Category: Economics

The Russian economy is not falling apart

…the economic decline is not as precipitous as some experts had expected it would be after the Feb. 24 invasion. Inflation is still high, around 17 percent on an annual basis, but it has come down from a 20-year peak in April. A closely watched measure of factory activity, the S&P Global Purchasing Managers’ Index, showed that Russian manufacturing expanded in May for the first time since the war began.

Behind the positive news is a combination of factors playing to Mr. Putin’s advantage. Chief among them: high energy prices, which are allowing the Kremlin to keep funding the war while raising pensions and wages to placate ordinary Russians. The country’s oil revenues are up 50 percent this year.

Here is more from the NYT.  Most of the story focuses on how a Russian-owned version of McDonald’s has reopened, serving what is broadly the same food.  But they don’t serve Big Macs because…the sauce is proprietary.  Presumably they already were making the sauce on their own?  It is funny which parts of international law a country will or will not break.

And here WaPo reports that Russia is winning the war.

Unmeasured inflation from higher tip demands?

Increasingly many point-of-sale terminals ask if you would like to tip – these days even occasionally at places like grocery stores. This (probably) has the effect of increasing the true average prices paid for a considerable fraction of consumer goods. If you buy that premise, then the addition of this feature to POS terminals has a  (perhaps short-term or temporary, but perhaps significant) inflationary effect (no?). How interesting do you think it would be to see this quantified? From my perspective, it would be interesting if this seemingly-small UI feature measurably contributed non-negligibly to inflation. (I’m not an economist. I’d also be curious to know where one might start getting data, etc., to do this kind of analysis.)

That is from an email from Andrey Mishchenko.

A Bloody Waste

Image by Satheesh Sankaran from Pixabay

Hemochromatosis is a disorder in which extra iron builds up in the body. A potential treatment is phlebotomy so patients with hemochromatosis want to donate blood and donate regularly. The American Red Cross, however, does not permit people with hemochromatosis to donate blood. Why not? The blood is safe and effective. The blood of these patients doesn’t have much, if any, extra iron (the iron builds up in the body not so much in the blood per se). The “problem” is that people with hemochromatosis benefit themselves by giving blood and for this reason their blood is considered tainted by the American Red Cross.

The American Red Cross, which controls about 45% of the nation’s blood supply, does not currently accept donations from people with known hemochromatosis. Everyone agrees that the blood is safe and of high quality. There is no risk of passing on a genetic disease through blood transfusions. But the Red Cross has a long-standing policy that potential donors are not allowed to receive direct compensation for their donation (beyond the usual orange juice and cookie). Because people with hemochromatosis would otherwise have to pay for their therapeutic phlebotomies, they would in effect be getting something of value for being able to donate for free. Thus the Red Cross has ruled that such donations violate their policy.

The FDA does allow patients with hemochromatosis to donate blood so long as there is no charge for phlebotomy (i.e. so long as patients don’t have an incentive to lie to obtain free phlebotomy via donation.) Some countries and some blood banks within the US do accept donations from people with hemochromatosis as do some Kaiser locations. But the American Red Cross is the biggest collector of blood and so it is very often the case that when people with hemochromatosis get a phlebotomy their blood is simply thrown away.

Once a week, Dan Gray pays to have a pint of blood taken at Franklin Memorial Hospital. And once a week, that blood is thrown out rather than donated to someone in need.

It frustrates him.

“You could take a pint out of me, a pint out of you and a pint out of somebody else and play three-pint monte with it and they wouldn’t know whose is whose,” Gray said. “As far as the analysis of it, no one would know.”

and here:

The Cape Fear Valley Blood Donor Center put out a desperate call this past week for blood donations.

…Every time Carol Barbera hears of such pleas, she gets upset. She was once an avid blood donor and would be one still.

She also has plenty of blood to give.

A medical condition requires her to have a pint of blood drawn at least every two months. The blood is perfectly usable as donor blood. Instead, it goes straight into medical waste.

The Red Cross’s antipathy towards donations from people with hemochromatosis appears to stem from a confused ethical view that incentivized donations are either “coerced” or “non-altruistic” and an old bias against paid donations coming from Titmuss. Actual studies of paid donation, however, show that incentives increased donations without reducing quality.

Thus, as far as the evidence is concerned, there are no good reasons to prohibit people with hemochromatosis from donating blood and given the repeated shortages of blood in the United States there are many good reasons for allowing them to donate.

