Category: Political Science
We recorded this two days ago on the spur of the moment, the discussion is still current, here is the transcript and audio, here is the CWT summary:
Tyler and Russ Roberts joined forces for a special livestreamed conversation on COVID-19, including how both are adjusting to social isolation, private versus public responses to the pandemic, the challenge of reforming scrambled organization capital, the implications for Trump’s reelection, appropriate fiscal and monetary responses, bailouts, innovation prizes, and more.
Russ is more optimistic than I am, here is one excerpt on the economic side:
COWEN: Well, two to four weeks [of shutdown], those are easy cases. If you think of many service sectors as having to shut down say until August, which is quite a possible scenario in some cases even later. That to me is greatly concerning and it may vary across sectors. So if you think about the NBA, whenever the NBA is ready to play games again, I mean the players will show up the next day and there’ll be ready, right? That will come back very quickly. But if you think of small businesses, say restaurants, the big chains aside, they’re typically thinly capitalized.
Let’s say a significant portion of those are gone forever. And then when things are somewhat normal again, how does the economy re-scramble and re-constitute the organizational capital that was in those ongoing enterprises? That to me is a hugely difficult problem and whatever you think the government should or should not do, just spending a lot on fiscal stimulus will not ease that problem. That’s the actual destruction going on is the relationships, the organizational capital, the intangibles that will decay. Not over two weeks, probably not over four weeks but over four or five months or longer. Then I think that’s a matter really of great concern…
But even in China where the number of new cases is really in most parts of the country, genuinely very low, they are not returning with live sporting events. Keep in mind we will have a pool of never infected people, which will be fairly large in absolute numbers and what risks we will be willing to take. Insurance companies would allow, our liability system and corporate lawyers would be willing to allow. When you think through all of that stickiness, I think we’re really not so close to resuming many of these shutdown activities.
There is much more at the link, we start off on the personal side and then move into the larger issues.
Saloni has long and detailed arguments against herd immunity. Here is Caplan on Hanson. Here is Kling on Hanson. Here is the Taleb critique. Here is the underlying Imperial College paper everyone is talking about. The bottom line is that “locking everyone up to bend the hospital admissions curve” might have to last for at least a year to really choke off the coronavirus.
I’m not going to recap this complex debate, which most of you already have some inkling of. Instead, I’d like to stress the issue of time consistency, noting that I’ll consider some extreme versions of policies to make exposition easier, even though no one advocates exactly those extreme versions.
Let’s say we expose lots of people to the virus rather quickly, to build up herd immunity. Furthermore, we would let commerce and gdp continue to thrive.
Even if that were the very best policy on utilitarian grounds, it might not be time consistent. Once the hospitals start looking like Lombardy, we don’t say “tough tiddlywinks, hail Jeremy Bentham!” Instead we crumble like the complacent softies you always knew we were. We institute quarantines and social distancing and shutdowns and end up with the worst of both worlds.
Alternatively, let’s say we start off being really strict with shutdowns, quarantines, and social distancing. Super-strict, everything closed. For how long can we tolerate the bankruptcies, the unemployment, and the cabin fever? At what point do the small businesspeople, one way or another, violate the orders and resume some form of commercial activity? What about “mitigation fatigue“?
Again, I fear we might switch course and, again, end up with the worst of both worlds. We would take a big hit to gdp but not really stop the spread of the virus.
I also can imagine that we keep switching back and forth. The epidemic yoyo. Because in fact we find none of the scenarios tolerable. Because they are not.
David Brooks postulates another possible form of time inconsistency:
What happens when there are a lot of people who’ve had the disease and become temporarily immune. They start socializing. Social distancing for the rest become harder if not impossible.
I greatly fear the epidemic yoyo. And figuring out how to deal with it may be at least as important as calculating the numerical returns from various consistent policies.
I thank an anonymized correspondent for the term “epidemic yoyo.”
