Month: January 2019

What should I ask Mark Koyama and Noel Johnson

They are my colleagues, and both are economic historians, and they have an important forthcoming book Persecution and Toleration: The Long Road to Religious Freedom.  I will be doing a Conversation with them.

More generally they have worked on state capacity, nation building, why China evolved into such a large political unit, the Black Death, scapegoating, usury prohibitions in history, the economic impact of volcanic eruptions, and more.  I am always happy to see them.

Their home pages are here and here.  So what should I ask them?

The United States is Underpoliced and Overprisoned

Daniel Bier has a nice rundown on the ratio of police to prison spending comparing the United States to Europe. The US spends less on police and more on prisons than any European country.

Moreover, this is not because Europe spends less on criminal justice. Surprisingly, there is very little correlation between total spending and the ratio of police to prison spending. What we see in the graph below, for example, is that Europe is on the right, indicating more police to prison spending but not noticeably below the US states on total spending as a percent of GDP.

As I have argued before, the United States is underpoliced and overprisoned.

Does temporary migration from rich to poor countries cause commitment to development?

The author is Lee Crawfurd and the subtitle of the paper is “Evidence from quasi-random Mormon mission assignments.”  Here is part of the abstract:

…we address this question using a natural experiment–the assignment of Mormon missionaries to two-year missions in different world regions–and test whether the attitudes and activities of returned missionaries differ. I find that assignment to a region in the global South causes returned missionaries to report greater interest in global development and poverty, but no difference in support for government aid or higher immigration, and no difference in personal donations or other involvement.

Maybe Mormons are different in this regard, or maybe missions are different (you feel you have done your bit?), but still an interesting result.

The top marginal tax rate

Taxing Top Incomes in a World of Ideas
Charles I. Jones∗
Stanford GSB and NBER September 26, 2018 — Version 0.5
Preliminary Abstract
This paper considers the taxation of top incomes when the following conditions apply: (i) new ideas drive economic growth, (ii) the reward for creating a successful innovation is a top income, and (iii) innovation cannot be perfectly targeted by a separate research subsidy — think about the business methods of Walmart, the creation of Uber, or the “idea” of Amazon.com. These conditions lead to a new term in the Saez (2001) formula for the optimal top tax rate: by slowing the creation of the new ideas that drive aggregate GDP, top income taxation reduces everyone’s income, not just the income at the top. When the creation of ideas is the ultimate source of economic growth, this force sharply constrains both revenue-maximizing and welfare-maximizing top tax rates. For example, for extreme parameter values, maximizing the welfare of the middle class requires a negative top tax rate: the higher income that results from the subsidy to innovation more than makes up for the lost redistribution. More generally, the calibrated model suggests that incorporating ideas and economic growth cuts the optimal top marginal tax rate substantially relative to the basic Saez calculation.

Via Illya Novak.  Here are the slides, here is the paper.

That was then, this is now

Obama’s goal now is to make clear to adults in Central America that there is no payoff for sending their children on the dangerous journey northward, said Cecilia Muñoz, the White House domestic policy director. “He feels intensely a responsibility to prevent an even greater humanitarian crisis,” she said.

That, however, means speeding the deportation of most of those who have already arrived, which many in Obama’s own party are resisting.

That is circa 2014, here is the full story.  I thank an MR reader for the pointer.

Two Teaching Resources

William Luther has put together an excellent list of Planet Money episodes that are keyed to the relevant chapters in Modern Principles of Economics. A similar list is also available for the excellent intermediate-micro text by Goolsbee, Levitt and Syverson.

For graduate students, Luke Stein has put together a 64 page “cheat sheet” (pdf) for basically the first 2 years of micro and macro theory. It’s not for everyone but would be great for studying for prelims at many top programs. This diagram summarizing key results in consumer theory was excellent.

People, the streets are empty here, in and around D.C.

…sales have slowed, with one exception: Happy hour. People are coming in earlier and staying longer, but often not having dinner.

“It’s increasing happy hour and decreasing dinner,” he said.

He said he had moved happy hour earlier to 3 p.m. from 4 p.m. for anyone showing government identification, and that people were coming in as early as 2 p.m.

And this:

On Tuesday, the City Council gave the mayor emergency authority to issue marriage licenses, because the Marriage Bureau, funded by the federal government, is closed.

That is all from Sabrina Tabernise in the NYT, the article has other interesting points.

My *Stubborn Attachments* essay for Cato Unbound

Here it is, here is one excerpt:

The classics of political philosophy deal with wealth and economic growth awkwardly at best. John Rawls, in his Theory of Justice and elsewhere, was suspicious of economic growth outright. Rawls feared that the savings rate of the first generation would lead to deprivation, and a diminishment of the well-being of the worst-off group (that first generation), and so he toyed with John Stuart Mill’s idea of the stationary state. Robert Nozick evinced a good understanding of markets in his Anarchy, State, and Utopia, but still he focused on individual libertarian rights as an underpinning for a free society. Like Nozick, I believe in individual rights, but I don’t think they settle most questions, and I don’t find modest levels of taxation under democratic conditions to be morally problematic.

In part I wrote Stubborn Attachments to respond to Derek Parfit’s Reasons and Persons, first published in 1984. In that wonderful book, Parfit wondered whether consequentialist reasoning could in fact produce coherent recommendations, for either individuals or societies. Yet there is no talk in Reasons and Persons of economic growth, or how a much better future might help resolve aggregation problems. Nonetheless Parfit did produce an important appendix on why the social discount rate should be zero, and you can think of Stubborn Attachments as trying to think through the broader implications of that argument.

