Category: Current Affairs

Jack Goldsmith on cybersecurity and international law

…the U.S. intelligence services break into computers and computer networks abroad at an astounding rate, certainly on a greater scale than any other intelligence service in the world.

How will the United States respond when Russia and China and Iran start naming and indicting U.S. officials?  Maybe the United States thinks its concealment techniques are so good that the type of detailed attribution it made against the Russians is infeasible.  (The Shadow Brokers revealed the identities of specific NSA operators, so even if the National Security Agency is great at concealment as a matter of tradecraft that is no protection against an insider threat.)  Maybe Russia and China and Iran won’t bother indicting U.S. officials unless and until the indictments actually materialize into a trial, which they likely never will.  But what is the answer in principle?  And what is the U.S. policy (if any) that is being communicated to military and civilian operators who face this threat?  What is the U.S. government response to former NSA official Jake Williams, who worked in Tailored Access Operations and who presumably spoke for many others at NSA when he said that “charging military/gov hackers is dumb and WILL eventually hurt the US”?

The post has many other points of interest, a number of them uncomfortable truths.

Good-bye soccer moms? (and dads)

Or U.S.A. fact of the day:

Over the past three years, the percentage of 6- to 12-year-olds playing soccer regularly has dropped nearly 14 percent, to 2.3 million players, according to a study by the Sports & Fitness Industry Association, which has analyzed youth athletic trends for 40 years. The number of children who touched a soccer ball even once during the year, in organized play or otherwise, also has fallen significantly.

…In general, participation in youth sports nationwide has declined in the past decade, as children gravitate to electronic diversions and other distractions…

“It’s lost more child participants than any other sport — about 600,000 of them,” said Tom Farrey, executive director of the Aspen Institute Sports & Society Program.

That is from Joe Drape at the NYT.

Are wages rising slowly because of a pool of reserve labor?

I see this claim in my Twitter feed pretty often, but I don’t get how it is supposed to run.  Let’s try an analogy with the non-human animal kingdom.

Right now there are many cows in the world, and even more potential cows to be bred, or cows in low-value situations that could be moved around by boat or even helicopter, if need be.  Call it the “moo reserve army of the unemployed.”  If the market as a whole increased its demand for cows, the price of cows would go up.  It would not make sense to say “that happens only when all the cows are busy all the time and there are no extra cows or potential cows left.”  Very likely, there is an upward-sloping cost curve for mobilizing more cows.

To be sure, under a constant cost assumption, the price of cows would not go up, following an increase in demand.  The quantity of eligible, working cows would rise, stifling upward price pressure, and possibly this would take the form of a Malthusian equilibrium.  But note: in this situation you should expect the price of cows never to go up, as the cost structure is preventing that.

Alternatively, you might think that demand for cows and the cost structure for cow expansions interact in some very particular way.  If you pinned this down in just the right manner, you could model a situation where an increase in demand for cows won’t boost the price of cows now, but in broader situations the price of cows can sustainably rise.  Indeed that is possible, I just don’t see particular reason to believe that such a convoluted construction is doing most of the explanatory work for current labor markets.

I look at it this way: measured wages for male labor near the median haven’t gone up much in decades, and this is poorly understood (you may or may not think the same is true for actual real wages, and for women the story is somewhat more complicated).  So if measured wages for non-supervisors are not going up much now, that is hardly a huge shock.  The fact that we don’t understand it well doesn’t mean some remaining particular hypothesis — in this case about the size of reserve armies — has to be the true one.

Most cow parables, upon closer examination, collapse into structural explanations anyway.  And in labor markets, it is almost always both blades of the scissors that matter.

Addendum: You might try a matching model.  Imagine that potential workers are fully passive, stoned so to speak, but will accept credible good offers from well-capitalized employers.  The cost structure of the workers, or worker search, does not influence the outcome.  Over the course of the recovery, employers invest more in searching for the right workers because their profits are higher and they make a successively greater number of offers to well-suited workers, but at constant wages.  The number of employed keeps on rising, wages stay flat, but longer-run wages nonetheless may rise with productivity (and with enough bids for their labor, workers move out of passive strategies).  I’m not saying this is a good representation, only that it might capture the claimed mix of flat wages and a large reserve pool of labor, yet without forcing wages into a longer-run flatness.  It also suggests, by the way, that some measure of monopoly/high profits has been good for social welfare, as it has boosted employment.

