Category: Political Science
Fragments of truth
This time, not even an entire sentence is required:
…the Republican position appears to be: “How do we preserve current tax rates and most current spending while getting Democrats to accept deep cuts to the small fraction of the budget called non-defense discretionary spending?”
(Could you improve that fragment by subbing in “is” for “appears to be”?) Ezra Klein’s associated prediction is that a government shutdown is on its way.
Lazy Boys Shakedown Chinese Furniture Makers
James Hagerty at the WSJ has an excellent piece showing how trade policy really works at the ground floor level:
Some U.S. furniture makers and their lawyers have found a reliable way to extract cash from Chinese competitors deemed by U.S. officials to have “dumped” their products in the U.S., selling them at unfairly low prices.
Each year since 2006, they have asked the Commerce Department to review the U.S. duties paid by Chinese manufacturers on imports of wooden bedroom furniture. Many Chinese firms, fearing a steep rise in duties, agreed within months each time to pay cash to their U.S. competitors in return for being removed from the review list.
“Everybody in the industry in the U.S. and China understands that these payments are clever shakedowns,” said William Silverman, a lawyer representing U.S. furniture retailers, big importers of Chinese products, at an October hearing of the U.S. International Trade Commission.
The Chinese firms have paid millions of dollars to Lay-Z-Boy (really, I am not making this up) other US furniture makers and to their bagmen lawyers to avoid having the ITC sicked on them. I suppose one could argue that the payments are an efficient way of redistributing the gains from trade. The question then becomes why are US firms assumed to own the rights to sell to US consumers?
Hat tip to Chuck Sicotte.
Does a government shutdown boost fiscal conservatism?
Matt Mitchell says no:
It turns out that in 23 U.S. states, the government will automatically shut down in the event that the governor and the legislature fail to agree on a budget. In his work on budget rules, David Primo examined the theoretical impact of these provisions from a game theoretic perspective. He noted that in states with an automatic shutdown provision, “the legislature will be able to achieve its ideal budget, so long as the governor prefers it to no spending.” (p. 102)
He therefore predicted that states with such a provision will spend more than states without such a rule. He then tested the hypothesis, controlling for a number of other factors known to impact state spending and found that states with an automatic shutdown provision actually spend about $64 more per capita than other states. As he notes, “This effect is remarkably large, given that shutdowns occur rarely.” (p. 103)
This suggests that the federal government’s automatic shutdown provision—by making Congress’s desired spending level a take-it-or-leave-it offer—tends to bias the government toward more spending. By extension, it also suggests that a government shutdown will shift negotiating power toward those who favor more spending. So, paradoxically, fiscally-conservative Tea Partiers stand to lose the most if the federal government shuts down.
Maybe you’re not convinced by that $64 difference. Maybe you ascribe it to unobserved variables. Still, it is hard to argue, based on the evidence, that shutdowns help the cause of fiscal conservatism.
The history of Libyan unity and partition
In 1949, Benjamin Rivlin wrote an instructive piece “Unity and Nationalism in Libya” (JSTOR), excerpt:
…the Big Four have been sharply divided on the question of Libyan unity…In supporting the Sanusi claims, Great Britain has become the chief advocate of a divided Libya…Similarly, the United States has given support to a divided Libya by abandoning its original proposal for an international trusteeship, in favor of support for the British position…Not to be forgotten is…France, also, advocated a partitioning of Libya, but a partition of its own special variety. Under the guise of “border rectifications,” France has laid claim to the Fezzan in southwestern Tripolitania and to all of Libya south of the Tropic of Cancer…The French claim is based primarily on the fact that Free French troops wrested this desert region from Italian control, and is an attempt to bolster the sagging prestige of France as a world power by a tangible reward for its role in the war.
The Soviet Union opposed a partition of Libya and favored Italian trusteeship. Back then, it seems that Europe took the lead role and the U.S. followed along. Here is one good sentence:
In examining the history of Libya one is struck with the fact that only on rare occasions has the area constituted a unified political entitity…there have never been firm bonds of union.
The difference between the two territories goes back to antiquity, when the territory was divided by rule by Greece and rule by Phoenicia. Even when Italy claimed the country in 1912, it effectively governed over two separate territories, Tripolitania and Cyrenaica. What is the fundamental principle of division?:
The division of Libya into Cyrenaica and Tripolitania down through the ages is no mere quirk of history. It reflects, rather, the basic physiographic character of the territory. A great natural barrier — the Gulf of Sirte [now Sidra] and the projection of Libyan desert along its 400-mile shore — divides Cyrenaica from Tripolitania, limiting communication between the two territories and to a very large extent shaping their economies. Trade between the two territories has played a minor role, and the movement of the nomadic tribes in both territories has been and remains north-south, not east-west.
