Category: History
More cars, fewer pedestrian deaths
Michael Blastland and David Spiegelhalter have a new book about risk — The Norm Chronicles: Stories and Numbers About Dangers and Death — and it does actually have new material on what is by now a somewhat worn out topic. Here is one example:
In 1951 there were fewer than 4 million registered vehicles on the roads in Britain. They meandered the highways free of restrictions such as road markings, traffic calming, certificates for roadworthiness, or low-impact bumpers. Children played in the streets and walked to school. The result was that 907 children under 15 were killed on the roads in 1951, including 707 pedestrians and 130 cyclists. Even this was less than the 1,400 a year killed before the war.
The carnage had dropped to 533 child deaths in 1995, to 124 in 2008, to 81 in 2009, and in 2010 to 55 — each a tragedy for the family, but still a staggering 90 percent fall over 60 years.
You can buy the book here.
*Age of Ambition*, by Evan Osnos
This is one of the best books on contemporary China, maybe the best. The subtitle is Chasing Fortune, Truth, and Faith in the New China. Osnos is the former New Yorker correspondent in the country for five years up through 2013. Here is one excerpt:
Li routinely taught in arenas, to classes of ten thousand people or more. The most ardent fans paid for a “diamond degree” ticket, which included bonus small-group sessions with the great man. The list price was $250 a day — more than a full month’s wages for the average Chinese worker. Students thronged him for autographs. On occasion, they sent love letters, wrapped around undergarments.
There was another widespread view of Li’s work. “The jury is still out on whether he actually helps people learn English,” Bob Adamson, an English-language specialist at the Hong Kong Institute of Education, told me. Li’s patented brand of shouting occupied a specific register: to my ear, it was not quite the shriek reserved for alerting someone to an oncoming truck, but it was more urgent than a summons to the dinner table. He favored flamboyantly patriotic slogans such as “Conquer English to Make China Stronger!” On his website, he declared, “America, England,Japan — they don’t want China to be big and powerful! What they want most is for China’s youth to have long hair, wear bizarre clothes, drink soda, listen to Western music, have no fighting spirit, love pleasure and comfort! The more China’s youth degenerated, the happier they are!”
Definitely recommended, fascinating throughout.
*American Railroads* (arrived on my desk)
The subtitle is Decline and Renaissance in the Twentieth Century, and the authors are Robert E. Gallamore and John R. Meyer. John Meyer passed away in 2009 and this volume is a finished version of his last major work.
“We all know that wealth inequality has gone up”
That is a response to the Piketty criticisms from Paul Krugman, and also mentioned by Matt Yglesias. Phiip Pilkington also has a useful treatment. This point however doesn’t do the trick as a defense. Keep in mind that the “new and improved numbers,” as produced by Chris Giles, are showing doubts about the course of measured wealth inequality in the UK. Maybe wealth inequality hasn’t gone up.
Now maybe that does “have to be wrong.” But if the “new and improved” numbers are wrong, it is hard to then argue Piketty’s wealth inequality numbers can be trusted. In which case we are back to knowing that income inequality has gone up, but not knowing so much concrete about wealth inequality. (That is one reason why my own Average is Over focuses on income, and on labor income in particular, because that is where the main action has been.) The data section of Piketty’s book, which has gathered so much praise, then is not so useful, though by no fault of Piketty’s. We might think it likely that wealth inequality has gone up, but if we are going to do these selective overrides of the best available data, we cannot trust the data so much period or otherwise cite it with authority. We also could not map wealth inequality into particular measures of the r vs. g gap at various periods of time.
If there is one big lesson of the FT/Piketty dust-up, it is that we don’t have reliable numbers on wealth inequality.
Now do we in fact “know” that wealth inequality has gone up? See this piece by Allison Schrager. Intuitions about wealth vs. income inequality are trickier than you might think. And on what we actually do and do not know, here is a very good comment on Mian and Sufi’s blog (for U.S. data):
How much have white Americans benefited from slavery and its legacy?
Many people are talking about the Ta-Nehisi Coates essay on reparations. Ezra Klein has a summary of the argument, which runs as follows:
What Coates shows is that white America has, for hundreds of years, used deadly force, racist laws, biased courts and housing segregation to wrest the power of compound interest for itself. The word he keeps coming back to is “plunder.” White America built its wealth by stealing the work of African-Americans and then, when that became illegal, it added to its wealth by plundering from the work and young assets of African-Americans. And then, crucially, it let compound interest work its magic.
