Month: November 2019

The Anarchy

William Dalrymple is one of my favorite writers of non-fiction. He burst upon the scene in 1989 as a precocious, if occasionally a bit snotty travel writer, with In Xanadu in which he traced the path of Marco Polo from the Church of the Holy Sepulchre in Jerusalem to Xanadu in Inner Mongolia. He really hit stride, however, with City of Djinns: A Year in Delhi, an essentially perfect example of the “Year in” genre that combines humor, history and analysis and remains to this day an excellent guide to historical Delhi. In From the Holy Mountain Dalrymple traveled from Greece to Turkey, Syria, Lebanon and Egypt to understand the ancient roots of the Christian populations in these countries. Sadly, Dalrymple’s trip has become in some respects a last document of cultures now disappearing under the stress of war, revolution and suppression. As Dalrymple aged he turned more and more to pure history. In The Last Mughal and Return of a King: The Battle for Afghanistan, Dalyrmple gives what I think are the definitive accounts of the Indian mutiny of 1857 and the British invasion of Afghanistan of 1839-1842. Especially notable in both of these books is that Dalyrmple draws on previous ignored or underused Indian and Afghani accounts. There are other books, collections of journalistic essays, photographs and more but I will mention just one more, Nine Lives: In Search of the Sacred in Modern India, a beautiful and unforgettable account of nine people in modern India each walking a unique religious path.

In his latest book, The Anarchy, Dalrymple recounts the remarkable history of the East India Company from its founding in 1599 to 1803 when it commanded an army twice the size of the British Army and ruled over the Indian subcontinent. I review The Anarchy at EH.net. Here’s one bit from my review:

The Mughal emperor Shah Alam, for example, had been forced to flee Delhi leaving it to be ruled by a succession of Persian, Afghani and Maratha warlords. But after wandering across eastern India for many years, he regathered his army, retook Delhi and almost restored Mughal power. At a key moment, however, he invited into the Red Fort with open arms his “adopted” son, Ghulam Qadir. Ghulam was the actual son of Zabita Khan who had been defeated by Shah Alam sixteen years earlier. Ghulam, at that time a young boy, had been taken hostage by Shah Alam and raised like a son, albeit a son whom Alam probably used as a catamite. Expecting gratitude, Shah Alam instead found Ghulam driven mad. Ghulam took over the Red Fort and cut out the eyes of the Mughal emperor, immediately calling for a painter to immortalize the event.

Read the whole review and buy the book. It’s a hell of a story.

Imperfect optimization

Paul Ohm, a former prosecutor in the Justice Department’s computer crime and intellectual property section, said the laws governing child sexual abuse imagery were among the “fiercest criminal laws” on the books.

“Just the simple act of shipping the images from one A.I. researcher to another is going to implicate you in all kinds of federal crimes,” he said.

Here is more from Dance and Keller at the NYT.

Social Security isn’t doomed for younger generations

No, it is not one of the great Boomer rip-offs, as I argue in my latest Bloomberg column.  Here is one excerpt:

According to his [Blahous’s] estimates [link here], if no further steps are taken to shore up the finances of Social Security, the system will stop being able to meet its scheduled payment obligations sometime in the 2030s. (Note that benefit hikes are part of the schedule.) That would be bad, but even under this scenario the system is still paying out a roughly constant level of inflation-adjusted benefits over time, at least as those benefits are defined as a percentage of workers’ taxable earnings (about 13%). Of course, to the extent those taxable earnings rise, the benefits will be rising too, even if not at a spectacular pace.

Keep in mind that this is the worst-case scenario offered by a relative pessimist.

Another way to describe the problem is that, over the next 75 years, about 17% of scheduled benefits are currently unfinanced. Blahous estimates that the U.S. could cover that gap if the Social Security payroll tax were raised from 12.4% to 15.1%.

Now, you might have strong views about the wisdom of that kind of tax increase, but you should acknowledge that this is a very different reality than a bankrupt system. With Social Security on full cruise control, and with no forward-looking reforms, today’s younger earners still are slated to receive more than their parents did — just not very much more.

Dean Baker, an economist to the left of Blahous, also has studied Social Security. He estimates that retirees 30 to 40 years from now will receive monthly checks that are about 10% higher in real terms than today’s benefits. And keep in mind those are estimates per year. To the extent life expectancy rises, total benefits received will be higher yet.

The winners and losers from Airbnb

Overall, renters in New York City suffer a loss of $178mm per annum, as the losses from the rent channel dominate the gains from the host channel. I find that the increased rent burden falls most heavily on high-income, educated, and white renters, because they prefer housing and location amenities most desirable to tourists. Moreover, there is a divergence between the median and the tail, where a few enterprising low-income households obtain substantial gains from home-sharing, especially during demand peaks.

That is from the job market paper of Sophie Calder-Wang of Harvard.  You will note there still are likely net gains once you count tourist demand, but of course this helps explain why Airbnb rentals are unpopular in some cities.

Tuesday assorted links

Politically Incorrect Paper of the Day: The United Fruit Company was Good!

