Month: February 2020
Peter Thiel reviews Ross Douthat
The word “self-recommending” now takes on a stronger meaning yet, here is the review. Here are the closing two paragraphs:
It is a paradox of our time that the path to radical progress begins with moderation. Extreme optimism and fatalistic pessimism may seem to be stark opposites, but they both end in apathy. If things were sure to improve or bound to collapse, then our actions would not matter one way or the other.
Not only do our actions matter, I believe they matter eternally. If we do not find a way to take the narrow and moderate path, then we may find out that stagnation and decadence were all that kept immoderate men from stumbling into the apocalypse.
Self-recommending! Here is my own short and very positive review of Ross’s book.
The history and economics of Mexican drug cartels
This paper studies the origins, and economic and social consequences of some of the most prominent drug trafficking organizations in the world: the Mexican cartels. It first traces the current location of cartels to the places where Chinese migrated at the beginning of the 20th century, discussing and documenting how both events are strongly connected. Information on Chinese presence at the beginning of the 20th century is then used to instrument for cartel presence today, to identify the effect of cartels on society. Contrary to what seems to happen with other forms of organized crime, the IV estimates in this study indicate that at the local level there is a positive link between cartel presence and better socioeconomic outcomes (e.g. lower marginalization rates, lower illiteracy rates, higher salaries), better public services, and higher tax revenues, evidence that is consistent with the known stylized fact that drug lords tend have great support in the local communities in which they operate.
That is from a recently published paper by Tommy E. Murphy and Martin A. Rossi. Note that Chinese immigration (and also German immigration, in the paper) is used for a proxy for preexisting desirability for a locale.
I can no longer recall but this one seems like from TEKL?
What causes car deaths and how to limit them
Perhaps the biggest reason why we don’t see more fatal crashes on freeways is that there are no intersections on them (with a few exceptions). In fact, there are more drivers killed in intersections (20%) than on freeways.
After accounting for freeways (18%) and intersections and junctions (20%), we’re still left with more than 60% of drivers killed in automotive accidents left accounted for.
It turns out that drivers killed on rural roads with 2 lanes (i.e., one lane in each direction divided by a double yellow line) accounts for a staggering 38% of total mortality. This number would actually be higher, except to keep the three categories we have mutually exclusive, we backed out any intersection-related driver deaths on these roads and any killed on 2-lane rural roads that were classified as “freeway.” So, to recap, 3 of out every 4 deaths in a car occur on the freeway, at an intersection/junction, or on a rural road with a single lane in each direction.
And:
In drivers killed on 2-lane rural roads, 50% involved a driver not wearing a seat belt. Close to 40% have alcohol in their system and nearly 90% of these drivers were over the legal limit of 0.08 g/dL. About one-third involved speeding, and 16% did not have a valid driver’s license.
Here is the full piece by Peter Attia, interesting throughout. Via Anecdotal.
Monday assorted links
1. Cosmos and Taxis symposium on Boettke and Hayek.
2. Justin Fox on the economics of textbooks. Greg Mankiw comments. I think OER [open educational resources] will do better, and is already doing better, than Greg suggests. A lot of “OER” is simply a mix of unmeasured uses of Google, Wikipedia, and YouTube, rather than a formal non-profit outcompeting the for-profit suppliers on their own terms. I do agree with Greg that “In any event, it is not a good time to be entering the market with a new textbook.”
3. Rain as a source of renewable energy.
The importance of family structure — was the nuclear family a mistake?
If you want to summarize the changes in family structure over the past century, the truest thing to say is this: We’ve made life freer for individuals and more unstable for families. We’ve made life better for adults but worse for children. We’ve moved from big, interconnected, and extended families, which helped protect the most vulnerable people in society from the shocks of life, to smaller, detached nuclear families (a married couple and their children), which give the most privileged people in society room to maximize their talents and expand their options. The shift from bigger and interconnected extended families to smaller and detached nuclear families ultimately led to a familial system that liberates the rich and ravages the working-class and the poor.
That is from David Brooks writing in The Atlantic, do read the whole thing, so far the best essay of the year with many fine and subtle points.
Directed Innovation in the Artificial Limb Industry
Innovation responds to both demand and supply. New scientific discoveries can arise exogenously and lower the cost of some types of innovation. Innovation, however, also responds to demand. The patenting of new energy devices increases as the price of oil increases. Similarly, new pharmaceuticals to treat diseases of old age increase as the number of elderly increase.
Similarly, the Civil War and World War I created a boom in the demand for artificial limbs and that in turn created a boom in innovation that led to better artificial limbs. The demand for new prosthetics was in some cases personal, as MacRae writes:
…the person who launched the era of modern prosthetics was also the first documented amputee of the Civil War–Confederate soldier James Edward Hanger. Hanger, who lost his leg above the knee to a cannon ball, was first fitted with a wooden peg leg by Yankee surgeons. Unhappy with the cumbersome appendage, Hanger eventually designed and built a new, lightweight leg from whittled barrel staves. Hanger’s innovative leg had hinges at the knee and foot, which helped him to sit more comfortably and to walk with a more natural gait. Hangar won the contract to make limbs for Confederate veterans. The company he founded–Hanger, Inc.–remains a key player in prosthetics and orthotics today.
