Category: Data Source

Evidence for State Capacity Libertarianism

The plots do not support the hypothesis that small government produces either greater prosperity or greater freedom. (In reading the charts, remember that the SGOV index is constructed so that 0 indicates the largest government and 10 the smallest government.) Instead, smaller government tends to be associated with less prosperity and less freedom. Both relationships are statistically significant, with correlations of 0.43 for prosperity and 0.35 for freedom.

Using SoG, the Cato measure of size of government, instead of SGOV, the IMF measure, does not help. The correlations turn out still to be negative and statistically significant, although slightly weaker.

Let’s turn now to the alternative hypothesis that quality of government, rather than size, is what counts for prosperity and freedom. Here are those scatterplots:

This time, both relationships are positive. High quality of government is strongly associated both with greater human prosperity and greater human freedom. Furthermore, the correlations are much stronger than those for the size of government.

That is all by Ed Dolan, recommended, and by the way smaller governments are not correlated with higher quality governments.

Countering The Narrative

A surprising fact about the 2016 election is that Trump received fewer votes from whites with the highest levels of racial resentment than Romney did in 2012…Trump’s vote totals improved the most among swing voters: low-socioeconomic status whites who are political moderates.

That is from recent research by Justin Grimmer and William Marble, hat tip anonymous.

How bad are smart phones for people and kids?

The latest research, published on Friday by two psychology professors, combs through about 40 studies that have examined the link between social media use and both depression and anxiety among adolescents. That link, according to the professors, is small and inconsistent.

“There doesn’t seem to be an evidence base that would explain the level of panic and consternation around these issues,” said Candice L. Odgers, a professor at the University of California, Irvine, and the lead author of the paper, which was published in the Journal of Child Psychology and Psychiatry…

The new article by Ms. Odgers and Michaeline R. Jensen of the University of North Carolina at Greensboro comes just a few weeks after the publication of an analysis by Amy Orben, a researcher at the University of Cambridge, and shortly before the planned publication of similar work from Jeff Hancock, the founder of the Stanford Social Media Lab. Both reached similar conclusions.

“The current dominant discourse around phones and well-being is a lot of hype and a lot of fear,” Mr. Hancock said. “But if you compare the effects of your phone to eating properly or sleeping or smoking, it’s not even close.”

Here is the full NYT piece by Nathaniel Popper.

Assessing State Capacity Libertarianism

Ryan Murphy and Colin O’Reilly suddenly have a 33 pp. (yes substantive) paper on my January 1 blog post on State Capacity Libertarianism (on speed, perhaps they have learned from a master).  Here is the abstract:

Cowen (2020) argues for a redirection of effort towards “State Capacity Libertarianism,” which keeps the core of policy proposals from libertarianism intact while emphasizing a select set of policies aimed at furthering economic growth. These policies center on the ability of the state to accomplish that which it sets out to accomplish, i.e. state capacity. This paper interprets Cowen’s proposal in terms of an interaction between economic freedom and state capacity. Using four measures of state capacity, it finds that state capacity and economic freedom are neither additive nor complementary. Rather, they are substitutes for one another. These results are uncomfortable for conventional libertarianism, for the advocates of state capacity, and for State Capacity Libertarianism itself. One measure of state capacity we use is a novel measure using data from the Varieties of Democracy dataset, which may be useful for researchers in other contexts.

I am very pleased (and flattered) they undertook this investigation.  In terms of response on the particulars, I would say that State Capacity Libertarianism is about living standard levels, not marginal growth rates holding per capita income constant (as they do), which tends to drain off the benefits of state capacity.  You can run into similar misspecification problems by regressing against growth rates for the particular American states, whereas again the levels ought to be central to the analysis.  I readily admit the levels are not easy to handle econometrically, mostly because (outside of some oil principalities) “all good things go together,” and the correct causal model is not well understood.

In any case, the debate will go on.

How economics has changed

Panel A illustrates a virtually linear rise in the fraction of papers, in both the NBER and top-five series, which make explicit reference to identification.  This fraction has risen from around 4 percent to 50 percent of papers.

And:

Currently, over 40 percent of NBER papers and about 35 percent of top-five papers make reference to randomized controlled trials (RCTs), lab experiments, difference-in-differences, regression discontinuity, event studies, or bunching…The term Big Data suddenly sky-rockets after 2012, with a more recent uptick in the top five.