Hat tip: The tireless Peter Jaworski.

The Insane Wait Times to Get an Appointment for a US Visitor Visa

The wait times to get an appointment to get a visa to visit the US are absurdly long. To get an appointment for a Visitor Visa in New Delhi, for example, takes 291 days. In Mexico City the wait time is 581 days. In Nairobi, Kenya it takes 664 days!  Moreover, “It should be noted that the “Wait Times for a Nonimmigrant Visa to be Processed” information by country does not include time required for administrative processing.”

In the past, I’ve criticized India for making it cumbersome to get a tourist visa–greatly lowering much needed tourism revenues in India–but India has been moving in the right direction. The US in contrast is just an embarassment.

Hat tip: Todd Moss on twitter.

Crypto’s volatility premium

That is the topic of this week’s Bloomberg column, 2x the usual length, building on earlier work by Tyrone, see also this Megan McArdle column.  As for me, here is a key excerpt:

Much of the primary value of crypto assets is from their price volatility, which is part of their appeal. I raised this possibility some while ago, tongue in cheek, but upon further reflection it seems to me an actually useful (albeit counterintuitive) way of thinking about crypto assets. The general idea of price volatility as a value dates at least as far back as Fischer Black, one of the founders of options price theory.

In standard economic theory, investors are risk-averse, meaning they prefer more stable consumption patterns to less stable ones. That is usually true, but it does not mean investors always prefer more stable investment prices — a crucial distinction.

Consider this hypothetical: You are given an envelope containing one dollar. You are then offered the opportunity to exchange it for an envelope which contains either twice the money (that is, $2) or half the money (50 cents), each with 50% probability. In essence, you are accepting some exchange-rate volatility.

Most people will find this bet a pretty good one. The new expected value of your envelope is (0.5 x $2) + (0.5 x $0.5), or $1.25. That is a higher expected value than your original dollar.

If you are perched at the margin of subsistence, this bet might seem too risky. But for most investors, who have some level of wealth, it is an improvement in prospects, though with some additional risk.

Bitcoin and other crypto assets are essentially offering you a form of this bet. To be sure, this 50-50 bet does not exactly describe the price dynamics of crypto assets. But it is one way of illustrating that crypto prices, relative to the dollar, will either go up a lot or down a lot. The bet helps show that some investors might welcome price volatility — or, if you wish, call it exchange-rate volatility. And with even wilder swings in value, there is more extreme price volatility, which can be even more appealing.

So when Bitcoin and other crypto assets come along, they are a new source of expected gain — precisely due to their price volatility. It is like being invited into a casino where the odds favor you rather than the house! You won’t always win, but a lot of people will want to keep playing.

I’ve been pondering that argument since 2013, maybe now is the time to simply accept it.. Fischer Black and Jensen’s Inequality!

Factory Built Housing

Government concerns about great disparities in housing conditions, what are often called housing crises, date to at least the 1920s. These great disparities are, of course, still with us 100 years later. In this essay, we argue there will be no progress ending these great disparities until the residential construction industry adopts technology that other industries began adopting more than 100 years ago – factory production methods. There have been attempts to introduce these methods in residential construction for the last century, but they are always blocked and sabotaged by monopolies in the traditional construction sector, that is, the sector producing homes outside, on-site, using “stick-built” methods. Monopolies in traditional construction sabotage many types of factory-built homes. In this essay, we focus on the sabotage of particular types of such homes, what we call small-modular homes. These homes can be produced and sold at very-low prices, so that the sabotage of these homes has disproportionately hurt the low-income. The sabotage is the primary reason for the existence of, and perpetuation of, U.S. housing crises.

[Small-modular homes]…are blocked from most areas of the country – it’s simply illegal for a household to purchase such a home and place it on land owned by the household. In areas where they are “allowed,” they are often zoned for areas like manufacturing districts and dumps. Even then, regulations mean higher production costs for these homes in factories. They also mean the homes are financed as automobiles (with personal loans, or chattell loans) and not real estate loans. It’s clear why these homes are a threat to those constructing stick-built homes, especially in the lower-priced home market, and why monopolies in traditional construction have invested so heavily in blocking these small-modular homes. The homes are of high-quality, built to a strict national building code. They are manufactured at a cost per square foot that is one-third to one-half less than the cost per square foot to construct homes with traditional methods.

