Category: Political Science

The forthcoming Chinese charter city?

From Bloomberg BusinessWeek:

The government intends to ring-fence Port City from Sri Lanka’s legal system to facilitate currency movement and create favorable tax and investment incentives. Harsha de Silva, a state minister who once campaigned against the project but is now one of its most vocal supporters, is involved in drafting the separate legal structure. “This must be a top-10 city for doing business in the world,” he says. “Otherwise, what’s the point?” Sri Lanka is currently ranked 111 out of 190 nations on the World Bank’s ease-of-doing-business index.

And here is the take on one of the nearby port projects:

Today, Hambantota handles about one ship a day, not enough to make it commercially viable, and wild elephants regularly breach the perimeter fencing. At a nearby airport, which CCCC also helped build during Rajapaksa’s administration, the only commercial flight was canceled in June because of frequent peacock strikes and low demand.

Is it fair to call all this a “hegemon charter city“?

The three kinds of charter cities

First, there is the minimal charter city.  During a cruise ship vacation, everyone lives under cruise ship law.  This works fine, and is easy to start up, but it also has limited applicability.  No one has to make a big cultural shift, as long as they don’t get too drunk while playing shuffleboard out on the deck.

Second, there is hegemon-backed charter city.  The British empire ran Hong Kong, and the mainland United States (partially) has run Puerto Rico and earlier managed the Panama Canal Zone.  By definition, a hegemon is required to enforce the law in the external jurisdiction, and of course such hegemons may be scarce, unwilling, or their rule may be oppressive or counterproductive.  Portuguese rule over Goa was not a major success, nor was British rule over India more generally.  European extraterritoriality in China proper was an imperialist disaster.  One problem is that exporting legal systems without exporting their cultural preconditions can lead to failure.

Third, some charter cities are based on the idea of a complementary exported culture.  Singapore did in fact absorb many parts of British culture and law, and some parts of Western mores; it now feels like the most Western part of Asia.  The partial export of Western law and culture has been extremely successful, and the role of culture here means there is strong indigenous support, within Singapore, for Singapore being the Singapore we all know and love.  These are the charter cities that work best, but they are also the hardest to pull off.

You can think of the original charter city idea as postulating law as a non-rival public good.  Why not just spread the best laws to more jurisdictions?  But does spreading the law without the underlying culture suffice?  You can think of the three kinds of charter cities, as mentioned above, as varying responses to this problem.

And spreading culture does not seem to be a public good at all, rather it involves a lot of hard work and it often fails or backfires.

This blog post is drawn from a talk I gave in San Francisco at an inaugural conference for Mark Lutter’s new Center for Innovative Governance.

Has private philanthropy become underrated?

My latest Bloomberg column focuses on Jeff Bezos in particular, and his recently announced $2 billion gift to preschool education and to help the homeless.  Here is one excerpt:

…the gift is unlikely to take the form of Jeff Bezos dictating terms, even if he is the world’s richest man. Bezos and his team will have to work through many institutions — not just preschools and homeless shelters but other organizations that help them do their work. Even brand new preschools and homeless shelters, funded entirely by Bezos, will have their own charters, missions, staffs and fiduciary responsibilities.

Any wealthy person who wants to give away money will find that incentives and the nature of decentralization and bureaucracy impose their own set of checks and balances. Real philanthropic influence goes to those who can persuade others to work with them and share their vision.

Rob Reich, a professor of political science at Stanford, argues in his forthcoming book that the philanthropy of the wealthy is not very democratic. But philanthropy operates a lot more like democracy than it might — and in fact, it may be too democratic. Voters, like philanthropists, can wish for a particular set of outcomes, but what they get will be filtered through broadly similar constraints of bureaucracy and decentralized incentives.

And this:

How about replacing philanthropy with higher taxes and more spending from the government, which is at least democratically controlled? Well, obviously there is room for both democracy and philanthropy in American society. But the elderly vote the most, and democratic expenditures — Social Security, Medicare, pensions and the like — are skewed toward the elderly. Philanthropy, including the Bezos initiative with its stated focus on homeless families, is usually more oriented toward the young or future generations.

The points I make about taxation of capital income should already be familiar to attentive MR readers.

Revolving Door Patent Examiners

The revolving door between government and private industry creates opportunities for regulatory capture. Dick Cheney’s moves between Secretary of Defense, CEO of Halliburton and Vice-President certainly raised eyebrows. Secretaries of the Treasury, Robert Rubin, Hank Paulson and Steve Mnuchin were all former bankers at Goldman Sachs. Former members of Congress who become lobbyists are common as are bureaucrats and congressional staffers who turn to lobbying on behalf of the industries they previously regulated. At the same time, it seems desirable that government should be able to draw from top notch people in the private sector and it’s not surprising that private sector firms would want to hire people with government experience. It’s unfortunate (in my view) that government is so entwined with the private sector but that is inevitable in a mixed economy. Nevertheless, it would be useful if we had more data and less anecdote when it comes to the revolving door.

