Category: Current Affairs

What is a good name for a trade deal?

When I see USMCA, I also think of “United States Marine Corps,” a connection Donald Trump himself has noted. Of course the Marines have nothing to do with international trade policy, but given the public’s longstanding confidence in the military, the association is unlikely to hurt politically. Other people may confuse USMCA with USCMA, or the United States Catholic Mission Association, another positive connotation.

This next point may sound slightly cynical, but here goes: Perhaps being so easy to say and remember has been part of Nafta’s problem. The sad reality is that voters do not love the idea of free trade once it is made concrete to them, and both Barack Obama and Trump campaigned against Nafta in its current form. So maybe every time people heard the name Nafta, they were reminded of how much they disliked it.

I recall, more than a decade ago, hearing talk of a supposed “Nafta superhighway,” a series of roads that would supposedly bring the three Nafta countries under some kind of joint, conspiratorial rule, enforced by the movement of vehicles on these connector roads and sometimes in league with Satan himself. The alternative phrase — “USMCA Superhighway” — doesn’t roll off the tongue as easily, so maybe it will be harder to drum up fake news about the new deal.

Here is the rest of my Bloomberg column on the topic.  And this:

Looking back, the General Agreement on Tariffs and Trade (Gatt) had a pretty good name for its time. It conveyed that there was in fact a general agreement, and that branding sold well enough in an earlier, more multilateral era. It might have sounded dull and technocratic, but that was OK for policies which were … dull and technocratic. Much worse, however, was the 1995 relabeling into the World Trade Organization, a name which to many people sounds globalist, faceless and sinister. They might as well have called it SPECTRE, the name of the criminal group in many James Bond novels and films.

I even quote a Canadian quoting Shakespeare…

They solved for the equilibrium, China equilibrium of the day

China will be less severe with its smog curbs this winter as it grapples with slower economic growth and a trade war with the United States, according to a government plan released on Thursday.

Instead of imposing blanket bans on industrial production in the Beijing-Tianjin-Hebei area as it did last winter, the Ministry of Ecology and Environment said it would let steel plants continue production as long as their emissions met standards.

Targets for overall emissions cuts have also been revised down. In the next six months, 28 cities in northern China are required to cut levels of PM2.5 – the tiny airborne particles that are most harmful to human health – by about 3 per cent from a year ago.

That is less than the 5 per cent cut proposed in an initial plan seen by the South China Morning Post last month.

Meanwhile, the new plan stipulates that the number of days of severe air pollution should be reduced by about 3 per cent, also revised down from 5 per cent in last month’s draft.

Here is more from Orange Wang at SCMP.  As I am sure you all know, air pollution (and I don’t just mean carbon emissions) is one of the great underrated problems in the world today.  The trade war with China is making it worse.

The Kavanaugh saga from afar

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

There is an asymmetry between male and female perceptions.

Most men are not abusers, yet very large numbers of women have been abused. So if a man is an abuser, there is a good chance he has abused a fair number of women.

That means many well-meaning men experience sexual abuse as a relatively rare phenomenon. They haven’t done it, and most of their male friends haven’t either. At the same time, most women have abuse, rape or #MeToo stories, and they experience these phenomena as relatively common and often life-altering. Probably they also have heard multiple such stories from their female friends. This structural asymmetry of perspectives is crucial to understanding the discourse and the often fundamental differences in opinion.

Our criminal justice system isn’t very good.

Whether you think Kavanaugh is innocent or guilty, we can all agree there are large numbers of intelligent people on both sides of the debate, and even after a week of intense national scrutiny there is no resolution. The reality is that ordinary accused people, who are basically presumed guilty by the criminal justice system, don’t receive very fair judgments. And if Kavanaugh is innocent, might we hope that this experience will make him more sympathetic to the plight of the unjustly imprisoned and accused?

But perhaps now we can move on to talking about the renegotiation of the trade agreement formerly known as NAFTA

Let’s just simulate economic mobility on TV

…contemporary Americans are watching a record number of entertainment TV programs emphasizing “rags to riches” narratives.  Using detailed Nielsen ratings data and original content analyses, I demonstrate that such shows have become a ubiquitous part of the American media landscape over the last two decades.  In three national surveys…I find that exposure to these programs increases viewers’ beliefs in the American Dream; for heavy viewers this effect is as powerful as that of having immigrant parents.  In experiments conducted both online and in a lab-in-the-field setting establish that these media effects are causal, and stronger among Republicans.

That is from a new paper by Eunice Kim, via Matt Grossman.