This one was done with an associated public event, ah the good ol’ days! Here is the audio and transcript, here is the summary:
Who can you ask about the Great American Songbook, the finer Jell-O flavors, and peculiar languages like Saramaccan all while expecting the same kind of fast, thoughtful, and energetic response? Listeners of Lexicon Valley might hazard a guess: John McWhorter. A prominent academic linguist, he’s also highly regarded for his podcast and popular writings across countless books and articles where often displays a deep knowledge in topics beyond his academic training.
John joined Tyler to discuss why he thinks that colloquial Indonesian should be the world’s universal language, the barbaric circumstances that gave rise to Creole languages, the reason Mandarin won’t overtake English as the lingua franca, how the Vikings shaped modern English, the racial politics of Gershwin’s Porgy and Bess, the decline of American regional accents, why Shakespeare needs an English translation, Harold Arlen vs. Andrew Lloyd Webber, whether reparations for African-Americans is a good idea, how living in Jackson Heights shapes his worldview, what he learned from his mother and father, why good linguistics students enjoy both Russian and Chinese, and more.
COWEN: Let’s say I interview a job candidate using Skype or Zoom rather than face-to-face, how is that different linguistically? How should I adjust? What should I expect that’s different?
MCWHORTER: You mean if they’re not actually there in the room?
COWEN: Right, but I see them on the screen.
MCWHORTER: I think that’s fine.
COWEN: You think it’s just as good?
MCWHORTER: It helps bring the world together. Do I need to be in the room with the person, watching what they do with their legs, getting a vague sense of whatever their redolence happens to be?
COWEN: All of these people have showed up, right?
MCWHORTER: Yeah. To tell you the truth, all of that to me is a distraction. I would rather just hear their voice. Frankly, I despise Skype. You’re sitting there, you look bad, and it always cuts out. Yet your whole life these days is about “You wanna Skype?” And I’m thinking, “Yeah, it’s going to cut out, and we’re both going to look bad.”
But I would rather just hear the person. Maybe that’s because I’m kind of linguist-centric.
COWEN: Here’s a very basic question. Let’s say immersion is not possible. How should an adult study a foreign language?
MCWHORTER: It’s hard. Sleep with somebody, frankly.
Closing the border is his signature issue, and the Democrats have staked out a position as the “resistance” to that. I know that they think they can benefit from this crisis, but I would be surprised if they do.
My earlier Feb.3rd Bloomberg column suggested it would help Trump. I won’t repeat the core claims of my column (some summarized here), but I am still sticking with that earlier call for a few reasons:
1. Few Americans will know/understand that some foreign governments did a better job than we did, and indeed that is already the case in many other policy areas. “Foreign country did this better than us” is never an argument that works in American politics.
2. The literature on political business cycles suggests that absolute performance is not what matters, but rather whether the economy is gaining momentum. So if the coronavirus situation is improving in the months leading up to November, Trump will receive some credit for that, no matter how poor the initial response. And I think that plausibly will be the case. Even if you believe in a second winter wave, it may take longer to materialize.
3. The literature on disaster spending suggests politicians are rewarded electorally for their response to disasters, not for preparation. Enough of the American public still is oblivious to this issue that a major Trump action still could be marketed as timely and indeed pro-active.
4. For my hypothesis to be true, Trump at some point needs to make a “big push” kind of response, but I consider that highly likely, even if the push is ill-considered in its details.
In poor countries the price of electricity is low, so low that “utilities lose money on every unit of electricity that they sell.” As a result, rationing and shortages are common. Writing in the JEP, Burgess, Greenstone, Ryan and Sudarshan argue that “these shortfalls arise as a consequence of treating electricity as a right, rather than as a private good.”