That’s from James Schmitz’s paper for the Minneapolis Fed, Solving the Housing Crisis will Require Fighting Monopolies in Construction.

Amazingly, a majority of the houses produced in the early 1970s were factory-built before these types of houses were driven out of the market. Capps at Bloomberg notes:

Manufactured homes briefly dominated the U.S. housing market during the 1960s. By 1972, these homes — not just mobile homes but small-scale modular houses — accounted for some 60% of all new single-family homes produced nationwide, according to census data. That number has diminished so much that the role of factories in building affordable housing has gone all but forgotten.

The Biden administration wants to put America’s house factories — those used to be a thing, really — back to work. A new housing plan by the White House offers a set of actions designed to close the nation’s massive affordability gap.

As Schmitz discusses at length in another paper, part of the reason economists have ignored the destruction of factory built housing is that economists came to think of the danger of monopoly as solely involving price (or, to put it the other way as Austrians do, they thought of the virtue of competition as only involving price.). In fact, monopolies reduce productivity and they use the political process to sabotage other firms. Competition isn’t just about price but about increased productivity and creative destruction.

P.S. I am in the process of building a factory-built house. The factory part was by far the easiest and most efficient part of the process.

Rubin and Koyama on the Industrial Revolution

From Dylan Matthews:

The big question is what drove this transformation. Historians, economists, and anthropologists have proposed a long list of explanations for why human life suddenly changed starting in 18th-century England, from geographic effects to forms of government to intellectual property rules to fluctuations in average wages.

For a long time, there was no one book that could explain, compare, and evaluate these theories for non-experts. That’s changed: How the World Became Rich, by Chapman University’s Jared Rubin and George Mason University’s Mark Koyama, provides a comprehensive look at what, exactly, changed when sustained economic growth began, what factors help explain its beginning, and which theories do the best job of making sense of the new stage of life that humans have been experiencing for a couple brief centuries.

Here is the full coverage with interview.  And you can order the book here from Amazon.  I haven’t read it yet, but this is surely self-recommending…

Moving From Opportunity: The High Cost of Restrictions on Land Use

ImagePeople are more productive in cities. As a result, people move to cities to earn higher wages but some of their productivity and wages is eaten up by land prices. How much? In a new paper Philip G. Hoxie, Daniel Shoag, and Stan Veuger show that net wages (that is wages after housing costs) used to increase in cities for all workers but since around 2000 net wages actually fall when low-wage workers move to cities. The key figure is at right.

As I wrote earlier, it used to be that poor people moved to rich places. A janitor in New York, for example, used to earn more than a janitor in Alabama even after adjusting for housing costs. As a result, janitors moved from Alabama to New York, in the process raising their standard of living and reducing income inequality. Today, however, after taking into account housing costs, janitors in New York earn less than janitors in Alabama. As a result, poor people no longer move to rich places. Indeed, there is now a slight trend for poor people to move to poor places because even though wages are lower in poor places, housing prices are lower yet.

Ideally, we want labor and other resources to move from low productivity places to high productivity places–this dynamic reallocation of resources is one of the causes of rising productivity. But for low-skill workers the opposite is happening – housing prices are driving them from high productivity places to low productivity places. Furthermore, when low-skill workers end up in low-productivity places, wages are lower so there are fewer reasons to be employed and there aren’t high-wage jobs in the area so the incentives to increase human capital are dulled. The process of poverty becomes self-reinforcing.

Why has housing become so expensive in high-productivity places? It is true that there are geographic constraints (Manhattan isn’t getting any bigger) but zoning and other land use restrictions including historical and environmental “protection” are reducing the amount of land available for housing and how much building can be done on a given piece of land. As a result, in places with lots of restrictions on land use, increased demand for housing shows up mostly in house prices rather than in house quantities.

Moreover, as I also argued earlier, even though the net wage is still positive for college-educated workers a signficant share of the returns to education are actually going to land owners!  Enrico Moretti (2013) estimates that 25% of the increase in the college wage premium between 1980 and 2000 was absorbed by higher housing costs. Moreover, since the big increases in housing costs have come after 2000, it’s very likely that an even larger share of the college wage premium today is being eaten by housing. High housing costs don’t simply redistribute wealth from workers to landowners. High housing costs reduce the return to education, reducing the incentive to invest in education. Thus higher housing costs have reduced human capital and the number of skilled workers with potentially significant effects on growth.