I would suggest that most living white Americans would be wealthier had this nation not enslaved African-Americans and thus most whites have lost from slavery too, albeit much much less than blacks have lost. For instance it is generally recognized that freer and fairer polities tend to be wealthier for most of their citizens. (We may disagree about what “fair” means for many issues, but slavery and its legacy are obviously unfair.)
More specifically, many American whites benefited from hiring African-American labor at discrimination-laden discounted market prices, but many others lost out because it was more costly to trade with African-Americans. That meant fewer good customers, fewer eligible employees, fewer possible business partners, fewer innovators, and so on, all because of slavery and subsequent discrimination. The wealth-destroying effects are surely much larger here, even counting whites alone. And the longer the time horizon, the more likely the dynamic benefits from trade will outweigh the short-run benefits from discriminating against some class of others.
Empirically, I do not think whites in slavery-heavy regions have had especially impressive per capita incomes. And a lot of the economic catch-up of the American South came only when the region abandoned Jim Crow.
We also can look at how many white Americans have had ancestors who, at least for a while, had zero or near-zero net wealth. The returns from slavery may have been compounding for some heirs of Mississippi plantation owners, but not for most of us. My father, when he was thirty, had just gone bankrupt from an unsuccessful attempt to manage a New Jersey pet store. In what sense was he, or later I, reaping compound returns from a legacy of slavery? We go back to the point that overall he probably would have had a better chance in the wealthier and fairer non-discriminating society, even if you can pinpoint some mechanisms through which he might have benefited, such as facing less competition from potential African-American pet store entrepreneurs.
The economic incidence of slavery is a tricky matter (most of what Squarely Rooted argues here is wrong). A lot of whites in the slave trade bought slaves at the going market price and earned the going market rate of return. Of course these same whites were reluctant to free the slaves they had bought and that meant terrible lives for the victims. But the gains of those whites are not mirror images of the losses of the slaves. Thus in some regards slavery was a massive collective action problem with a relatively small number of beneficiaries. Those benefiting would include individuals who first saw the gains from seizing slaves from Africa, and individuals who were good at spotting undervalued slaves and buying them up and exploiting them. That’s a fair number of people but it is far from comprising the overwhelming majority of society in 1840, much less 1940 or 2014, once we consider possible wealth transmission to their heirs.
There is still a moral case for reparations even if most American whites have lost from slavery rather than benefited. (Although I doubt if the America public would see the matter that way, which is one reason why the reparations movement probably isn’t going anywhere.) Nonetheless on the economics of the issue I would suggest a very different analysis than what I am seeing from many of the commentators. And this analysis makes slavery out to be all the more destructive, and reparations to be all the more unlikely.
Addendum: It is amazing how many of you cannot read and digest a simple sentence such as “There is still a moral case for reparations even if most American whites have lost from slavery rather than benefited.” Which by the way is far to the “left” of where the current debate stands in American politics and indeed in most other parts of the world.
What do the Piketty data problems really mean?
In some ways the new FT criticisms may not matter much, although I think not in a way which is reassuring for Piketty. There were already several major problems with Piketty’s analysis and also empirics, including what Alex has called the asset price problem. He wrote:
According to four French economists, Piketty’s measure of the capital stock is greatly influenced by the Europe-US housing bubble that preceded the financial crisis.
Adjusting for that factor seems to make the main results go away, and that is a purely empirical problem which has not been answered, at least not yet.
Another pre-existing empirical problem is that 19th century data seem to indicate that a “Piketty world,” even if we take it on its own terms, far from being a disaster, would likely be accompanied by rising real wages and declining consumption inequality, albeit rising wealth inequality.
That hasn’t been answered either, although a few people have suggested (without serious back-up) that if wealth inequality is going up that has to lead to political problems, or problems of some kind or another, and thus it can’t be something we can approve of or accept with equanimity, because inequality is really really bad, and therefore Piketty is somehow right anyway. That’s a weak response to begin with and furthermore it doesn’t fit the available data.
Empirically, inheritances aren’t nearly as important as Piketty seems to suggest.
On Twitter Clive Crook wrote of the:
…distance between treacherous data and super-bold conclusions an issue at the outset. This underlines the point.
