Category: Current Affairs

What is behind the spread of so many mass protests?

One frequent theme is people objecting to a price increase. In Ecuador,  a focal point of the protests has been a demand for restoration of fuel subsidies. Petroleum price subsidies also have been central to the Haitian protests. In Lebanon, citizens have been upset at a new tax levied on the use of WhatsApp, with a social media tax also having been an issue in Uganda. In Sudan cuts to food and fuel subsidies have been a major complaint. In Chile they are protesting subway fare hikes.

The trend is that price increases may continue to become less popular. And, crucially, the internet will help people organize against such changes.

Consider that an old-style labor-oriented protest can be organized through the workplace or plant itself, through on-the-ground techniques that long predate the internet. There is a common locale and set of social networks in place, including perhaps a union. Those who suffer from a price increase, in contrast, typically do not know each other or have common social ties. Just about everyone buys gasoline, either directly or indirectly. The internet, however, makes it possible to mobilize these people into protests with prices as the common theme.

In other words: Protests of workers seem to be becoming less important, and protests of consumers are becoming more important.

You may recall that one of the original demands of the “gilets jaunes” protests in France was for free parking in Disneyland Paris. If you think that sounds a little crazy, you haven’t yet internalized the nature of the new millennium.

In the future, efficiency-enhancing or austerity-induced changes in prices may be much harder to accomplish politically. The new trend is neither central planning nor market liberal reforms, but rather frozen prices, especially when those prices are set in the political realm.

Here is the rest of my latest Bloomberg column on that topic.  Two further points: my global warming point I pulled from Noah Smith, though I could no longer find his tweet to cite. Furthermore, many of the recent protests, such as in Spain, fit a more political and ethnic model, I am not saying price increases are always the major factor.

When can companies force change by standing up to foreign governments

From Jason Miklian, John E. Katsos, Benedicte Bull:

It’s easy to condemn firms for meek apologies — and to criticize the NBA and others as willing tools of the Chinese regime, “submitting to authoritarianism” to make a buck. However, our research suggests even when companies want to support global democracy and human rights, they find it much harder than anticipated and trap themselves in unenviable choices…

Our research has shown, time and again, how companies fail to live up to these lofty expectations [improving liberties and human rights]. It’s not for lack of trying. Instead, companies find the problems governments want them to solve are incredibly hard — and companies themselves suffer the political fallout when they can’t get things right.

And this:

Companies are most likely to deliver benefits when the measures they take are concrete, focused on specific goals and build on existing corporate expertise. These measures are more likely to affect change when companies join in collective actions by the business community that complement international political campaigns.

There is much more at the link, including discussions of China and South Africa.

The Nobel Prize in Economic Science Goes to Banerjee, Duflo, and Kremer

The Nobel Prize goes to Abhijit Banerjee, Esther Duflo and Michael Kremer (links to home pages) for field experiments in development economics. Esther Duflo was a John Bates Clark Medal winner, a MacArthur “genius” award winner, and is now the second woman to win the economics Nobel and by far the youngest person to ever win the economics Nobel (Arrow was the previous youngest winner!). Duflo and Banerjee are married so these are also the first spouses to win the economics Nobel although not the first spouses to win Nobel prizes–there was even one member of a Nobel prize winning spouse-couple who won the Nobel prize in economics. Can you name the spouses?

Michael Kremer wrote two of my favorite papers ever. The first is Patent Buyouts which you can find in my book Entrepreneurial Economics: Bright Ideas from the Dismal Science. The idea of a patent buyout is for the government to buy a patent and rip it up, opening the idea to the public domain. How much should the government pay? To decide this they can hold an auction. Anyone can bid in the auction but the winner receives the patent only say 10% of the time–the other 90% of the time the patent is bought by the government at the market price. The value of this procedure is that 90% of the time we get all the incentive properties of the patent without any of the monopoly costs. Thus, we eliminate the innovation tradeoff. Indeed, the government can even top the market price up by say 15% in order to increase the incentive to innovate. You might think the patent buyout idea is unrealistic. But in fact, Kremer went on to pioneer an important version of the idea, the Advance Market Commitment for Vaccines which was used to guarantee a market for the pneumococcal vaccine which has now been given to some 143 million children. Bill Gates was involved with governments in supporting the project.