Note that about one-quarter of NBER working papers in applied micro make references to difference-in differences. And:

The importance of figures relative to tables has increased substantially over time…

And about five percent of top five papers were RCTs in 2019.  Note also that “structural models” have been on the decline in Labor Economics, but on the rise in Public Economics and Industrial Organization.

That is all from a recent paper by Janet Currie, Henrik Kleven, and Esmee Zwiers, “Technology and Big Data are Changing Economics: Mining Text to Track Methods.”

Via Ilya Novak.

Is there a happiness cost to being too patient?

We find that excessive patience is costly for individual well-being. This result is consistent across nine different measures of subjective well-being. Our measure of patience varies from a minimum of -1.31 to a maximum of 2.76 (this measure has standardized mean of zero and standard deviation of 1). For one of the main well-being indices, the life evaluation index, the level of patience that maximizes happiness is equal to 1.56, a numerical value similar to the one obtained using other well-being indicators.

And:

…moving from a level of patience of 1.40 corresponding to the peak in the positive experience index to the 99thpercentile in patience reduces the positive experienced index by 1.07, equivalent to 26% of the difference in happiness between those who completed college (7.16) and those with a high school diploma (3.12).

Contrary to how the language of the authors might be interpreted, this is a correlation rather than an established relationship.

The 13 pp. paper by Paola Giuliano and Paola Sapienza is too short, but interesting nonetheless.  I also would like to see a study on how the patience of parents affects the happiness of their children and grandchildren.

U.S. military fact of the day

In 2016, Politico reported that the total number of trombone, trumpet, keyboard and other instrument players [in the U.S. military] stands at about 6,500.

That’s a lot of Souza marches, but the State Department fields a bigger squad of diplomats. There are 8,106 Foreign Service officers, according to a State Department report. (The State Department has about another 5,700 people to support the diplomats, but they don’t do direct diplomatic work.) Still, there are a good 1,600 more diplomats than musicians.

Here is further information.  Here is another relevant source.  Via Andrew Goldman.

CEO pay in perspective how big is that rip-off anyway?

…the B-ratio I proposed here, measured as the CEO pay over the total payroll of the firm, relates CEO pay to the salary of each employee and may be the most relevant and informative figure on CEO pay as perceived by the firm’s employees themselves. How much a typical employee of the S&P500 firms implicitly “contributes” to the salary of his/her CEO? An amount of $273 on average or 0.5% of one’s salary, that is, one half of one percent on an individual salary basis.

That is from Marcel Boyer, via Alex T. and the mysterious v and Vincent Geloso.

Gangs really matter

We study the effects that two of the largest gangs in Latin America, MS-13 and 18th Street, have on economic development in El Salvador. We exploit the fact that the emergence of gangs in El Salvador was in part the consequence of an exogenous shift in US immigration policy that led to the deportation of gang leaders from the United States to El Salvador. Using the exogenous variation in the timing of the deportations and the boundaries of the territories controlled by the gangs, we perform a spatial regression discontinuity design and a difference-in-differences analysis to estimate the causal effect that living under the rule of gangs has on development outcomes. Our results show that individuals living under gang control have significantly worse education, wealth, and less income than individuals living only 50 meters away in areas not controlled by gangs. None of these discontinuities existed before the arrival of gangs from the US. The results are not determined by exposure to violence, lower provision of public goods, or selective migration away from gang locations. We argue that our findings are mostly driven by gangs restricting residents’ mobility and labor choices. We find that individuals living under the rule of gangs have less freedom of movement and end up working in smaller firms. The results are relevant for many developing countries where non-state actors control parts of the country.

That is from a new paper by Nikita Melnikov, Carlos Schmidt-Padilla, and Maria Micaela Sviatschi.  Via the excellent Samir Varma.

Urban growth and its aggregate implications

That is the title of a new paper by Gilles Duranton and Diego Puga.  This piece goes considerably beyond previous research by having a more explicit model of both urban-rural interactions, and also possible congestion costs arising from more YIMBY.  Here are a few results of the paper:

1. If you restricted New York City and Los Angeles to the size of Chicago, 18.9 million people would be displaced and per capita rural income would fall by 3.6%, due to diminishing returns to labor in less heavily populated areas.

2. The average reduction in real income per person, from this thought experiment, would be 3.4%.  You will note that NIMBY policies are in fact running a version of this policy, albeit at different margins and with a different default status quo point.

