Month: February 2017

China fact of the day

During one of the greatest economic booms in the history of the world, working-age men had trouble staying alive.

That is the disheartening news from China, where its insurance regulator recently updated a more-than 10-year-old table of mortality rates. A key finding: Mortality rates among Chinese men aged 41 to 60, who account for nearly three-quarters of the working-age population, increased by 12% over the decade through 2013, the most recent data available. This was even as mortality rates generally improved across other age groups and genders.

It could be that financial success breeds bad health habits. Disposable income per capita has risen 90% in the past six years and probably more than that over the past decade, though official government data is limited. Chinese liquor consumption—where men consume 60% more than women—has risen 5% compounded annually over the past 15 years, considered fast by global standards, according to Bernstein analysts. Richer diets go along with high incidence of lung and coronary issues for Chinese men.

That is from Anjani Trevedi at the WSJ, via the always-interesting Dan Wang.

Summers on Arrow

Larry Summers reflects on Ken Arrow with a memory that captures well the academic life. I had similar experiences watching my father, a professor of mechanical engineering, interacting with his students in our home.

My mother’s brother, the Nobel economist Kenneth Arrow, died this week at the age of 95. He was a dear man and a hero to me and many others. No one else I have ever known so embodied the scholarly life well lived.

I remember like yesterday the moment when Kenneth won the Nobel Prize in 1972. Paul Samuelson—another Nobel economist and, as it happens, also my uncle—hosted a party in his honor, to which I, then a sophomore at MIT, was invited. It was a festive if slightly nerdy occasion.

As the night wore on, Paul and Kenneth were standing in a corner discussing various theorems in mathematical economics. People started leaving. Paul’s wife was looking impatient. Kenneth’s wife, my aunt Selma, put her coat on, buttoned it and started pacing at the door. Kenneth raised something known as the maximum principle and the writings of the Russian mathematician Pontryagin. Paul began a story about the great British mathematical economist and philosopher Frank Ramsey. My ride depended on this conversation ending, so I watched alertly without understanding a word.

But I did understand this: There were two people in the room who had won Nobel Prizes. They were the two people who, after everyone else was exhausted and heading home, talked on and on into the evening about the subject they loved. I learned that night about my uncles—about their passion for ideas and about the importance and excitement of what scholars do.

The repeal of China’s one-child policy isn’t mattering very much

Crude birth rates in Guangxi and Gansu edged down in 2016 from a year earlier. Both poor, western provinces have a large share of ethnic minorities, who were already exempt from the one-child policy, but are now assimilating the low-birth habits of the richer ethnic Han majority.

More surprising are the minuscule birth rate increases in China’s heartland. In Jiangxi province, the birth rate ticked up from 13.2 births per 1,000 people in 2015 to 13.45 last year, while in central Shaanxi province the rate rose from 10.1 to 10.64. The overall number of women of childbearing age has declined, meaning the potential impact of looser policy is limited, but changing social norms also play a role.

Here is more from Gabriel Wildau in the FT.

The culture of culture that is French

A French artist is preparing to be entombed for a week inside a 12-tonne limestone boulder in a modern art museum in Paris, after which he will emerge and attempt to hatch a dozen eggs by sitting on them for weeks on end.

…He once spent a fortnight inside a stuffed bear, was buried under a rock for eight days and navigated France’s Rhone river inside a giant corked bottle.

…He also played at being a human mole, and crossed France on foot in a straight line with a friend.

As for the entombment:

The only mystery is how he will go to the toilet, with the artist becoming uncharacteristically evasive when pressed on the subject.

Here is the article, via Anecdotal.

Friday assorted links

Is the border adjustment tax a good idea?

Probably not, so say Fichtner, de Rugy, and Michel, here is one bit:

The efficiency claims of proponents rely on several key assumptions that are required for the tax to be non-distortionary. Mainly, the border adjustment must be implemented completely, and international currency markets must fully adjust. For example, the US dollar would need to appreciate by 25 percent to offset a proposed 20 percent import tax and export subsidy.

The academic and policy debate on DBCFTs is generally fragmented, overly confident, and lacking in evidence, as there are no real-world examples of a destination-based cash flow tax. In this paper, we explore just a few of the most pressing questions that threaten to undermine the theoretical benefits of such a reform. Given the uncertainty and large downside risk to a DBCFT, we conclude that the proposal is not yet ready to be implemented and policymakers should focus on more traditional and straightforward reforms.