How can treating electricity as a right undermine the aim of universal access to reliable electricity? We argue that there are four steps. In step 1, because electricity is seen as a right, subsidies, theft, and nonpayment are widely tolerated. Bills that do not cover costs, unpaid bills, and illegal grid connections become an accepted part of the system. In step 2, electricity utilities—also known as distribution companies—lose money with each unit of electricity sold and in total lose large sums of money. Though governments provide support, at some point, budget constraints start to bind. In step 3, distribution companies have no option but to ration supply by limiting access and restricting hours of supply. In effect, distribution companies try to sell less of their product. In step 4, power supply is no longer governed by market forces. The link between payment and supply has been severed: those evading payment receive the same quality of supply as those who pay in full. The delinking of payment and supply reinforces the view described in step 1 that electricity is a right [and leads to] a low-quality, low-payment equilibrium.
The Burgess et al. analysis coheres with my observations in India where “wire anarchy” is common (see picture). It’s obvious that electricity is being stolen but no one does anything about it because it’s considered a right and a government that did do something about it would be voted out of power.
The stolen electricity means that the utility can’t cover its costs. Government subsidies are rarely enough to satisfy the demand at a zero or low price and so the utility rations.
The consequences for electricity consumers, both rich and poor, are severe. There is only one electricity grid, and it becomes impossible to offer a higher quantity or quality of supply to those consumers who are willing and sometimes even desperate to pay for it.
Moreover,the issue is not poverty per se.
…the vast majority of customers in Bihar expect no penalty from paying a bill late, illegally hooking into the grid, wiring around a meter, or even bribing electricity officials to avoid payment. These attitudes are in stark contrast to how the same consumers view payment for private goods like cellphones. It is debatable whether cellphones are more important than electricity, but in Bihar we find that the poor spend three times more on cellphones than they do on elec-tricity (1.7 versus 0.6 percent of total expenditure).
Burgess et al. frame the issue as “treating electricity as right,” but one can can also understand this equilibrium as arising from low state capacity and corruption, in particular corruption with theft. In corruption with theft the buyer pays say a meter reader to look the other way as they tap into the line and they get a lower price for electricity net of the bribe. Corruption with theft is a strong equilibrium because buyers who do not steal have higher costs and thus are driven out of the market. In addition, corruption with theft unites the buyer and the corrupt meter reader in secrecy, since both are gaining from the transaction. As Shleifer and Vishny note:
This result suggests that the first step to reduce corruption should be to create an accounting system that prevents theft from the government.
Burgess et al. agree noting, “reforms might seek to reduce theft of electricity and nonpayment of bills” and they point to programs in India and Pakistan that allow utilities to cut off entire neighborhoods when bills aren’t paid. Needless to say, such hardball tactics require some level of trust that when the bills are paid the electricity will be provided and at higher levels of quality–this may be easier to do when there are other sources of authority such as trusted religious leaders.
In essence the problem is that the government is too beholden to electricity consumers. If the government could commit to a regime of no or few subsidies, firms would supply electricity and prices would be low and quality high. But if firms do invest in the necessary electricity infrastructure the government will break its promise and exploit the firms for temporary electoral advantage. As a result, the consumers don’t get much electricity. The government faces a time consistency problem. Independent courts would help to bind the government but those often aren’t available in developing countries. Another possibility is a conservative electricity czar who, like a conservativer central banker, doesn’t share the preferences of the government or the voters. Again that requires some independence.
In short, to ensure that everyone has access to high quality electricity the government must credibly commit that electricity is not a right.
The top 1% are the only affluent group consistently more inclined than the general population to attribute variation in drive and IQ to both internal causes, particularly to innate causes (the top 1% also differ from the other affluent, at p < .01). This said, the affluent are not more dismissive than others of environmental causal explanations. Interestingly, across all income groups, “environmental” explanations for drive and IQ are more popular than the two internal explanations.
In countries that did experience mass protests (Chile, Colombia, Ecuador and Bolivia) on the other hand, inequality was either constant or continued to decline in the last few years for which data is available.
Here is the transcript and audio, here is part of the opening summary:
Garett joined Tyler to discuss his book 10% Less Democracy, including why America shouldn’t be run by bondholders, what single reform would most effectively achieve more limited democracy, how markets shape cognitive skills, the three important P’s of the repeated prisoner’s dilemma, why French cuisine is still underrated, Buchanan vs. Tullock, Larry David vs. Seinfeld, the biggest mistake in Twitter macroeconomics, the biggest challenges facing the Mormon church, what studying to be a sommelier taught him about economics, the Garett Jones vision of America, and more.