My Conversation with Bruno Maçães

Here is the audio and transcript, here is the opening summary:

Political scientist Bruno Maçães has built a career out of crossing the globe teaching, advising, writing, and talking to people. His recent book, born out of a six-month journey across Eurasia, is one of Tyler’s favorites.

So how does it feel to face Tyler’s rat-a-tat curiosity about your life’s work? For Bruno, the experience was “like you are a politician under attack and your portfolio is the whole of physical and metaphysical reality.”

Read on to discover how well Bruno defended that expansive portfolio, including what’s missing from liberalism, Obama’s conceptual foreign policy mistake, what economists are most wrong about, how to fall in love with Djibouti, stagnation in Europe, the diversity of Central Asia, Hitchcock’s perfect movie, China as an ever-growing global force, the book everyone under 25 should read, the creativity of Washington, D.C versus Silicon Valley, and more.

Here is one bit:

MAÇÃES: This raises deep philosophical questions and political questions. If you want Turkey to become like Europe, then you have to project European power across Turkey. If Europe no longer has that ability, then you shouldn’t be surprised that Turkey looks elsewhere.

It’s very simple. I think I say in the book that in order to be loved, you also have to be feared. This idea that you find in Europe now, that without projecting any kind of power, other countries will be attracted to the European model, that’s a form of utopianism. I just cannot see that happen.

COWEN: So Europe lacks the spirit of adventure.

MAÇÃES: That is certainly the case. I think you see that. One of the areas where the spirit of adventure today is more relevant and important is technology. You see in Europe the idea that technology’s against us, and we should resist this rather than embrace it. A very negative spirit, which I think is a good example of how adventure has disappeared from the European psyche.

And:

COWEN: Russia. Why is Russia as a world power currently underrated?

MAÇÃES: The most impressive thing about Russia is, in fact, something that you might not think at first: the power of organization. We have this image of Russia as a failed state in many respects.

But in order to keep that empire, in order to keep it together throughout the centuries, in order to develop it to some extent, in order to bring together so many ethnicities, so many religions . . . it’s fair to say that Russia has done a better job of integrating its Muslim population, which is close to 15 percent, than any other country, I would argue — certainly any other major country.

The power of the Russian state, the ability to organize, to dispose, to connect, is one of the great political stories of mankind — to see how the Russian state was able to grow and to extend itself. And that’s still there.

Original and highly recommended.  Again, here is Bruno’s book The Dawn of Eurasia: On the Trail of the New World Order.

Climate change may be more expensive than we think

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

I am struck by the costs of climate change suggested in the UN’s Intergovernmental Panel on Climate Change report, hardly a source of denialism. Its cost estimate — “1 to 5% of GDP for 4°C of warming” — is relatively reassuring. After all, global GDP is right now growing at more than 4 percent a year. If climate change cost “only” 4 percent of GDP on a one-time basis, then the world economy could make up those costs with less than a year’s worth of economic growth. In essence, the world economy would arrive at a given level of wealth about a year later than otherwise would have been the case. That sounds expensive but not tragic.

Unfortunately, that is not the right way to conceptualize the problem. Think of the 4 percent hit to GDP, if indeed that is the right number, as a highly unevenly distributed opening shot. That’s round one, and from that point on we are going to react with our human foibles and emotions, and with our

highly imperfect and sometimes corrupt political institutions. (Libertarians, who are typically most skeptical of political solutions, should be the most worried.)

Considering how the Syrian crisis has fragmented the EU as well as internal German politics, is it so crazy to think that climate change might erode international cooperation all the more? The true potential costs of climate change are just beginning to come into view.

The forthcoming Chinese charter city?

From Bloomberg BusinessWeek:

The government intends to ring-fence Port City from Sri Lanka’s legal system to facilitate currency movement and create favorable tax and investment incentives. Harsha de Silva, a state minister who once campaigned against the project but is now one of its most vocal supporters, is involved in drafting the separate legal structure. “This must be a top-10 city for doing business in the world,” he says. “Otherwise, what’s the point?” Sri Lanka is currently ranked 111 out of 190 nations on the World Bank’s ease-of-doing-business index.

And here is the take on one of the nearby port projects:

Today, Hambantota handles about one ship a day, not enough to make it commercially viable, and wild elephants regularly breach the perimeter fencing. At a nearby airport, which CCCC also helped build during Rajapaksa’s administration, the only commercial flight was canceled in June because of frequent peacock strikes and low demand.

Is it fair to call all this a “hegemon charter city“?

