Category: Current Affairs

That was then, this is now

Four decades ago Venezuelans could fly in and out of Caracas’s Maiquetía airport on Concorde. These days they are leaving the country on foot — walking over the border into Colombia, traipsing down the Andes to Ecuador and Peru or trudging through the Amazon basin to Brazil. As the economy collapses, the Venezuelan exodus “is building to a crisis moment”, the UN has warned. Drawing comparisons with the desperate journeys of Syrians and Africans through the Mediterranean in recent years, it says 2.3m people — 7 per cent of the population — have left Venezuela since 2015. On Monday, President Nicolás Maduro put the figure at just 600,000, and his vice-president Delcy Rodríguez said the outflow was “normal”. Outcry over the exodus, she said, was “designed by the Pentagon to justify intervention in Venezuela”.

That is from Gideon Long in the FT.

Angered, Sweden

I wish to visit Angered, Sweden (sometimes called Angered Centrum), yes that is the name of the place:

When I entered this mysterious end station. I didn’t expect to find a shopping center that had so many Halal restaurants, Turkish delights stores and Kebab places. I love to eat Kebabs here in Norway with Halal meat, so for me its not a problem eating this. I rather found this place interesting, because it had all of the world foods in one place.

At the end of this shopping center, I found ICA store and here I found some Swedish people. But mostly everywhere I went there was foreigners…Why is Angered Centrum almost empty of Swedish people? Have the government in Sweden made this to a place so that foreigners and Swedish people should live so far apart from each other that it would reduce conflicts?

Here is more.  The Wikipedia page of Angered is unusual, it serves up tidbits such as:

The hilly terrain forced the planners to build the different parts of Angered at some distance from each other.

It turns out that Angered was modeled after Brasilia, and it was a major center for public housing investment.

The locale can be subdivided further yet:

Of those born in Hjallbo, a district of Angered, three-quarters have a foreign background. This compared with a half two decades ago and just 6.5 per cent in all of Sweden.

Added to this sense of cultural and social isolation is the suburb’s reputation for criminality and violence. Nawol and Hamdi, two Somali teenagers in hijabs, voice their concerns about living in a neighbourhood that has long been characterised as a ghetto. “I don’t like living in Angered. A lot of people do bad things,” said Nawol, 19. Hamdi added: “There are a lot of gangsters.”

There is a Swedish election on Sunday, and to counter the Sweden Democrats many of the other Swedish parties are moving to the right on immigration, the median voter theorem in slow motion, so to speak.

Exactly what kind of institutional failure is this?  Political?  Intellectual?  Democratic?  The absence of real democracy?  I should stress that I am happy to live near Somali and Yemeni women in hijab (and not) in northern Virginia, and I believe American assimilation continues to work reasonably well, including for Muslims and in fact especially for Muslims overall.  But the formula seems to work less well in Sweden, with its tighter social structures and more generous welfare benefits.  What exactly went wrong?  What is the final equilibrium?  Will anyone ever be able to say again “if only they had a Nordic-style social welfare state”?

Don’t blame the fake news, it’s the truth that is the problem

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

The world of the internet – fundamentally a world of information – is reporting on the failures of the elites 24/7. And while pretty much every opinion is available, some have more resonance than others. Is it not the case that, post-2008, most people really are skeptical of the ability of American elites to prevent the next financial crisis? Going even further back, I recall the optimism surrounding the Mideast peace talks of the 1970s or the Oslo accords of the 1990s. Hardly anyone honest has the same positive feelings about today’s efforts at peace talks.

Again, these impressions are based on actual information. An informed populace, however, can also be a cynical populace, and a cynical populace is willing to tolerate or maybe even support cynical leaders. The world might be better off with more of that naïve “moonshot” optimism of the 1960s.

…Instead of today’s swamp of negativism, do you not instead long for a few rousing hymns, a teary rom-com happy ending, a non-ironic exhibit of wonderful American landscape paintings? Yet all these cultural forms are largely on the wane. It’s no accident that the hugely successful romantic comedy “Crazy Rich Asians” is set in Singapore.

Homer > Socrates!

Don’t Get Into a Knife Fight with Larry Summers

Larry Summers is not happy with Joseph Stiglitz’s piece The Myth of Secular Stagnation, which argues that the idea of secular stagnation as put forward by Summers and others was little more than a mask for poor economic policy and performance under the Obama administration.