My Conversation with Jamal Greene

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

Jamal and Tyler discuss what he’d change about America’s legal education system, the utility of having non-judges or even non-lawyers on the Supreme Court, how America’s racial history influences our conception of rights, the potential unintended consequences of implementing his vision of rights for America, how the law should view economic liberty, the ideal moral framework for adjudicating conflicts, whether social media companies should consider interdependencies when moderating content on their platforms, how growing up in different parts of New York City shaped his views on pluralism, the qualities that make some law students stand out, and more.

Here is one excerpt:

COWEN: There is a crude view in popular American society — even possibly correct — that, simply, American society is too legalistic. There’s that book, Three Felonies a Day. If you have expired prescription medicine in your cabinet, you’re committing a felony. People who are very smart will just tell me, “Never talk to a cop. Never talk to an FBI agent.” I’m an upper-class White guy who’s literally never smoked marijuana once, and they’re telling me, “Don’t ever speak with the law.”

Isn’t something wrong there? Is the common intuition that we’re too legalistic correct?

GREENE: I think that we are too apt to submit political disputes to legal resolution. I think that for sure. What your friends are telling you about police officers is slightly different, insofar as one can have a deeply non-legalistic culture in which the correct advice is to not talk to police officers if those people are corrupt, if those people are abusive.

When I hear that advice — and I might be differently situated than you — that’s what people are saying is, someone might be out to trick you. And that might be a mistrust of state power, as you mentioned before. Maybe it’s a rational mistrust of state power, but I don’t know that that’s about legalism, which again, is a separate potential problem.

We tend to formulate our problems in legal terms, as if the right way to solve them is to decide how they are to be resolved by a court, or how they are to be resolved by some adjudicative official, as opposed to thinking about our problems in terms of just inherent in, again, pluralism, which has to be solved through politics, has to be solved through conversation.

COWEN: But we still have whatever is upstream of the American law, the steep historical and cultural background, so anything we do is going to be flavored by that. We’re not ever going to get to a system where the policemen are like the policemen in Germany, for instance, or that the courts are like the courts in Germany.

Given that cultural upstream, again, isn’t the intuition basically correct? Just be suspicious of the law. We should have fewer laws, rely less on the legal process, in essence, deregulate as many different things as we can. Why isn’t that the correct conclusion, rather than building in more rights?

Interesting throughout.

Fact Checking Increases Fake News

Florian Ederer and Weicheng Min have an interesting new paper called Bayesian Persuasion with Lie Detection which shows that under some conditions fact checking can increase fake news.

How does lie detection constrain the potential for one person to persuade another to change her action? We consider a model of Bayesian persuasion in which the Receiver can detect lies with positive probability. We show that the Sender lies more when the lie detection probability increases. As long as this probability is sufficiently small, the Sender’s and the Receiver’s equilibrium payoffs are unaffected by the presence of lie detection because the Sender simply compensates by lying more. However, when the lie detection probability is sufficiently high, the Sender’s equilibrium payoff decreases and the Receiver’s equilibrium payoff increases with the lie detection probability.

The paper is difficult so here’s my stab at the intuition.

Suppose that politicians always want war but war is not always good. If voters can always detect a lie, politicians would always report war-is-good only when war was good and not-war when war was bad. Now suppose that voters can never detect a lie and also that the true probability of war being good is low. In this case, if politicians always report war-is-good then the voters would always ignore the politicians and choose no-war. But suppose that politicians always report war-is-good when war is good but sometimes report war-is-bad when war is bad (and, of course, sometimes report war-is-good when war is bad). In this situation, voters could be better off listening to politicians than ignoring them completely and the politicians will also be better off because they will get war more often—always when it is good and sometimes when it is bad. So, even though they always want war, how often should politicians report war-is-bad when war is bad? Just enough so that the voters are indifferent between following the politician’s advice and ignoring it altogether. In other words, voters have a threat point—ignore the politician completely. Knowing this threat point, politicians should tell the truth just enough so that voters prefer following the politician’s advice to ignoring them completely. Thus, even though voters can never detect a lie, politicians should sometimes tell the truth.

Now assume that there is (imperfect) lie detection. It’s immediately obvious that holding all else equal voters will be better off because now they will detect some of the times politicians say war-is-good when in fact war-is-bad. But precisely for this reason, all else will not be held equal, politicians will now report war-is-good when it is bad more often, i.e. they will lie more often. Working “backwards”, the voters threat point—ignore the politicians altogether—hasn’t changed and so their expected utility won’t change but that means that lie detection can’t make them better off and the reason is that politicians will lie more often.