And:
Unity vs. separatism has been the chief concern of all political leaders in Tripolitania and Cyrenaica ever since the relaxation of military administration controls during the past three years…
Here is a summary of the Sanusi. Here is a useful map. Having read this article, I have revised upwards my priors on the likelihood of partition as the result of the current conflict, whether or not Gaddafi falls.
U.S. press coverage of foreign crises
Here is a well-known but now somewhat dated (1991) paper by Zaller and Chiu. It suggests two regularities:
1. U.S. press coverage tends to take its positions from the range of views which exist within government (“indexing”).
2. When a foreign conflict goes well, the U.S. press becomes more hawkish; when the conflict goes less well, the press becomes more dovish. The press swing in opinion is stronger than the swing of opinion from official sources.
Here is an empirical paper, applying this framework to the Libya crisis of 1985-1986. Here is a general look at the indexing hypothesis, again dated and pre-blogosphere. Here is a 2008 paper, showing greater influence for media, relative to the distribution of opinion within government.
A tale of Washington and Iowa and Libya
Sunstein got in such an involved conversation with a voter that he left [Austan] Goolsbee and [Samantha] Power outside, shivering in the snow. The three joked that, between their three sprawling areas of expertise, they had almost any potential question about Obama covered. They failed at the first door, when a voter wanted to know the location of the nearest caucus.
Sunstein and Power, who is 39, soon went on a date, and she asked him if he ever fantasized about doing anything else. “I expected him to say he dreamed of playing for the Red Sox,” she told me. “His eyes got real big and he said: ‘Ooh! OIRA!’ ”
“And I said, ‘What the hell is that?’ ”
The article is here (beware Canadians, not worth the click!). Here is a recent article on Samantha Power as the architect of Obama’s Libya policy. Here is an article on why last chapters disappoint.
*Why Marx was Right*
That’s the new Terry Eagleton book, which apparently needs no subtitle. Most of the claims in the book are correct, and they debunk superficial or incorrect readings of Marx. In that regard it is useful and it is also clearly written. Still, I have to judge it as a bad book, for instance:
But the so-called socialist system had its achievements, too. China and the Soviet Union dragged their citizens out of economic backwardness into the modern industrial world, at however horrific a human cost; and the cost was so steep partly because of the hostility of the capitalist West.
Or:
Building up an economy from very low levels is a backbreaking, dispiriting task. It is unlikely that men and women will freely submit to the hardships it involves.
Or:
…there is a paradoxical sense in which Stalinism, rather than discrediting Marx’s work, bears witness to its validity.
Try this one:
Revolution is generally thought to be the opposite of democracy, as the work of sinister underground minorities out to subvert the will of the majority. In fact, as a process by which men and women assume power over their own existence through popular councils and assemblies, it is a great deal more democratic than anything on offer at the moment. The Bolsheviks had an impressive record of open controversy within their ranks, and the idea that they should rule the country as the only political party was no part of their original programme.
Ahem. Terry Eagleton…telephone!
Is Japanese leadership broken?
Never has postwar Japan needed strong, assertive leadership more — and never has its weak, rudderless system of governing been so clearly exposed or mattered so much…
Japan’s leaders need to draw on skills they are woefully untrained for: improvisation; clear, timely and reassuring public communication; and cooperation with multiple powerful bureaucracies.
Postwar Japan flourished under a system in which political leaders left much of its foreign policy to the United States and its handling of domestic affairs to powerful bureaucrats. Prominent companies operated with an extensive reach into personal lives; their executives were admired for their role as corporate citizens.
But over the past decade or so, the bureaucrats’ authority has been eviscerated, and corporations have lost both power and swagger as the economy has foundered. Yet no strong political class has emerged to take their place. Four prime ministers have come and gone in less than four years; most political analysts had already written off the fifth, Naoto Kan, even before the earthquake, tsunami and nuclear disaster.
I wouldn’t quite put it that way, but the points are well-taken and the article is interesting throughout.
Where does Japan put its nuclear reactors?
Chris Blattman reports on the work of Daniel Aldrich, quoting Aldrich:
Using a new dataset from Japan, this paper demonstrates that state agencies choose localities judged weakest in local civil society as host communities for controversial projects. In some cases, powerful politicians deliberately seek to have facilities such as nuclear power plants, dams, and airports placed in their home constituency. This paper then explores new territory: how demographic, political, and civil society factors impact the outcomes of siting attempts. It finds that the strength of local civil society impacts the probability that a proposed project will come to fruition; the greater the concentration of local civil society, the less likely state-planned projects will be completed.
The polity that is America
Now, with the collapse of the Florida [Orlando to Tampa] route, it looks as if the nation’s first segment of true high-speed rail will be in an even unlikelier place — linking Fresno and Bakersfield, in California’s Central Valley, and scheduled to end construction in 2017.
Here is more.
