Category: Political Science
How’s the Argentina recovery coming along?
They are probably in bigger trouble than the European periphery. Why hold them up as a model? Why not instead obsess over the quality of a country’s institutions? They get a D. Here is the latest:
As Greece and Italy go to hell in a hand basket, down here in the Banana Republic of Argentina we’re seeing a déjà vu of the 2001 collapse. The government imposed a “green” corralito by which through one excuse or another the American currency is being unofficially but effectively banned. The US Dollar was the way in which Argentines protected their savings from the even more volatile funny money that is the Argentine peso. With the new restrictions, before buying dollars you have to be authorized by the AFIP, the Argentine version of the IRS. Through a complex system that not even themselves understand, they check how much money you earn, what are your expenses, how much you may have saved based on that, and only then do they somewhat estimate what you should be allowed to buy. There’s people that own big companies that aren’t even allowed 50 USD.
…So yes, these are interesting times to say the least. Lots of rumors, lots of desperate people out there. People that were just about to travel and needed dollars but can’t buy them, people about to close business deals in dollars but can’t get the money either. USD accounts being closed, Pesos accounts being closed as well out of fear and the too vivid ghost of 2001. Interest rates have doubled in banks in the last few days and everyone is just waiting, and I guess that the key word in today’s article. Waiting, staying put to see what happens. What happens when the economy is about to collapse, or just collapsed? Everyone waits. I saw the exact same thing 10 years ago. No one buys anything or sells anything unless they really have to.
Here is more, and I thank Matthew Weitz for the pointer. There is mounting capital flight, and multinationals are seeking to repatriate capital. A confiscatory devaluation may be in the works. Yes I do know all the good numbers they have put up in the last few years, but I also know Austro-Chinese-Soya business cycle theory! It’s also the case that Argentina will send economists to jail for trying to calculate the correct rate of inflation.
In short, I am crying for Argentina.
File also under “Yet another reason not to take IS-LM models too seriously.”
Sentences to ponder
It found that in 1979, households in the bottom quintile received more than 50 percent of all transfer payments. In 2007, similar households received about 35 percent of transfers.
That is from Shikha Dalmia (though I don’t agree with everything in the longer article).
Who gets what wrong?
My colleague Daniel Klein reports from the front:
…under the right circumstances, conservatives and libertarians were as likely as anyone on the left to give wrong answers to economic questions. The proper inference from our work is not that one group is more enlightened, or less. It’s that “myside bias”—the tendency to judge a statement according to how conveniently it fits with one’s settled position—is pervasive among all of America’s political groups. The bias is seen in the data, and in my actions.
And what do the “right-wing” thinkers get wrong?
More than 30 percent of my libertarian compatriots (and more than 40 percent of conservatives), for instance, disagreed with the statement “A dollar means more to a poor person than it does to a rich person”—c’mon, people!—versus just 4 percent among progressives. Seventy-eight percent of libertarians believed gun-control laws fail to reduce people’s access to guns. Overall, on the nine new items, the respondents on the left did much better than the conservatives and libertarians. Some of the new questions challenge (or falsely reassure) conservative and not libertarian positions, and vice versa. Consistently, the more a statement challenged a group’s position, the worse the group did.
A college education, by the way, doesn’t help much. Here is another statement of the conclusion:
A full tabulation of all 17 questions showed that no group clearly out-stupids the others. They appear about equally stupid when faced with proper challenges to their position.
That’s a lesson David Hume would have appreciated.
Why is Greece turning down the “bailout”
Make no mistake about it, the decision to hold a “referendum” is a decision to turn down the deal altogether. The referendum will never be held. It is scheduled for January and the current deal, which is not even a worked out deal, won’t be on the table by then. It’s already not on the table. The opposition leader is already opposed to the referendum, there are months more of market volatility to come, the other EU powers will get skittish about the deal, how is the conscientious Slovakia supposed to feel, and how many other factors do I need to cite? And how can the Greeks decide how the referendum will be worded?
This is a way to back out of everything, under the guise of “democracy” and ex post blame the speculators and the rest of Europe. But why? Here is one on the mark take on the matter:
A plan being developed to help reduce Greece’s debts — and prevent it from becoming the first euro-zone country to default on its debts — will fall hardest on the country’s banks and the national pension system. They would face tens of billions of dollars in losses on investments in Greek government bonds.
According to data from the European Banking Authority, major Greek banks hold about $70 billion
in Greek bonds, more than one-fourth of the total held by private investors worldwide. Greece’s national pension system has about $30 billion at risk, according to local bank and corporate officials.