Canadian immigration sentences to ponder

It’s that commitment to policing immigration that has, paradoxically, sustained such high levels of support…

As for illegal and irregular immigration, Canadian governments from both ends of the political spectrum have worked—quietly—to ensure there is as little of it as possible. The unspoken underpinning of Canada’s otherwise welcoming immigration policy is a giant and assiduously maintained border wall…

Despite Canada’s open-door reputation, the country has some of the world’s most restrictive visa rules. A World Economic Forum survey of travel and tourism professionals ranked Canada among the worst in the world—120th out of 136 countries—for the restrictiveness of its visitor visa requirements. It’s a quiet but effective means of preempting irregular immigration.

That is from Tony Keller, the piece has other points of interest, such as how border-jumping from the U.S. is a major factor causing the Canadian immigration consensus to fray.  And don’t forget this:

Since the late 1980s, Canada has consistently been a high-immigration country, at least relative to the U.S. As a result, the proportion of Canadians born outside the country hit 21.9 percent in 2016. That same year, America’s foreign-born population was 13.4 percent. That’s a record high for the U.S.—but it’s been 115 years since Canada’s foreign-born population was at such a low level.

Under one simple model here, people need to feel in control before they will entertain further liberalization.

How to give admissions officers more discretion

Heaven forbid that grading should occur on a common scale with strong safeguards against cheating.  This missive is from Princeton:

On July 5, the University dropped the need for applicants to submit an essay score from the SAT or ACT. Beginning this 2018-2019 application season, applicants will, instead, have to submit a graded high school writing sample, preferably a work either of English or history.

In a statement, the University said that this new policy shift “aims to alleviate the financial hardship placed on students, including those who have the opportunity to take the test without writing during the school day and for free.”

Taking either test with the writing section costs more than taking the test without the writing section. The ACT with the writing section costs $16.50 more than without it, and the SAT similarly costs $17 more with it.

According to the statement, University officials “believe that assessing a student’s in-class work will provide helpful and meaningful insight into a student’s academic potential.”

The net result of this decision is to lower the status of higher education.  Here is the full article, via Catherine Rampell.

Epp and Borghetto have solved for the equilibrium…

And most of you won’t like it:

This article investigates the effects of economic inequality on legislative agendas. It considers two competing hypotheses: (1) that policymakers will act to counter rising inequality by renewing their focus on redistributive social policies, and (2) that rising inequality makes legislative agendas especially vulnerable to the influence of economic elites, and that these elites will attempt to keep redistributive social policies off the agenda. Empirical tests, which are designed to arbitrate between these hypotheses, use data on public laws and parliamentary bills introduced in the legislatures of nine European countries between 1941 and 2014. The evidence is supportive of the second hypothesis: as inequality becomes more acute, European legislative agendas become systematically less diverse and this narrowing of attention is driven by a migration away from social safety-net issues toward issues relating to law enforcement, immigration, and national defense.

Here is the paper, via the excellent Matt Grossman.

Not the United States

The father was detained in February; three months later the mother was also taken away by authorities. They had allegedly shared extremist Islamist content on their mobile phones, family friends said. Despite protests from relatives, two of their children, aged 18 and 15, were then detained and their younger two, aged seven and nine, were sent to a state welfare centre. “The grandfather even wept, but the authorities would not let him keep his grandchildren,” recalled an acquaintance.

So what’s up?:

As the Trump administration struggles to reunite migrants and their children forcibly separated at the US border, China has been separating families on a far larger scale as part of a rapidly intensifying security campaign.

That is from Emily Feng at the FT, via Comrade Balding.

It’s all about investment, not tariffs and trade wars

I’ve been saying this for a while, here is an excellent piece by Shawn Donnan at the FT:

Since it was first created in 1975 as an inter-agency committee, Cfius has been able to review foreign investments only on narrow national security grounds. But if it adopts the broad Trumpian definition of national security as economic security, this could open a whole new range of transactions to its scrutiny. Might a mid-western auto plant that makes components purely for civilian vehicles suddenly be treated as a national security asset and be banned from foreign ownership?

Presidents have for years resisted efforts in Congress to require Cfius to consider an economic benefits test when it approves large foreign investments, as similar bodies do in countries such as Australia and Canada. Mr Trump, however, seems to be embracing the idea.  Legislation to reform Cfius, which the Trump administration will have broad powers to shape in its implementation, is nearing its final journey through Congress.

Maybe they’ll have to revise the Star Wars prequels too…

Why doesn’t Mexico’s economy grow more quickly?

That is the topic of my latest Bloomberg column, here is one bit:

Instead, it is education that is arguably Mexico’s most fundamental problem. In most emerging economies, if you are ambitious and seek higher wages, you will invest in more education. Mexicans have traditionally had another choice — crossing the border to work in the U.S. Mexicans who make this choice can move from earning a dollar or two a day to 10 or 15 dollars an hour, though with higher living costs. It is hard to beat that boost simply by finishing high school or even college in Mexico.