In fact, lie detection doesn’t help the voters unless it is very accurate–perhaps more accurate than in our world.

Note that in this model voters cannot punish politicians for lying nor is there any opportunity for politicians to signal, to take costly actions that could separate truth tellers from liars. The model is all about “senders” and “receivers” of information–it’s a model of Bayesian persuasion not Bayesian punishment. In a model with punishment the ability to detect lies–even the ability to detect lies ex post–could result in more optimistic scenarios. Similarly, signaling might help, at the expense of some cost.

Nevertheless, the lesson I take is that information revelation is rarely pure. Information revelation is strategic–what is revealed and when it is revealed are choices in a game that may have complex and counter-intuitive equilibria.

For more, see Peter Coy’s interesting article on Bayesian persuasion in the New York Times.

The paradox of auction happiness

If you win something at auction, even if you end up paying your full bid, you are typically quite happy, rather than just a smidgen happy.

Then why didn’t you bid more in the first place?

Is your mistake being too happy, or is your mistake having bid too low?

Do you become happy only by winning discrete, decent-sized lumps of happiness, rather than smidgens of happiness?  Does that even make sense?

Or is it just the value of winning per se, in which case there might be some other artificial way of manufacturing the same feeling?

Note this all runs a bit counter to winner’s curse arguments, which suggest you should be a smidgen unhappy when you win, not when you lose.

How should we best model this?

The Parent Trap–Review of Hilger

Nate Hilger has written a brave book. Almost everyone will find something to hate about The Parent Trap. Indeed, I hated parts of it. Yet Hilger is willing to say truths that are often not said and for that I would rather applaud than cancel.

Hilger argues that the problems of poverty, pathology and inequality that bedevil the United States are not primarily due to poor schools, discrimination, or low incomes per se. The primary cause is parents: parents who are unable to teach their children the skills that are necessary to succeed in the modern world. Since parents can’t teach the necessary skills, Hilger calls for the state to take their place with a dramatic expansion of not just child care but collective parenting.

Let’s unpack some details. Begin with schooling. It’s very common to bemoan the state of schools in the “inner city” or to complain about “local financing” which supposedly guarantees that poor counties will have underfunded schools. All of this, however, is decades out-of-date.

A hundred years ago there really were massive public-school resource gaps by class and race. These days, however, state and federal spending play a larger role than local property tax revenue and distribute educational resources more progressively….In fact, when we include federal aid, 42 states spent more on poor school districts than on rich school districts in 2012. The same pattern holds between schools within districts

….The highest spending districts are large urban centers such as New York City, Boston and Baltimore. These cities spend large sums to educate rich and poor children alike. p. 10-11

Hilger is correct. No matter what you saw on The Wire, Baltimore spends more than sixteen thousand dollars per student, among the highest in the nation in large school districts and above average for the nation as a whole. Public schools are quite egalitarian in funding with any bias running towards more funding for poorer districts.

Schools, Hilger writes are “actually the smallest and most equalizing part of a much larger skill-building system.” The real problem, says Hilger, are parents.

But what about discrimination? When it comes to wage discrimination, Hilger is brutally honest:

If we compare individuals with similar cognitive test scores, Black college graduates earn higher wages than white college graduates. Studies that don’t control for test score differences but examine earnings gaps within specific professions—lawyers, physicians, nurses, engineers, scientists—tend to find Black workers earn zero to 10 percent less than white workers. These gaps could reflect discrimination, unmeasured skill differences, or other factors such as geography. In any case, such gaps are small compared to the 50 percent overall Black-white earnings gap and reinforce the idea that closing skills gaps would go a long way toward closing income gaps.

Hilger argues that racism does play an important role in explaining Black-white wage differentials but it’s the historical racism that made black parents less skilled and less able to pass on skills to their children. In the twentieth century, Asians, Hilger argues, were discriminated against in the United States at least much as Black Americans. But the Asians that came to the United States had high skills while the legacy of slavery meant that Black Americans began with low skills. Asians, therefore, were better able to overcome discrimination. The success of Nigerians and Jamaican immigrants in the United States also speaks to this point.  (Long time readers may recall that in 2016 I dubbed Hilger’s paper on Asian Americans and Black Americans the Politically Incorrect Paper of the Year .)