Now, when you cut through the small stuff, the new empirical problem seems to be that UK revisions, combined with a population-weighted series for Europe, contradicts Piketty’s claim of rising wealth inequality for Europe. I would call that a serious problem. I am not impressed by the “downplaying” responses which focus on coding errors, Swedish data points, and the other small stuff. Let’s face up to the real (new) problem, namely that robustness suddenly seems much weaker. You can’t argue that population-weighting is “the right way to do it,” but it is an entirely plausible way to estimate the wealth inequality trend. If Piketty’s results don’t survive population weighting (and what are apparently the superior UK numbers), that suggests the overall rise in European wealth inequality is not very robust to how the pie is carved up and also that it is not backed by dominant, “rule the roost” sorts of forces.
It should be noted that Piketty’s response to the new criticisms was quite weak. Maybe he’s not to be blamed for what was surely a rapid and caught-off-guard response, and perhaps there is more to come, but it doesn’t reassure me either. He also should have run it by a PR person first (for instance, don’t start your response with a sentence ending in an exclamation point.)
That said, don’t focus on Piketty. When evaluating debates of this kind, never ever confuse a) is he right? with b) “how much should we raise/lower the relative status of the author as a result of the new exchange”? So responses like “he made all his data freely available,” or “he admits all along how complicated this all is,” address b) but not the more important a). And if you are seeing people focus on b) rather than a), they have a problem themselves. On empirical grounds it does seem we have another reason for thinking Piketty’s central claim isn’t quite right, at least not for the reasons he sets out, and perhaps not quite right altogether.
Addendum: Ryan Avent has a good survey of some key issues and responses.
Piketty update
…according to a Financial Times investigation, the rock-star French economist appears to have got his sums wrong.
The data underpinning Professor Piketty’s 577-page tome, which has dominated best-seller lists in recent weeks, contain a series of errors that skew his findings. The FT found mistakes and unexplained entries in his spreadsheets, similar to those which last year undermined the work on public debt and growth of Carmen Reinhart and Kenneth Rogoff.
The central theme of Prof Piketty’s work is that wealth inequalities are heading back up to levels last seen before the first world war. The investigation undercuts this claim, indicating there is little evidence in Prof Piketty’s original sources to bear out the thesis that an increasing share of total wealth is held by the richest few.
Prof Piketty, 43, provides detailed sourcing for his estimates of wealth inequality in Europe and the US over the past 200 years. In his spreadsheets, however, there are transcription errors from the original sources and incorrect formulas. It also appears that some of the data are cherry-picked or constructed without an original source.
For example, once the FT cleaned up and simplified the data, the European numbers do not show any tendency towards rising wealth inequality after 1970. An independent specialist in measuring inequality shared the FT’s concerns.
The full FT story is here.
Addendum: Here is the in-depth discussion. Here is Piketty’s response.
George Terborgh’s *The Bogey of Economic Maturity*
Since the idea of secular stagnation has reemerged in economic discourse, I thought I would go back and reread this 1945 critique of Alvin Hansen. It is uneven, overly polemic, but definitely interesting in places. The author argues for instance that rates of population growth simply don’t predict spurts of economic growth very well. It is also interesting to see how much commentators of that time blurred together demand-side and supply-side approaches to stagnation. Is that insight or misunderstanding? Perhaps we still don’t know. Here is one excerpt from Terborgh:
There is thus no evidence that investment in major innovations as a class, including the young and old ones alike, has had any higher growth rate than investment in minor innovations as a class. There is no evidence that one “great new industry” is any more dynamic in its impact on capital formation than ten small new industries. The important thing is the total flow of technological development, not its degree of concentration.
And I enjoyed this rhetoric:
Capital formation is not a polite game in which replacements meekly and decorously await, like dutiful heirs, the natural death of existing assets. It is a ruthless and cutthroat struggle in which new capital goods rob the function of the old.
You can buy the book here, and here is a Questia link to the text. And here is his 1966 book The Automation Hysteria. It seems he had the temperament of a debunker. I don’t know much about Terborgh, but for a while he was a private sector economist and also a research economist at the Fed.
The early days of American Austrian economics
John Blundell has a captivating report (pdf), here is one bit:
When Hayek asked Bartley to do the biography he said: “There are only three things that sell books namely sex, money and violence. As to sex, well, I left my first wife for my first girlfriend. As to money, well, I never had any. And as to violence, let me tell you how I came to bayonet a man to death in World War One!”
For the pointer I thank Yana.
