Category: Economics

Here are obituaries.  Chandler’s The Visible Hand filled in the historical boxes of how large firms developed by learning to control their immediate economic environments.  He was a father of modern business history.  His writings were sometimes dry but he had an extraordinary sense of the newness of large-scale corporate organization and the importance of new preconditions for its emergence.  His Strategy and Structure integrated managerial theory and economics.  Much of his work brought together history, economics, and business management in new and original ways.  Chandler taught at Harvard Business School for many years and was the seed of many a promising paper or book in economic history; for decades he was the center of the business history group there.  Here is Wikipedia on Chandler.  Here is a short bio.  Here is the book The Essential Alfred Chandler.

The pointer is from Kurt Schuler.

…the Pasadena Now
web site apparently posted an ad saying "We seek a newspaper journalist
based in India to report on the city government and political scene of
Pasadena, California, USA."

Via Matt Yglesias.  Dani Rodrik has relevant and oft-overlooked remarks, though I think he is underemphasizing the case where trade starts by bidding people into higher-wage jobs.

It is by Erik Reinert, How Rich Countries Got Rich, and Why Poor Countries Stay Poor; here is a home page for the book.  The title is misleading and sounds too monocausal.  Reinert’s well-written book in fact revives the arguments of Friedrich List, Henry Carey, and the 19th century protectionists.  In his view many forms of manufacturing are increasing returns to scale activities and help support civil society in the longer run.  Agriculture and the sale of raw materials are "Malthusian" sectors with diminishing returns and they are unable to create a stable middle class.  The solution of course is to stop pushing free trade upon the third world and thus allow it to develop.  Reinert claims Tudor England, 19th century America (though see Doug Irwin’s revisionist work), Bismarckian Germany, and pre-reform Latin America as data points on his side.  Unlike many critics of free trade, he does fully understand Ricardian and other theories of comparative advantage.

I don’t think his main claims are crazy and they are by no means theoretically impossible.  I wish however he had devoted more attention to the following:

1. Many other preconditions — most of all educational potential and some decent institutions — must be in place for tariffs to spur economic development in this manner.  Not all regions can create sustainable increasing returns to scale industries in manufacturing, tariffs or not.

2. Reinert cites many historical examples but doesn’t establish that they all apply, or apply with the force he suggests.  The book is a polemic, as might be written by an advocate of free trade.

3. On average the free-trading poor nations have had higher growth rates than the protectionists; see the work of Anne Krueger.  India is one obvious case of a miscalculated protectionism.

4. More often than not, tariffs and trade protection are abused for purposes of corruption and special interests. 

5. Reinert himself stresses that the proper growth path requires a later move to free trade.  This development is by no means automatic, given that protectionism creates its own special interests.

I’m still not sure why Dani Rodrik thinks that invoking 4 and 5 amounts to playing politics, or guessing at politics, at the expense of substantive economics.  I think of it as citing a downward-sloping demand curve in the time-honored tradition of political economy and public choice.  Like so much of modern economic thought, it comes from Adam Smith. 

No economist says "I favor a philosopher-King and here is what he should do.  I can’t tell you what he will do, that is politics."  Sub in "protectionist trade policy" for "a philosopher-King" and decide whether this sentence makes any more sense.

Yours truly, vs. Nouriel Roubini.

Key lexical nouns in Economic Journals:

American Economic Review, 1990s: equation, model, equilibrium

Economic Journal (UK), 1990s: pension, unemployment, wages

Journal of Economic Perspectives, 1990s: insurance, liability, health

American Journal of Economics and Sociology, 1990s: land, property, poverty

Here is the cite and a longer discussion.  The paper has many more interesting results.

Some people say no:

This paper studies whether prosocial values are transmitted from parents to their children.  We do so through an economic experiment, in which a group of families play a standard public goods game.  The experimental data presents us with a surprising result. We find no significant correlation between the degree of cooperation of a child and that of his or her parents.  Such lack of cooperation is robust across age groups, sex, family size and different estimation strategies.  This contrasts with the typical assumption made by the theoretical economic literature on the inter-generational transmission of values.  The absence of correlation between parents’ and children’s behavior, however, is consistent with part of the psychological literature, which emphasizes the importance of peer effects in the socialization process.

