Environmental sentences to ponder
Our empirical subjects are public and private entities’ compliance with the U.S. Clean Air Act and Safe Drinking Water Act. We find that, compared with private firms, governments violate these laws significantly more frequently and are less likely to be penalized for violations.
That is from Konisky and Teodoro, via Robin Hanson.
*Modern Chinese Warfare, 1795-1989*, by Bruce Elleman
I am delighted to have been reading this 2001 history, which is now one of my favorite books on China. It is perhaps the best background I know for understanding current Chinese foreign policy, even though it does not focus on foreign policy per se. Do you wish to understand why the 19th century was so traumatic for China? How the Opium Wars and Taiping rebellion fit together? Why Manchuria was once such a flash point for global affairs? (Has any region fallen out of the major news so dramatically?) How is this for a good sentence?:
The 1929 Sino-Soviet conflict is perhaps China’s least studied and understood war.
I learned something from every page, you can buy the book here.
The flash reading of the Caixin China general manufacturing purchasing managers’ index dropped to 47 points in September, down from 47.3 in August, marking the worst performance for the sector in 78 months.
A reading above 50 indicates improving conditions while a reading below 50 signals deterioration. The index has now indicated contraction in the sector for seven consecutive months.
How quickly do services have to be expanding for the entire Chinese economy to be growing at anything close to six percent?
The incidence of the ACA mandates
Here is Mark Pauly, with Adam Leive and Scott Harrington (NBER), this is part of the abstract:
We find that the average financial burden will increase for all income levels once insured. Subsidy-eligible persons with incomes below 250 percent of the poverty threshold likely experience welfare improvements that offset the higher financial burden, depending on assumptions about risk aversion and the value of additional consumption of medical care. However, even under the most optimistic assumptions, close to half of the formerly uninsured (especially those with higher incomes) experience both higher financial burden and lower estimated welfare; indicating a positive “price of responsibility” for complying with the individual mandate. The percentage of the sample with estimated welfare increases is close to matching observed take-up rates by the previously uninsured in the exchanges.
I’ve read so many blog posts taking victory laps on Obamacare, but surely something is wrong when our most scientific study of the question rather effortlessly coughs up phrases such as “but most uninsured will lose” and also “Average welfare for the uninsured population would be estimated to decline after the ACA if all members of that population obtained coverage.” The simple point is that people still have to pay some part of the cost for this health insurance and a) they were getting some health care to begin with, and b) the value of the policy to them is often worth less than its subsidized price.
You will note that unlike say the calculation of the multiplier in macroeconomics, the exercises in this paper are relatively straightforward. They also show that people exhibit a fairly high degree of economic rationality when it comes to who signs up and who does not.
It has become clearer what has happened: members of various upper classes have achieved some notion of “universal [near universal] coverage,” while insulating their own medical care from most of the costs of this advance. Those costs largely have been placed on the welfare of…the other members of the previously uninsured. So we’ve moved from being a country which doesn’t care so much about its uninsured to being…a country which doesn’t care so much about its (previously) uninsured. I guess countries just don’t change that rapidly, do they?
I fully understand that Obamacare has survived the ravages of the Republican Party, and it was barely attacked in the recent series of debates, and thus it is permanently ensconced, and that no better politically feasible alternative has been proposed. At this point, the best thing to do is to improve it from within. Still, there are good reasons why it will never be so incredibly popular.
Data on deductibles
Kaiser, a health policy research group that conducts a yearly survey of employer health benefits, calculates that deductibles have risen more than six times faster than workers’ earnings since 2010.
I would stress two points. First, the value of benefits is in some regards eroding, so those who wish to cite benefits as an answer to wage stagnation will encounter some push back from reality.
Second, I don’t see this factor cited often as a possible contributing force to the moderation of health care cost inflation in recent years. But perhaps it plays some role.
The NYT Reed Abelson article is here.
What I’ve been reading
1. Deep South, by Paul Theroux. It’s OK enough, but Theroux’s best writing was motivated by bile and unfortunately he has matured. Still, he can’t get past p.9 without mention Naipaul’s “rival book” A Turn in the South. My favorite Theroux book is his Sir Vidia’s Shadow, a delicious story of human rivalry and one of my favorite non-fiction books period.