My second Kremer paper is Population Growth and Technological Change: One Million B.C. to 1990. An economist examining one million years of the economy! I like to say that there are two views of humanity, people are stomachs or people are brains. In the people are stomachs view, more people means more eaters, more takers, less for everyone else. In the people are brains view, more people means more brains, more ideas, more for everyone else. The people are brains view is my view and Paul Romer’s view (ideas are nonrivalrous). Kremer tests the two views. He shows that over the long run economic growth increased with population growth. People are brains.

Oh, and can I add a third Kremer paper? The O-Ring Model of Development is a great and deep paper. (MRU video on the O-ring model).

The work for which the Nobel was given is for field experiments in development economics. Kremer began this area of research with randomized trials of educational policies in Kenya. Duflo and Banerjee then deepened and broadened the use of field experiments and in 2003 established the Poverty Action Lab which has been the nexus for field experiments in development economics carried on by hundreds of researchers around the world.

Much has been learned in field experiments about what does and also doesn’t work. In Incentives Work, Dufflo, Hanna and Ryan created a successful program to monitor and reduce teacher absenteeism in India, a problem that Michael Kremer had shown in Missing in Action was very serious with some 30% of teachers not showing up on a typical day. But when they tried to institute a similar program for nurses in Putting a Band-Aid on A Corpse the program was soon undermined by local politicians and “Eighteen months after its inception, the program had become completely ineffective.” Similarly, Banerjee, Duflo, Glennerster and Kinnan find that Microfinance is ok but no miracle (sorry fellow laureate Muhammad Yunus). A frustrating lesson has been the context dependent nature of results and the difficult of finding external validity. (Lant Pritchett in a critique of the “randomistas” argues that real development is based on macro-policy rather than micro-experiment. See also Bill Easterly on the success of the Washington Consensus.)

Duflo, Kremer and Robinson study How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya. This is an especially interest piece of research because they find that rates of return are very high but that farmers don’t use much fertilizer. Why not? The reasons seem to have much more to do with behavioral biases than rationality. Some interventions help:

Our findings suggest that simple interventions that affect neither the cost of, nor the payoff to, fertilizer can substantially increase fertilizer use. In particular, offering farmers the option to buy fertilizer (at the full market price, but with free delivery) immediately after the harvest leads to an increase of at least 33 percent in the proportion of farmers using fertilizer, an effect comparable to that of a 50 percent reduction in the price of fertilizer (in contrast, there is no impact on fertilizer adoption of offering free delivery at the time fertilizer is actually needed for top dressing). This finding seems inconsistent with the idea that low adoption is due to low returns or credit constraints, and suggests there may be a role for non–fully rational behavior in explaining production decisions.

This is reminiscent of people in developed countries who don’t adjust their retirement savings rates to take advantage of employer matches. (A connection to Thaler’s work).

Duflo and Banerjee have conducted many of their field experiments in India and have looked at not just conventional questions of development economics but also at politics. In 1993, India introduced a constitutional rule that said that each state had to reserve a third of all positions as chair of village councils for women. In a series of papers, Duflo studies this natural experiment which involved randomization of villages with women chairs. In Women as Policy Makers (with Chattopadhyay) she finds that female politicians change the allocation of resources towards infrastructure of relevance to women. In Powerful Women (Beaman et al.) she finds that having once had a female village leader increases the prospects of future female leaders, i.e. exposure reduces bias.

Before Banerjee became a randomistas he was a theorist. His A Simple Model of Herd Behavior is also a favorite. The essence of the model can be explained in a simple example (from the paper). Suppose there are two restaurants A and B. The prior probability is that A is slightly more likely to be a better restaurant than B but in fact B is the better restaurant. People arrive at the restaurants in sequence and as they do they get a signal of which restaurant is better and they also see what choice the person in front of them made. Suppose the first person in line gets a signal that the better restaurant is A (contrary to fact). They choose A. The second person then gets a signal that the better restaurant is B. The second person in line also sees that the first person chose A, so they now know one signal is for A and one is for B and the prior is A so the weight of the evidence is for A—the second person also chooses restaurant A. The next person in line also gets the B signal but for the same reasons they also choose A. In fact, everyone chooses A even if 99 out of 100 signals are B. We get a herd. The sequential information structure means that the information is wasted. Thus, how information is distributed can make a huge difference to what happens. A lot of lessons here for tweeting and Facebook!