Parental investment is surely important but Hilger overstates his case. He writes as if poorer parents have neither the abilities nor the time to teach their children while richer, better educated parents simply invest lots of hours and money imbuing their children with skills:

…the enormous variation in parents’ own academic skills has big implications for kids because we also demand that parents try to be tutors. During normal times, parents in America spend an average of six hours per week helping—or trying to help—their kids with school work. Six hours per week is more than K12 math and English teachers get with children…good tutoring by parents for six hours a week, every week, year after year of childhood could raise children’s future earnings by as much as $300,000.

The data on the effectiveness of SAT test-prep suggests that these efforts are not nearly so effective as Hilger argues. The parental investment story also doesn’t fit my experience. I didn’t spend six hours a week helping my kids with their homework. I doubt most parents do. I simply assumed my kids would do their work. I do recall that we signed my kids up for tutoring at Kumon, the Japanese math education center. My kids would complain bitterly when we took them for drill on the weekend. It was mostly filling out rote forms and my kids would hide or bury their drill sheets so we were always behind. Driving my kids to the Kumon center, monitoring them. and forcing them to do the work when they rebelled like longshoreman on work-to-rule was time consuming and it was ruining our weekends. I felt guilty, but after a while, my wife and I gave up. Today one of my sons is a civil engineer and the other is a math and economics major at UVA.

Hilger has an answer to this line of objection, or at least he says he does, but to my mind it’s a very odd answer. He argues, relying heavily on Sacerdote, that adoption studies show that more skilled parents result in more skilled kids. I find that answer odd because my reading of Sacerdote is that the effect of parents are small after you control for genetics—this is, as Hilger acknowledges, the conventional wisdom among psychologists. (See Caplan for an excellent review of the literature). It is true that Sacerdote plays up the effect of parents, but it looks small to me. Here is the effect of the adopted mother’s maternal education on the child’s education.

As you can see there is an effect but it is almost all from the mother going from having less than a high school education to graduating high school (11 to 12 years). In contrast, the mother can move from graduating high school to having a PhD and there is very little change in the education level of an adoptee. Note, however, that the effect on non-adoptees, i.e. biological children, is much larger throughout the entire range which suggests the influence of nature not nurture.

I am not surprised that there is some effect of parental education on child’s education because going to college is in part a cultural issue. Parents can influence cultural aspects of their children’s identity such as whether a child grows up up nominally Catholic, Mormon, or Hindu but they have relatively little effect on child religiosity, let alone personality or IQ. I think that a large fraction of the college wage premium is signaling (50% is a moderate estimate, Caplan thinks 90% is closer to the truth), so I am also not overly excited about college attendance as a marker of success.

The effect of parental income on the income of child adoptees is even more dramatic than on education—which is to say negligible. The income of the adopted parents has zero effect (!) on child’s income even as parent’s income varies by a factor of 20! The only correlation is with non-adoptee income—which again suggests the influence of nature not nurture.

At this point in the book, it was almost inevitable that we were going to get yet another paean to the Perry Preschool Project and indeed Hilger waxes enthusiastically about Perry. Seriously? The Perry Preschool project started in the 1960s and had just 123 participants (58 in treatment and 65 in control!). There are more papers about the Perry Preschool project than there were participants. I am jaded.

Aside from the small sample size, the project had imperfect randomization and missing data and most importantly limited external validity. The Perry Preschool project treated a small group of disadvantaged African American children with low-IQs (IQs of 70-85 were part of the selection criteria). The treatment is usually described as “active learning pre-school” but it was more intrusive than that. Every week counselors would go to the homes of the kids to teach the parents (mostly mothers) how to raise their children. The training was important to the program. Indeed, Hilger notes, without sense of irony, that “facilitating greater skill growth in low-income children was so complicated that it required home visitors with advanced postsecondary degrees.” (p. 89). And what were the results?

The results were good! (Heckman et al. 2010, Belfield et al. 2006). But in the popular literature the impression one gets is that the program took a bunch of disadvantaged kids and helped them read and write, making them more middle-class and successful. Some of that happened but the big gains actually happened because the participants, especially the boys, were so socially dangerous and destructive that even a bit of normalization made life substantially better for everyone else. In particular 82% of the treated group of 33 males had been arrested by age 40, including for one murder, 4 rapes, 8 robberies, 11 assaults and 14 burglaries. The control group were worse. In the control group of 39 males there were 2 murders. Indeed the reduction of one murder in the treatment group accounts for a significant benefit of the entire Perry PreSchool project.