Those responsible for managing the 2008 recovery (the same individuals bearing culpability for the under-regulation of the economy in its pre-crisis days, to whom President Barack Obama inexplicably turned to fix what they had helped break) found the idea of secular stagnation attractive, because it explained their failures to achieve a quick, robust recovery. So, as the economy languished, the idea was revived: Don’t blame us, its promoters implied, we’re doing what we can.

Larry responds:

I am not a disinterested observer, but this is not the first time that I find Stiglitz’s policy commentary as weak as his academic theoretical work is strong.

…In all of my accounts of secular stagnation, I stressed that it was an argument not for any kind of fatalism, but rather for policies to promote demand, especially through fiscal expansion. In 2012, Brad DeLong and I argued that fiscal expansion would likely pay for itself. I also highlighted the role of rising inequality in increasing saving and the role of structural changes toward the demassification of the economy in reducing demand.

…Stiglitz condemns the Obama administration’s failure to implement a larger fiscal stimulus policy and suggests that this reflects a failure of economic understanding. He was a signatory to a November 19, 2008 letter also signed by noted progressives James K. Galbraith, Dean Baker, and Larry Mishel calling for a stimulus of $300-$400 billion – less than half of what the Obama administration proposed. So matters were less clear in prospect than in retrospect.

Indeed, Stiglitz’s piece is difficult to understand as economic commentary because it’s hard to see much daylight between Stiglitz and Summers on actual diagnosis or policy. Stiglitz, for example, points to secular reasons for stagnation when he writes:

The fallout from the financial crisis was more severe, and massive redistribution of income and wealth toward the top had weakened aggregate demand. The economy was experiencing a transition from manufacturing to services, and market economies don’t manage such transitions well on their own.

Gautti Eggerstson is not as entertaining as Summers but he offers useful background.

Kiwi cat quotas?

A regional council in New Zealand has proposed banning all domestic cats in an attempt to protect native animals.

Environment Southland’s “pest plan” calls for all domestic cats in the region to be neutered, microchipped and registered. Then, when a cat dies, residents would not be permitted to have another.

“We’re not cat haters,” John Collins, of the Omaui Landcare Trust told Newshub. “But we’d like to see responsible pet ownership and this really isn’t the place for cats.”

Ali Meade, the council’s biosecurity operations manager, said that if the move was approved the improvement for the environment and bird life would be vast…

Kapiti Island’s Kotuku Parks subdivision has a no-cat rule and Auckland council is also looking at a plan to euthanise any cat caught in an “ecologically significant site” without a microchip.

Here is the full story, via Ian Bremmer.

What explains America’s economic anomalies?

Apart from low productivity growth, of course.  That is the topic of my latest Bloomberg column.  Wages have been sluggish throughout the recovery, profits on capital seem to be high, there is a domestic investment drought, and the onset of the internet and globalization make many of the “monopolization” charges less than plausible.  Here is one possible route of inquiry:

Capital today can cross borders more easily than it could a few generations ago. That might keep real wages down in the U.S. If wages threaten to rise during an economic recovery, for instance, it is then profitable to invest more capital abroad, where wages usually are lower. The end result resembles what economists call a “Malthusian” equilibrium. That means there is an upper limit to returns to labor: They cannot exceed the cost of bringing more labor to market, for instance by investing abroad (or perhaps building robots). Even a long recovery won’t help wages rise above that limit.

This same hypothesis can help explain both the U.S. investment drought and supercharged growth in many emerging economies. If capital is flowing overseas, that will boost growth abroad and worsen a shortfall of investment at home. Too much foreign capital flowing into the U.S. is absorbed by Treasury securities, rather than the private sector.

What about the high rates of return measured for capital investment in the U.S.? It seems strange to have high profits but low investment. Why not invest more to earn more money, thereby leading to an investment glut until the profits are competed away?

One hypothesis is that investors now expect a higher rate of return for domestic investments, a possibility suggested by economists Loukas Karabarbounis and Brent Neiman in a recent paper. Let’s say that entrepreneurs used to be willing to make domestic investments for an expected 7 percent return but now they demand at least 10 percent.

Entrepreneurs will cut back on investment, but the remaining projects will have higher returns on average, more closely bunched around 10 percent than 7.