Banerjee is also the author of some original and key pieces on Indian economic history, most notably History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India (with Iyer).

Duflo’s TED Talk. Previous Duflo posts; Kremer posts; Banerjee posts on MR.

Before last year’s Nobel announcement Tyler wrote:

I’ve never once gotten it right, at least not for exact timing, so my apologies to anyone I pick (sorry Bill Baumol!). Nonetheless this year I am in for Esther Duflo and Abihijit Banerjee, possibly with Michael Kremer, for randomized control trials in development economics.

As Tyler predicted he was wrong and also right. Thus, this years win is well-timed and well-deserved. Congratulations to all.

The ebb and flow of political correctness doctrine

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

What caused the P.C. movement to stall after the ‘90s? One theory is that it was due to two particular events. First, a Democratic president was impeached for his sexual conduct with an intern. That made the left (at least temporarily) less interested in rooting out and punishing all abuses of power. Second, the attacks of Sept. 11, and the subsequent wars in Afghanistan and Iraq, created a new and different focal point for activist energy: first anti-terror, then anti-war.

The history of political correctness also shows that ideas can have a long genesis, as this essay by Musa al-Gharbi illustrates. The idea of sensitivity training, for instance, was created by Kurt Lewin in 1946-47, and later popularized by Carl Rogers in 1961. The notion of “safe spaces” started in gay and lesbian bars in the mid-1960s. The term “microaggressions” comes from Chester Pierce in 1974. It is possible that the phrase “identity politics” comes from the Combahee River Collective Statement of 1977.

The lesson here is clear: If you are dealing in the world of ideas, play the long game — don’t be too discouraged by momentary setbacks. For all the talk of America having a throwaway culture that moves rapidly from one idea to the next, the history of political correctness does not support that vision. It is possible for people to promote and sustain ideas to give them resonance and influence.

Please note I am trying to learn from the history of the movement, and it is not the point of this column to condemn it excesses (which are very real).

How many NBA players have tweeted in support of Hong Kong?

As I am writing this post, zero (perhaps someone has done so by the time this pops up, but it won’t have been much).  And yet there are about 300 players on opening day NBA rosters, more in the preseason of course, maybe 450?

Presumably the league has, either directly or indirectly, told them not to run off at the mouth on this topic.

I don’t feel I am trafficking in unjust stereotypes to note that many of these guys are pretty big, pretty tough, and not so used to being pushed around.  They come from a wide variety of backgrounds and also countries and income classes.

One hypothesis is that all three hundred of these individuals are craven cowards, worthy of our scorn.  Maybe.

Another hypothesis, closer to my view, is that it has turned out sports leagues (and players) are neither the most efficient nor the most just way to combat social and political problems related to China.

There is plenty of worthwhile China-related legislation and regulation on tap, including expanding the role for CFIUS, discouraging our allies from using Huawei 5G, and protesting against American companies working in Xinjiang (and yes that does include the NBA training camp there).  Human rights legislation related to Xinjiang is another plausible option, though I have not studied the details of those proposals.

It is fine to favor those and other measures — in conjunction with our allies as much as possible — while simultaneously thinking this is not the NBA’s fight.  Trump himself is far more “anti-China” than any other U.S. president in recent times, and he too decided to push this issue aside.

Should you really feel so much better about “the NBA standing up to China” if they are doing it because the U.S. Congress has intimidated them into this new form of “free speech”?

What I observe happening is that many people have been “dropping the ball” on China for years.  A highly visible issue comes up, and one where they also can take a potshot at multinational corporations.  So they take an isolated stand on an isolated case, mood affiliating on two different issues at once, namely “stand up to China,” and “criticize corporations for their craven corruptness.”

I say think through the problem in the broadest possible terms.  The approach of “sound coordinated measures through our government and its allies, while retaining commercial friendliness and political neutrality for MNCs” is in fact a pretty good one.  It could be much worse, and most likely it soon will be so.

Get Government Out of the Construction Business

USA Today: Nearly three years after city voters approved a $1.2 billion construction program over 10 years, the city has  yet to see the first building completed. Average per-apartment costs have zoomed more than $100,000 past prior predictions, the study by city Controller Ron Galperin finds.