And:

Admittedly, this [informal, grey or black market] labor can be and often is absorbed into the more formal, more productive sectors of the economy, including exports. But the rate of absorption is quite slow, which in turn helps to set the slow growth rate of the economy. And in any case neither the high-productivity nor the low-productivity firms have that much room to grow within their respective categories, a major difference from many other emerging economies.

The odds are that Mexico will have to opt for the slow but steady long game, as Denmark once did.

CIVIL and the future of media?

David Siegel emails me:

CIVIL is a new start-up from Consensys, whose goal is to change journalism.

The Civil marketplace is built on a protocol that in turn is built on the Ethereum blockchain.

This ecosystem is built around a token-curated registry, using what we call a “skin-in-the-game coin,” the CVL. This is an application of mechanism design to blockchain-based tokens that can be acquired, exchanged, and go up in value, creating a new micro-economy for – in this case – truthy journalism. The basic unit of Civil is a newsroom. A newsroom is a person or group who can publish anything they like. They can charge readers using CVL tokens or credit cards or anything else. What makes Civil interesting is that anyone can challenge a story’s veracity.

To challenge a story, you send some CVL coins to a smart contract. The community then votes on the veracity of the story, or even the newsroom itself. Anyone who votes must stake coins. If the story is voted true, those who voted true take the pot – they win all the staked tokens. If the community finds it’s false, then those who voted for false share the purse. This skin-in-the-game mechanism is the next evolution of communities like Steem and is game-theoretically far more advanced than Reddit or Quora. It promises to eliminate fake ratings, reviews, and content farms pumping out propaganda. By creating token-based games that reward virtuous behavior – the first one of which was Bitcoin – today’s blockchain entrepreneurs promise to bring us a new era of less biased news, better blogging, more accurate ratings, and potentially better science.

Trump’s gender gap also concerns intensity of preference

Among self-identified Republicans, Trump’s approval is 91 percent among men and 82 percent among women. But the gap in intensity of support is what is particularly telling. While 68 percent of male Republicans say they strongly approve of the way Trump is handling his job, just 31 percent of female Republicans say the same — a whopping 37-point difference.

There is a double-digit difference between all men and women in their evaluation of Trump’s handling of immigration, and likewise among Republican men and women. On trade, Republican men and women are in general agreement in giving positive marks, but they are widely separated in whether they feel strongly about that support.

On his handling of the economy, the gap is even larger. Across the entire population, more than 6 in 10 men give him positive marks for the economy, but fewer than 4 in 10 women say the same. Among Republicans, there is a 27-point difference between men and women in the level of strong approval expressed for the way the president is dealing with the economy.

Here is the full story by Dan Balz.

Mobile money in Somaliland

Since its launch in 2009, Zaad, which means “to grow” in Somali, has swelled to 850,000 users—roughly one-quarter of the nation’s population. Locals use the platform on battered old cellphones and, less frequently, on smartphones and a designated app.

Without mobile money, cash has a hard time flowing through the country. No commercial banks really operate here, and hauling physical cash over rough roads is time-consuming. Companies use Zaad for their monthly payrolls, instead of handing wads of cash to their employees.

Today, each user on average makes 35 Zaad transactions a month, and Somalilanders say they try to use Zaad for most transactions. A rudimentary texting system makes it easy even for the many Somalilanders who are illiterate.

It seems to be a kind of free banking:

Apart from phone-to-phone transactions, users can top up their mobile wallets by handing cash—shillings [the Somaliland currency] or dollars—over to an official agent, who is often a single person in a shack on the side of the road.

“This service has been a driving force for the smooth operation of our economy,” said Abdikarim Dil, Telesom’s chief executive.

Since mobile-money services aren’t regulated by the central bank, they aren’t subject to the restrictions that traditional banks face, including requirements meant to block terror financing.

Here is the story (WSJ) by the consistently interesting Matina Stevis-Gridneff (there are few journalists better to read these days), via the excellent Samir Varma.

Informational autocrats

That is a new and important paper by Sergei M. Guriev and Daniel Treisman, here is the abstract:

In recent decades, dictatorships based on mass repression have largely given way to a new model based on the manipulation of information. Instead of terrorizing citizens into submission, “informational autocrats” artificially boost their popularity by convincing the public they are competent. To do so, they use propaganda and silence informed members of the elite by co-optation or censorship. Using several sources–including a newly created dataset of authoritarian control techniques–we document a range of trends in recent autocracies that fit the theory: a decline in violence, efforts to conceal state repression, rejection of official ideologies, imitation of democracy, a perceptions gap between masses and elite, and the adoption by leaders of a rhetoric of performance rather than one aimed at inspiring fear.

Again, here is my related Bloomberg column from June 18.