Starve the beast means feed the machine
Joseph Daniel Ura and Erica Socker report (pdf):
The notion of starving the beast has been an important justification for major elements of the fiscal program advocated by many Republicans and conservatives over the last three decades. While the idea of restraining government spending by limiting government revenues has an intuitive appeal, there is convincing evidence the reducing federal tax rates without coordinated reductions in federal spending actually produces long-term growth in spending. This seemingly perverse result is explained by Buchanan’s theory of “fiscal illusion.” By deferring the costs of government services and benefits through deficit financing, starve the beast policies have the effect of lowering the perceived price of government in the minds of many citizens. We assess the principal behavioral prediction of the fiscal illusion strategy. Incorporating estimates of the effects of federal deficits into a standard substantive model of Stimson’s mood index, we find strong support for a subjective price-driven theory of demand for government. In particular, we find that the size of the federal budget deficit is significantly associated greater demand for government services and benefits.
From the comments: what does the fiscal endgame look like?
Slocum writes:
Nonetheless it is naive to think spending cuts can do the job alone, and insisting on no tax hikes drives us faster along the path of fiscal ruin.
This is a political, not economic judgement on Tyler's part — that a majority won't accept the necessary cuts. But I think it's much less politically feasible to imagine enacting VAT (which, in the past, has been Tyler's preferred approach). That's an idea that practically demagogues itself (A EUROPEAN-style Tax! A regressive, HIDDEN tax on EVERYTHING you buy! A tax that will hit the savings of RETIREES the hardest –people who 'worked hard and played by the rules' who were taxed when they earned and saved the money and are now going to be hit by a REGRESSIVE, EUROPEAN, HIDDEN TAX on EVERYTHING when they try to spend the money).
Republicans are so married to 'no new taxes' and Democrats to 'higher taxes only for the rich', that a VAT (or any other new broad-based tax) seems out of the question. So I can much more easily imagine spending cuts eventually getting bipartisan approval with only nominal tax increases included in the bargain.
A few points:
1. A VAT has never been my preferred outcome, rather I warn that it may be necessary if we do not act soon.
2. Balancing the budget within five to ten years with spending cuts alone would be difficult but by no means impossible. I am all for doing that, but a) it won't happen as stated, and b) it still won't balance the budget over a ten to twenty year time frame.
3. The path toward long-run fiscal balance involves recalibrating Medicare, Medicaid, and Social Security to lower rates of indexation, reimbursement, benefit increase, and so on. We need to start that process now. It cannot be done overnight or even over a few years' time. It takes a long time for those gains to come in, cumulatively. No one is going to vote for a "thirty percent cut to Medicare, today," although they might vote for changes in rates, which over time would amount to large reductions.
4. The time for a Grand Fiscal Bargain is now. If we don't do it fairly soon, we won't get spending under control at all. Furthermore the number and percentage of elderly voters will only increase, which will make spending cuts more difficult as time passes.
5. Let's say a proposal for long-run balance were presented, with $3 in spending cuts for every $1 in tax hikes. That is still a good deal for the anti-tax, anti-spending conservative. Rejecting such a deal means we will end up with something closer to $3 in tax hikes for every $1 in spending cuts. (And no, I don't know what is the "break even" point for a good bargain in this regard.)
6. Bill Niskanen's research shows that by taking tax hikes off the table we simply encourage governments to spend more. Spending then looks like a free lunch.
7. Making it a priority to "avoid any tax hike today" is the same kind of short-run view which brings us to fiscal catastrophe in the longer run. In the medium-run, much less the long run, this attitude will lead to higher taxes. However much it may masquerade as a low-tax attitude, it is in reality a high-tax attitude. Unintended consequences is a fundamental economic idea and it is very much operating here.
8. If I called on President Obama to push for a budget deal, and I cite CAP in support, it was not to criticize the Democrats, or Obama (as DeLong and Krugman mysteriously suggested), but rather because I see him as by far the most influential player in this process.
In short, I am asking for the true fiscal conservatives to step up to the plate, and bring about lower taxes in the long run, rather than simply "playing team on the tax issue" in the short run. Time is not on our side, and if we think it is we are fooling only ourselves.
One account of what political elections are for
From David Brooks's new blog:
What do you do after your party wins an election? In a forthcoming study for the journal Computers in Human Behavior, Patrick Markey and Charlotte Markey compared Internet searches in red and blue states after the 2006 and 2010 elections. They found that the number of searchers for pornography was much higher right after the 2010 election (a big G.O.P. year) than after 2006 (a big Democratic year). Conversely, people in blue states searched for porn at much higher rates after 2006 than after 2010. One explanation is this: After winning a vicarious status competition, people (predominantly men, I guess) tend to seek out pornography.
And David's new book is here.
Common mistakes of left-wing economists?