Here is one bit:
COWEN: But let’s say it’s the early 1990s. Eastern European countries are suddenly becoming free, and they ask you, “Garett, what electoral system should we have?” What do you say?
JONES: What I really would go for is presidential systems, if you can handle it, something like a first-past-the-post system, where those people elected from local districts focused on local problems — which have less of a free-rider problem involved — go up to the parliament and actually argue their case. The presidential element is less important than the parliamentary idea of the single-district voting. I tend to think that creates more accountability on the part of the government.
COWEN: For the United States, what is the most effective way, in your view, that you would want us to have 10 percent less democracy? What’s the one thing you would change?
JONES: I would change the House of Representatives to a six-year term. I picked that because it’s not outside the range of plausibility, and because I think people would instantly understand what it accomplishes — not because it has the highest payoff, but because it balances payoff with plausibility in a democracy.
And on boosting IQ:
COWEN: But what’s the key environmental lever? Whatever Ireland did [to have induced an IQ rise], it’s not that people were starving, right? That we understand.
JONES: No, true.
COWEN: So why don’t we do more of whatever they did, whatever was done to the East Germans, everywhere?
COWEN: But what is that lever? Why don’t we know?
JONES: I would say that thing is the thing we call capitalism.
COWEN: Capitalism is a big, huge thing. Not all of capitalism makes us smarter.
JONES: Yeah, that’s the thing — figuring out which things within capitalism — what is it about living in a free society with competitive markets where, at least in our youth and middle age, we feel a need to sell ourselves as valuable creators. There’s something about that that probably is what’s most valuable for boosting cognitive skills. It’s a sort of demand-side desire to try to use our minds in socially productive ways. And I think in communism, we can —
COWEN: So marketing makes us smarter?
JONES: That’s what I would say, yeah.
There is much more at the link, an excellent Conversation. Here you can order Garett’s book 10% Less Democracy: Why You Should Trust the Elites a Little More and the Masses a Little Less. You can read the introduction to the book on-line.
The NSC [National Security Council] was established in the 1947 National Security Act, which named the members of the council: president, vice president and secretaries of state and defense. The function of the council “shall be to advise the president with respect to the integration of domestic, foreign, and military policies relating to the national security.” The law required regular meetings…
Mr. Kissinger grew the council to include one deputy, 32 policy professionals and 60 administrators. By my count, alumni of his NSC include two secretaries of state, four national security advisers, a director of national intelligence, a secretary of the Navy, and numerous high-ranking officials in the State, Defense and Treasury departments as well as the Central Intelligence Agency.
But the NSC has only continued to expand. By the end of the Obama administration, 34 policy professionals supported by 60 administrators had exploded to three deputies, more than 400 policy professionals and 1,300 administrators.
The council lost the ability to make fast decisions informed by the best intelligence.
Here is more from John Lehman (WSJ).
Using panel data from the US states, we document a robust negative relationship between state-level government corruption and ideological polarization. This finding is sustained when state polarization is instrumented using lagged state neighbor ideology. We argue that polarization increases the expected costs of engaging in corruption, especially deterring marginal low-level corruption. Consistent with this thesis federal prosecutorial effort falls and case quality increases with polarization. Tangible anti-corruption measures including the stringency of state ethics’ laws and independent commissions for redistricting are also associated with increased state polarization.
Here is the transcript and audio, here is part of the summary:
Tim joined Tyler to discuss the role of popular economics in a politicized world, the puzzling polarization behind Brexit, why good feedback is necessary (and rare), the limits of fact-checking, the “tremendously British” encouragement he received from Prince Charles, playing poker with Steve Levitt, messiness in music, the underrated aspect of formal debate, whether introverts are better at public speaking, the three things he can’t live without, and more.