Tax salience and the new Trump tariffs

That is the topic of my latest Bloomberg column.  Here is one excerpt:

…tariffs distort consumer decisions more than sales taxes do. It may well be true that consumers don’t notice tariffs as such. But they respond by buying less, lowering their well-being and also possibly lowering GDP and employment.

It gets worse yet. President Donald Trump’s tariffs typically are applied to intermediate goods coming from China, such as circuit boards and LCD screens. The end result is more expensive computers at the retail level. But most consumers see only the higher price for computers. They probably don’t know which intermediate goods Trump put the tariffs on, and for that matter many U.S. consumers probably don’t even know what circuit boards are, much less where they come from.

The end result is that the tariffs are somewhat invisible, or at least they are invisible as tariffs. It’s highly unlikely there will be mass protests against a 10 percent tariff on circuit boards. No one will get “circuit board tariff charge” bill in the mail, as they might with their property taxes, and unlike gasoline, people don’t buy computers very often.

Most generally, it can be said that the new Trump policy makes the high prices salient, but the underlying tariffs not very salient at all. This is the worst possible scenario. The higher prices will reduce consumption and output, yet the invisibility of the tariffs will limit voter pushback.

Do read the whole thing.

Are generational or cohort-level changes strong?

Here is the view of Kali H. Trzesniewski and M. Brent Donnellan, in their piece “Rethinking “Generation Me”: A Study of Cohort Effects from 1976-2006”:

Social commentators have argued that changes over the last decades have coalesced to create a relatively unique generation of young people. However, using large samples of U.S. high-school seniors from 1976 to 2006 (Total N = 477,380), we found little evidence of meaningful change in egotism, self-enhancement, individualism, self-esteem, locus of control, hopelessness, happiness, life satisfaction, loneliness, antisocial behavior, time spent working or watching television, political activity, the importance of religion, and the importance of social status over the last 30 years. Today’s youth are less fearful of social problems than previous generations and they are also more cynical and less trusting. In addition, today’s youth have higher educational expectations than previous generations. However, an inspection of effect sizes provided little evidence for strong or widespread cohort-linked changes.

The pointer is from @hardsci.  As he (Sanjay) notes on Twitter: “Researchers these days just don’t make cohort arguments like they used to”  And here are some related results on narcissism.

The incidence of tariffs on Chinese goods

…start-ups are likely to be hit hardest, whether their products are made in China or they import components and do the final assembly work in the US.

“Your resistor or diode is already costing you 10 times what you’d pay if you were Apple,” said Mr Kelly. Slapping a tariff on these higher prices will add to the pain, he said. Companies such as Brilliant face the extra challenge of trying to price their products in a way that will generate demand in new markets that have yet to establish themselves.

…breaking into the mass market usually involves cutting the price, something that is now much harder.

Furthermore:

In the technology industry, hardware start-ups face some of the longest odds for success. Until they reach high enough volumes to strike better deals with suppliers and support the costs of brand marketing it is hard to make the economics work, and profit margins are notoriously low. “When you’re in hardware, a 25 per cent tariff can be a death knell to your business,” says Nate Kelly, a supply chain expert who now heads TrackR, a company that makes Bluetooth devices. The lack of a financial cushion or a diversified set of products means many companies will not be able to “ride this out for six months or a year”, he said.

And Mexico will gain, China will lose.  That is from Richard Waters at the FT.

My Conversation with Michele Gelfand

Here is the audio and transcript, and here is the summary:

Michele Gelfand is professor of psychology at the University of Maryland and author of the just-released Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire Our World. In her conversation with Tyler, Michele unpacks the concept of tight and loose cultures and more, including which variable best explains tightness, the problem with norms, whether Silicon Valley has an honor culture, the importance of theory and history in guiding research, what Donald Trump gets wrong about negotiation, why MBAs underrate management, the need to develop cultural IQ, and why mentorship should last a lifetime.

Here is one excerpt:

COWEN: As you know, it’s a common distinction in cross-cultural analysis to call some cultures individualistic and others collectivistic. How does tightness and looseness differ from that distinction? What do you pick up that, say, the work of Triandis does not?

GELFAND: Actually, Triandis is my mentor. I went to Champaign to work with him. I did a lot of research on collectivism and individualism. For a long time, that was the one dimension that we looked at in cross-cultural psychology.

It’s almost akin to, in personality psychology, only studying extroversion to the neglect of other dimensions, like neuroticism. In cross-cultural psychology, we got a little bit narrow in what we were studying. Collectivism-individualism is related to tightness but distinct.

