Discrimination against shorter people, as reported by Andrew Solomon

by  Tyler Cowen in

One recent study observed that adults with achondroplasia have “lower self-esteem, less education, lower annual incomes, and are less likely to have a spouse.”  The income statistic bears witness to institutional discrimination against LPs; the study found that while three-quarters of the dwarfs’ family members, presumably demographically similar to them in most regards, made more than $50,000 per year, less than a third of the dwarfs made that amount.

That is from Andrew Solomon’s new book, Far From the Tree: Parents, Children, and the Search for Identity.

I pre-ordered this book eagerly, but overall I am having difficulty with it.  Too many sections throw too much at the proverbial wall and fail to sort out truth from fallacy.  I am not sure what is supposed to be insight and what is supposed to be a recording of different views.  I would have liked a more direct confrontation with the issue of parental narcissism.  This is still a good review of the book.  I longed for a page of Ross Douthat or Michael Bérubé.

The book, however, supplies excellent data for anyone wishing to study the utter hypocrisy of current understandings of diversity.

One Amazon reviewer raised a good question:

As a special ed teacher, my question is, does it make sense to include murderers in the same category with deaf people, dwarves, and people with physical disabilities? Perhaps he has a justification for it, in that parents might be disappointed and heartbroken in all these cases. But right off the bat that seems wrong to me, categorically different, moral deviance v. physical or intellectual.

Solomon is a very smart guy.  But overall this book leaves one with a sense of being tired of the value of the individual, written by an author overwhelmed by what comes across as, despite Solomon’s quest for nobility, a rogue’s gallery of misfits, baroque style, and without the writing itself coming to terms with the book’s own underlying emotional tenor.  Is it unfair to read this as still being, ultimately, a book about depression?

This book may interest many of you, and its publication can be seen as an event of sorts, but I can’t quite bring myself to recommend it.

Ghana “fact” of the day

by  Tyler Cowen in

Two years ago Ghana’s statistical service announced it was revising its GDP estimates upwards by over 60%, suggesting that in the previous estimates about US$13bn worth’s of economic activity had been missed. As a result, Ghana was suddenly upgraded from a low to lower-middle-income country. In response, Todd Moss, the development scholar and blogger at the Center of Global Development in Washington DC, exclaimed: “Boy, we really don’t know anything!”

Here is more, by Morten Jerven. Here is another good paragraph from that article:

Let us be conservative and assume that the GDP in Nigeria merely doubles following the revision. This alone will mean that the GDP for the whole region increases by more than 15%. The value of the increase amounts to nothing less than 40 economies roughly the size of Malawi’s. The knowledge that currently there are 40 “Malawis” unaccounted for in the Nigerian economy should raise a few eyebrows.

I have just pre-ordered his forthcoming book Poor Numbers: How We Are Misled by African Development Statistics and What to Do about It.

Mexico facts of the day

by  Tyler Cowen in

Six years ago, Mexico was the world’s ninth largest exporter of cars. Today the country is ranked fourth—behind Germany, Japan and South Korea—with exports expected to total more than 2.14 million vehicles this year.

One in 10 cars sold last year in the U.S. was made in Mexico. Next year, every new taxi in New York’s fleet—made by Nissan Motor Co.  —will carry the “Hecho en Mexico” label. Mexico is now exporting vehicles to China, and even helped Japan keep up with orders after last year’s tsunami.

Mexico’s Economy Minister Bruno Ferrari boasted that a batch of new factories planned by car makers will help Mexico surpass South Korea in a few years.

Here is more.

David Brooks on the conservative future

by  Tyler Cowen in

It is an excellent column and here is one good bit:

Soft Libertarians. Some of the most influential bloggers on the right, like Tyler Cowen, Alex Tabarrok and Megan McArdle, start from broadly libertarian premises but do not apply them in a doctrinaire way.

Many of these market-oriented writers emphasize that being pro-market is not the same as being pro-business. Luigi Zingales of the University of Chicago published an influential book, “A Capitalism for the People,” that took aim at crony capitalism. Tim Carney of The Washington Examiner does muckraking reporting on corporate-federal collusion. Rising star Derek Khanna wrote a heralded paper on intellectual property rights for the House Republican Study Committee that was withdrawn by higher-ups in the party, presumably because it differed from the usual lobbyist-driven position.

There are additional shout outs to many other writers I admire (and like).  And this:

Most important, they matured intellectually within a far-reaching Web-based conversation. In contrast to many members of the conservative political-entertainment complex, they are data-driven, empirical and low-key in tone.

But do read the whole thing.

Addendum: Paul Krugman comments.