Here is one bit near the opening:
COWEN: These are all easy questions. Let’s think about public speaking, which you’ve done quite a bit of. On average, do you think extroverts or introverts are better public speakers?
HARFORD: I am an introvert. I’ve never seen any research into this, so it should be something that one could test empirically. But as an introvert, I love public speaking because I like being alone, and you’re never more alone than when you’re on the stage. No one is going to bother you when you’re up there. I find it a great way to interact with people because they don’t talk back.
COWEN: What other non-obvious traits do you think predict being good at public speaking?
HARFORD: Hmmm. You need to be willing to rehearse and also willing to improvise and make stuff up as you go along. And I think it’s hard for somebody to be willing to do both. I think the people who like to rehearse end up rehearsing too much and being too stiff and not being willing to adapt to circumstances, whereas the people who are happy to improvise don’t rehearse enough, and so their comments are ill formed and ill considered. You need that capacity to do both.
And another segment:
HARFORD: …Brian Eno actually asked me a slightly different question, which I found interesting, which was, “If you were transported back in time to the year 700, what piece of technology would you take — or knowledge or whatever — what would you take with you from the present day that would lead people to think that you were useful, but would also not cause you to be burned as a witch?”
COWEN: A hat, perhaps.
HARFORD: A hat?
COWEN: If it’s the British Isles.
HARFORD: Well, a hat is useful. I suggested the Langstroth beehive. The Langstroth beehive was invented in about 1850. It’s an enormously important technology in the domestication of bees. It’s a vast improvement on pre-Langstroth beehives, vast improvement on medieval beehives. Yet, it’s fairly straightforward to make and to explain to people how it works and why it works. I think people would appreciate it, and everybody likes honey, and people have valued bees for a long time. So that would have been my answer.
COWEN: I’ve read all of your books. I’ve read close to all of your columns, maybe all of them in fact, and I’m going to ask you a question I also asked Reid Hoffman. You know the truths of economics, plenty of empirical papers. Why aren’t you weirder? I’ve read things by you that I disagreed with, but I’ve never once read anything by you that I thought was outrageous. Why aren’t you weirder?
The conversation has many fine segments, definitely recommended, Tim was in top form. I very much enjoyed our “Brexit debate” as well, too long to reproduce here, but I made what I thought was the best case for Brexit possible and Tim responded.
That is the topic of my latest Bloomberg column, here is one excerpt:
Chinese citizens are currently upset and panicked, and their online communication might exceed the ability of the censors to control it. Some censorship is done algorithmically, but much of it is performed by humans, if only because the algorithms are far from perfect and cannot pick up on the rapidly changing allusions and code words people use.
What happens if there are too many subversive messages to censor? The system might break down, and speech might become more free. Reimposing censorship might be difficult, politically and logistically.
There is yet another reason censorship might prove difficult. If you feel desperate and fear for your health, the penalties for speaking out online might not seem so bad by comparison. You might not care so much about that promotion at work or your standing in the party. Moreover, the stress of the situation may lower your inhibitions. And if public criticism becomes more common, it may seem safe to join the growing crowd. The eventual result of all this would be a partial collapse of censorship.
The link also considers the entirely possible scenario that Chinese liberties could instead decrease.
From the Journal of Economic Perspectives by Devesh Kapur:
The Indian state’s performance spans the spectrum from woefully inadequate, especially in core public goods provision, to surprisingly impressive in successfully managing complex tasks and on a massive scale. It has delivered better on macroeconomic rather than microeconomic outcomes, where delivery is episodic with inbuilt exit than where delivery and accountability are quotidian and more reliant on state capacity at local levels, and on those goods and services where societal norms on hierarchy and status matter less than where they are resilient. The paper highlights three reasons for these outcomes: under-resourced local governments, the long-term effects of India’s “precocious” democracy, and the persistence of social cleavage. However, claims that India’s state is bloated in size and submerged in patronage have weak basis. The paper concludes by highlighting a reversal of past trends in that state capacity is improving at the micro level even as India’s macro performance has become more worrisome.