In a new and impressive paper (summary here), Haris Tabakovic and Thomas Wollmann take a detailed look at this issue using patent examiners. Using data on over 1 million patent decisions they find that examiners grant significant more patents to firms that later hire them.

It’s possible that examiners want to work for firms that have high quality patents but several considerations suggest that this is not the explanation for the correlation between grant probability and firm hiring. First, the firms doing the hiring are law firms that handle patent applications. We are not talking about USPTO examiners all wanting to work for Google.

Second, in a very clever analysis the authors show that USPTO examiners who leave for the private sector tend to go to a city near their college alma mater. Moreover, examiners who leave are more likely to approve patents to firms located their alma mater (even when these firms subsequently do not hire them). In other words, it looks as if (on the margin) patent examiners are more generous to firms that they might want to subsequently work for because they are located in places desirable to them. Patent examiners who do not leave do not show a similar bias which removes a home-city boosterism effect. All of these effects are after taking into account examiner fixed effects–so it’s not that examiners who leave are different on average it’s that examiners who leave act differently when firms are located in regions that are potentially desirable to those examiners.

Finally, the authors show that patent quality, as measured by future citations, is lower for patents granted to firms that later hire the examiner or to firms in the same city who are granted patents by the examiner (i.e. to firm-patents the examiner might have given a pass to in order to curry favor). The authors also find some evidence in the patents themselves. Namely, patents that are grant to subsequent employers tend to have claims that are shorter (i.e. stronger) because fewer words were added during the claims process.

The policy implications are less clear. Waiting periods are crude–in other contexts we call these non-compete clauses and most people don’t like them. Note also that these relationships appear to be driven by norms rather than explicit bargaining. USPTO examiners are paid substantially less than their private sector substitutes and that nearly always seems like a bad idea. Paying examiners more would reduce the incentive to rotate.

Will having China as a geopolitical enemy help revitalize the United States?

“Probably not” is the conclusion of my latest Bloomberg column.  Here is one excerpt:

The Soviets had a string of leaders who were well-suited to play movie villains. Stalin murdered millions and radiated evil. Khrushchev was more moderate in terms of domestic policy, but in New York he banged his shoe on the table and shouted “We will bury you!” He also moved Soviet nuclear weapons into Cuba. Brezhnev came across as a crusty, malevolent stiff.

Chinese president Xi Jinping, in contrast, looks and acts not much different than many other world leaders. The standing joke in China, though often banned on Chinese social media, is to compare him to Winnie the Pooh because of his posture, his walk and what sometimes appears to be a kind of ambling geniality. As for earlier Chinese leaders, post-Mao, most didn’t have much of a profile in the U.S. at all.

Do read the whole thing.  International rivalries can indeed help make countries great, but so far the American rivalry with China is not having that effect, and probably will not anytime soon.

Note furthermore that China’s “low publicity” approach implies the biggest China hawks and warners should be those who know the country relatively well (as opposed to the usual equilibrium where the expats are more sympathetic), a regularity which I believe is born out by the facts (thanks to D. for this point).

My Conversation with Michele Gelfand

Here is the audio and transcript, and here is the summary:

Michele Gelfand is professor of psychology at the University of Maryland and author of the just-released Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire Our World. In her conversation with Tyler, Michele unpacks the concept of tight and loose cultures and more, including which variable best explains tightness, the problem with norms, whether Silicon Valley has an honor culture, the importance of theory and history in guiding research, what Donald Trump gets wrong about negotiation, why MBAs underrate management, the need to develop cultural IQ, and why mentorship should last a lifetime.

Here is one excerpt:

COWEN: As you know, it’s a common distinction in cross-cultural analysis to call some cultures individualistic and others collectivistic. How does tightness and looseness differ from that distinction? What do you pick up that, say, the work of Triandis does not?

GELFAND: Actually, Triandis is my mentor. I went to Champaign to work with him. I did a lot of research on collectivism and individualism. For a long time, that was the one dimension that we looked at in cross-cultural psychology.

It’s almost akin to, in personality psychology, only studying extroversion to the neglect of other dimensions, like neuroticism. In cross-cultural psychology, we got a little bit narrow in what we were studying. Collectivism-individualism is related to tightness but distinct.