Even as Greece benefits from emergency debt relief included in the new bailout plan approved by European leaders last week, the Greek government will have to borrow even more money to shore up its financial system and replenish the pension fund. Greek bankers say they doubt they could come up with the money on their own.
In other words, the deal would make the country totally bankrupt. Greek voters already feel blackmailed. A good rule of thumb is that if a very unpopular government holds a referendum on something — anything — that government will lose. Seriously now, which way do you expect the Greek bus drivers to vote?
Did I mention that the Italian ten-year yield was up to 6.31%?
Sentences to ponder
Contrary to some recent claims:
…Obama has brought in more money from employees of banks, hedge funds and other financial service companies than all of the GOP candidates combined, according to a Washington Post analysis of contribution data. The numbers show that Obama retains a persistent reservoir of support among Democratic financiers who have backed him since he was an underdog presidential candidate four years ago.
Obama also has raised more money from Romney’s former firm, Bain Capital, than has Romney. There is more at the link.
The Mexican Mafia
The Mexican Mafia is a fairly small prison gang (perhaps 150-300 made members) and it has significant operational control only within 
prisons in Southern California yet the Mexican Mafia is extremely powerful. In fact, the MM taxes hundreds of often larger Southern California street gangs at rates of 10-30% of revenues. How can a prison gang tax street gangs? In Governance and Prison Gangs (also here), a new paper in the APSR, David Skarbek explains the structure, conduct and performance of the Mexican Mafia.
The key to the MM’s power is that most drug dealers will sooner or later, usually sooner, end up in prison. Thus, the MM can credibly threaten drug dealers outside of prison with punishment once they are inside prison. Moreover, prison is the only place where members of many different gangs congregate. Thus, by maintaining control of the prison bottleneck, the MM can tax hundreds of gangs.
One of the most interesting aspects of Skarbek’s analysis is that he shows–consistent with Mancur Olson’s stationary bandit theory–that as the MM grew in power it started to provide public goods, i.e. it became a kind of government. Thus, the MM protects taxpayers both in prison and on the street, it produces property rights by enforcing gang claims to territory and it adjudicates disputes, all to the extent that such actions increase tax revenue of course. The MM is so powerful that it often doesn’t even have to use its own enforcers; instead, the MM can issue what amounts to a letter of marque and reprisal, a signal that a non-taxpaying gang is no longer under its protection, and privateers will do the rest.
The MM even internalizes externalities:
In addition, the Mexican Mafia regulates drive-by shootings…because any particular street gang only suffers a portion of the increased attention of law enforcement from drive-by shootings, each street gang has an incentive to do too-many (Buchanan 1973). In 1992, Mexican Mafia members sent notes throughout the prison system and Sureño neighborhoods that any gang member participating in an unauthorized drive-by shooting would be killed. Shortly after the Mexican Mafia announced this rule, drive by shootings declined.
The Mexican Mafia has much to teach us about crime and governance.
Interview with Edward Luttwak on geopolitics
It is interesting throughout, for instance:
There is a good measure of social control in Iran, and that is the price of genuine imported Scotch whiskey in Tehran, because it’s a) forbidden, and b) has to be smuggled in for practical purposes from Dubai, and the only way it can come from Dubai is with the cooperation of the Revolutionary Guard. The price of whiskey has been declining for years, and you go to a party in north Tehran now and you get lots of whiskey. And it’s only slightly more expensive than in Northwest Washington.
But on the other hand, the regime is doing something for which they will have my undying gratitude—that is, they have been manufacturing the one and only post-Islamic society. They created a situation in which Iranians in general, worldwide, not only in Iran, are disaffiliated. They are converting Muslim Iranians into post-Muslim Iranians.
The pointer comes from Steve Sailer.
Italy fact of the day
Italy spends a full 14 percent of its aggregate output on pension benefits for retired government employees.
There is much more, most of it depressing, here. The good news is that most Italians own their homes outright and so there is this sentence:
Were more Italians to take out mortgages on their houses to buy government bonds, for example, Italy could eliminate its interest-payment problem.
Sentences to ponder
Support for redistribution, surprisingly enough, has plummeted during the recession. For years, the General Social Survey has asked individuals whether “government should reduce income differences between the rich and the poor.” Agreement with this statement dropped dramatically between 2008 and 2010, the two most recent years of data available. Other surveys have shown similar results.
…the change is not driven by wealthy white Republicans reacting against President Obama’s agenda: the drop is if anything slightly larger among minorities, and Americans who self-identify as having below average income show the same decrease in support for redistribution as wealthier Americans.
Here is more. The researchers, Ilyana Kuziemko and Michael I. Norton, attribute this to “last place aversion,” namely the desire to always have someone below you in the income pecking order:
Which group was the most opposed [to an increase in the minimum wage]? Those making just above the minimum wage, between $7.26 and $8.25.