What accounts for this increased reluctance? Karabarbounis and Neiman consider factors such as greater risk aversion. A simpler alternative explanation, consistent with my capital mobility hypothesis, is that newly available rates of return in other countries are high, and that means competing investments in the U.S. will need to offer higher returns too.

Do read the whole thing, I also consider potential flaws in the argument, such as capital possibly not being mobile enough.

My Conversation with Claire Lehmann of Quillette

Here is the transcript and audio, definitely recommended.  Here is part of the summary:

She and Tyler explore her ideas about the stifling effect of political correctness and more, including why its dominant form may come from the political right, how higher education got screwed up, strands of thought favored by the Internet and Youtube, overrated and underrated Australian cities, Aussie blokes, and more.

Here is an excerpt:

COWEN: When did political correctness become a major issue, or become a major issue again? And why do you think it happened exactly then?

LEHMANN: That’s a good question, and I don’t know if I have the answer. I know that there were lots of debates around political correctness in the early ’90s, for example.

COWEN: Yes, and it seems to fade away and then come back.

LEHMANN: Yeah. That’s when Camille Paglia was talking about PC, and Robert Hughes had a book, The Culture of Complaint.

I’ve noticed in my own life that I started noticing political correctness around 2007. At the time, I thought it had something to do with the business model of Internet publishing.

That was when Gawker and the blog Jezebel was really popular. It was established in 2007, and then it got very popular over the next couple of years. I thought that there were a lot of clickbait kind of articles promoting these really simplistic black-and-white narratives of oppression.

Unless one had reasonable critical thinking skills, I could see how young people could be influenced by that kind of content coming out. I think there’s something to do with the Internet and the way the media has had to adapt to this new business model where you have to drive . . . You have to get lots of views, lots of hits, millions more than you would with the newspapers.

I think it’s something to do with that, but that’s probably just one variable in many other factors.

COWEN: What do you think of the hypothesis that political correctness is a kind of virus that’s hijacked the left? It’s figured out some kind of weak entry point, and it’s come in and taken over parts of it, and it will bring down many victims with it, but actually, it’s crippling the left.

LEHMANN: Yep, yeah.

COWEN: True or false?

LEHMANN: Probably true.

COWEN: If one objects to that argument, we should in a sense encourage more of it, at least if we’re being pure utilitarians, or not?

And:

COWEN: Probably in the media? In general, intellectual life, but if you take, say, the United States as a whole, do you think it’s left-wing or right-wing political correctness that’s stronger and more destructive?

LEHMANN: Yeah, it’s probably right-wing political correctness.

A question from me:

COWEN: I’ve been speaking about the right in aggregate terms, but if you think of the effect of the Internet, which strands of the right do you think are favored, and which do you think are falling away because of Internet discourse? Because it shouldn’t favor it all equally, correct?

We also cover Australia vs. New Zealand, the masculine ethos of Australia and its origins, why PC is different in Australia, the movie Lantana (which we both strongly recommend), and yes Australian fashion.

Trump’s NAFTA renegotiation

That is the topic of my latest Bloomberg column, the deal will be “good enough,” but the method costly.  Here is one excerpt:

At what price? Canadians and Canadian politicians now feel slighted, and it will be harder for Canada to support U.S. initiatives, especially those led by Trump, in the future. It may be a long time before Canada feels like an even vaguely equal partner again. In the meantime, the U.S. and Canada have ongoing dealings and negotiations concerning water rights, border and migration issues, intelligence sharing, terror prevention, and presenting a (relatively) united front against other foreign powers, including Russia in the Arctic. The marginal gains in trade just don’t seem worth the deterioration in the relationship.

And should Mexico really feel elevated by getting the first crack at the deal? Surely it must know that it might not be the favored party the next time around.

Do read the whole thing.  The best extraction of rent policy, of course, is simply to let Canada keep its gains from trade right now, but later demand larger concessions when it comes to Arctic policy, which will really matter.  That’s assuming nationalism, of course, as a kind of second best rejoinder.  I am more comfortable with the alternative position that the citizens in the other NAFTA member countries count for just as much as Americans.

What went wrong in the West and with liberalism?