The United Fruit Company is the bogeyman of Latin America, the very apotheosis of neo-colonialism. And to be sure in the UFC history there is wrongdoing and plenty of fodder for conspiracy theories but the UFC also brought bananas (as export crop), tourism, and in many cases good governance to parts of Latin America. Much, however, depends on the institutional constraints within which the company operated. Esteban Mendez-Chacon and Diana Van Patten (on the job market) look at the UFC in Costa Rica.

The UFC needed to bring workers to remote locations and thus it invested heavily in worker welfare:

the UFC invested in sanitation infrastructure, launched health programs, and provided medical attention to its employees. Infrastructure investments included pipes, drinking water systems, sewage system, street lighting, macadamized roads, a dike (Sanou and Quesada, 1998), and by 1942 the company operated three hospitals in the country.

Given the remoteness the plantations and to reduce transportation costs, the UFC provided the majority of its workers with free housing within the company’s land. This was partially motivated by concerns with diseases like malaria and yellow fever, which spread easily if the population is constantly commuting from outside the plantation. By 1958 the majority of laborers lived in barracks-type structures… [which] exceeded the standards of many surrounding communities (Wiley, 2008).

Image result for united fruit companyThe UFC wasn’t just interested in healthy workers, they also needed to attract workers with stable families:

One of the services that the company provided within its camps was primary education to the children of its employees. The curriculum in the schools included vocational training and before the 1940s, was taught mostly in English. The emphasis on primary education was significant, and child labor became uncommon in the banana regions (Viales, 1998). By 1955, the company had constructed 62 primary schools within its landholdings in Costa Rica (May and Lasso, 1958). As shown in Figure 6a,spending per student in schools operated by the UFC was consistently higher than public spending in primary education between 1947 and 1963.21 On average, the company’s yearly spending was 23% higher than the government’s spending during this period.

…The UFC did not provide directly secondary education although offered some incentives. If the parents could afford the first two years of secondary education of their children in the United States, the UFC paid for the last two years and provided free transportation to and from the United States.

A key driver of UFC investment was that although the UFC was the sole employer within the regions in which it operated, it had to compete to obtain labor from other regions. Thus a 1925 UFC report writes:

We recommend a greater investment in corporate welfare beyond medical measures. An endeavor should be made to stabilize the population…we must not only build and maintain attractive and comfortable camps, but we must also provide measures for taking care of families of married men, by furnishing them with garden facilities, schools, and some forms of entertainment. In other words, we must take an interest in our people if we might hope to retain their services indefinitely.

This is exactly the dynamic which drove the provision of services and infrastructure in unjustly maligned US company towns. It’s also exactly what Rajagopalan and I found in the Indian company town of Jamshedpur, built by Jamshetji Nusserwanji Tata.

The UFC ended in Costa Rica in 1984 but the authors find that it had a long-term positive impact. Using historical records, the authors discover a plausibly randomly-determined boundary line between UFC and non-UFC areas and comparing living standards just inside and just outside the boundary they find that households within the boundary today have better housing, sanitary conditions, education and consumption than households just outside the boundary. Overall:

We find that the firm had a positive and persistent effect on living standards. Regions within the UFC were 26% less likely to be poor in 1973 than nearby counterfactual locations, with only 63% of the gap closing over the following 3 decades.

The paper has appendixes A-J. In one appendix (!), they show using satellite data that regions within the boundary are more luminous at night than those just outside the region. The collection of data is especially notable:

For a better understanding of living standards and investments during UFC’s tenure, we collected and digitized UFC reports with data on wages, number of employees, production, and investments in areas such as education, housing, and health from collections held by Cornell University, University of Kansas, and the Center for Central American Historical Studies. We also use annual reports from the Medical Department of the UFC describing the sanitation and health programs and spending per patient in company-run hospitals from 1912 to 1931. We also collected data from Costa Rican Statistic Yearbooks, which from 1907 to 1917 contain details on the number of patients and health expenses carried out by hospitals in Costa Rica, including the ones ran by the UFC. Export data was also collected from these yearbooks, and from Export Bulletins. 19 agricultural censuses taken between 1900 and 1984 provide information on land use, and we use data from Costa Rican censuses between 1864-1963 to analyze aggregated population patterns, such as migration before and during the UFC apogee, or the size and occupation of the country’s labor force.

Overall, a tremendous paper.

Television facts of the day

There were 496 scripted TV shows made in the US last year, more than double the 216 series released in 2010. In the past eight years the number of shows grew by 129 per cent, while the US population rose only 6 per cent. The trend is set to deepen, as groups like AT&T’s WarnerMedia commission dozens of new series to convince people to sign up for their streaming services.

…In the span of about six months, Disney, Apple, AT&T and Comcast are launching new streaming services, asking people to pay nothing for some services or up to $15 a month to watch their libraries of films and shows.

Here is more from Anna Nicolaou and Alex Barker at the FT.  Yes, you might be tempted to short this sector and perhaps I am too.  Still, another possible part of the equilibrium adjustment is simply that the market swallows the content and factor prices fall, a’la music streaming.  That would be one way to get all of those costly special effects out of so many movies.

A Coasean solution for New Delhi?