Hilger, to his credit, is reasonably clear that what is really needed is an intensive program for disadvantaged African Americans, especially males. In a stunning sentence he writes:

The more we rely on families rather than professionals to build skills in children, the tighter we link people’s current prospects to the prospects of their ancestors. p. 134

But he soon forgets or papers over the context of the Perry Preschool project and like everyone else in the literature uses this to support a national program for which there is no external validity. It’s hard to believe, given the lack of external validity, but Heckman et al. (2010) only exagerate mildly when they write:

The economic case for expanding preschool education for disadvantaged children is largely based on evidence from the HighScope Perry Preschool Program…

Hilger’s case for the difficulty of parenting is well taken—the FAFSA was a nightmare that taxed two PhDs in my family. But the bottom line is that most parents do just fine. Moreover, it’s shocking that in recounting the difficulties of parenting Hilger says hardly one word about an obvious factor which makes parenting more than twice as hard. Namely, single parenting. I was a single parent. Once for a whole week. Don’t do it. Get married, stay married. Perhaps Hilger didn’t want to appear to be too conservative.

Instead of recommending marriage and small targeted programs and more experiments, Hilger goes full Plato.

What would it look like if we [asked]…less not more of parents? It would look like professional experts managing more than the meagre 10 percent of children’s time currently managed by our public K12 system—much more. p. 184

And why should we do this? Because we are all part slaves and part slave-owners on a giant collective farm:

As fellow citizens who benefit from tax revenue, we all—even those of us without children—collectively own about 30 percent of any additional income other people’s children wind up earning. p. 197

Ugh. We own ourselves, not one another. Society isn’t about maximizing the collective it’s about free individuals coming together to produce rules so that we can enjoy the benefits of collective action while still living in a diverse society that respects individual rights, beliefs, and ways of living.

I told you I hated parts of The Parent Trap but Hilger has written an interesting and challenging book and he is mostly right that neither schooling nor labor market discrimination play a major role in the black-white wage gap. Hilger is probably also right that we spend too much on the elderly relative to the young. The idea of greater state involvement in the raising of children is on the table today in a way it hasn’t been for some time. See also Dana Susskind’s recent book Parent Nation. Changes on the margin may be warranted. Nevertheless, I stand with Aristotle and not Plato in thinking that raising children is better done by parents than by the state.

Why We Can’t House the Homeless

During the pandemic, New York State allocated $100 million to turn struggling New York City hotels into low-cost housing. What could be simpler? Hotels are already used to house people so converting a hotel to more longer-term housing ought to be much simpler and cheaper than building from scratch or converting a parking structure into housing. Nope.

Politico: “There are very few hotels that physically could be converted and comply with the requirements of today’s zoning and building code without substantial, expansive reconstruction, partial removal or demolition,” said James Colgate, a land use partner at Bryan Cave Leighton Paisner LLP who has advised clients on zoning issues including the conversions of hotels. “That would increase the costs greatly.”

For example, a building’s elevators, doorways, or rooms may be slightly short of the size required for a residential structure. Residential buildings are also required to have a certain amount of rear-yard space that a hotel may not have.

“You would literally have to be chopping off part of the building,” Rosen said.

…The legislation dictates that each unit include a kitchen or kitchenette with a full-sized refrigerator, cooktop and sink — something Rosen said made utilizing the program “simply too expensive.”

“This is the classic case of the perfect being the enemy of the possible,” said Mark Ginsberg, a partner at the firm Curtis + Ginsberg Architects, which has worked on hotel conversions.

Some advocates who pushed the creation of the program say those provisions were necessary to ensure it didn’t generate substandard housing.

Substandard housing compared to what? Living on the street?  And get this person.

“We didn’t want a program that cut corners to make it more palatable to developers,” said Joseph Loonam, housing campaign coordinator for the progressive advocacy group VOCAL-NY. “We wanted a program that centered the needs of homeless New Yorkers, which is true high quality affordable housing where they can have full autonomy and dignity.”

Well, they got what they wanted, the program wasn’t palatable to developers as only one application has been received and none of the money spent. Thanks progressive advocacy group for centering the needs of homeless New Yorkers.