Which James Bond villain plan made the most economic sense?

by  Tyler Cowen in

I suspect Tim Harford knew I would blog this when he tweeted this piece.  It starts with this:

We looked through their schemes, and asked Jean-Jacques Dethier [TC: link is mine], a development economist at the World Bank (and a lifelong Bond fan), what he thought.

And then:

Goldfinger
Plot: Gold tycoon Auric Goldfinger’s (Gert Frobe) plan is quite simple: He wants to attack the U.S. Bullion Depository in Fort Knox and detonate an atomic bomb, thus irradiating the gold stored there, rendering it worthless for decades. This will in turn increase the value of Goldfinger’s own gold and cause economic chaos in the Western world.

Plausibility: “This looks plausible to me,” says Dethier…

I must disagree.  First, it requires an upward-sloping marginal cost curve for gold production, including the flow out of commodity uses.  That’s actually plausible, but should death-risking criminal schemes rely on that?  Second, if you are going to blow up some gold, don’t blow up the gold held as an endowment, blow up some gold which might go on the market.  Third, couldn’t governments in response simply increase the capital gains rate on gold sales?  In any case just setting off a dirty bomb probably would spike the gold price more than blowing up some gold.  Or how about this criminal strategy?: hold on to the gold and perhaps in due time it will go up from $35 to the unthinkable level of $200 or $300 an ounce.

And there is yet another complication.  At that time the U.S. was (sort of) on a gold standard!  Admittedly ability to redeem was quite limited and held by foreigners who were themselves having their arms twisted not to redeem.  Still, what if the price of gold doesn’t go up (denominated in terms of what?  most of the major currencies are then fixed not floating) but the U.S. price level goes down?  Why use bombs to try to manipulate the price which is about the hardest to budge in the direction which is hardest to get it to budge in?  What if only quantities adjust?  And so on.  Wouldn’t an inflationary scheme have been easier to implement?  I am not convinced Gert Frobe was a stellar macroeconomist.

I see this alternative scheme as potentially more effective, and Dethier seems to go along with it as well:

Casino Royale
Plot: Before Bond foils him (and forces him into a high-stakes underground poker game), Le Schiffre (Mads Mikkelsen) is shorting airline stocks, while simultaneously planning to destroy a prototype luxury jetliner on its maiden voyage. That will then drive airline stocks down, allowing him to make millions.

If your productivity is especially high today, go over to Twitter and try #KrugmanBondFilms.

Gaolbalization offshoring markets in everything the culture that is Dutch (Belgian)

by  Tyler Cowen in

Belgium and the Netherlands have an interesting arrangement, an example of economics and incentives working clearly in the public law field. Belgium has more convicts than it can accommodate in its prisons. Neighboring Netherlands has the opposite problem: not enough prisoners. Several years ago, it was facing having to shutter some facilities. But then the two countries made a deal: Belgium rents space for its inmates in Dutch jails, patrolled by Dutch corrections guards. (Perhaps the Flemish hope they can be “transferred” to Dutch custody as well, or at least out of Belgium.)

Here is more, from Eugene Kontorovich, pointer from the estimable Chug.

Does corruption harm economic growth?

by  Tyler Cowen in

Chris Blattman says maybe not.  Excerpt:

The reasons that corruption should hurt growth are so persuasive that economists have been pretty surprised not to find much evidence.  One team reviewed 41 different cross-country studies of corruption and development. Two-thirds of the studies don’t even find a negative correlation. Cross-country studies have mostly bad data and empirics, so we should not rest here. But Jacob Svensson has a nice overview of the broader evidence and draws the same conclusion: there’s not much to show that corruption reduces growth on net.

I worry more about corruption than those remarks would indicate, though I agree with Chris that the issue isn’t nearly as important as stopping a civil war.

First, I see a strong correlation between high levels of per capita income and low corruption.  (I don’t worry about the lack of correlation with growth rates because, for one thing, poor countries, even many corrupt ones, may grow more rapidly for reasons related to the Solow model.)  The causality here is hard to sort out, but there is plenty of micro evidence that corruption harms prosperity; it’s not just an aesthetic taste of wealthy people to limit corruption, the way they might buy nice interior drapes.

Furthermore, the correct corruption/poverty model may have multiple equilibria, depending on expectations.  In that setting, making your country “look clean” may improve outcomes by shifting the economy up to better equilibria, even if lower corruption isn’t a direct cause of greater prosperity.  There is worse advice than “Act like a rich country, and in the meantime you may become one,” at least provided you do not take this as liberty to spend above your means or to slack off with the work hours.

