Category: Uncategorized
Milei and populism
Bryan Caplan and Daniel Klein both opine on Milei and populism, Dan being very enthusiastic, while Bryan praising Milei but more reserved in his praise of populism. I too am a big fan of Milei, and I think he is still on a good track. If his reforms do not succeed, likely it will not be his fault, but rather the result of soft commodity prices, pending credit lawsuits (predating him), and an impatient public. But so far things are holding up.
What neither Klein nor Caplan mentions — and it is very very important for this issue — is that Milei has hewed pretty closely to the IMF playbook for his most important reforms. He named a very serious and mainstream finance team to oversee his changes. And his plan is dependent on an IMF bailout. The more “populist” elements of the original promises, such as rapid dollarization, have been put on hold indefinitely. In other words, the actual policies, for the most part, are not populist at all.
It is fine to call Milei a populist in some very critical rhetorical regards. But the project is working because he has turned his back on a lot of populism and is mainly following the recommendations of expertise, as well as relying on the IMF.
Parents should believe in upward mobility
There is a new paper on this topic, with multiple authors by led by Rebecca Ryan. Here is the abstract:
Research in economics and psychology shows that individuals are sensitive to cues about economic conditions in ways that affect attitudes, beliefs, and behavior. We provide causal evidence that parents’ beliefs about economic mobility prospects shape parental investments of time and money in children. To do so we conduct an on-line information experiment with ~ 1,000 socioeconomically diverse parents of children ages 5-15. The information treatment aimed to manipulate parents’ beliefs in the possibility for future upward (downward) economic mobility in US society. The experimental results yield three conclusions. First, parents are highly sensitive to signals about future economic mobility prospects. Second, parents who are induced to believe in the likely possibility of future upward mobility increase their beliefs about the return on their own investments of time and money. Using a novel measure of time investment we developed, these parents also increase their time investments in the service of boosting children’s skill. Finally, they report being more willing to pay for resources that would boost their child’s skill development. Third, these patterns are true for economically advantaged and disadvantaged families alike. We discuss the implication of these results in terms of reports showing that Americans are losing faith in “The American Dream.”
No, researchers should not lie, but perhaps this gives some additional perspective on who exactly is harming the world. There can be a cost to publishing neurotic, untrue ideas.
Via the excellent Kevin Lewis.
Friday assorted links
Bolivia update, uh-oh
With international reserves at about a tenth of their $15 billion peak in 2014, the government of President Luis Arce is safekeeping every dollar bill and gram of gold, depressing activity, sparking fuel shortages and stoking social unrest — all in the name of avoiding a devaluation of an untenable 6.9 boliviano-per-dollar peg…
Arce has been trying to contain the collapse by reversing the damaging decline in hydrocarbon output, granting incentives for foreign oil and gas companies and liberalizing the fuel market last week in an attempt to mitigate gasoline shortages. Even if these measures are on the right track, they are too little, too late: These imbalances have been brewing in Bolivia for years, the result of policy malpractice during the golden era of Evo Morales’s socialist rule between 2006 and 2019, when Arce was his economic czar. A government with a more sensible approach would have tamed spending and invested in making sure the country’s natural gas bonanza kept paying the bills for the next decades (for a detailed chronicle of what went wrong in Bolivia, read my colleagues Peter Millard and Sergio Mendoza here.)
Thursday assorted links
1. How good are American roads?
2. Civil War death toll higher than had been thought (NYT).
3. The reason a minimum wage struggles to deliver efficiency gains is that with realistic firm productivity dispersion, a minimum wage that
eliminates monopsony power at one firm causes severe rationing at another.”
How DOGE is really going to work
In the last few days, Vivek has issued a series of tweets showing he understands how the regulatory process works. That is good, but in turn it means DOGE ambitions end up scaled down. Now there is a WSJ piece by Vivek and Elon. Here is what I take to be the critical passage:
DOGE will work with legal experts embedded in government agencies, aided by advanced technology, to apply these rulings to federal regulations enacted by such agencies. DOGE will present this list of regulations to President Trump, who can, by executive action, immediately pause the enforcement of those regulations and initiate the process for review and rescission.
I’m all for this (and more), but take a look at what we are getting here. Paused enforcement is better than nothing, but the rule doesn’t go away. In the meantime, private companies probably will continue to act as if the rule may continue, given limited time horizons in politics and indeed for DOGE itself. The process for “review and rescission” of course is extremely time-consuming and labor-intensive. Again, bring it on but just do not expect too much from this. Note further that “right-leaning regulatory troops” are quite thin on the ground, most of all in these agencies.
The column has numerous further points of interest, which perhaps I will take up in the future. Here is a very good indeed essential piece by Stuart Buck on government efficiency, Here again is my earlier Bloomberg column on priorities for DOGE. James Broughel has a sunset suggestion for regulations.
Bike lanes are not about bikes
The city [WDC] has built about 20 miles of bike lanes in the past five years, but despite that, the portion of D.C. residents who bike to work peaked in 2017 and has decreased each year since, falling from 5 percent to 3 percent. So who are these lanes for?
And:
Across town, on South Dakota Avenue NE, the fight is ongoing, and, as The Post’s Rachel Weiner reported, this squabble reveals an essential truth about bike lanes as weapons of civic planning: They are often installed not to satisfy the barely measurable trickle of residents who pedal to work but mainly to make car traffic worse enough that people will be discouraged from driving.