There is additional concern that the proposed reforms, as currently understood, would not meet the trade neutrality standards of the WTO.

And this:

…the preponderance of evidence seems to show that currencies don’t adjust as theory would predict. Two academic analyses show that VATs do alter international trade by reducing trade volumes, contrary to standard economic models that predict no effect on trade flows. Real-world imperfections in the design and implementation of VATs, such as imperfect border adjustments, are likely to fall more directly on traded goods over others. In a higher-level analysis, Rogoff explains “the extent to which monetary models (or indeed, any existing structural models of exchange rates) fail to explain even medium-term volatility is difficult to overstate.” The economics profession’s understanding of exchange rates is so “mediocre” that our models fail to outperform random walk models—a model that assumes we can’t predict the future.

Since the DBCFT was proposed, many private-sector analyses have supported the academic literature that finds currencies do not always fully adjust. Morgan Stanley research expects that a DBCFT would have a significant impact on foreign exchange markets. It concludes that the dollar could appreciate by 10 to 15 percent, but that real-world frictions and uncertainty around WTO eligibility would keep exchange rates from fully adjusting. Citigroup research projects a 14.6 percent rise in the real effective exchange rate three years after DBCFT implementation, finding that “slow real exchange rate adjustments are the historical norm.”

Proponents who claim that DBCFTs do not effect domestic savings-to-investment decisions are at odds with others who describe the proposal as a consumption tax.

Here is the full piece.

Are the Articles of Confederation underrated?

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

But I would say that the Articles, for all their formal flaws, are badly underrated. They are a brilliant construction for a power vacuum, given that the relevant parties in the 1780s couldn’t agree on very much, but nonetheless needed some path forward.

In other words, think of the Articles as an early business plan or charter for a startup. The point isn’t to get everyone’s roles and responsibilities right on first crack, but rather to make sure that the institution survives and that continued growth is possible.

By this metric, the Articles were an unprecedented success. Keep in mind that many European thinkers of the time thought that America was hopelessly disunited and that its system of government was due to collapse. The Articles proved them wrong by serving as a bridge from the Revolution to the later development of America as a fully fledged nation.

It is sometimes forgotten just how fruitful the Articles period was for laying the foundations for the further growth of the country. A system of relatively egalitarian and transferable property rights was codified for the settlement of external lands. Most importantly, the Northwest Ordinance of 1787 determined that future settlements could be incorporated into the country as states rather than subordinate territories or colonies. The independence and sovereignty of the initial founding states allowed them to support such policies, without fearing much dilution of their power or influence.

Alas I did not have the space to consider either Native Americans or slavery in the column.  National expansion was of course in general bad for Native Americans.  Slavery is a trickier matter, however.  Since the Articles gave states stronger rights, it may seem like they must have been bad for slaves.  But is that true?  Under the Articles, precisely because states’ rights were stronger, it might have been easier to create more free states on the rest of the continent.  I would judge the comparison as uncertain, plus we know the history with the Constitution involved an extremely bloody civil war.

The column has much more, including a discussion of the EU and also the emoluments clause in the Articles, do read the whole thing.

Israel’s omission from airline route maps

That is the subject of a new paper by Joel Waldfogel and Paul M. Vaaler, here is the abstract:

While product differentiation is generally benign, it can be employed to discriminate against customer groups, either to enhance profitability by appealing to discriminatory customers or in unprofitable ways that indulge owners’ tastes for discrimination. We explore discriminatory product differentiation in the airline market through airlines’ depiction of Israel on their online route maps and whether their online menus include kosher meal options. We first show that several international airlines omit Israel from their online route maps. Three of these airlines are members of the major international airline alliances. With data on over 100 airlines, we then document that Israel map denial is more likely for airlines with passengers from countries exhibiting greater anti-Semitism. Owner tastes also matter: denial is more likely for state-owned airlines in countries that do not recognize Israel. Kosher meal options on online menus follow similar patterns, suggesting anti-Semitic rather than anti-Zionist motivations. Israel denial does not reduce the probability of alliance membership with alliance leaders having few airline alternatives to choose from in the Middle East.

For the pointer I thank the excellent Kevin Lewis.