And:

You should always ask what are the weakest points of any book, including this one. For me, it is the fear that progress has a mean-reverting character and that improvements end up as temporary rather than sustainable. In that case, the idea of enduring benefits would be an illusion, and even if pursuing such benefits were a good recommendation we might end up with the empty set in terms of policy recommendations. Historical pessimism would trump my recommendations, and we would be devoting our energies to the proverbial rearranging of the deck chairs on the Titanic.

Furthermore, Stubborn Attachments gives little guidance on how to offset the claims of humans versus the claims of nature. The benefits of economic growth are specified for human beings, and it is less clear that such economic growth is good for the animal kingdom as a whole, given the encroachments of humans and also the tortures of factory farming. If it is any consolation, however, I don’t think other philosophers have solved that problem either. Utilitarians, for instance, offer no plausible guidelines for weighting the well-being of non-human animals versus the well-being of humans, nor have they shown how it might be feasible to follow such guidelines.

Philosophical critiques will be forthcoming, so stay tuned!

When State-Building Hinders Growth: The Legacy of China’s Confucian Bureaucracy

That is the title of a new paper by Daniel Mattingly:

Do countries with a long history of state-building fare better in the long run? Recent work has shown that earlier state-building may lead to higher levels of present-day growth. By contrast, I use a natural experiment to show that the regions of China with over a thousand years of sustained exposure to state-building are significantly poorer today. The mechanism of persistence, I argue, was the introduction of a civil service exam based on knowledge of Confucian classics, which strengthened the social prestige of the civil service and weakened the prestige of commerce. A thousand years later, the regions of China where the Confucian bureaucracy was first introduced have a more educated population and more Confucian temples, but lower levels of wealth. The paper contributes to an important debate on the Great Divergence, highlighting how political institutions interact with culture to cause long-run patterns of growth.

Via the excellent Kevin Lewis.

The World Bank reappointment process

Kim had been a lame duck for some while, and few outsiders grasp how active is the role of the Board in the World Bank.  So it is probably good they got him out of there sooner rather than later.

I know you’re all aghast that Trump will pick the successor, but remember the good ol’ days when everyone fell apart when Bush picked Paul Wolfowitz, considered to be one of the architects of the Iraq War?  Whatever you think of Wolfowitz and his tenure at the Bank, it was not The End Times or even the beginning of the end.

It is very hard for a bad Bank president to shut down the works.  The World Bank has borrowed a lot of money and to pay it back the Bank needs to make profitable loans.  The mechanism for this to happen is already in place, and short of bankrupting the institution it is hard to imagine how a Bank president can totally gum up the works.  That is also why good Bank presidents find it hard to reform the place.

It is trendy to call for a “meritocratic” approach to this appointment and who could be opposed to that?  That said, there are plenty of plausible candidates ex ante, but it is not so easy to determine who will be effective ex post.  So if you read someone calling for meritocracy here, odds are they have some other political agenda in mind (which may be fine, but evaluate that agenda on its own terms).  There are plenty of Americans qualified at the highest level for this post.

I think America and yes DT should pick the next Bank president and should pick an American.  How do you think it is going to go the next time the Bank calls for more capital from the US and UK?  Whose certification there do you think is most important?  And which country is the most nervous about the World Bank doing something geopolitically unpopular, as say the UN repeatedly has done?  All this will run most smoothly if the U.S. feels, to some extent, that the Bank is its preserve.  And of course the “we’ve really got to up China’s quota and get it more involved” days are long since past.

You’re all out there saying Trump should not disengage America from the world, blah blah blah etc.  I agree.  But let’s be honest about what the terms of that engagement were in the first place, and be willing to swallow the whole package deal once again.

Here is some FT analysis, noting that not all of its suggested candidates are good ideas.

The culture that is (some of) Indian science

The organisers of a major Indian science conference distanced themselves Sunday from speakers who used the prestigious event to dismiss Einstein’s discoveries and claim ancient Hindus invented stem cell research.

The Indian Scientific Congress Association expressed “serious concern” as the unorthodox remarks aired by prominent academics at its annual conference attracted condemnation and ridicule.

The distinguished gathering of Indian researchers and scientists hosts Nobel laureates, but in recent years has seen Hindu mythology and faith-based theories edging onto the agenda.

At this year’s congress, the head of a southern Indian university cited an ancient Hindu text as proof that was discovered on the subcontinent thousands of years ago.

“We had 100 Kauravas from one mother because of stem cell and test tube technology,” said G. Nageshwar Rao, Vice Chancellor at Andhra University, referring to a story from the Hindu epic Mahabharata.

Rao, who was addressing school children and scientists at the event, also said a demon king from another centuries-old Hindu epic had two dozen aircraft and a network of landing strips in modern-day Sri Lanka.

“Hindu Lord Vishnu used guided missiles known as ‘Vishnu Chakra’ and chased moving targets,” added the professor of inorganic chemistry.

Event organisers tried to hose down the remarks, saying it was “unfortunate” the prestigious event had been derailed by controversy.

Here is the full account, via Anecdotal.  My point here is not to make fun of India, which I am a big admirer of.  Rather, successful science requires many, many cultural dimensions, not just a few, and those dimensions must be applied consistently.  India has an active and mostly successful space program, is a world leader in cheap and effective heart surgery, and in general the country is teeming with innovation, including in the culinary realm I might add.

So many of you take the cultural prerequisites of science for granted, and yes Max Weber still is underrated.

Border Crime

Alex Nowrasteh at Cato shows that crime is lower in counties adjacent to the Mexican border than in the rest of the United States:

If the entire United States had crime rates as low as those along the border in 2017, then the number of homicides would have been 33.8 percent lower, property crimes would have been 2.1 percent lower, and violent crimes would have dropped 8 percent.

Obviously border counties are different than non-border countries, more rural etc. Nevertheless, the raw fact is striking in comparison to the heated rhetoric about illegal immigration and American blood.