That is the topic of my latest Bloomberg column, and the core of my answer is that liberalism and cooperativeness declined in the West, as WWI and the Cold War receded into historical distance (I am indebted to a much earlier conversation with Daniel Klein on these matters).  But I wish to excerpt from another point of the piece:

There is another explanation for the rise in anti-liberal sentiment: immigration. Through a series of historical accidents, it was kept off the table as a major issue for many decades. The U.S. had choked off immigration in 1920, and at first the liberalization of the 1960s did not have much of a visible impact on the American population. In those early decades after the Immigration and Naturalization Act of 1965, many poor nations were so poor and unfree that it wasn’t easy to leave them.

As for Europe, in-migration was too small to make much of a political impact. For a while in the 1960s and 1970s, the bigger story was emigration, due to high taxes, from countries such as the U.K. and Sweden. The presence of the Iron Curtain also blocked some of the routes and sources that enable some migration to Western Europe today.

In a democratic society where there simply isn’t much immigration, it is much harder for nationalists and populists to use it as an issue. But today much of the West has seen high immigration for 20 years or more, giving nationalist and populist forces a major talking point. Even if most of the population is broadly pro-immigration, perhaps a core of 15 to 20 percent will not be. With that base, a movement of counterreaction can have real political impact.

Do read the whole thing.

Is Facebook causing anti-refugee attacks in Germany?

Here is the key result, as summarized by the NYT:

Wherever per-person Facebook use rose to one standard deviation above the national average, attacks on refugees increased by about 50 percent.

Here is the underlying Müller and Schwarz paper.  They consider 3,335 attacks over a two-year period in Germany.  But I say no, their conclusion has not been demonstrated.  Where to start?

Here is one picture showing a key correlation:

It is difficult to see if there is causation in the correlationThat looks pretty strong, doesn’t it?  Nein!  That is not how propaganda works, as an extensive literature in sociology and political psychology will indicate.  That is how it looks when you measure what is essentially the same variable — or its effects — two different ways.  For instance, that very big spike in the middle of the distribution?  As Ben Thompson has pointed out, it represents the New Year’s harassment attacks in Cologne.  Maybe that caused both Facebook activity and other attacks to spike at the same time?  Will you mock me if I resort to the “blog comment cliche” that correlation does not show causation?

To continue with the excellent Ben Thompson (he is worth paying for!), the identification method used in the paper is suspect, and he focuses on this quotation from the authors:

In our setting, the share of a municipality’s population that use the AfD Facebook page is an intuitive proxy for right-wing social media use; however, it is also correlated with differences in a host of observable municipality characteristics — most importantly the prevalence of right-wing ideology. We thus attempt to isolate the local component of social media usage that is uncorrelated with right-wing ideology by drawing on the number of users on the “Nutella Germany” page. With over 32 million likes, Nutella has one of the most popular Facebook pages in Germany and therefore provides a measure of general Facebook media use at the municipality level. While municipalities with high Nutella usage are more exposed to social media, they are not more likely to harbor right-wing attitudes.

The whole result rests on assumptions about Nutella?  What if you used likes for Zwetschgenkuchen?  Has a robustness test been done?  Was a simple correlation not good or not illustrative enough?  I’ll stick with the simple hypothesis that some municipalities have both more Facebook usage, due to high AfD membership, and also more attacks on refugees, and furthermore both of those variables rise in tense times.  AfD is the German party with the strongest presence on Facebook, I am sorry to say.

You will note by the way that within Germany the Nutella page has only verifiable 21,915 individual interactions, including likes (32 million is the global number of Nutella likes…die Deutschen are not that nutty), and that is distributed across 4,466 municipal areas.  (If you are confused, see p.12 in the paper, which I find difficult to follow and I suspect that represents the confusion of the authors.)  That should make you more worried yet about the Nutella identification strategy.  They never tell us what they would have without Nutella, a better tasting sandwich I would say.

I also would note the broader literature on propaganda once again.  Consider the research of Markus Prior: “…evidence for a causal link between more partisan messages and changing attitudes or behaviors is mixed at best.”  These Facebook results are simply far outside of what we normally suppose to be true about human responsiveness — so maybe the company is undercharging for its ads!