The downside is well-known, here is the sometimes underappreciated upside:
But on the other side, the Indian state has a strong record in successfully managing complex tasks and on a massive scale. It has repeatedly conducted elections for hundreds of millions of voters—nearly 900 million in the 2019 general elections—without national disputes. In this decade, it has scaled up large programs such as Aadhaar, the world’s largest biometric ID program (which crossed one billion people enrolled within seven years of its launch). Most recently, it has implemented the integrated Goods and Services Tax (GST), one of the most ambitious tax reforms anywhere in recent times. India ranks low on its ability to enforce contracts, but its homicide rate has dropped markedly from 5.1 in 1990 to 3.2 (per 100,000) in 2016 (UNODC 2019).
Public health services in India leave much to be desired. Yet India achieved a remarkable public health milestone when it completed a full five years as a “ polio-free nation” on January 13, 2016. Even into the 1980s, tens of thousands of children were contacting polio each year. As late as 2009, India reported 741 polio cases, more than any other country in the world. It faced daunting challenges in eradicating polio: high population density and birth rate, poor sanitation, widespread diarrhea, inaccessible terrain, and the reluctance of a section of the population to accept the polio vaccine. The sheer scale of the effort, requiring 172 million children to be vaccinated twice each year, all within a day or two, with the assistance of about 2.5 million volunteers and 150,000 vaccine administration Why Does the Indian State Both Fail and Succeed? 39supervisors, required substantial state capacity in logistics and coordination. Again, the Indian state performed well in a “mission mode” activity that was highly temporally concentrated
Sinn Féin promises rent freezes and an expansion of public housing. It will tax corporations, particularly multinational companies. It offers a typical, left-of-centre shopping list, financed by borrowing and higher taxes on the rich.
And what about the IRA? In the past days, the connection between the IRA and Sinn Féin in the North has dominated headlines, but most voters in the Republic are weary of the past. One in four are prepared to give Sinn Féin a chance. It would be completely wrong to equate Sinn Féin’s votes with support for the IRA.
Here is more from the FT. There is close to a three-way tie at the top, but “31.8% of 18-24s voted Sinn Féin – more than FF and FG combined in that age group.” And: “According to the exit poll, Sinn Féin now the most popular party in every age group under 65.”
And that is from Ireland, one of the biggest neoliberal success stories. Martin Gurri something or other, yes, etc. yup, that’s right, Martin Gurri, etc.
The long-held belief that pollution is the cost a country has to pay for development is no longer true as bad air quality has a measurable detrimental impact on human productivity that could in turn reduce GDP, Canadian-American economist Alex Tabarrok said.
…“There is this old story that pollution is bad, but it increases GDP… When the United States and Japan were developing, they were polluted. So India and China also have to go through that stage of pollution — so that they get rich, and then they can afford to reduce pollution,” Tabarrok said.
“I want to say that that story is wrong. What I want to argue is that a lot of the new research indicates that we may be in a situation where we could be both healthier and wealthier at the same time by reducing pollution,” he said.
…At the seminar, Tabarrok pointed out that expecting people to make sacrifices for the sake of future generations is not a politically fruitful way to deal with pollution.
Citing the issue of crop burning in India, he said farmers are not going to be inclined to change their behaviour if they are told to stop stubble burning for the sake of Delhi residents.
“However, if these farmers are made aware of how the crop burning harms them and their families and affects their soil quality, they are more likely to participate in mitigation measures,” he said.
I was pretty tough on government policy as Business Today India reported:
More than half of India’s population lives in highly polluted areas. Research by Greenstone et al (2015) proves that 660 million people live in areas that exceed the Indian Ambient Air Quality Standard (NAAQS) for fine particulate pollution. In this context, having measures such as banning e-cigarettes and having odd-even days for vehicles to solve the problem of air pollution seems ridiculous, says Alex Tabarrok, Professor of Economics at the George Mason University and Research Fellow with the Mercatus Centre. “These are not appropriate solutions to the scale and the dimensions of the problem,” he says.