For the pointer I thank The Browser.
The Negative Externality of Voting
Here is Jason Brennan:
How other people vote is my business. After all, they make it my business. Electoral decisions are imposed upon all through force, that is, through violence and threats of violence. When it comes to politics, we are not free to walk away from bad decisions. Voters impose externalities upon others.
We would never say to everyone, “Who cares if you know anything about surgery or medicine? The important thing is that you make your cut.” Yet for some reason, we do say, “It doesn’t matter if you know much about politics. The important thing is to vote.” In both cases, incompetent decision-making can hurt innocent people.
Commonsense morality tells us to treat the two cases differently. Commonsense morality is wrong.
…In The Ethics of Voting, I argue that…voters should vote on the basis of sound evidence. They must put in heavy work to make sure their reasons for voting as they do are morally and epistemically justified. In general, they must vote for the common good rather than for narrow self-interest. Citizens who are unwilling or unable to put in the hard work of becoming good voters should not vote at all. They should stay home on election day rather than pollute the polls with their bad votes.
Steven Pinker on violence
It is an important and thoughtful book, and I can recommend it to all readers of intelligent non-fiction, reviews are here But I’m not convinced by the main thesis.
Might we run an econometrics test on regime changes? The 17th century was much more violent than the preceding times, as was the early 19th century, albeit to a lesser extent. Perhaps the distribution is well-described by “long periods of increasing peace, punctuated by large upward leaps of violence”, as was suggested by Lewis Richardson in his 1960 book on the statistics of violent conflict? Imagine a warfare correlate to the Minsky Moment. In the meantime, there will be evidence of various “great moderations,” though each ends with a bang.
Pinker does discuss these ideas in detail in chapter five, but at the end of that section I am not sure why I should embrace his account rather than that of Richardson. I am reminded of the literature on the peso problem in finance.
Another hypothesis is to see modern violence as lower, especially in the private sphere, because the state is much more powerful. Could this book have been titled The Nationalization of Violence? But nationalization does not mean that violence goes away, especially at the most macro levels. In a variant on my point above, one way of describing the observed trend is “less frequent violent outbursts, but more deadlier outbursts when they come.” Both greater wealth (weapons are more destructive, and thus used less often, and there is a desire to preserve wealth) and the nationalization of violence point toward that pattern. That would help explain why the two World Wars, Stalin, Chairman Mao, and the Holocaust, all came not so long ago, despite a (supposed) trend toward greater peacefulness. Those are hard data points for Pinker to get around, no matter how he tries.
We now have a long period between major violent outbursts, but perhaps the next one will be a doozy.
How would this book sound if it were written in 1944? Maybe there is a regime break at 1945 or so, with nuclear weapons deserving the credit for a relative extreme of postwar peace. Pinker’s discussion of the nuclear question starts at p.268, but he underrates the power of nuclear weapons to reach the enemy leaders themselves and thus he does not convince me to dismiss the nuclear issue as central to the observed improvement, throw in Pax Americana if you like.
In one of the most original sections of the book (e.g., p.656), Pinker postulates the greater reach of reason, and the Flynn effect, working together, as moving people toward more peaceful attitudes. He postulates a kind of moral Flynn effect, whereby our increasing ability to abstract ourselves from particulars, and think scientifically, helps us increasingly identify with the point of view of others, leading to a boost in applied empathy. On p.661 there is an excellent mention of the wisdom of Garett Jones. Pinker’s thesis implies the novel conclusion that those skilled on the Ravens test have an especially easy time thinking about ethics in the properly cosmopolitan terms; I toy with such an idea in my own Create Your Own Economy.
What is the alternative hypothesis to this moral Flynn Effect? Given that the private returns to supporting violence are rare — most of the time — and violence has been nationalized, people will have incentives to invest in greater empathy and to build their self-images around such empathy. This empathy will be real rather than feigned, but it also will be fragile rather than based in a real shift in cognitive and emotive faculties; see 1990s Mostar and Sarajevo or for that matter Nagasaki or British or Belgian colonialism.
When doing the statistics, one key issue is how to measure violence. Pinker often favors “per capita” measures, but I am not so sure. I might prefer a weighted average of per capita and “absolute quantity of violence” measures. Killing six million Jews in the Holocaust is not, in my view, “half as violent” if global population is twice as high. Once you toss in the absolute measures with the per capita measures, the long-term trends are not nearly as favorable as Pinker suggests.