In a highly original paper, Jeffrey Clemens and Parker Rogers document the increase in patents during the war eras but they also show that the type of innovation not just the quantity also responded to economic incentives.
In the Civil War era, the quantity of limbs demanded increased but the government was quite stingy in paying for artificial limbs. As a result, innovators focused on process innovations that enabled the production of more limbs at lower cost. In contrast, WWI payments were more generous and the government emphasized reintegrated soldiers into society which made appearance a more dominant feature in limb patenting.
More generally, Clemens and Rogers show how the type of procurement contracts directs not just the quantity but the form of innovation. The lessons are relevant for modern health care costs. Many people, for example, have wondered why innovation tends to lower costs in most fields but raise costs in health care. Clemens and Rogers point to the nature of procurement contracts as a possible important influence.
The culture that is Disney? The culture that is GWU?
The George Washington University faculty and staff ain’t got no culture. Or worse, we’ve got a negative culture. This was the verdict of the Disney Institute, which the president of our university commissioned last year to assess the culture on our campus. Fortunately, the institute, which is the “professional development and external training arm of The Walt Disney Company,” has a remediation plan. It has designed workshops to teach us the cultural “values” and “service priorities” we evidently require….
Our president is rumored to have forked over three to four million dollars to the Disney Institute to improve our culture (he refuses to reveal the cost). A select group of faculty and staff, those identified as opinion leaders, are being offered all-expenses paid trips to the Walt Disney World Resort in Orlando “to gain first-hand insight into Disney’s approach to culture.” For everyone else, the university is conducting culture training workshops that run up to two hours. All staff and managers are required to attend. Faculty are strongly “encouraged” to participate, and some contract faculty, who have little job security, evidently have been compelled to do so.
I attended one of these workshops. It was a surreal experience. About a hundred mostly sullen university employees—maintenance workers, administrative staff, faculty members, and more—filled a ballroom. Two workshop leaders strained to gin up the crowd’s enthusiasm with various exhortations and exercises, supplemented by several slickly produced videos. The result was a cross between a pep rally and an indoctrination camp.
We were introduced at the beginning of the workshop to the university’s brand new slogan: “Only at GW, we change the world, one life at a time.”
Here is the full blog post from Dane Kennedy, faculty at GWU. Via Isaac C.
Reversing the STEM gender gap in Israel?
A new study compares Hebrew-speaking with some Arabic-speaking communities, here is the abstract:
In the past three decades in high‐income countries, female students have outperformed male students in most indicators of educational attainment. However, the underrepresentation of girls and women in science courses and careers, especially in physics, computer sciences, and engineering, remains persistent. What is often neglected by the vast existing literature is the role that schools, as social institutions, play in maintaining or eliminating such gender gaps. This explorative case study research compares two high schools in Israel: one Hebrew‐speaking state school that serves mostly middleclass students and exhibits a typical gender gap in physics and computer science; the other, an Arabic‐speaking state school located in a Bedouin town that serves mostly students from a lower socioeconomic background. In the Arabic‐speaking school over 50% of the students in the advanced physics and computer science classes are females. The study aims to explain this seemingly counterintuitive gender pattern with respect to participation in physics and computer science. A comparison of school policies regarding sorting and choice reveals that the two schools employ very different policies that might explain the different patterns of participation. The Hebrew‐speaking school prioritizes self‐fulfillment and “free‐choice,” while in the Arabic‐speaking school, staff are much more active in sorting and assigning students to different curricular programs. The qualitative analysis suggests that in the case of the Arabic‐speaking school the intersection between traditional and collectivist society and neoliberal pressures in the form of raising achievement benchmarks contributes to the reversal of the gender gap in physics and computer science courses.
The article is “Explaining a reverse gender gap in advanced physics and computer science course‐taking: An exploratory case study comparing Hebrew‐speaking and Arabic‐speaking high schools in Israel” by Halleli Pinson, Yariv Feniger, and Yael Barak.
Via the excellent Kevin Lewis.
Coronavirus markets in everything
Government officials across Hubei province, the epicenter of the coronavirus outbreak, are desperate to find ways to stop the spread of the infection.
In Hubei’s Fangxian County, officials are trying a different approach — paying sick people.
According to an official Fangxian County notice, anyone who is sick and reports themselves to a hospital can expect to be paid.
Patients who have a fever and turn themselves in will receive 1,000 yuan ($142).
But officials and other interested parties are also being offered cash incentives if they catch anyone with a fever. For each person with a fever who is reported by an official or citizen, there is a reward of 500 yuan ($71).
The notice said that the offer is only valid from today until February 18.
Here is the link (nothing extra there, except a noisy video and you have to scroll down a lot). Via Neville.