2. Elmira Bayrasli, From the Other Side of the World: Extraordinary Entrepreneurs, Unlikely Places. A well-written, completely spot on analysis about how the quality of the business climate needs to be improved in emerging economies, and about how much potential for entrepreneurship there is. If economists were to do nothing else but repeat this message, the quality and usefulness of our profession likely would rise dramatically.
3. Michael White, Travels in Vermeer: A Memoir. Nominated in the non-fiction National Book Award category, I actually enjoyed reading this one, all of it except the parts about…Vermeer. It’s better as a memoir of alcoholism and divorce, interspersed with visits to art museums.
Tom Gjelten’s A Nation of Nations is an interesting “immigration history” of Fairfax County. I enjoyed Deirdre Clemente’s Dress Casual: How College Students Redefined American Style.
Jennifer Mittelstadt’s The Rise of the Military Welfare State is a useful history of how a social welfare state for the military was first created, for recruitment purposes, and then later dismantled.
I recommend L. Randall Wray’s Why Minsky Matters: An Introduction to the Work of a Maverick Economist, forthcoming in November. Minsky isn’t so readable, but Wray is. I’ve just started my review copy, I hope to report more on it soon.
Open Borders and the Welfare State
Milton Friedman famously said that you can’t have a welfare state and open borders. I disagree. In many respects (not all), you can have open borders and a welfare state.
What we think of as the welfare state encompasses many different programs, many of which are not handouts. Social Security for example is mostly a forced savings program. For these types of insurance programs there is no problem at all as, for the most part, a person has to work and pay into the program to get money out of the program. For programs like schooling there is also no problem–even if the schooling is provided free to immigrant children–because the schooling leads to higher wages later in life which are taxed. In these cases, the immigrant children are really just receiving a loan which they will have to pay back from their own earnings later in life. The story for basic health is similar. Thus, the only cases where there is a worry about excessive transfers from citizens to immigrants is in pure handouts or health benefits to say the elderly. In these cases, I would simply say that such benefits are not available to immigrants or only available after five years or some such time period.
Addendum: I gave this answer in an interview for a Brazilian newspaper. You can read the full interview here although it is in Portuguese.
Tuesday assorted links
1. Barter continues to grow in Greece. And the FT on Sardex in Sardinia.
2. What happens when Australians allow markets in everything.
3. Does social responsibility lower risk-taking behavior? Paper is here.
4. In most plausible models, is Volkswagen the only car-maker to have rigged emissions data?
5. At top schools, more than one in five female undergraduates suffers one or more sexual attacks, and no this is not mainly trivial attacks. It is odd how many people who otherwise insist on the relevance of Darwin to human affairs find this conclusion difficult to accept. There is more information here.
Is there a Russia-America-China “grand bargain” on the way?
Imagine a deal where America and Russia agree on combating ISIS in Syria, admittedly through the sad means of supporting or at least tolerating Assad. After all, we were all able to agree on Iran, right?
Russia also will agree to keep Snowden away from the embarrassment of a trial and conviction in the United States. Easier for Obama to let sleeping dogs lie.
America and China could agree on how close American planes and ships could come to the artificial islands. The Philippines could be part of that deal.
We know which two nations need to lead a climate change agreement.
Toss in a U.S.-China bilateral investment treaty.
Then there’s the arms control agreement for cyberspace, for all three nations, maybe someday Iran too.
Up to forty different U.S.-Chinese agreements have been predicted — after all, Uncle Xi has to come home with something.
It all seems so easy, and logical too. But, unfortunately, international politics is rarely so straightforwardly Coasian. Maybe the bilateral investment treaty will come to pass!
For a useful conversation I thank J.
How big is Busan really?
Giacomo Ponzetto emails me:
I’m glad you found our recent working paper on urban networks interesting and cited it on Marginal Revolution. I’m also glad that your readers pointed out our lack of clarity concerning Busan.