Part of the problem we’ve had is, we’ve confounded cultures in our research. We’ve been studying East Asia, which is both tight and collectivistic, with the United States and other Western cultures, which tend to be loose and individualistic. So they have been confounded.

But when you think about the off-diagonals of that two-by-two, you can imagine cultures like Germany, Switzerland, Austria that tend to be pretty individualistic. They emphasize privacy. They’re not hugely group and family oriented, but they’re relatively tight. They have strong rules and punishments for deviance.

On the flip side, you can think about Latin American cultures — in our data, that’s Brazil or Spain — that tend to be pretty family oriented and pretty collectivistic, but they’re rather loose.

In a lot of ways, you can disentangle that variation, even if they’re related. They tend to be related about 0.4. That’s found both in modern nations and also traditional societies. At the state level, they also tend to be related but again distinct. Only in that case, it’s about 0.2 or 0.3, the correlation between tightness and collectivism.

And:

COWEN: Overrated or underrated, Staten Island?

GELFAND: [laughs] I would say probably underrated. That’s because I actually am familiar with Staten Island. We have relatives that live there. It’s probably the last undiscovered place around the city. Brooklyn has become a chichi place to live, but Staten Island has not. There’s great delis there. I’ve spent some time there.

And:

COWEN: Putting aside your political views, but just if you observe Donald Trump as a negotiator — as a psychologist, what strikes you?

GELFAND: Donald Trump has a very classic negotiation style. It’s a distributive negotiation style. It’s a win-lose style. It works in certain contexts, especially contexts where there’s one issue or when there’s very little expected future interaction.

What Donald Trump does is, he takes that style to international [laughs] politics where these contexts, the structure of these situations is very different. There’s usually many issues at the table. There’s expected future interaction…His style is really mismatched with the context that he’s in.

Many of the best parts are at or near the end, so do read or listen all the way through.  And you can buy Michele’s book here.

What has and has not changed in Guangzhou

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

I hadn’t been to Guangzhou in more than 30 years, and I wanted to see what I would remember.

And here is one bit:

How about the train ride between Hong Kong and Guangzhou? In 1988 I saw lone farmers plowing the field with their oxen. These days the journey brings you through Shenzhen, China’s tech capital, where many iPhones are assembled and which has eclipsed Guangzhou as a source of economic dynamism.

And yet I cannot conclude that Guangzhou is altogether a story of change and change alone.

That all said, Guangzhou is no longer an economic leader in China.  Overall it struck me that Guangzhou has become a bit of an economic backwater, albeit at an enormous size and decent (compared to the rest of China) standard of living.

American competitive democracy survives

Most elections in the United States are not close, which has raised concerns among social scientists and reform advocates about the vibrancy of American democracy. In this paper, we demonstrate that while individual elections are often uncompetitive, hierarchicaltemporal, and geographic variation in the locus of competition results in most of the country regularly experiencing close elections. In the four-cycle period between 2006 and 2012, 89% of Americans were in a highly competitive jurisdiction for at least one office. Since 1914, about half the states have never gone more than four election cycles without a close statewide contest. More Americans witness competition than citizens of Canada or the UK, other nations with SMSP-based systems. The dispersed competition we find also results in nearly all Americans being represented by both political parties for different offices.

That is from Bernard L. Fraga, and Eitan D. Hersh, via the excellent Kevin Lewis.

The rise of the Swedish Democrats

There is a new research paper on this topic, from Ernesto Dal Bo, Frederico Finan, Olle Folke, Torsten Persson, and Johanna Rickne:

We study the rise of the Sweden Democrats, a radical-right party that rose from negligible size in 2002 to Sweden’s third largest party in 2014…We take a starting point in two key economic events: (i) a series of policy reforms in 2006-2011 that significantly widened the disposable-income gap between “insiders” and “outsiders” in the labor market, and (ii) the financial-crisis recession that doubled the job-loss risk for “vulnerable” vs “secure” insiders. On the supply side, the Sweden Democrats over-represent both losing groups relative to the population, whereas all other parties under-represent them, results which also hold when we disaggregate across time, subgroups, and municipalities. On the demand side, the local increase in the insider-outsider income gap, as well as the share of vulnerable insiders, are systematically associated with larger electoral gains for the Sweden Democrats. These findings can be given a citizen-candidate interpretation: economic losers (as we demonstrate) decrease their trust in established parties and institutions.

Is it being an economic loser that makes you support the Sweden Democrats, or simply observing a lot of economic losers around you, the latter having been the case for Donald Trump’s support?  This Twitter thread gives some key pictures from the paper and summary of results.