Month: September 2017

Saturday assorted links

1. How secure is biometric identification?

2. Henry on the national anthem.

3. “Canada MPs to loosen penalties for drunks in kayaks.”  That said, “Drinking while flying a hovercraft would remain an offence.”  Do note that “An estimated 40% of the boating-related accidents in Canada involve alcohol consumption as a factor.”

4. Matt Levine on “Insider Tainting,” and other matters.

5. Hand, lion’s den, scale matters.

No liquidity trap in Puerto Rico

Fewer than half of Puerto Rico’s bank branches and cash machines are up and running, still crippled by diesel shortages, damaged roads and severed communications lines. Bank officials say they are struggling even to find employees who can get to work when there is no public transportation and gasoline is hard to find.

Across the island, people who have spent their last dollars on an $8 bag of ice or $15 for gasoline are waiting for hours outside banks and A.T.M.s in hopes of withdrawing as much money as possible.

That is from Jack Healy at the NYT.  How about a literal helicopter drop of newly minted cash?

At a more general level, if the mainland were trying harder with its rescue efforts, where would the binding constraint be?  Here are a few possible candidates:

1. Port capacity

2. Ability to land helicopters

3. Ability of the helping forces to organize enough generators

4. Ability to fuel generators

5. Ability to rationally allocate food and other vital resources without enough money and decentralized markets

6. Ability to transport troops and other forces of assistance around the island

7. Data

8. Something else?

Raghuram G. Rajan’s *I do what I do*

The title is apt, the book was published in India, and the excellent Rama Rao was so kind as to send me a copy.  It is a collection of columns and memos, many published in India and covering the economic affairs of India.  It’s a good way to get a look at what Raghu “really thinks,” at least as filtered through the media while he is central banker or earlier working at the IMF.  He writes directly, gets frustrated at people who don’t understand the rate of inflation, favors central bank independence, is skeptical about how much foreign aid can drive growth, and with Luigi Zingales tells us that “Capitalism Does Not Rhyme with Colonialism.”

Here are various Indian reviews.  Here is the link to Amazon India.

The long-term effects of American Indian boarding schools

That is a new paper by Matthew T. Gregg, forthcoming in Journal of Development Economics.  Here is the abstract:

This paper explores some long-standing questions of the legacy of American Indian boarding schools by comparing contemporary Indian reservations that experienced differing impacts in the past from boarding schools. Combining recent reservation-level census data and school enrollment data from 1911 to 1932, I find that reservations that sent a larger share of students to off-reservation boarding schools have higher high school graduation rates, higher per capita income, lower poverty rates, a greater proportion of exclusively English speakers, and smaller family sizes. These results are supported when distance to the nearest off-reservation boarding school that subsequently closed is used as an instrument for the proportion of past boarding school students. I conclude with a discussion of the possible reasons for this link.

And this is from the paper’s conclusion:

Last, the link drawn here between higher boarding school share and assimilation should not be misinterpreted as an endorsement of coercive assimilation. Unobserved costs generated by the first generation of students might outweigh the estimated gains in long term assimilation. The program itself was extremely costly, which is one of the reasons for the change in policy towards on-reservation schooling during the 1930s. These results do, however, suggest that the assimilation gains from boarding schools are sizable, but, due to data limitations, this study does not reflect a complete assessment of the trade-offs of boarding school attendance.

Here are earlier ungated versions.  For the pointer I thank the excellent Kevin Lewis.

Facts and observations about the Jones Act

1. In 2011, 67 percent of the vessels operating in the Port of San Juan were foreign flag vessels, often Panamanian.  Of course they were not carrying cargo from the United States.  That limits the economic costs of the Jones Act, but also implies it doesn’t do much to keep up U.S. shipbuilding for military purposes.  I found this GAO report useful.

2. How can we achieve the military purposes of the Jones Act?  Some observers recommend direct subsidies, but those are much more costly and furthermore require targeting and thus a more specific brand of crony capitalism.  We tried such subsidies in the past and abandoned them due to cost.

3. China, South Korea, and Japan account for over 91 percent of the flow of new ships, circa 2015.  That is sourced from this Mercatus study, by Thomas Grennes, which is the best piece I’ve found on the Jones Act and also the source for the points to follow.

