Chavez and the Power of the State
Between 2002 and 2004 millions of Venezuelans signed petitions calling for a vote to remove Hugo Chavez from office. Signatories were not anonymous and during the petition campaign Chavez supporters hinted darkly that there would be retaliation. Chavez was in fact forced into a recall election, but unfortunately he won (not one of democracy's better moments). After the election, the list of signatories was distributed to government agencies in an easy-to-use database. The database included the names and addresses of all registered voters and whether they had signed an anti-Chavez petition. Technology thus provided Chavez supporters the information they needed to retaliate.
Technology cuts both ways, however, and in a truly remarkable paper, Hsieh, Miguel, Ortega and Rodriguez match information in the petition database to another database on wages, employment and income. What the authors find is shocking, albeit not surprising. Before the recall election, petition signatories and non-signatories look alike. After the election, the employment and wages of signatories drop considerably, about a 10% drop in wages relative to non-signatories. Survey evidence conducted by the authors is consistent with retaliation by Chavez supporters especially in the form of job losses in the public sector. The authors estimate that the retaliation was so widespread, many workers were pushed into informal employment, that the Venezuelan economy was significantly damaged.
This is original, important and actionable research. Bravo to the authors, especially to Ortega who–as of this posting–has a job in Venezuela.
Fast Food, Fat Food
Catherine Rampell at Economix posts this interesting chart showing the relationship between the "time the average person in a given country spends eating and that country’s obesity rate (as measured by the percentage of the national population with a body mass index higher than 30)."
Modern Principles: Macroeconomics, Economic Growth
course an embarrassment. In much of the developing world, diarrhea
is a killer, especially of children. Every year 1.8 million
children die from diarrhea. Ending the premature deaths of these
children does not require any scientific breakthroughs, nor does it
require new drugs or fancy medical devices. Preventing these deaths requires
only one thing: economic growth.
That’s the opening paragraph of The Wealth of Nations and Economic Growth, Chapter 6 in Modern Principles: Macroeconomics. Does the opening make you a little bit squeamish? We hope so–we wanted an opening that would jar students out of complacency and remind them how vital economic growth is to human life. Â
Due to its importance, we have more material on growth and development than any other principles text.  In Chapter 6 we lay out the key facts and the basic framework for understanding economic growth. I think we do an especially good job explaining that the proximate causes of growth, increases in capital, labor, and technology must themselves be explained. Why do people save? Why do people invest?  Why do people research and develop new ideas?  It’s these questions which connect macroeconomics to microeconomics and point to the fundamental importance of incentives and institutions. These questions also foreshadow future chapters on savings, investment, financial intermediation and the economics of ideas.Â
For a limited time, you can read Chapter 6 at the link above (and do enjoy the pretty color pictures before you print!).  Tyler and I will be writing more about Modern Principles: Macroeconomics this week; you can also find more information at www.SeeTheInvisibleHand.com.
China Facts of the Day
In a county in Hubei Province every
office of administration, school and hospital is being required to consume a certain
quantity of cigarettes produced by local firms. The local government has assigned a quota to each of these organizations and they send out inspectors to look at the cigarette stubs. If the staff
are consuming brands that are not produced by local firms, they
will be punished!
The link (in Chinese) is here.
In other news, the divorce rate is up in Yunnan province due to a house dismantling project. One couple can get one apartment as
compensation for their dismantled house but if they get
divorced, they can get two. The local cadres
were the first ones to got divorced.
The link (in Chinese) is here.
Thanks to Helen Yang for both of these pointers and translation!
Laissez-Faire, eh?
U.S. government spending as a percentage of GDP is now equal to Canada's and rising, leading one Canadian op-ed writer to crow about Canada's low tax, free market economy. Damn that hurts.
Google Data
Google has tied BLS data to a nifty graph utility making it very easy to examine say unemployment rates across counties, states and so forth. Do a search for unemployment rate, click on the top graph and check it out. More is planned.
Hat tip to Flowing Data.
TED interviews Tabarrok
Following up on my TED talk, is this interview with Matthew Trost. We cover whether limited natural resources are a constraint on growth, the Lebensraum fallacy, The Wire, the tragedy of the commons and other topics. Here's one bit on growth and democracy in the context of China and India.
A lot of people say that India has been held back by its democracy. But let’s remember that despite being a poor country India’s democracy meant that its government never let millions of people starve. No politician wants to starve potential voters. In the long run, I think India is going to benefit from its democracy and not be harmed by it. Democracy is, in a sense, like markets. It provides information and feedback, it leads to a more open system and it constrains government from the worst kinds of abuses. I think that the more China proceeds along the wealth path, the more difficult they will find it not to have a democracy.
The Future of Economic Growth: TED Talk
My TED talk, an optimistic account of the past and future of economic growth, is up. I haven't watched it yet but at the time I thought it went well.
Are you hot?
Ever since the 2003 outbreak of SARS, or severe acute respiratory syndrome, Hong Kong has used infrared scanners to measure the facial temperatures of all arrivals at its airport and at its border crossings with mainland China.
Debating Economics
Intelligence Squared has held a series of debates in which they poll ayes and nayes before and after. How should we expect opinion to change with such debates? Let’s assume that the debate teams are evenly matched on average (since any debate resolution can be written in either the affirmative or negative this seems a weak assumption). If so, then we ought to expect a random walk; that is, sometimes the aye team will be stronger and support for their position will grow (aye after – aye before will increase) and sometimes the nay team will be stronger and support for their position will grow. On average, however, we ought to expect that if it’s 30% aye and 70% nay going in then it ought to be 30% aye and 70% nay going out, again, on average. Another way of saying this is that new information, by definition, should not swing your view systematically one way or the other.