Here is John Gray’s (excessively hostile) review of Pinker. In my view this is very much a book worth reading and thinking about. And I very much hope Pinker is right. He has done everything possible to set my doubts to rest, but he has not (yet?) succeeded. I find it easiest to think that the changes of the last sixty years are real when I ponder nuclear weapons.
John Ralston Saul on the decline of political speech
Via www.bookforum.com, from an interesting interview:
GB Who are the best speakers in the world today, politically?
JRS Long silence. The reason for which there is a ‘long silence’ is that, with the gradual bureaucratization of politics, we have ended up with – through the 1970s, 1980s and 1990s – politicians increasingly reading speeches written for them by somebody else; that is, politicians being made to feel that they were not the real political leaders, but rather – in a sense – heads of a large bureaucracy. The result has been that politicians may think that they have a responsibility to speak in a solid and measured way – with the consequence that they not only became boring and bad speakers, but sound artificial and are not listened to. Modern speech writers started adding in ‘rhetoric,’ which sounded artificial, and led to people listening even less to political speeches. This also came with a rise in populism; that is, we saw the revival of populist speaking – with populist politicians winning power here and there – meaning that the speech writers started putting populist rhetoric in as a gloss on top of the boring managerial material that they had been producing. So what we now have are sensible, elected leaders giving speeches that, at one level, are boring, solid stuff and, at another level, cheap rhetoric.
…Many political leaders think that it is dangerous to speak well. In fact, they are looking to bore people – and we feel that. As a result, when we stand up and say real things, people are quite shocked. And that is because they are always working on this level of measurement. If we take someone like a Trudeau or an FDR, or an LBJ, or a de Gaulle – someone like that – they knew that speeches are not about who will like them and dislike them. Speeches are actually about whether people will respect you because you have spoken to them in a way that they take to be honest – as if they are treated in a way that is intelligent. Trudeau was often boring, but his secret was that, even when he was being insulting, he was talking to you as if you were as smart as he was.
A model of political corruption
Lessig takes on the model of lobbying as “legislative subsidy” developed by political scientist Richard Hall and economist Alan Deardorff as an alternative to the naive lobbying-as-bribe model. Legislators come to Washington passionate about several issues. Quickly, though, they come to depend on the economy of influence for help in advancing an agenda. They need the policy expertise, connections, public-relations machine, and all the rest that lobbyists can offer. Since this legislative subsidy is not uniformly available, the people’s representatives find themselves devoting more of their time to those aspects of their agenda that moneyed interests also support. No one is bribed, but the political process is corrupted.
That is from Matt Yglesias.
A simple theory of regulations, new and old
Q = min (#laws, #regulators)
The number of laws grows rapidly, yet the number of regulators grows relatively slowly. There are always more laws than there are regulators to enforce them, and thus the number of regulators is the binding constraint.
The regulators face pressure to enforce the most recently issued directives, if only to avoid being fired or to limit bad publicity. On any given day, it is what they are told to do. Issuing new regulations therefore displaces the enforcement of old ones.
If the best or most fundamental regulations are the ones issued first, over time the average quality of regulation will decline.
Critics from both sides will claim, at the same time, that “regulation is too high,” and “regulation is too low.” They will both be describing aspects of the same proverbial elephant.
The ability of a new regulation to pass a (partial equilibrium) cost-benefit test does not mean said regulation is a good idea, at least not without adjusting for the “crowding out” effect.
Hiring more regulators will address the dilemma only temporarily (assuming that the number of regulators cannot keep up with the number of laws). At first more regulations will be enforced, but as time passes the quality gap between the enforced regulations and the most important regulations will again open up.
If you think you just passed some really, especially important regulations, slow down the pace of future regulations.
If you are pro-deregulation, slowing down the pace of forthcoming regulations won’t much help your cause. It will shift back attention and labor to slightly more important regulations, however. It is possible that the net regulatory impact goes up.
Sunset provisions may induce regulators to treat, enforce, and monitor the old regulations more like the new ones, and vice versa. What other institutions might contribute toward this end?
Complaints Choir of Singapore
They sing complaints about their city-state, here is one excerpt:
Stray cats get into noisy affairs
At night my neighbor makes weird animal sounds
People put on fake accents to sound posh
And queue up 3 hours for donuts
Will I ever live till eighty five to collect my CPF?
It sounds like a terrible place:
Old National Library was replaced by an ugly tunnel
Singaporean men can’t take independent women
People blow their nose into the swimming pool
And fall asleep on my shoulder in the train
Full lyrics and explanation are here. Yet it is now legally banned for foreigners to sing the complaints. Here is a video of the Choir, definitely recommended, best video I’ve seen this year and do watch it through to the end.
For the pointer I thank Chug Roberts.