4. What counts as an “American ship” for Jones Act purposes is not always defined or enforced very rigorously.  If deep trouble were to hit East Asia, it might not be possible to expand the production of American ships very much, because of reliance on foreign components.

5. In 1960, there were 2,926 large ships in the U.S. fleet, now there are only 169 such ships.  And of those, only 91 are Jones-Act eligible.

6. Wages on American ships are five times higher than on comparable foreign-flag vessels.  The crews for the latter are often Filipino or Chinese.  Part of the Jones Act motivation is to have surge capacity on the crew side, not just on the shipbuilding side.

7. The cost of producing new ships in American shipyards is four to five times higher than in the relevant foreign shipyards.

8. Given changing share ownership, we don’t even know if “American-owned” ships, for Jones Act purposes, are necessarily American-owned or controlled.

9. John McCain introduced a bill to repeal the Jones Act as long ago as 2010.  He has argued the Act serves no useful military purpose, as it still does not leave America with a useful “surge capacity” for military purposes.  This problem remains outstanding.

10. Trump did just temporarily waive the Jones Act for Puerto Rico.  While this is to be applauded, in the short run this still won’t help very much, as the main problem is transport and infrastructure on the island, not shipping per se.

Me on the Thucydides Trap and North Korea

I’m not by any means convinced that conflict [between China and America] is inevitable. I don’t believe in the Thucidydes Trap, and here’s why not. North Korea so far has been China’s thorn in our side. I feel that’s flipped. Chinese public opinion has flipped. Opinion within the Chinese government is in the middle, but has been changing a lot. China would like to undo the current North Korea situation but they don’t know how to do it in a way that doesn’t harm their national interests. North Korea will become our thorn in China’s side over time, pretty quickly. And so if there’s North Korea and a rearming and maybe eventually someday nuclear Japan, and also India, the first line of China containment is India, North Korea (oddly enough) and Japan. I don’t know how that will go, but it’s a kind of buffer between China and us, it can be a force that pulls us into conflict, it could be a kind of buffer that allows us to stay somewhat removed from it.

That is from my dialogue with Bill Kristol, the transcription (with commentary) is from Sam Roggeveen.  He also transcribes this bit:

…for the first time in my life time, in a way the first time ever, America finally has a peer country. The Soviet Union was a peer with its nuclear weapons but not in general. But in terms of human talent, GDP, China right now is in most ways a peer country to the United States. We’re not ready for that, mentally or emotionally.

Draft animals as common property

The full title is “There Will Be Killing: Collectivization and Death of Draft Animals,” by Shuo Chen and Xiaohuan Lan.  Here is the abstract:

The elimination of private property rights can lead to inefficient use of productive assets. In China’s collectivization movement from 1955 to 1957, instead of transferring draft animals to the ownership of the collectives, peasants slaughtered them to keep the meat and hide. By comparing 1,600 counties that launched the movement in different years, the difference-in-differences estimates suggest that the animal loss during the movement was 12 to 15 percent, or 7.4–9.5 million head. Grain output dropped by 7 percent due to lower animal inputs and lower productivity.

Here are earlier, ungated copies.

*Adam Smith: Systematic Philosopher and Public Thinker*

That is the new, excellent, and detailed book by Eric Schliesser, a political scientist at Amsterdam.  I would say that Schliesser is a very learned “left Smithian,” and that you should take the subtitle very very seriously.  Here is one excerpt:

1. I argue that while Smith certainly took experience and empirical science seriously, he should not be understood as a empiricist in epistemology and his moral epistemology; he relies crucially on innate ideas and innate mental structure.

2. This book gives the first extensive (albeit not exhaustive) study and taxonomy of Smith’s theory of the passions, which I treat as elements of his system (cf. Hume’s treatise  In fact, I argue that the content of a social passion is inherently normative in Smith’s approach.

3. I argue that Smith is decidedly reserved about deploying mathematics within his political economy.

4. I argue that Smith’s account of liberty should not be identified with the so-called liberty of the moderns, or freedom of contract.  While Smith certainly was a defender of freedom of contract, his account of liberty is more expansive (and more attractive).