Ben adds:

I am bothered by the paper’s robustness section in two ways: first, every single robustness test confirmed the results. To me that does not suggest that the initial result must be correct; it suggests that the researchers didn’t push their data hard enough. There is always a test that fails, and that is a good thing: it shows the boundaries of what you have learned. Second, there were no robustness tests applied to one of the more compelling pieces of evidence, that Internet and Facebook outages were correlated with a reduction in violence against refugees. This is particularly unfortunate because in some ways this evidence works against the filter bubble narrative: after all, the idea is the filter bubbles change your reality over time, not that they suddenly inspire you to action out of the blue.

The authors do present natural experiments from Facebook and internet outages.  They find that “…for a given level of anti-refugee sentiment, there are fewer attacks in municipalities with high Facebook usage during an internet outage than in municipalities with low Facebook usage without an outage.” (p.28).  Again I find that confusing, but I note also that “internet outages themselves…do not have a consistent negative effect on the number of anti-refugee sentiments.”  That is the simple story, and it appears to exonerate Facebook.  pp.28-30 then present a number of interaction effects and variable multiplications, but I am not sure what to conclude from the whole mess.  I’m still expecting internet outages to lower the number of attacks, but they don’t.

Even if internet or Facebook outages do have a predictive effect on attacks in some manner, it likely shows that Facebook is a communications medium used to organize gatherings and attacks (as the telephone once might have been), not, as the authors repeatedly suggest, that Facebook is somehow generating and whipping up and controlling racist sentiment over time.  Again, compare such a possibility to the broader literature.  There is good evidence that anti-semitic violence across German regions is fairly persistent, with pogroms during the Black Death predicting synagogue attacks during the Nazi time.  And we are supposed to believe that racist feelings dwindle into passivity simply because the thugs cannot access Facebook for a few days or maybe a week?  By the way, in their approach if there is an internet outrage, mobile devices do not in Germany pick up the slack.

I’d also like to revisit the NYT sentence, cited above, and repeated many times on Twitter:

Wherever per-person Facebook use rose to one standard deviation above the national average, attacks on refugees increased by about 50 percent.

That sounds horrible, but it is actually a claim about variation across municipalities, not a claim about the absolute importance of the internet.  The authors also reported a very different and perhaps more relevant claim to the Times:

…this effect drove one-tenth of all anti-refugee violence.

I would have started the paper with that sentence, and then tried to estimate its robustness, without relying on Nutella.

As it stands right now, you shouldn’t be latching on to the reported results from this paper.

Has the space of possible political outcomes opened up?

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

Every now and then, one party will control all branches of government, and then the rhetoric and the expectations will be in place for some pretty big changes. Not long ago, I thought that even a 5-to-4 conservative Republican majority on the Supreme Court would essentially leave Roe v. Wade in place, for fear of taking this Republican-friendly issue off the national agenda. Now I’m not so sure. All of a sudden, Americans are getting used to the idea that extreme political change is possible, for better or worse, and that means many of them will demand it. In the Trump Era, if I may call it that, it is harder to tell your base that big changes just don’t happen that easily.

And:

There are also plenty of good ideas that don’t have a partisan tinge one way or the other. Five years ago, I thought the Federal Reserve was far away from adopting “nominal GDP targeting,” an idea supported by many economists on both the right and the left. Today it seems entirely possible that the Fed will move much further in that direction, if only because it wouldn’t be seen as such a big, radical change compared to so many other developments. Trump is probably going to tweet criticism at the Fed no matter what it does, so it might as well just go ahead and do some things it wants to do.

Do read the whole thing.

Drifter

Studio Drift had a great exhibit at the Stedelijk Museum in Amsterdam featuring drifter, a monolithic block that levitates, rotates and moves around and in space.

Drifter personifies Arthur C. Clarke’s adage that “Any sufficiently advanced technology is indistinguishable from magic.” Seeing it is magical. I can tell you that it’s 3-dimensional not a projection. You can see under, above and around it. There are no strings. You can see a video here. Music plays as the block moves. I’m pretty sure that isn’t an accident. I can guess how it was done but really the point is that this was an art work that fulfilled it’s promise

Drifter calls on the viewer to reconsider our relationship with our living environment, which is often accepted as static and lifeless. It creates a sense of disbelief and displacement, creating tension between humanity versus nature and chaos versus order. Disconnected from our expectations, it floats between the possible and impossible.

Drifter will be at the Stedelijk until August 26. Look for it elsewhere.