*The Impossible Exile: Stefan Zweig at the End of the World*
That is the new and truly excellent book by George Prochnik, think of it as a selective biography focused on themes of exile, perversion, Brazil, and suicide. Excerpt:
Martin Gumpert shared Zweig’s sense of depletion amid New York’s incessant activity, likening the exhaustion that befell almost every newcomer to a “magic spell.” When Bruno Walter first arrived in New York, the heat of his hotel room drove him out onto the street though it was still before dawn. On his initial promenade down Manhattan’s avenues, he imagined “wit a shudder of horror” that he was “walking at the bottom of immensely deep rocky canyons.” As the sun rose, his eyes caught sight of an enormous billboard on top of a building displaying the words “U.S. Tires.” In a daze he thought to himself, “Yes, it does — true enough — but why is this fact being advertised to me from the rooftops?”
And:
Even New York rain, Camus observed after his own first encounter with the city in the mid-1940s, was “a rain of exile. Abundant, viscous, and dense; it pours down tirelessly between the high cubes of cement into avenues plunged suddenly into the darkness of a well…I am out of my depth when I think of New York,” he acknowledged. Camus wrote of wrestling with “the excessive luxury and bad taste” of New York, but also with “the subway that reminds you of Sing Sing prison” and “ads filled with clouds of smiles proclaiming from every wall that life is not tragic.”
This is one of my favorite books of the year so far. (You will find here an interesting review.) And Zweig’s own The World of Yesterday is one of my favorite books period.
Gabriel Kolko has passed away
MIT’s rise to prominence in economics
There is a new paper (pdf) by Andrej Svorenčík on this topic:
The core question of MIT Economics Department’s history – why has MIT economics risen to prominence so quickly – requires an approach to history of economics that focuses on the role of the networks within which economists operate, their ideas diffuse, and gain scientific credit. By reconstructing the network of MIT economics Ph.Ds. and their advisors, this paper furnishes not just evidence of how MIT rose to prominence as documented by the numerous ties of Nobel Laureates, Clark Medalists, elected officials of the AEA or the Council of Economic Advisors to the MIT network. The MIT Economics Department is also revealed as a community of self-replicating economists who are to a large extent trained by a few key advisers who were mostly trained at MIT as well. MIT exhibits a large share of graduates who remain in American academia that is disproportionate to the number of graduates it has produced. It is hypothesized that this has been an important factor in MIT’s rise to prominence. On a methodological level this paper introduces prosopography or collective biography, a well-established historiographic method, to the field of history of economics.
When I was at Harvard in the 1980s, we typically thought of the MIT students as:
1. Smarter and harder working than we were
2. Better focused and better trained, and benefiting from a more collegial environment
3. More narrow
4. Somewhat less…um…modest, and thus you might prefer to have a Harvard student setting your economic policy.
Fortunately we all have moved on to broader and less prejudicial judgments.
The pointer is from @UdadisiSuperior.
The other new French book on inequality
It is The Society of Equals, by , and it is a transatlantic look at how the notion of inequality has changed over the last three centuries. It strikes me as the sort of book Crooked Timber would have a symposium on. Here is one good bit:
Thus there is a global rejection of society as it presently exists together with acceptance of the mechanisms that produce that society. De facto inequalities are rejected, but the mechanisms that generate inequality in general are implicitly recognized. I propose to call this situation, in which people deplore in general what they consent to in particular, the Bossuet paradox. This paradox is the source of our contemporary schizophrenia. It is not simply the result of a guilty error but has an epistemological dimension. When we condemn global situations, we look at objective social facts, but we tend to relate particular situations to individual behaviors and choices. The paradox is also related to the fact that moral and social judgments are based on the most visible and extreme situation (such as the gap between rich and poor), into which individuals project themselves abstract, whereas their personal behavior is concretely determined by narrower forms of justification.
Roger Berkowitz has a very good review here, excerpt:
As does Piketty, Rosanvallon employs philosophy and history to characterize the return of inequality in the late 20th and now 21st centuries. And Rosanvallon, again like Piketty, worries about the return of inequality. But Rosanvallon, unlike Piketty, argues that we need to understand how inequality and equality now are different than they used to be. As a result, Rosanvallon is much more sanguine about economic inequality and optimistic about the possibilities for meaningful equality in the future.
And:
…inequality absent misery may not be the real problem of political justice. The reason so much inequality is greeted with resentment but acceptance, is that our current imagination of justice concerns visibility and singularity more than it does equality of income.