Part of the problem we’ve had is, we’ve confounded cultures in our research. We’ve been studying East Asia, which is both tight and collectivistic, with the United States and other Western cultures, which tend to be loose and individualistic. So they have been confounded.

But when you think about the off-diagonals of that two-by-two, you can imagine cultures like Germany, Switzerland, Austria that tend to be pretty individualistic. They emphasize privacy. They’re not hugely group and family oriented, but they’re relatively tight. They have strong rules and punishments for deviance.

On the flip side, you can think about Latin American cultures — in our data, that’s Brazil or Spain — that tend to be pretty family oriented and pretty collectivistic, but they’re rather loose.

In a lot of ways, you can disentangle that variation, even if they’re related. They tend to be related about 0.4. That’s found both in modern nations and also traditional societies. At the state level, they also tend to be related but again distinct. Only in that case, it’s about 0.2 or 0.3, the correlation between tightness and collectivism.

And:

COWEN: Overrated or underrated, Staten Island?

GELFAND: [laughs] I would say probably underrated. That’s because I actually am familiar with Staten Island. We have relatives that live there. It’s probably the last undiscovered place around the city. Brooklyn has become a chichi place to live, but Staten Island has not. There’s great delis there. I’ve spent some time there.

And:

COWEN: Putting aside your political views, but just if you observe Donald Trump as a negotiator — as a psychologist, what strikes you?

GELFAND: Donald Trump has a very classic negotiation style. It’s a distributive negotiation style. It’s a win-lose style. It works in certain contexts, especially contexts where there’s one issue or when there’s very little expected future interaction.

What Donald Trump does is, he takes that style to international [laughs] politics where these contexts, the structure of these situations is very different. There’s usually many issues at the table. There’s expected future interaction…His style is really mismatched with the context that he’s in.

Many of the best parts are at or near the end, so do read or listen all the way through.  And you can buy Michele’s book here.

American competitive democracy survives

Most elections in the United States are not close, which has raised concerns among social scientists and reform advocates about the vibrancy of American democracy. In this paper, we demonstrate that while individual elections are often uncompetitive, hierarchicaltemporal, and geographic variation in the locus of competition results in most of the country regularly experiencing close elections. In the four-cycle period between 2006 and 2012, 89% of Americans were in a highly competitive jurisdiction for at least one office. Since 1914, about half the states have never gone more than four election cycles without a close statewide contest. More Americans witness competition than citizens of Canada or the UK, other nations with SMSP-based systems. The dispersed competition we find also results in nearly all Americans being represented by both political parties for different offices.

That is from Bernard L. Fraga, and Eitan D. Hersh, via the excellent Kevin Lewis.

Does the “extractive institutions” hypothesis fail the empirical test?

The title of this paper is “Colonial Revenue Extraction and Modern Day Government Quality in the British Empire,” and it is by Rasmus Broms.  Here goes:

The relationship between the extent of government revenue a government collects, primarily in the form of taxation, and its overall quality has increasingly been identified as a key factor for successful state building, good institutions, and—by extension—general development. Initially deriving from historical research on Western Europe, this process is expected to unfold slowly over time. This study tests the claim that more extensive revenue collection has long-lasting and positive consequences for government quality in a developmental setting. Using fiscal records from British colonies, results from cross-colony/country regression analyses reveal that higher colonial income-adjusted revenue levels during the early twentieth century can be linked to higher government quality today. This relationship is substantial and robust to several specifications of both colonial revenue and modern day government quality, and remains significant under control for a range of rivaling explanations. The results support the notion that the current institutional success of former colonies can be traced back to the extent of historical revenue extraction.

For the pointer I thank an MR reader.

The sixth and final volume of Knausgaard’s *My Struggle*

Remember when Ortega y Gasset wrote: “Within the novel almost anything fits…”?  Well, Karl Ove Knausgaard has proven him right in this improbably wonderful conclusion to his ongoing semi-fictionalized autobiographical series My Struggle, the first two volumes of which stand as literary masterworks.  It’s not every day that a 1153 pp. rant, outside the author’s main fields of expertise, turns out to be so compelling.  But wait…I guess those are his main fields of expertise.

Maybe a third of this book is an intellectual biography of Hitler and an analysis of how the proper readings of Mein Kampf change over the years and decades.  “Mein Kampf received terrible reviews,” writes K., and then we learn why they matter.  I found that segment to be a masterful take on liberalism and its potential for decline, as Knausgaard tries harder than most to make us understand how Hitler got anywhere at all.  Underneath it all is a Vico-esque message of all eras converging, and the past not being so far away from the present as it might seem.