Sometimes I draw a distinction between “branching” books, whose arguments spread out in many different directions and draw many distinctions, and “channeling” books, which try to put the material into a narrower, common framework.  (Reading each requires quite distinct sets of skills!)  This is a branching book.  You can order it here.

I thank my colleague David Levy for the pointer to this work.

Can an independent Puerto Rico work out?

I don’t think so, here are a few points:

1. Any deal would involve a transition period.  During that period, many more Puerto Ricans would move to the mainland than if there were no deal.  You may or may not think that is a good outcome, but it is not exactly what the “cut them loose” proponents have in mind.  “Let’s make Puerto Rico independent so we can have more Puerto Ricans in the United States” is not a winning rally cry for anyone.

2. The Caribbean as a region has been doing dismally for a few decades now.  Puerto Rico is by far the wealthiest part of the Caribbean, small tax and finance havens aside.   Without a connection to the United States, Puerto Rico might regress to Dominican Republic levels of income, GNI of roughly 24k vs. 15k.

3. The best thing about independence is that the deal might allow a “pure default” by the Puerto Rican government.  Still, that could be arranged under a version of the status quo.  Default plus independence would shred the Puerto Rican safety net at least for a few years, perhaps forever.  If you think their future is one of falling per capita income, that safety net never would recover.  You might believe that such a safety net is in some ways holding Puerto Rico back (true), but if the natural trajectory is to lose both population and per capita income, removing that safety net won’t do much good either.

So it’s simply not clear what is to be gained from independence.  On top of that another referendum would be needed, given that Puerto Ricans have rejected the notion in the past.  What if they still opt for a continuing attachment to the mainland?  That process then will have produced a few years of electoral uncertainty, with no change in the final outcome, as if the UK suddenly decided to reverse its Brexit decision.

Puerto Rico is very likely to remain a part of the United States, one way or another.

My philosophy of interviewing

After I do Conversations with Tyler interviews, I receive emails telling me I should have “stuck it to person X,” rather than “letting them off the hook,” etc.  “How could you not refute them on that topic!”  And so on.  Just to be clear, here is my underlying attitude behind the series:

1. Appreciation is an underappreciated art and skill.  These interviews are most of all about appreciation.

2. I hope to teach people how to learn from other people.

2a. For one thing, you can learn from what the interviewed person says, whether or not you agree with it.  In fact, you do better if you don’t focus on whether or not you agree with it.

2b. You also can learn something through a better understanding of how the person built his or her career into a success, and usually I ask something explicitly along these lines.  The broader conversation is implicitly all about this, of course.

2c. You also can learn something about how I try to learn from these people.  And that is the part of the conversation I have the most control over.  I am trying to teach the art of learning, and that art involves less rather than more contradicting and gainsaying.

3. Follow-up questions are overrated.

4. You want the interviewed person to be maximally open and relaxed, to bring out a steady stream of their best content.

5. If I leave a topic hanging, perhaps it is because I want you, the listener, to think more about it.

6. The best follow-up questions don’t sound like follow-up questions at all.

As I said to Ed Luce before my conversation with him: “You know, most famous people are used to someone trying to make them look bad.  They actually should be more nervous about someone trying to make them look really good.”

The American government pays the NFL to tell its players to stand during the national anthem

Via Alex — the Alex — here is the story.  Excerpt:

It turns out that from 2011-2014, the Department of Defense spent $5.4 million in contracts with 14 NFL teams for flag ceremonies. The National Guard got in on the action too, and gave $6.7 million to the NFL for the same kind of thing from 2013 to 2015.

…Before 2009, football players standing for the national anthem wasn’t even a thing. The teams stayed in the locker room until after “and the hoooome of the braaaave,” and then ran onto the field. No one was offended, and no one was on cable news eliciting tears from disrespected military families. But then, the Department of Defense and the National Guard got involved. They began to pay the NFL millions of dollars to have ostentatious flag ceremonies before games.

There is even a whole Senate report objecting to this entire practice, with John McCain as one of the most vocal critics.  As I’ve suggested lately, maybe the ceremony really isn’t so patriotic after all.