Poor Economics
In Delhi, street hawkers will sell food, flowers, and balloons to cars paused at an intersection and, sadly, small children will dance for alms. My favorites are the book hawkers. I suspect Banerjee and Duflo would approve of my choice of both title and seller. Good price also.
Sunday assorted links
10% *more* democracy?
John G. Matsusaka, in his new Princeton University Press book Let the People Rule: How Direct Democracy Can Meet the Populist Challenge, calls for the introduction of referenda at the national level in the United States. For instance he favors advisory referendums called by Congress, advisory referendums called by petition, advisory referendums required for specific issues, binding referendums for required issues, or called by petition, and constitutional amendments, proposed by petition (but not settled by a referendum itself). The United States in fact have never had a national referendum.
But do referenda defuse populist sentiment, or stoke it? Why is it that populism might be bad but referenda good? Don’t referenda give in to populism in some manner? Whether or not you favored Brexit as an outcome, was the process so smooth and wonderful? How much better could it have been? (the author does discuss this). Won’t money matter in politics more, and in the bad sense? Exactly which policy area would see superior concrete results through the use of national referenda? Won’t it mean we get madder at each other?
Switzerland aside, I am not convinced by the call for more referenda, but I am happy to see such fundamental questions raised anew.
The author lives in California.
What did Ireland just vote for?
Sinn Féin promises rent freezes and an expansion of public housing. It will tax corporations, particularly multinational companies. It offers a typical, left-of-centre shopping list, financed by borrowing and higher taxes on the rich.
And what about the IRA? In the past days, the connection between the IRA and Sinn Féin in the North has dominated headlines, but most voters in the Republic are weary of the past. One in four are prepared to give Sinn Féin a chance. It would be completely wrong to equate Sinn Féin’s votes with support for the IRA.
Here is more from the FT. There is close to a three-way tie at the top, but “31.8% of 18-24s voted Sinn Féin – more than FF and FG combined in that age group.” And: “According to the exit poll, Sinn Féin now the most popular party in every age group under 65.”
And that is from Ireland, one of the biggest neoliberal success stories. Martin Gurri something or other, yes, etc. yup, that’s right, Martin Gurri, etc.
Coronavirus multilateral insurance markets in everything
As financial markets fretted over the spread of a coronavirus outbreak in China this week, one security was in the firing line more directly than any other. Holders of the World Bank’s pandemic bond will lose principal if the disease spreads by a sufficient amount, writes Jasper Cox.
The World Bank’s pandemic bond, issued in 2017, provides funding for the development bank’s Pandemic Emergency Financing Facility (PEF) if an outbreak of one of six viruses meets certain conditions.
Here is the link (gated), here is a more detailed John Dizard FT story:
The event triggers were calculated on a complex formula based on deaths in the country of origin, a smaller number of deaths in neighbouring countries, and a relatively rapid increase in infection and mortality. Interest charges were assumed by rich-country donors including Germany and Japan. The riskier bonds pay 11.5 per cent over Libor, since they required only 250 deaths to reach the trigger. Not bad, considering the “expected loss” for the tranche was only 7.74 per cent. The less risky tranche required 2,500 deaths, so only paid 6.9 per cent over Libor, compared with an expected loss of 3.57 per cent.
Here is a pre-coronavirus discussion of the bonds, mostly with reference to Ebola.
Pollution in India and the World
I spoke on the negative effects of air pollution on health and GDP at Brookings India in Delhi. The talk was covered by Indian media. The Print had a good overview:
The long-held belief that pollution is the cost a country has to pay for development is no longer true as bad air quality has a measurable detrimental impact on human productivity that could in turn reduce GDP, Canadian-American economist Alex Tabarrok said.
…“There is this old story that pollution is bad, but it increases GDP… When the United States and Japan were developing, they were polluted. So India and China also have to go through that stage of pollution — so that they get rich, and then they can afford to reduce pollution,” Tabarrok said.
“I want to say that that story is wrong. What I want to argue is that a lot of the new research indicates that we may be in a situation where we could be both healthier and wealthier at the same time by reducing pollution,” he said.
…At the seminar, Tabarrok pointed out that expecting people to make sacrifices for the sake of future generations is not a politically fruitful way to deal with pollution.
Citing the issue of crop burning in India, he said farmers are not going to be inclined to change their behaviour if they are told to stop stubble burning for the sake of Delhi residents.
“However, if these farmers are made aware of how the crop burning harms them and their families and affects their soil quality, they are more likely to participate in mitigation measures,” he said.
I was pretty tough on government policy as Business Today India reported:
More than half of India’s population lives in highly polluted areas. Research by Greenstone et al (2015) proves that 660 million people live in areas that exceed the Indian Ambient Air Quality Standard (NAAQS) for fine particulate pollution. In this context, having measures such as banning e-cigarettes and having odd-even days for vehicles to solve the problem of air pollution seems ridiculous, says Alex Tabarrok, Professor of Economics at the George Mason University and Research Fellow with the Mercatus Centre. “These are not appropriate solutions to the scale and the dimensions of the problem,” he says.