Category: Uncategorized

*A Capitalism for the People*

by  Tyler Cowen

The author is Luigi Zingales, and the subtitle is Recapturing the Lost Genius of American Prosperity.  I know you have book fatigue, popular economics book fatigue, policy book fatigue, and books-with-subtitles-like-this fatigue, all at once.  But this book is really, really good.  It hits all the right notes, is clearly written, and refers to academics as the new crony capitalists.”  I agreed with almost all of it.

If I had to pick out one book, of this entire lot of books, to explain what is going on right now to a popular audience of non-economists, this might well be it.  It is due out in June.

The hysteresis effect on unemployed labor, and unemployment scarring

by  Tyler Cowen in

Here is a good WSJ piece on labor market hysteresis, a topic also of recent interest to Bernanke, Summers, DeLong, and others.  I’ve been trying to learn more about that literature, and here is what I came up with.

Pissarides has a seminal 1992 paper on the loss of skill during unemployment.

This very good paper (pdf) looks at women who take time off to care for their elderly parents, though there is an endogeneity problem.  Arguably it is the workers on a lower earnings trajectory who will take the time off.  Here is a much earlier 1980s paper on how intermittent labor force attachment lowers women’s wages.

Holocaust survivors seem to have earned lower rates of return on human capital (though interestingly their children do better on average).

This German paper (pdf) shows that state dependence of earnings is, and should be, much lower when the unemployment has been generally high for the labor force as a whole.  This paper finds there is not much “scarring effect’ in southern Italy, where unemployment perhaps is less socially shameful, but there is a significant scarring effect in northern Italy; social norms may matter.

This paper on Sweden suggests that one year out of work leads to a depreciation of skills — the skill of reading in their sample — is equal to losing five percentage points in the broader distribution of that skill.

Here is one paper from the psychology literature (with good cites); there are adverse psychological effects for the lower net worth unemployed but not necessarily for the higher net worth individuals.

Here is a whole host of papers on “unemployment scarring.”  This one, on the UK, gives a concrete number: “Our results suggest a scar from early unemployment in the magnitude of 13–21% at age 42. However, this penalty is lower, at 9–11%, if individuals avoid repeat exposure to unemployment.”  There are some reasonable controls for education and the like, though none for conscientiousness.

I was surprised to learn that “unemployment scarring” is a much more effective search term than is “labor hysteresis.”

Is there any good paper which seriously takes endogeneity of separation into account?

The return of the house call

by  Tyler Cowen in

In the Netherlands, where else?:

In early March, the NVVE opened the world’s first euthanasia clinic. It’s called the Levenseindekliniek, the “end of life clinic.” It serves as a point of contact for all Dutch people who want to die but don’t have a primary care physician prepared to help them do so. The clinic has mobile euthanasia teams, each of which consists of a doctor and a nurse. When an individual qualifies for the program after passing a screening, one of the teams makes a house call to inject two drugs. One puts the patient into a deep sleep, while the other stops all breathing, leading to death.

The rest of the story is here.  And there is this:

The sweets were distributed two years ago as part of a promotional campaign. At the time, her organization was calling for Dutch pharmacies to be allowed to sell lethal drugs to individuals with a prescription. Printed on the wrappers is the word Laatstwilpil, or “last will pill.”

*The Clash of Economic Ideas*

by  Tyler Cowen in

In 1958, on his first visit to India, the Hungarian-British development economist Peter Bauer was eager to meet the Indian economist B.R. Shenoy.  Bauer knew the name from a “Note of Dissent on the Memorandum of the Economists’ Panel,” which Shenoy had written criticizing India’s Second five-Year Plan.  In 1955 the Indian government had recruited twenty-one senior Indian economists for the Panel of Economists, chaired by the minister of finance, to review the plan.  Twenty of the economists had signed a memorandum endorsing the plan.  Professor Shenoy was the lone dissenter  Shenoy’s “Note of Dissent” was an annoyance to members of the Indian Planning Commission; to Prime Minister Nehru, who had initiated the planning effort; to Nehru’s adviser P.C. Mahalanobis, who had drafted the plan; and even to international aid officials, who overwhelmingly supported the planning effort.  Shenoy had become persona non grata in official economic policy-making circles.

Yet Shenoy turned out largely to be right.

That is from the forthcoming excellent book by Lawrence H. White, Amazon link here.  The book is not mostly about India, but it is about the role of economic ideas in shaping economic outcomes.  The chapter on India is my favorite, however, and it is perhaps the very best place to start to understand the failures of India’s planning period.

White also points our attention to Milton Friedman’s 1955 Memorandum to the Indian Government, which is I believe not well known, not even among Friedman fans.

Corruption and the history of development economics

by  Tyler Cowen in

A few observations, based on some recent reading:

1. It is remarkable how little the topic is discussed in the mainstream literature before the 1990s.  Gunnar Myrdal to his credit does discuss it a bit in his Asian Drama.

2. I have seen more than a few articles suggesting Anne Krueger showed that rent-seeking accounted for 7.3 percent of Turkish gdp (in the 1960s).  That’s not what Krueger said.  Rather she showed that import licenses were equivalent to this value, and that this provided an upper bound for the amount of rent-seeking.

3. The real costs of rent-seeking and corruption are the “limits to technology transfer” argument of Parente and Prescott, not the standard rent-seeking box.  That paper alone could bring a Nobel Prize, and yet it’s hardly ever mentioned in assessments of Prescott.

Will Arab Spring lead to democracy?

by  Tyler Cowen in

A new BPEA paper by Eric Chaney (pdf) suggests maybe not:

Will the Arab Spring lead to long-lasting democratic change? To explore this question I examine the determinants of the Arab world’s democratic defi…cit in 2010. I …find that the percent of a country’s landmass that was conquered by Arab armies following the death of the prophet Muhammad statistically accounts for this defi…cit. Using history as a guide, I hypothesize that this pattern reflects the long-run influence of control structures developed under Islamic empires in the pre-modern era and …and that the available evidence is consistent with this interpretation. I also investigate the determinants of the recent uprisings. When taken in unison, the results cast doubt on claims that the Arab-Israeli conflict or Arab/Muslim culture are systematic obstacles to democratic change in the region and point instead to the legacy of the region’s historical institutional framework.

Here is a good sentence:

…the fact that the Arab world’s democratic defi…cit is shared by 10 non-Arab countries that were conquered by Arab armies casts doubt on the importance of the role of Arab culture in perpetuating the democratic defi…cit.

And this:

Once one accounts for the 28 countries conquered by Arab armies, the evolution of democracy in the remaining 15
Muslim-majority countries since 1960 largely mirrors that of the rest of the developing world.