Here is the paper.  The alternative interpretation, of course, is that social cues learned from parents are specific to particular contexts.  Put people in some new and hitherto unexpected context — the lab games — and you can’t make much out of what goes on.  But if you’re predicting whether a Bedouin will bring water to someone lost in the desert, or whether a Swede will engage in recycling, I expect parental behavior has more predictive power.

The sophistication of financial decisions varies with age: middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults. We document this pattern in ten financial markets.  The measured effects can not be explained by observed risk characteristics.  The sophistication of financial choices peaks at about age 53 in our cross-sectional data.  Our results are consistent with the hypothesis that financial sophistication rises and then falls with age, although the patterns that we observe represent a mix of age effects and cohort effects.

Here is the paper.

The early twentieth century was just a fast-growing startup overpaying for infrastructure.  And we in the present are not a fallen people, who have abandoned whatever mysterious high-minded principles produced the high-paying union job.  We simply live in a time when the fast-growing companies overspend on different things.

Here is more, provocative throughout.  Thanks to Craig Fratrik for the pointer.

A prison in the US state of Iowa has changed its locks after a set of keys was sold online for $12.

The state spent $6,000 on refurbishing the Anamosa State
Penitentiary after keys that belonged to a guard who retired in the 70s
were auctioned.

Here is the full story, and thanks to Leonardo Monasterio for the pointer.

Mexican money is making a run for the border – the northern border.
Gruma, the world’s largest tortilla company, unveiled plans Friday to build a
major factory in Panorama City, part of a growing influx of Mexican spending in
the U.S. …

From the LA Times.  Thanks to the ever-vigilant Mark Thoma for the link.

Tim Harford, The Undercover Economist, reports:

Rent exhaustion is no economists’ fantasy – go to any place with
rich tourists and poor locals (Dar es Salaam, the first African city I
visited, fits the description nicely), and you’ll see lots of people
waiting for the one generous tip or overpriced taxi fare.  If the
tourists become more generous or gullible, the local guides don’t get
richer, they just multiply.  The bigger paydays become less frequent.

Tyler
Cowen – an economics professor with a popular blog – argues in his
forthcoming book, Discover Your Inner Economist, that for these reasons
you may wish to give money away by wandering around a poor country, far
away from the tourist trail, and handing cash to people who look busy.

Vicious fights over prime begging spots are yet another example of rent exhaustion in this context.  If the begging spot is worth say $50 a year, beggars will devote up to $50 a year to keep the spot.  Here is my previous post on whether you should give money to beggars.

In New Approaches to Ranking Economics Journals (or here) the authors rank journals based on citations from a larger sample of journals than has been used in the past, they distinguish overall journal impact from the impact per article and they break down impact into impact within economics, impact within all of social science, impact within policy and impact outside of economics. 

When impact is measured by citations from journals within economics, journal impact and impact per article are pretty much what you would expect with the AER, QJE, JPE and Econometrica all scoring highly.

Expanding the citation list to all social science, however, has some big effects especially on impact per article.  Most notably, the Journal of Law and Economics has the highest overall impact ranking per article.

Frankly, I was thrilled to see the JLE rank so highly since I have published a number of papers in that journal.  Come to think of it, the latter obviously explains the former!  Note, by the way, that the citation list does not include law journals so if anything the JLEs impact may be under-weighted.

Kudos must also go to Robert Barro, Ed Glaeser and Lawrence Katz, the editors of the Quarterly Journal of Economics, which is the only journal to rank in the top 5 categories no matter how you break down the data.      

Here is a previous post on Great Editors.  Thanks to Healthcare Economist for the pointer.

Here is his long post, his introduction reads as follows:

The question, if I understand is correctly, is whether I
think trade policy–and in particular trade policy which departs from free
trade–can ever do some good in a world where purely political motives and
rent-seeking are rampant.  My answer is
yes, but let me build my case point by point.

Here is one of his closing paragraphs:

…let me note the irony in how a discussion on free
trade among economists quickly ends up being a debate on its politics–that is,
a debate on whether this or that trade policy which on economic grounds is
actually desirable can also be politically feasible.  We are way beyond our area of expertise.  Your
hand-waving is as good as mine.

Here is my original query.  Read his whole response, comments are open, do let us all know what you think…