aid rules/ BRRD”
Two years ago, the New Mexico Department of Transportation decided to spice up a particularly desolate stretch of Route 66 between Albuquerque and Tijeras by adding grooves in the road that will play music when you drive over them. If you drive the speed limit of 45 mph for the quarter-mile stretch, you can hear “America the Beautiful” play through the vibrations in your car’s wheels.
The grooves in the road work just like the rumble strips or “drunk bumps” that vibrate your car when you start to drift out of your lane. But these rumble strips are precisely positioned to create different pitches when you drive over them. The result? The notes to “America the Beautiful” rising from the bottom of your car.
Though I guess it means travel speeds are not really going up…
The pointer is from Peter Metrinko.
The dimensions of China’s liquidity splurge are startling. Ousmène Jacques Mandeng, formerly with the International Monetary Fund, has calculated that between 2007 and 2015 China created 63 per cent, or $16.1tn, of the growth in the world’s supply of money.
That is from James Kynge at the FT. Italy could use some of that nominal gdp right now…
From Meg Greene, here is the clearest explainer I have seen, here is one short excerpt:
There are clear reasons to vote for and against the constitutional reform. If only most Italians were actually voting with these in mind! According to one recent survey, only one in ten Italians were going to cast their ballot in response to the actual constitutional reform proposed. Because Prime Minister Renzi said he would step down in the event of a “No” vote, many Italians are casting their vote in favor of or against the establishment. Voting against the establishment means a lot of things, but given that the main opposition party, the Five Star Movement (M5S), has polled neck-and-neck with the governing Democratic Party (PD) this year it amounts to tacit support for this populist, anti-elite, anti-European party.
There is much more at the link, here is one significant point:
If the “Yes” vote wins on Sunday, Mr. Renzi will be strengthened in the short term but, given the Italicum, could be weakened in the next election. The result may be a government led by the M5S that may pursue a referendum on Italy’s membership of the Euro.
We will soon know more…
Here I am referring to your personal plans, not to climate change. The weather can make your current circumstances seem more difficult or less pleasant. But extreme weather also tends to make your memories of journeys stronger and more lasting (“…remember that time in Goa when the monsoon came earlier than anyone thought…”). Since we overemphasize the maximization of current utility, and under-invest in the creation of significant memories, we worry too much about the weather.
3. Martha Argerich.
4. Octopuses and the puzzle of aging (NYT).