Thursday assorted links

1. A modeled argument, by Daniel Susskind at Oxford, that technological unemployment will be worse than you think.

2. Oldie but goodie: Iceland’s natural experiment in supply-side economics (pdf).

3. “Escaped livestock are relatively common in New York City, which is home to dozens of slaughterhouses.”  Location economics are usually a bit stranger than you think, link here.

4. Ted Lowi has passed away.

5. Will a revised Trump travel ban hold up?  And Cass Sunstein is recovering from his car accident.  But thinks there should be fewer of them.

*Time* magazine adaptation from *The Complacent Class*

Here is one paragraph:

Here is this change in a single number: The interstate migration rate has fallen 51 percent below its 1948–1971 average, and that number has been falling steadily since the mid-1980s. Or, if we look at the rate of moving between counties within a state, it fell 31 percent. The rate of moving within a county fell 38 percent. Those are pretty steep drops for a country that has not changed its fundamental economic or political systems. You might think that information technology (IT) would make it easier to find a job on the other side of the country, and maybe it has, but that has not been the dominant effect. If anything, Americans have used the dynamism of IT to help ourselves stay put, not to move around.

Here is the rest of the piece.  It is not mainly about age demographics, and we have in fact outsourced much of our geographic mobility to immigrants.

The real assimilation dilemma

Much of the immigration debate has focused on assimilation rates for second and third generation Latinos.  But put that aside and consider the rest of the arrivals.  It is striking to me how very rapidly they assimilate, and I don’t just mean the Canadians (on a given day, could you tell which of the writers of this blog is from north of the border?).  I mean the Russians, the Iranians, the Chinese, the Indians, and many others, including most of the Muslim immigrants.  They don’t become culturally identical to the native-born, but in terms of economic and social indicators, you couldn’t ask for a much better performance.

The assimilation problem in fact comes from the longstanding native-born Americans, often of more traditional stock.  The country around them has changed rapidly, and they do not assimilate so well to the new realities.  And since they are not self-selected migrants who know they will face hardship, they are not always so inclined to internalize a “suck it up” kind of attitude.  Many complain, others settle into niches of failure or mediocre careers.

In this regard, encouraging the actual arriving immigrants to assimilate better or faster can make the actual assimilation problem worse, because it will change the home culture more rapidly too.

Often, the real impact of immigration is not on wages or electoral outcomes, but it is the assimilation burdens placed on some of the longer-standing traditional natives of the home country.  And the more productive and successful the immigrants are, the more serious these problems may become.

I am grateful to the Cato liberaltarian group for a discussion of this issue; I have drawn on remarks from that dialogue, including from Will.

Department of Uh-Oh, a continuing series, the drone wars have begun

Late last month, a pair of Islamic State fighters in desert camouflage climbed to the top of a river bluff in northern Iraq to demonstrate an important new weapon: a small drone, about six feet wide with swept wings and a small bomb tucked in its fuselage.

The two men launched the slender machine and took videos from a second, smaller drone that shadowed its movements. The aircraft glided over the besieged city of Mosul, swooped close to an Iraqi army outpost and dropped its bomb, scattering Iraqi troops with a small blast that left one figure sprawled on the ground, apparently dead or wounded.

The incident was among dozens in recent weeks in a rapidly accelerating campaign of armed drone strikes by the Islamic State in northern Iraq.

The terrorist group last month formally announced the establishment of a new “Unmanned Aircraft of the Mujahideen” unit, a fleet of ­modified drones equipped with bombs, and claimed that its drones had killed or wounded 39 Iraqi soldiers in a single week.

Here is the full story by Joby Warrick.

Wednesday assorted links

Will Germany turn its back on neo-liberalism?

Perhaps the revolt is spreading east:

…in a speech in the north-western city of Bielefeld on Monday, Mr Schulz, the former president of the European Parliament, said the reforms needed to be corrected. Germany had seen an increase in insecure and badly paid jobs, “even in parts of the labour market that used to be well protected”, he said. There was less social mobility and growing inequality — the fault of a “neoliberal mainstream” that had declared workers’ rights and social welfare to be “obstacles to growth”.

…Mr Schulz’s speech was short on detail. But he was particularly critical of fixed-term work contracts, as well as restrictions on unemployment benefit. Before Agenda 2010, a worker could receive such handouts for up to 32 months after losing his or her job: afterwards, that was reduced to a maximum of two years.

That is from Guy Chazan in the FT.