T., a loyal MR reader, asked for a compendium. This is my off-the-cuff list, but in the interests of fairness I'm doing one on market-oriented economists as well. What are some of the common views found on the left which I consider not just disagreements but more along the lines of a mistake?
By no means is everyone is guilty of these mistakes, nor does it have to mean that the associated conclusions are wrong. Still I see these frequently:
1. Suggesting that money matters in politics far more than the peer-reviewed evidence indicates.
2. Evaluating government spending on a program-by-program basis, rather than viewing the budget as a series of integrated accounts. Cross check with the phrase "Social Security," or for use to take many discretionary spending cuts off the table.
3. A reluctance to incorporate sophisticated "public choice" theories into the analysis of favored programs.
4. Sins of omission: there are plenty of bad policies, such as occupational licensing, which fail to come under much attack from the left. Sometimes this is because the critique would run counter to the narrative of needing more government or needing more regulation.
5. Significantly overestimating the quality of the political economy of an America with more powerful labor unions and underestimating the history of labor unions as racist, corrupt, protectionist, and obstructions to positive change.
6. Overestimating the efficacy of fiscal policy, underestimating the power of monetary policy, and sometimes ignoring or neglecting how the two interact ("the monetary authority moves last").
7. Citing weak versions of structural unemployment theories and dismissing them with a single sentence or graph, while relying on stronger versions of structural theories in other, non-cyclical contexts.
8. Lack of interest in discussing ethnicity and IQ as relevant for social policy, except in preferred contexts.
9. Overly optimistic views of the fiscal positions of state governments. Since the states don't have the same tax-raising powers that the feds do, and since state government spending is favored, there is a tendency to see these fiscal crises as not so severe, or as caused by mere obstructionists who will not raise taxes to the required levels.
10. A willingness to think that one has "done one's best" in the realm of policy, and to blame subsequent policy failures on Republican implementation, rather than admitting that a policy which cannot be implemented by both political parties is perhaps not a good policy in the first place.
11. Use of a strong moral argument for universal health care coverage, combined with a fairly practical, hard-headed approach to the scope of the mandate, and not realizing the tension between the two. Failure to indicate where the "bleeding heart" argument actually should stop and at what margins we should (and will) let non-elderly people die, if only stochastically.
12. Implicitly constructing a two-stage moral theory, which first cordons off the sphere of the nation-state (public goods provision, etc.) and then pushing cosmopolitan questions off the agenda in the interests of expanding a social welfare state. (In fairness, many individuals on the right don't give cosmopolitan considerations even this much consideration, although right-oriented economists tend to be quite cosmopolitan.)
13. What about countries? Classical liberals are increasingly facing up to the enduring successes of the Nordic nations. There is not always a similar reckoning with the successes of Chile and Hong Kong and Singapore; often this is a sin of omission. (Addendum: comment from Matt here.)
14. Reluctance to admit how hard the climate change problem will be to solve, for fear of wrecking any emerging political consensus on taking action.
In most cases you can find evidence and links by searching back through the MR archives.
Common mistakes of right-wing and market-oriented economists?
This is a companion piece to my post on left-wing economists; see the caveats in that post. Not everyone commits these, nor are the associated conclusions necessarily false, nor am I postulating any equivalence of mistakes across the two groups. I am simply serving up two lists. Here goes:
1. There is excess fear of inflation and hyperinflation in the current economic environment. Further there is often an excess estimate of the costs of inflation in the two to five percent range.
2. We know much less about the causes and drivers of economic growth than we like to admit, and when pushed on this issue we fall back to citing relatively simple cases with extreme differences, such as East vs. West Germany.
3. Lower taxes don't spur economic development as much as it is often claimed, at least not below the "fifty percent or less of gdp" range.
4. There are many climate change issues of relevance here, not mostly economics, but it seems remiss not to mention them.
5. I'm all for Health Savings Accounts, but unless done on a Singaporean scale, and with lots of forced savings, they're not a health care plan to significantly benefit most Americans. There is less of a coherent health care plan, coming from this side, than one might like to think.
6. There is already considerable health care cost control embedded in the ACA, most of all for Medicare, and this is not admitted with sufficient frequency.
7. When it comes to the historical determinants of the Industrial Revolution, the Great Divergence, and the like, the importance of state-building in that process is often neglected.
8. The story of steady and significant economic progress for most Americans is accepted too readily.
9. The role of market failure in the recent financial crisis is underestimated. It is also believed that we can somehow commit to a policy of no future bailouts. Promoting that myth will make future bailouts more likely.
10. Relying on liability law, whether or not it is a good idea, is not intrinsically more pro-market, more libertarian, or less interventionist.
There are more, but those are what to come to mind right away. If you wish, you can interpret this list as saying more about me than about the doctrines I am referring to. Again, you can very often Google back to find more detailed discussions of these individual points.