3. If you were to force America’s 11 largest cities to be no larger than Miami, real income per American would fall by 7.9%.

4. If planning regulations were lifted entirely, NYC would reach about 40 million people, Philadelphia 38 million (that’s a lot of objectionable sports fans!), and Boston just shy of 30 million (ditto).

5. Output per person, under that scenario, would rise in NYC by 5.7% and by 13.3% in Boston.  That said, under this same scenario incumbent New Yorkers would see net real consumption losses of 13%, whereas for Boston the incumbent losses are only about 1.1%.

6. The big winners are the new entrants.  On average, real income would rise by 25.7%.

7. Alternatively, in their model, rather than laissez-faire, if America’s three most productive cities relaxed their planning regulations to the same level as the median U.S. city, real per capita income would rise by about 8.2%.

8. In all of these cases the authors calculate the change in rural per capita income, based on resulting population reallocations.

Recommended, I am very glad to see more serious work in this area.

The U.S. cultural elite

Overall I do not regard this as good news:

We examine the educational backgrounds of more than 2,900 members of the U.S. cultural elite and compare these backgrounds to a sample of nearly 4,000 business and political leaders. We find that the leading U.S. educational institutions are substantially more important for preparing future members of the cultural elite than they are for preparing future members of the business or political elite. In addition, members of the cultural elite who are recognized for outstanding achievements by peers and experts are much more likely to have obtained degrees from the leading educational institutions than are those who achieve acclaim from popular audiences.

That is from a new paper by Steven Brint, et.al., via the excellent Kevin Lewis.

The economic importance of the Middle East?

Or lack thereof?:

Even beyond Iran, the region scarcely registers on multinationals’ profit-and-loss statements. The Middle East and Africa accounted for 2.4% of listed American firms’ revenues in 2019, according to Morgan Stanley, a bank. For European and Japanese companies it was 4.9% and 1.8%, respectively. Middle Easterners still buy comparatively few of the world’s cars (2.3m out of 86m sold globally in 2018). Peddlers of luxury goods like Prada, an Italian fashion house, and L’Oréal, a French beauty giant, book 3% of sales in the Middle East (not counting sheikhs’ shopping trips to Milan or Paris).

The overall regional footprint of Western finance appears equally slight. At the end of 2018 big American banks had $18.5bn-worth of credit and trading activity in the region, equivalent to 0.2% of their assets. This includes JPMorgan Chase’s $5.3bn business in Saudi Arabia and Citigroup’s $9.6bn exposure to the United Arab Emirates (UAE). European banks have, if anything, been retreating. BNP Paribas of France sold its Egyptian business seven years ago and earned a footling €121m ($143m) in the Middle East in 2018. HSBC reports a substantial $58.5bn in Middle Eastern assets, though that is still a rounding error in the British lender’s $2.7trn balance-sheet.

Here is more from The Economist, noting that energy does play a larger role in other economic sectors.  If there is any part of the world that could use more multinational activity…

Africa Luxembourg Ethiopia Congo state capacity facts of the day

Government revenues average about 17% of gdp in sub-Saharan Africa, according to the IMF. Nigeria has more than 300 times as many people as Luxembourg, but collects less tax. If Ethiopia shared out its tax revenues equally, each citizen would get around $80 a year. The government of the Democratic Republic of Congo is so penurious that its annual health spending per person could not buy a copy of this newspaper.

That is from The Economist.

Facts about deaths of Roman emperors

Of the 69 rulers of the unified Roman Empire, from Augustus (d. 14 CE) to Theodosius (d. 395 CE), 62% suffered violent death. This has been known for a while, if not quantitatively at least qualitatively. What is not known, however, and has never been examined is the time-to-violent-death of Roman emperors…

Nonparametric and parametric results show that: (i) emperors faced a significantly high risk of violent death in the first year of their rule, which is reminiscent of infant mortality in reliability engineering; (ii) their risk of violent death further increased after 12 years, which is reminiscent of wear-out period in reliability engineering; (iii) their failure rate displayed a bathtub-like curve, similar to that of a host of mechanical engineering items and electronic components. Results also showed that the stochastic process underlying the violent deaths of emperors is remarkably well captured by a (mixture) Weibull distribution.

That is from a new paper by Joseph Homer Saleh, via the excellent Kevin Lewis.