Recommended.
From the comments
Here is Brett on Piketty:
I’m surprised to see so few critiques of Piketty on the grounds that higher wealth and income inequality won’t necessarily lead to oligarchical politics and the capture of the economy by rentiers. I’m a bit skeptical myself of his interpretation of 19th century politics – at the same time we had the Belle Epoque, there was increasing working class political power in the UK (particularly with reforms in the 1830s and 1860s), the lead-up to the near-complete loss of political power in the House of Lords in 1911, the rise of income taxes in both the UK and France, greater social mobility, broader modernization and consumer culture, and so forth. You see some pushback from Larry Bartels and the like pointing to research showing policymaking following the preferences of the rich and organized, but they don’t provide much information about whether this has changed with increasing income and wealth inequality – the rich and organized interest groups may have just always had a disproportionate interest on policymaking, even during the Postwar Period.
Morgan Kelly, in his review (via John O’Brien), serves up a related point:
If Piketty’s story about slow growth leading inevitably to rising inequality and the power of the rich is true, then we expect that inequality would have risen sharply during the 19th century when growth in industrialised economies was less than 1 per cent per year. In fact the longstanding research of Peter Lindert and Jeffrey Williamson on English inequality (which Piketty, incredibly, fails to cite) finds inequality was fairly constant, albeit high, until about 1870, and then appears to have fallen somewhat until 1913.
Why do we respond to charismatic leaders?
There is a new paper by Benjamin Hermalin, with the intriguing title “At the Helm, Kirk or Spock? Why Even Wholly Rational Actors May Favor and Respond to Charismatic Leaders.” The abstract runs like this:
When a leader makes a purely emotional appeal, rational followers realize she is hiding bad news. Despite such pessimism and even though not directly influenced by emotional appeals, rational followers’ efforts are nonetheless greater when an emotional appeal is made by a more rather than less charismatic leader. Further, they tend to prefer more charismatic leaders. Although organizations can do better with more charismatic leaders, charisma is a two-edged sword: more charismatic leaders will tend to substitute charm for real action, to the organization’s detriment. This helps explain the literature’s “mixed report card” on charisma.
Here is what actually drives the argument:
As shown below, a savvy leader makes an emotional appeal when “just the facts” provide followers too little incentive and, conversely, makes a rational appeal when the facts “speak for themselves.” Followers (at least rational ones) will, of course, understand this is how she behaves. In particular, the rational ones—called “sober responders”—will form pessimistic beliefs about the productivity state upon hearing an emotional appeal. But how pessimistic depends on how charismatic the leader is. Because a more charismatic leader is more inclined to make an emotional appeal ceteris paribus, sober responders are less pessimistic about the state when a more charismatic leader makes an emotional appeal than when a less charismatic leader does [emphasis added]. So, even though not directly influenced by emotional appeals, sober (rational) responders work harder in equilibrium in response to an emotional appeal from a more charismatic leader than in response to such an appeal from a less charismatic leader.
Would this same reasoning also imply we should choose intrinsically panicky leaders, because then, if we see them panic, we would think the real underlying situation isn’t so bad after all and we are simply witnessing their innate propensity to panic? Yet no one would buy that version of the argument.
I will instead suggest that we (sometimes) follow charismatic leaders because they have high social intelligence, and most of all because other people are inclined to follow them. Some of those followers of course do not have rational expectations but rather they are touched by the charisma directly. Given that, why not follow the focal leader, even if you yourself are not touched by the charisma?
A related question is to ask how many recent world leaders are in fact charismatic. Obama and Clinton yes, but how about David Cameron? How about most Prime Ministers of Japan, Abe being a possible exception? Arguably Merkel has become charismatic through a sort of extreme, cultivated anti-charisma, but I would not cite her in favor of the theory. Any Canadian since Trudeau? Helmut Kohl?
Putin? Well, he’s not charismatic to me but now we’re getting somewhere. And what does Putin have that say Prime Ministers of Japan do not? Could it be a citizenry that gets excited relatively easily by the brutish? Come to think of it, the USA has a wee bit of excitability of its own, though more about national pride and foreign policy than anything like Putin. Hint: does your theory predict that Argentina will have charismatic leaders relative to Denmark? Yes or no?
In which business sectors are the CEOs most likely to be charismatic?
For the pointer I thank the excellent Kevin Lewis.
Addendum: Hermalin responds here.
I could not have said it better myself.