Alas, the data refute this position. The graph shown below (click to enlarge) looks at the percentage of ayes and nayes among the decided 
before and after. The hypothesis says the data should lie around the 45 degree line. Yet, there is a clear tendency for the minority position to gain adherents – that is, there is an underdog advantage so positions with less than 50% of the ayes before tend to increase in adherents and positions with greater than 50% ayes tend to lose adherents. What could explain this?
I see two plausible possibilities.
1) If the side with the larger numbers has weaker adherents they could be more likely to change their mind.
2) The undecided are key and the undecided are lying.
For case 1, imagine that 10% of each group changes their minds; since 10% of a larger number is more switchers this could generate the data. The problem with 1 and with the data more generally is that we don’t seem to see a tendency towards 50:50 in the world. We focus on disputes, of course, but more often we reach some consensus (the moon is not made of blue cheese, voodoo doesn’t work and so forth).
Thus 2 is my best guess. Note first that the number of “undecided” swing massively in these debates and in every case the number of undecided goes down a lot, itself peculiar if people are rational Bayesians. A big swing in undecided votes is quite odd for two additional reasons. First, when Justice Roberts said he’d never really thought about the constitutionality of abortion people were incredulous. Similarly, could 30% of the audience (in a debate in which Tyler recently participated (pdf)) be truly undecided about whether “it is wrong to pay for sex”? Second, and even more doubtful, could it be that 30% of the people at the debate were undecided–thus had not heard arguments in let’s say the previous 10 years that converted them one way or the other–but on that very night a majority of the undecided were at last pushed into the decided camp? I think not, thus I think lying best explains the data.
Some questions for readers. Can you think of another hypothesis to explain the data? Can you think of a way of testing competing hypotheses? And does anyone know of a larger database of debate decisions with ayes, nayes and undecided before and after?
Hat tip to Robin for suggesting that there might be a tendency to 50:50, Bryan and Tyler for discussion and Robin for collecting the data.
Assorted Links
- Hayek v. Keynes in elegant powerpoints developed by Roger Garrison. Hat tip to Taking Hayek Seriously.
- The Independent Review (I am an assistant editor) appears in several scenes in the new Crowe, Affleck movie, State of Play. David Theroux says the movie would have been better had the writers paid more attention to the contents.
Strange Trip
Yesterday I chaperoned a group of ten year-olds to the Smithsonian. As the bus rolled by, I pointed out the Federal Reserve to my kid and one of the other boys his eyes all aglow said "ooohh, that's where Ben Bernanke works!" Even taking into account the possible uber-nerdiness of the group, this was a surprise.
On another note, five years ago (!) I pointed to a sign at the Smithsonian warning of another ice age and recent global cooling – well the sign (or something like it) is still there only now it does have a little placard above saying that this exhibit will soon be changed to reflect more recent science.
Not from the Onion
President Obama, whose healthcare and economic stimulus initiatives threaten to dramatically inflate the federal budget deficit, heralded a new push Saturday to cut wasteful spending in Washington…
The president singled out a move by Homeland Security Secretary Janet Napolitano to end consulting contracts to create seals and logos that he said had cost the department $3 million since 2003.
From the LA Times.
Partisanship Bias II
David Leonhardt points to another example of partisanship bias, this one from the latest Gallup Poll:
Despite Federal Reserve Chairman Ben Bernanke’s solid roots in the Bush administration, new Gallup polling finds 64% of Democrats nationwide feeling confident in Bernanke’s input on the economy, compared with only 36% of Republicans. This is a complete reversal of the Fed chairman’s image among partisans a year ago, under President Bush, when Republicans had the greater confidence in Bernanke, 61% vs. 40%.
Partisanship Bias and the Economy
Andrew Gelman and John Sides, writing at FiveThirtyEight, have a very good post on how partisanship biases perceptions of the economy. It's well known that views of the economy often differ by partisan identification but that could be explained by differences in interests. What Gelman hammers home is how partisanship can cause people to have views widely at variance with reality (regardless of interest) and how quickly views can change when partisanship changes even when the facts stay the same.
of Larry Bartels. He analyzed a 1988 survey that asked “Would you say that
compared to 1980, inflation has gotten better, stayed about the same, or gotten
worse?” Amazingly, over half of the self-identified strong Democrats in the
survey said that inflation had gotten worse and only 8% thought it had gotten
much better, even though the actual inflation rate dropped from 13% to 4% during
Reagan’s eight years in office. Republicans were similarly biased about the
Clinton-era economy: in 1996, a majority of Republicans thought that the budget
deficit had increased. This partisan filter was also evident after the
Democrats’ retaking of Congress in 2006. Research
by Alan Gerber and Greg Huber shows that Democrats became much more optimistic,
and Republicans more pessimistic, about the national economy.
Views
about foreign policy manifest a similar bias. For example, from 1965 through
1968, Democrats were more likely than Republicans to support the Vietnam War,
but starting in 1969, it was the Republicans who were (slightly) more
hawkish.
Could such biases be a product of the relatively mild economic
conditions of the past twenty years? Early returns from 2008 and 2009 suggest
that partisan biases still operate. According to Gallup Poll data from just
before the November election, 20% of Republicans and 8% of Democrats were
“satisfied with the way things were going in the United States.” Immediately
after Obama’s inauguration, the parties flipflopped: 18% of Democrats and 14% of
Republicans expressed satisfaction. That gap has only grown. In February
polls, 20% of Democrats but only 10% of Republicans expressed
satisfaction.
The same pattern emerges in consumer confidence. ABC News
surveys surveys show that the
views of Republicans became 19 points more negative between October and
mid-April. Meanwhile, the views of Democrats improved by 10 points, even as the
economic news became grimmer.