…At an average cost of $531,373 per unit – with many apartments costing more than $600,000 each –  building costs of many of the homeless units will exceed the median sale price of a market-rate condominium.

…Prices rose dramatically because of higher-than-expected costs for items other than actual construction, such as consultants and financing. Those items comprise up to 40% of the cost of a project, the study found. By contrast, land acquisition costs averaged only 11% of the total costs.

Based on a recent audit of the program.

It’s absurd for a government to be building houses, a task for which it is manifestly unsuited. What the government should be doing is easing restrictions on building, improving public transportation which increases the supply of effective housing and dealing with any shortfalls by using housing vouchers.

Daryl Morey vs. ESPN

Daryl Morey wrote a pro-Hong Kong tweet and had to retract it, and then both the Rockets and the NBA had to eat crow.  ESPN — part of the Disney empire I might add — has given only tiny, tiny coverage to the whole episode, even though it is a huge story on non-basketball sites.  I’ve been checking the espn/nba site regularly over the last 24 hours, and there is one small link in the upper corner, no featured story at all.

The ESPN pieces I’ve seen seem to be studiously carefully worded and non-incendiary.

Disney of course sells a lot of movies in China and presumably would love to sell more.

Everyone is upset about Morey, I haven’t seen anyone attack ESPN or even mention this.

Should we be so captive of the “endowment effect,” namely that deleting a tweet is more a form of visible “kowtowing” than is downplaying the story in the first place?

Didn’t Bastiat teach us about the seen vs. the unseen?  Right now people are overreacting with respect to the seen.

If you let your emotions be so whiplashed by “the seen,” you will find it harder and harder to understand the unseen.  Do not be a lap dog to the seen!

Addendum, from the comments: “The ESPN story that is on the top-right corner doesn’t even have a byline. It appears to be a reproduced AP story. So ESPN has not assigned a single reporter to produce a story about an NBA event that is on A1 of the NYT.”

And this: “ESPN forbids discussion of Chinese politics…

The NBA, Daryl Morey, and China

I changed my mind on this issue after pondering it for a while, here is my Bloomberg column on the topic.  Here is one bit:

True to form, I find myself in disagreement with the consensus: Morey committed a blunder, and deleting the tweet was the correct thing to do.

And more:

American politicians and leaders should offer greater support for the more liberal sides of the Hong Kong protest movement. But not all businesspeople are in the same position, especially if they are actively involved with China or other countries whose behavior is under consideration.

To provide a slightly more neutral example, the NBA is currently trying to market its product to India. In the meantime, I don’t think NBA executives should be tweeting or commenting about the status of Kashmir. Those strictures should hold even if the tweets or remarks are entirely correct.

There is simply too much tension between the fiduciary obligations of the potential speakers and the issues under consideration. For better or worse, the NBA is committed to a major expansion in China, and it is entirely normal for the association — like any other business — to demand that its executives do not conduct diplomacy, engage in negotiations or make political commentary on the side. The NBA’s mistake was simply to insist on this in far too clumsy and public a manner.

What they should do is simply pull the training camp out of Xinjiang, no squawking required.  By the way, here are much better American corporate targets than the NBA.  And the close:

As for the practical question of where things go from here, I’ll be watching to see what NBA players — most of all the stars, many of whom have contracts with Chinese companies — say next.

Finally:

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

There is much more at the link, more than usual.  Many of you love the doux commerce thesis, namely that trade ties encourage peace among nations.  Yes that is usually true, but sometimes the role of the corporations is to promote lies, or at least not speak the truth too loudly.  That is part of the Montesquieu bargain, whether one likes it or not.  You are installing an intermediary with incentives for cooperation and good will, not an arbiter of truth.

We are overreacting on this one because it is our main geopolitical rival — China — forcing a major American institution, namely the NBA, to eat crow, because of the sequencing of events.  But in reality, there is nothing wrong with a sports league that steers its major executives away from commenting on external politics and that is very often the norm in the corporate world, in countries both nasty and nice.

Which thinker from the past would you resurrect?

The Scholar’s Stage writes:

If I were to resurrect one person to comment on our current dilemmas, that person would be Hannah Arendt. 