Another third of the book covers various writers, including Dostoyevsky, Handke, Celan, Joyce, Hamsun, and Olav Duun, and why they matter to Knausgaard, and is interesting throughout.  There are detailed brilliant takes on Herman Broch’s The Death of Virgil and Rene Girard on Hamlet and then desultory remarks on William Petty’s Political Arithmetick.  For those sufficiently familiar with the underlying sources, it absolutely comes off.

The other third of the book, most prominent at the beginning, is a mostly failed and meandering fictional narrative of the author’s own life, unsatisfying if read “straight up” but in context a reminder that all thought processes degenerate, and an account of how and why they do so, and in that regard an ideal introduction to the rest of the work and a meta-move which ties together all six volumes of the series, including the often-unsatisfying volumes 3-5.  But it will try your patience.

As for what went wrong with liberalism, here is one relevant bit:

Charisma is one of the two great transcendental forces in the social world: beauty is the other.  They are forces seldom talked about, since both issue from the individual, neither may be learned or acquired, and in a democracy, where everyone is meant to be considered equal and where all relationships are meant to be just, such properties cannot be accorded value, though all of us are aware of them and of how much they mean…beauty eclipses everything, bedims all else, it is what we see first and what we consciously or unconsciously seek.  Yet this phenomenon is shrouded in silence…driving it out instead by our social mechanisms of expulsion, calling it stupid, immature, or unsophisticated, perhaps even primitive, at the same time as we allow it to flourish in the commercial domain, where it quietly surrounds us whichever way we turn…

I do “get” why the reviews have been so mixed, but I think someone has to have the stones to stand up and call this a masterpiece and that someone is me.  With it, Karl Ove Knausgaard has cemented his claim to have produced something truly creative and new, and now instructive as well.

You can pre-order it here, or if you were in a rush as I was, order from the UK.

The rise of the Swedish Democrats

There is a new research paper on this topic, from Ernesto Dal Bo, Frederico Finan, Olle Folke, Torsten Persson, and Johanna Rickne:

We study the rise of the Sweden Democrats, a radical-right party that rose from negligible size in 2002 to Sweden’s third largest party in 2014…We take a starting point in two key economic events: (i) a series of policy reforms in 2006-2011 that significantly widened the disposable-income gap between “insiders” and “outsiders” in the labor market, and (ii) the financial-crisis recession that doubled the job-loss risk for “vulnerable” vs “secure” insiders. On the supply side, the Sweden Democrats over-represent both losing groups relative to the population, whereas all other parties under-represent them, results which also hold when we disaggregate across time, subgroups, and municipalities. On the demand side, the local increase in the insider-outsider income gap, as well as the share of vulnerable insiders, are systematically associated with larger electoral gains for the Sweden Democrats. These findings can be given a citizen-candidate interpretation: economic losers (as we demonstrate) decrease their trust in established parties and institutions.

Is it being an economic loser that makes you support the Sweden Democrats, or simply observing a lot of economic losers around you, the latter having been the case for Donald Trump’s support?  This Twitter thread gives some key pictures from the paper and summary of results.

Can you describe a person’s politics in terms of hopes?

That is the topic of my recent Bloomberg column.  Excerpt:

I am reminded of these points by the recent death of the economist James Mirrlees, a Nobel laureate. His most famous contribution to the field was a model suggesting that the marginal rate of tax on the most skilled workers should be zero.

To illustrate the rationale for this view, imagine that Jerry Seinfeld is no longer doing comedy. His non-existent output, correspondingly, results in no government revenue. What if the government taxed his additional comedy work at a rate of zero? Theoretically, such a policy would encourage Seinfeld to produce more comedy shows without harming government revenue. Both Seinfeld and his audience would benefit.

Mirrlees did not think this was a practical guide to policy, if only because the tax authorities will never be able to tell at exactly what level a zero marginal tax rate will have the desired effect of inducing talented people to continue working. Instead, the model is a guide to thinking about the relevant trade-offs behind tax policy — namely, that foregone output from the talented is a major consideration.

Now, do I wish the world was arranged in such a way that zero tax rates could be handed out, at the proper margins, to these highly talented individuals? Absolutely. I don’t think you would find the same aspirational enthusiasm from the progressive left on this issue.

Do read the whole thing.

Death, Trauma and God: The Effect of Military Deployments on Religiosity

Learning to cope with man’s mortality is central to the teachings of the world’s major religions. However, very little is known about the impact of life-and-death trauma on religiosity. This study exploits a natural experiment in military deployments to estimate the causal effect of traumatic shocks on religiosity. We find that combat assignment is associated with a substantial increase in the probability that a serviceman subsequently attends religious services regularly and engages in private prayer. Combat-induced increases in religiosity are largest for enlisted servicemen, those under age 25, and servicemen wounded in combat. The physical and psychological burdens of war, as well as the presence of military chaplains in combat zones, emerge as possible mechanisms.