If the late Ronald Coase could be called upon to advise the Delhi government, he would persuade chief minister Arvind Kejriwal to pay farmers in Punjab and Haryana to stop burning crop residue.

In recent times, air quality in Delhi has remained poor throughout the year for various reasons, including the rapid loss of green cover, construction of homes and infrastructure projects, and vehicular as well as industrial pollution. But for a few weeks every November, it gets almost impossible to breathe. The last straw has been the crop residue burning (CRB) by farmers in Punjab and Haryana, which causes a heavy smog to settle over Delhi…

The good news is that these [health] costs—avoidable by Delhi residents if CRB were eliminated—are about 10 times the cost that would be incurred by farmers in adopting substitutes to crop burning. Where policymakers see costs, Coase saw potential for gains from trade.

Here is more from Shruti Rajagopalan.

Do the rich save more?

Yes, not a surprise but here are some details:

We identify a strong negative relationship between the consumption rate and the lifetime net resource. The predicted APC [average propensity to consume] of the highest net resource cohort about 0.03, which is two standard deviations smaller than the lowest resource cohort.

That is from a new paper by Ilin, Ye, and Yu (Yu is on the job market).  Of course this relates to the recent wealth tax debate — almost all of that tax would fall on the investment of the wealthy, not their consumption.  Note, however, that if the wealth tax induced more consumption by the wealthy, consumption inequality could quite easily go up.

Monday assorted links

Narcissism and coldness

…narcissistic people anticipate that success and failure is generally less momentous and (a) assume others are less affected by most success and failure and (b) often feel less happy for successful others and less concerned for unsuccessful others. Findings across three studies were consistent with these propositions. Narcissistic people anticipated that both the self and others will be less reactive to successes and failures (Studies 1–3); moreover, although narcissistic people indicated less warmth toward successful and unsuccessful others, these relations were eliminated after controlling for narcissistic people’s assumptions that other people are less reactive to success and failure (Study 3). Hence, narcissistic coldness could, in part, have its origin in what we believe is reasonable disagreement about the momentous nature of events.

That is from Hart, Tortoriello, and Richardson, via the excellent Kevin Lewis.

*Walter Raleigh: Architect of Empire*

An excellent book, by Alan Gallay, this one will make my year-end “best of” list.  It has merchant voyages, royal monopolies, hermeticism, captive Inuits brought to London to perish, conquests of Ireland, Edmund Spenser, virgin queens, charter cities, and the best overall understanding of early British colonialism/imperialism I have seen.  It is perhaps better read than excerpted, but here is one bit:

[John] Gilbert would not sail again for America until 1583. For three and a half years, English resources that might have gone to overseas expeditions to America had to be devoted to Ireland — the pope’s decision to become militarily involved in Irish affairs deterred the English America; in the coming decade American colonization would be frequently sidetracked by the same three things: events in Ireland, relations with Spain, and the English propensity to go plundering at sea.

And:

For colonization to succeed, the English required investors, sailors, and colonists.  All were difficult to come by.  The English intended to turn the New World into a haven for English Catholics as a way to solve multiple problems: rid England of religious dissidents, obtain investors, and alleviate overcrowding by moving surplus populations of the unemployed overseas to become useful.  English Catholic interest wavered, however…

I am sure to read the whole thing through, you can pre-order here.

The racial integration of the Korean War

The racial integration of the US Army during the Korean War (1950-1953) is one of the largest and swiftest desegregation episodes in American history. This paper argues that racial integration improved white survival rates at the expense of blacks, and resulted in less anti-black prejudice among white veterans decades after the war. Using a novel military casualty file, I construct a wartime similarity index to measure the extent of racial integration across military units and time. Using exogenous changes in racial integration, I show that integrated whites were 3% more likely to survive their injuries than segregated whites, whereas integrated blacks were 2% were less likely to survive their injuries than segregated blacks. Given that blacks were initially confined to noncombat support roles, the results reflect a convergence in hazardous combat assignments. To explore the long-term effects of racial integration, I link individual soldiers to post-war social security and cemetery data using an unsupervised learning algorithm. With these matched samples, I show that a standard deviation change in the wartime racial integration caused white veterans to live in more racially diverse neighborhoods and marry non-white spouses. In aggregate, these results are some of the first and only examples of large-scale interracial contact reducing prejudice on a long-term basis.

That is from the job market paper from Daniel Indacochea of the University of Toronto.

Rent control is also not great for labor market outcomes

I had never thought of this before:

This paper, using a novel data set on rent stabilization in New  York City, takes a first step in investigating the policy’s unintended consequences on tenant labor market outcomes, while also exploring the impact of policy awareness on those outcomes. Recognizing the potential endogeneity of living in a rent-stabilized unit, this paper uses three decades of housing vacancy data to construct an instrumental variable leveraging variation in the availability of rent-stabilized units across New York boroughs over time. The sorted effects method in Chernozhukov, Fern´andez-Val, and Luo (2018) is also applied to investigate heterogeneous effects beyond their averages. The main results demonstrate that rent-stabilized tenants are more likely to be unemployed compared with tenants in private market-rate units. These effects are particularly salient among white and high-skilled tenants.

That is from the job market paper of Hanchen Jiang of Johns Hopkins University.