What issue of importance today did she not ponder?  How should Western countries understand and respond to authoritarian states? What makes meaningful community possible? Does bureaucracy, technology, and settled life diminish our freedom?  Why do politicians lie—and what consequences should there be for lying in office? How do political institutions decay? Should we forgive our political enemies? When is violence justified, and when is it not? How can it be controlled or avoided? What should the ‘justice’ in phrases like ‘social justice’ actually mean? What role should guilt, rage, and fear play in our political lives? How should we translate abstract political principles into living realities?

Arendt wrote about all of these things and more. She would have the intellectual background needed to say something useful about the biggest political and social challenges we face today: America’s relationship with China, technology’s encroach upon democracy, the unsettled relation between the sexes, the collapse of American social capital and community life, the strengths and foibles of social justice campaigning, partisanship and ‘post-reality’ politics, and of course, the presidency of Donald Trump.

I wish we could hear her opinions on these things. I wish this because I honestly do not know what her opinions would be. I recognize positions she would not adopt, but I can only guess what she would make of Facebook or consider the proper political grounding for impeachment.

A case is made against several other plausible options, including the Founding Fathers.  One approach is simply to ask who would be good on television, or on social media.  Another is to pick a person whose historical reputation is so strong that he or she cannot be ignored — perhaps that would militate in favor of Abraham Lincoln or how about Jane Austen?  Perhaps attention is the true scarcity that needs to be overcome.

I believe I would revive Confucius, at least assuming everyone would accept that it is indeed the real Confucius.  He is perhaps the person most likely to have an influence in China, and there is some chance he would seek to reverse the current course of political events.

Robert Kagan has solved for the equilibrium

Consider what it will mean if we decide that what Trump and Giuliani have already acknowledged doing in Ukraine becomes an acceptable practice for all future presidents. Sending the signal that other governments can curry favor with a U.S. president by helping to dig up dirt on his or her political opponents would open our political system and foreign policy to intervention and manipulation on a global scale. Every government in the world wishing to influence U.S. foreign policy will have an incentive to come to a sitting president with information on his or her potential political opponents.

That information might be related to investments or other financial dealings in a particular country, as in Ukraine. Or it might have to do with the behavior of a particular individual while traveling abroad — who he or she sees and what he or she does. Other governments will therefore have an incentive to conduct surveillance of political figures traveling through their countries on the off chance of gleaning some bit of information that could be traded in Washington for some favor. Nor would other governments be limited to what they can see in their own countries. They would have an incentive to dig into the lives of potential opposition politicians in the United States, through monitoring their social media and other Internet presences, their bank accounts and other personal information — as already happened in 2016, and which Trump openly welcomed then, too.

Here is the full piece.  I mostly agree, but wonder if foreign governments haven’t already been doing this for some time, but hoarding the information rather than releasing it to select American politicians (no reason to encourage them further, of course).

Not a single child born in the U.K. in 2016 was named Nigel

When he heard that no babies born in Britain in 2016 were named Nigel, Nigel Smith began to fret that the people with whom he shared a first name were a “dying breed.”

“I thought that’s a bit of a worry, really, because most of us are over a certain age,” Smith told As It Happens host Carol Off.

Instead of going into mourning, however, he decided to have some fun with it. He owns the Fleece Inn, near Worcestershire, so he organized “Nigel Night” at the pub.

“We’re going to die out soon, so it’s important to sort of celebrate our Nigel-ness before we all pop off the planet.”

Smith says 434 Nigels — including himself — joined in the festivities on Saturday to enjoy some music, food and celebrating their mutual “Nigel-ness.”

It’s believed to be the biggest gathering of Nigels in the world — though it’s unclear who’s keeping track of this unusual statistic…

All attending Nigels, ranging in age from seven months to 80 years old, were verified with an ID check, and handed a badge with their name on it. Other attendees were issued badges that read “Not Nigel” on them.

According to the U.K. Office for National Statistics, no boys born in 2016 were named Nigel. The name enjoyed a slight uptick with 11 new Nigels in 2017, and eight in 2018.

That number pales in comparison to the most popular name, Oliver, which saw 5,390 new additions in 2018. Other top boys’ names over the last decade included George, Harry, Noah and Jack.