Here is the full piece by Marc Fisher. A rare sane take on an ultra-mood-affiliated topic. You may recall my earlier and unfulfilled request for a good cost-benefit analysis on bike lanes for American cities. Houston fortunately is moving away from this idea, and no “I love the Netherlands” is not an effective counter to the issues at stake here.
New Zealand’s Regulatory Standards Act
“To lift productivity and wages, ACT’s coalition agreement includes a commitment to pass a Regulatory Standards Act.
“The Bill will codify principles of good regulatory practice for existing and future regulations,” says Mr Seymour.
“It seeks to bring the same level of discipline to regulation that the Public Finance Act brings to public spending, with the Ministry for Regulation playing a role akin to that of Treasury.
“Some regulations operate differently in practice than they do in theory. To make regulators accountable to the New Zealanders they regulate, the Bill contains a recourse mechanism, by establishing a Regulatory Standards Board. The Board will assess complaints and challenges to regulations, issuing non-binding recommendations and public reports.
“If we raise the political cost of making bad laws by allowing New Zealanders to hold regulators accountable, the outcome will be better law-making, higher productivity, and higher wages.
I am pleased to, many years ago, have done preperatory work with Bryce Wilkinson on the ideas behind this legislation. I am told this is likely to pass, here is more on the bill.
Wednesday assorted links
The economic powers of the HHS secretary
That is the topic of my latest Bloomberg column, here is one excerpt:
One of the problems with an RFK Jr. ascendancy is that his core views, which run strongly against vaccines and pharmaceuticals, make it unlikely that any of these reimbursement revisions will be done in a rational or scientific way. The best evidence indicates that pharmaceuticals are a relatively cost-effective ways of saving lives, and conversely that many costly surgical procedures are not very effective. One of the main drawbacks of the US health-care system is often described as overtreatment, yet some vaccines and drugs — the Covid vaccines, GLP-1 medications and HIV-AIDS treatments, to name just a few — are yielding very high returns.
The danger is that, with RFK Jr. at HHS, the US would restrain health-care spending in exactly the wrong areas. The human costs of such a mistake are obvious, but from a more narrow fiscal perspective, a sicker America would lead to even more serious budgetary problems.
In any case, for all the recent talk and speculation about DOGE, the HHS secretary could well have more of an impact on the federal budget, for better or worse.
HHS also oversees liability protection for vaccines…
Worth a very serious ponder.
The Impact of Divorce Laws on the Equilibrium in the Marriage Market
Does easier divorce affect who marries whom? I exploit time variation in the adoption of unilateral divorce across the United States and show that it increases assortative matching among newlyweds. To unravel the underlying mechanisms, I estimate a novel life-cycle equilibrium model of marriage, labor supply, consumption, and divorce under the baseline mutual consent divorce regime. By solving the model under unilateral divorce, I find that, consistent with the data, assortative matching increases. Effects are largely due to changes in choices when risk sharing and cooperation within marriage decrease, which highlights the importance of considering equilibrium effects when evaluating family policies.
That is from a new JPE piece by Ana Reynoso.
Tuesday assorted links
“The Misery of Diversity”
I am surprised this paper made it through, but I am pleased to see the intellectual diversity it represents:
Evolutionary accounts assert that while diversity may lower subjective well-being (SWB) by creating an evolutionary mismatch between evolved psychological tendencies and the current social environment, human societies can adapt to diversity via intergroup contact under appropriate conditions. Exploiting a novel natural experiment in history, we examine the impact of the social environment, captured by population diversity, on SWB. We find that diversity lowers cognitive and hedonic measures of SWB. Diversity-induced deteriorations in the quality of the macrosocial environment, captured by reduced social cohesion, retarded state capacity, and increased inequality in economic opportunities, emerge as mechanisms explaining our findings. The analysis of first- and second-generation immigrants in Europe and the USA reveals that the misery of home country diversity persists even after neutralizing the role of the social environment. However, these effects diminish among the second generation, suggesting that long-term improvements in the social environment can alleviate the burden of diversity. Finally, in exploring whether human societies can adapt to diversity, we show evidence that diversity causes adopting cultural traits (such as establishing stronger family ties, assigning greater importance to friendships, and adopting a positive attitude towards competition) that can mitigate the misery of diversity. These results survive an exhaustive set of robustness checks.
That is from the NBER series, authored by
Monday assorted links
1. Getting AI data centres in the UK.
2. Those new pillowfighting service sector jobs.
3. Exchange rates really matter (Sarah Gertler).
4. Ben Affleck on AI and the movies.
5. New predictions from John Gray.
6. Human in a bear suit used to defraud insurance companies (NYT).
How badly do humans misjudge AIs?
We study how humans form expectations about the performance of artificial intelligence (AI) and consequences for AI adoption. Our main hypothesis is that people project human-relevant problem features onto AI. People then over-infer from AI failures on human-easy tasks, and from AI successes on human-difficult tasks. Lab experiments provide strong evidence for projection of human difficulty onto AI, predictably distorting subjects’ expectations. Resulting adoption can be sub-optimal, as failing human-easy tasks need not imply poor overall performance in the case of AI. A field experiment with an AI giving parenting advice shows evidence for projection of human textual similarity. Users strongly infer from answers that are equally uninformative but less humanly-similar to expected answers, significantly reducing trust and engagement. Results suggest AI “anthropomorphism” can backfire by increasing projection and de-aligning human expectations and AI performance.
That is from a new paper by Raphael Raux, job market candidate from Harvard. The piece is co-authored with Bnaya Dreyfuss.