Second, even high levels of wealth will in some regards bring more corruption, especially as a country moves out of “fourth world” status or other forms of extreme poverty.  Corruption very often rises with complexity and so along some margins it is correlated with wealth levels too.  Similarly, we find that economic growth tends to bring more sexual harassment in the workplace, if only because more women are working outside the home.  Yet it is still correct to think of the harassment as a very real negative, as is corruption.

In any case, this week’s new videos are up at MRU and they cover the topic of corruption, go over and take a look.  Here is one video on the causal question about corruption and growth.  Here is our video on the causes and predictors of corruption, historically speaking.  Here is our video on how corruption can trap economies.

Why rebuild? (simple points, but worth a mention)

by  Tyler Cowen in

Across the nation, tens of billions of tax dollars have been spent on subsidizing coastal reconstruction in the aftermath of storms, usually with little consideration of whether it actually makes sense to keep rebuilding in disaster-prone areas. If history is any guide, a large fraction of the federal money allotted to New York, New Jersey and other states recovering from Hurricane Sandy — an amount that could exceed $30 billion — will be used the same way.

Tax money will go toward putting things back as they were, essentially duplicating the vulnerability that existed before the hurricane.

The full story is here.

Why so many men’s suits for the communists?

by  Tyler Cowen

David Stearns asks:

I was looking at Kim Jonh-Il looking at things, and it struck me how many of his hangers on were wearing suits.  It seems odd given that this is probably the most anti-western country around.  Do you have any ideas on why this style of formalwear basically became the world standard?

Of course the Chinese communists experimented with other styles. Yet pushback came; in 2008, one part of the Chinese Communist Party began an anti-pajamas campaign, on the grounds they looked “uncivilized.”

Here is a rather frank web site on etiquette campaigns in China.  Recently, Chinese leaders seem to prefer red ties.

I would stress that non-free states tend to encourage conformity along many dimensions, and what better code of dress to match conformity into than men’s suits?

The Incidence of Mandated Maternity Benefits

by  Tyler Cowen in

I know that is from 1994, but it is by Jonathan Gruber (pdf) and the point is an important one:

I consider the labor-market effects of mandates which raise the costs of employing a demographically identifiable group. The efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group-specific wages. I study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans, raising the relative cost of insuring women of childbearing age. I find substantial shifting of the costs of these mandates to the wages of the targeted group. Correspondingly, I find little effect on total labor input for that group.

This has become more relevant in light of a recent story out of California, excerpt:

The ability of the exchange to lower healthcare costs remains unclear. Experts said average premiums could rise in the exchange because the Affordable Care Act requires improved benefits, but consumers’ out-of-pocket medical costs could decrease under those same changes.

California insurance officials have expressed concern about substantial rate hikes for some existing policyholders going into the exchange.

Under a new rating map approved by state lawmakers, the Department of lnsurance estimated that premiums for similar coverage could increase as much as 25% in West Los Angeles, 22% in the Sacramento area and nearly 13% in Orange County.

I believe some of that is from a pooling effect and some from a greater coverage effect.  I do not, by the way, find this reassuring:

Janice Rocco, the state’s deputy insurance commissioner for health policy, said her agency is pushing a new rating map that would cap increases at 8%. That proposal could be considered during a special legislative session in the coming months.

“We want to minimize the rate spikes,” she said.

I’ve said it before and I’ll say it again: the mandate as currently constituted probably won’t work.  The Medicaid extension can, in principle, work, and yet the state-level rebellion against it does not seem to be fading away.

Indian economists want the Food Security Bill modified

by  Tyler Cowen in

You will find their petition here, signed by many notables including from MIT and Princeton.  They want to “abolish the distinction between general and priority households, and give the same PDS entitlements to all households outside the excluded category.”  Furthermore cash transfers are raised as an alternative possibility, a good idea in my view.

Vipin Veetil and Atanu Dey raise some issues which these economists neglected, for instance:

On the production side, laws restricting for-profit corporate investments in agriculture (like those forbidding corporate ownership of agricultural land) starve the rural economy of capital investment and technology transfers. Such laws have two effects. First, they impoverish farmers by reducing demand for their primary asset – agricultural land. Second, corporations bring efficiency gains through large-scale knowledge-intensive farming. This is equally damaging but more difficult to detect. In addition they furnish a steady wage income to workers; this is desirable for low-income households. In the absence of corporations (and markets for insurance) farmers have no way of transferring the risk of production, i.e. they borrow money on fixed rates but face an uncertain return on investment. A crop failure then has the potential to begin a debt-cycle.

All those smart economists on the first petition, and not nearly enough talk of markets.