And:

Smith didn’t rule out the possibility that Farage’s role in the 2016 Brexit referendum may have even played a part in the dearth of newborn Nigels that year.

“Despite the man, we are fighting back.”

Here is the link, via Michelle Dawson.

Who again wants ten percent less democracy?

The Prospect has identified 30 meaningful executive actions, all derived from authority in specific statutes, which could be implemented on Day One by a new president. These would not be executive orders, much less abuses of authority, but strategic exercise of legitimate presidential power.

Without signing a single new law, the next president can lower prescription drug prices, cancel student debt, break up the big banks, give everybody who wants one a bank account, counteract the dominance of monopoly power, protect farmers from price discrimination and unfair dealing, force divestment from fossil fuel projects, close a slew of tax loopholes, hold crooked CEOs accountable, mandate reductions of greenhouse gas emissions, allow the effective legalization of marijuana, make it easier for 800,000 workers to join a union, and much, much more. We have compiled a series of essays to explain precisely how, and under what authority, the next president can accomplish all this.

Here is more from David Dayen.  Here is my previous post on the forthcoming Garett Jones book.

The white collar job apocalypse did not happen

In a follow-up paper released Friday, another economist, Adam Ozimek, revisited Mr. Blinder’s analysis to see what had happened over the past decade. Some job categories that Mr. Blinder identified as vulnerable [to offshoring], like data-entry workers, have seen a decline in United States employment. But the ranks of others, like actuaries, have continued to grow.

Over all, of the 26 occupations that Mr. Blinder identified as “highly offshorable” and for which Mr. Ozimek had data, 15 have added jobs over the past decade and 11 have cut them. Altogether, those occupations have eliminated fewer than 200,000 jobs over 10 years, hardly the millions that many feared. A second tier of jobs — which Mr. Blinder labeled “offshorable” — has actually added more than 1.5 million jobs.

But Mr. Blinder didn’t miss the mark entirely, said Mr. Ozimek, who is chief economist at Upwork, an online platform for hiring freelancers. The new study found that in the jobs that Mr. Blinder identified as easily offshored, a growing share of workers were now working from home. Mr. Ozimek said he suspected that many more were working in satellite offices or for outside contractors, rather than at a company’s main location. In other words, technology like cloud computing and videoconferencing has enabled these jobs to be done remotely, just not quite as remotely as Mr. Blinder and many others assumed.

Here is more from Ben Casselman (NYT).

The political business cycle, China style

He has pledged to achieve “national rejuvenation”, a goal that is supposed to include getting Taiwan under Chinese control by 2049, the centenary of the founding of the People’s Republic of China. But analysts have warned that Mr Xi could be under pressure to demonstrate “progress” on Taiwan much earlier — in 2022, when the Communist party leadership is due to confirm whether to allow him to stay on beyond the end of his second term.

That is from Kathrin Hille at the FT.

My trip to Karachi

Most recently, the city has been beset by a plague of flies — a “bullying force,” says the New York Times, “sparing no one.” The swarm of flies, which I was fortunate enough to miss, was the result of monsoon season, malfunctioning drainage systems clogged with solid waste, and slaughtered animals from the Muslim celebration of Eid. (The same monsoon season, by the way, led to power blackouts of up to 60 hours.) On a livability index, Karachi ranks near the bottom, just ahead of Damascus, Lagos, Dhaka and Tripoli.

There is no subway, and a typical street scene blends cars, auto-rickshaws, motorbikes and the occasional donkey pulling a cart. It’s fun for the visitor, but I wouldn’t call transportation easy.

And yet to see only those negatives is to miss the point. Markets speak more loudly than anecdotes, and the population of Karachi continues to rise — a mark of the city’s success. This market test is more important than the aesthetic test, and Karachi unambiguously passes it.

And:

Most of all, I am impressed by the tenacity of Pakistan. Before going there, I was very familiar with the cliched claim that Pakistan is a fragile tinderbox, barely a proper country, liable to fall apart any moment and collapse into civil war. Neither my visit nor my more focused reading has provided any support for that view, and perhaps it is time to retire it. Pakistan’s national identity may be strongly contested but it is pretty secure, backed by the growing use of Urdu as a national language — and cricket to boot. It has come through the Afghan wars battered but intact.

That is all from my longer than usual Bloomberg column, all about Karachi.