That is from Resul Cesur, Travis Freidman, and Joseph J. Sabia.

That was then, this is now, Hubert Humphrey edition

Is this only slightly corrupt, or very corrupt?  It is not obvious to me:

The financial assistance wealthy friends provided, in an era when ties between politicians and businessmen were not scrutinized, was indicative of Humphrey’s longer-term dependence on such people. His three sons…attended Shattuck Military Academy…courtesy of scholarships provided to the school by Minneapolis-born William Benton, who had made a fortune in advertising before becoming Humphrey’s Senate colleague from Connecticut during 1950-52…Eventually, Ewald [a wealthy Minnesotan dairyman] also helped.

Later, when Humphrey became vice president, he would turn over his modest stock holdings to Dwayne Andreas, the multimillionaire agribusinessman who transformed the Archer-Daniels-Midland Company into a multinational powerhouse, to be put into a blind trust.  Andreas commingled Humphrey’s funds with his own in his mutual income fund that invested heavily in ADM stock.  Andreas never mentioned this arrangement to Humphrey, who never inquired.  By the time of his death in 1978, Humphrey’s share of the mutual income fund was about half a million dollars…

That is all from Arnold A. Offner’s Hubert Humphrey: The Conscience of a Country.

Why did Prohibition end?

While most accounts trace prohibition’s demise to widespread noncompliance and the graft it generated, we argue that elite congressional support for prohibition gave way when civil service reforms removed federal prohibition agents as patronage resources. We also argue that by giving states control of designing state conventions, and thereby risking state malapportionment of conventions, Democrats succeeded in overcoming the traditional fissures that divided their southern and northern wings.

That is from a new paper by Aaron J. Ley and Cornell W. Clayton.  Maybe I got this from somewhere on Twitter?

My Conversation with Claire Lehmann of Quillette

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

She and Tyler explore her ideas about the stifling effect of political correctness and more, including why its dominant form may come from the political right, how higher education got screwed up, strands of thought favored by the Internet and Youtube, overrated and underrated Australian cities, Aussie blokes, and more.

Here is an excerpt:

COWEN: When did political correctness become a major issue, or become a major issue again? And why do you think it happened exactly then?

LEHMANN: That’s a good question, and I don’t know if I have the answer. I know that there were lots of debates around political correctness in the early ’90s, for example.

COWEN: Yes, and it seems to fade away and then come back.

LEHMANN: Yeah. That’s when Camille Paglia was talking about PC, and Robert Hughes had a book, The Culture of Complaint.

I’ve noticed in my own life that I started noticing political correctness around 2007. At the time, I thought it had something to do with the business model of Internet publishing.

That was when Gawker and the blog Jezebel was really popular. It was established in 2007, and then it got very popular over the next couple of years. I thought that there were a lot of clickbait kind of articles promoting these really simplistic black-and-white narratives of oppression.

Unless one had reasonable critical thinking skills, I could see how young people could be influenced by that kind of content coming out. I think there’s something to do with the Internet and the way the media has had to adapt to this new business model where you have to drive . . . You have to get lots of views, lots of hits, millions more than you would with the newspapers.

I think it’s something to do with that, but that’s probably just one variable in many other factors.

COWEN: What do you think of the hypothesis that political correctness is a kind of virus that’s hijacked the left? It’s figured out some kind of weak entry point, and it’s come in and taken over parts of it, and it will bring down many victims with it, but actually, it’s crippling the left.

LEHMANN: Yep, yeah.

COWEN: True or false?

LEHMANN: Probably true.

COWEN: If one objects to that argument, we should in a sense encourage more of it, at least if we’re being pure utilitarians, or not?

And:

COWEN: Probably in the media? In general, intellectual life, but if you take, say, the United States as a whole, do you think it’s left-wing or right-wing political correctness that’s stronger and more destructive?

LEHMANN: Yeah, it’s probably right-wing political correctness.

A question from me:

COWEN: I’ve been speaking about the right in aggregate terms, but if you think of the effect of the Internet, which strands of the right do you think are favored, and which do you think are falling away because of Internet discourse? Because it shouldn’t favor it all equally, correct?

We also cover Australia vs. New Zealand, the masculine ethos of Australia and its origins, why PC is different in Australia, the movie Lantana (which we both strongly recommend), and yes Australian fashion.