As they have already noted, what we meant is that the metropolitan city of Busan would be the second largest city in the European Union by population within administrative city limits, after Greater London (8.5 million) and pretty much tied with the city-state of Berlin at 3.5 million (the latest official figures we could find are 3,563,578 for Busan in 2013 and 3,562,166 for Berlin on 31 December 2014). We find this an interesting fact. It reflects political and administrative decisions to facilitate urban integration in Asia and conversely to preserve local identities in Europe. On the other hand, we agree that administrative boundaries often don’t provide the most useful definition of a city. The problem is that no other definition is unambiguous and plainly comparable across countries.
In its 2006 Territorial Review Competitive Cities in the Global Economy, the OECD defined the Busan metro area to include the administrative units of Busan, Ulsan, and Gyeonsangnam-do. By this definition, greater Busan has around 8 million residents, which is also the figure reported by Wikipedia, without defining the metro area. As the OECD noted, this is probably an overstatement because Gyeongsangnam-do is a large province including non-urban districts. Yet, a much smaller Busan-Ulsan-Changwon metro area (including Gimhae, Yangsan, Miryang and Geoje) has around 7 million residents. It would be the third largest in the European Union, behind London and Paris (12 million residents in the functional urban area as defined by Eurostat) but ahead of Madrid (6.5 million).
However, if instead one takes the view that Busan, Ulsan and Changwon are three continguous metro areas instead of a single one, then Busan-Gimhae-Yangan would have only around 4.5 million residents. It would be smaller than Madrid, the Ruhr, Berlin and Barcelona, but at the top of the pack that includes Rome, Milan and Athens. We chose to rely on the administrative-city figures to avoid having to adjudicate which is the most accurate functional definition of Busan’s metro area. Either way, you’re right it’s all too easy to underestimate Busan.
Intertemporal substitution in Iran, sanctions edition
A good rule of thumb is that if a policy is going to happen, it is better to have that policy sooner rather than later. Here is the latest from the land of fesenjan:
With hopes high that Tehran’s nuclear accord with world powers could lead to the lifting of international sanctions, consumers are holding back on spending in the expectation of price drops and the arrival of better quality imported goods. The motor industry has been badly hit, with sales of domestically produced cars dropping by 15 per cent over the past five months, according to official figures.
Officials warn the carmakers’ crisis is having knock-on effects across the economy, hitting sectors from parts-makers to the critical steel industry, the second-biggest non-oil sector, which is already struggling amid a housing slowdown.
Overall:
The centrist government of President Hassan Rouhani has managed to cut inflation from about 40 per cent to 12.6 per cent over the past two years and end three successive years of economic contraction, with growth of 3 per cent in the year to March. But economists believe the economy has now stopped growing and may even be contracting.
Of course some of that is an oil price effect. The full FT story by Najmeh Bozorgmehr is here.
Monday assorted links
1. Don Boudreaux responds to Dani Rodrik on free trade. And Arnold Kling responds. And Dan Klein reviews Charles C.W. Cooke’s The Conservatarian Manifesto.
2. A quick way to access what betting markets are telling us about the candidates.
3. The NBA is moving toward wearable tech — are you next?
4. More data on Chinese services, including telecom.
5. Should we adjust for this data, or learn from it? The temporal evolution of citation counts, across fields.
6. Generalized results about interest rates and banks profits, check out the Chicago Fed link here, Genay and Podjasek, it is #2 in the order which comes up for me, or try this link. Overall banks are more profitable when interest rates are low, contra some recent blog posts by Krugman. This effect is especially strong for small banks, which have a good deal of political power. In any case “Interest rate changes generally have small effects on bank profits…” and that effect is dominated by the effect from macroeconomic conditions, including employment and also home prices. Here are useful comments from Brad DeLong.
A Phool and His Money
I was disappointed with Akelof and Shiller’s Phishing for Phools.
Cinnabon pastries are hard to resist. Advertising can be deceptive. Humans sometimes act in foolish ways. If these statements strike you as anodyne then there is no need to read George Akerlof and Robert Shiller’s new book Phishing for Phools, a disappointing foray into behavioral economics from two recent Nobel Prize winners. If these statements strike you as novel then I recommend instead Ariely’s Predictably Irrational, Sunstein and Thaler’s Nudge, Kahneman’s Thinking, Fast and Slow or Daniel Gilbert’s Stumbling on Happiness, to name just a few classics in the field
You can read my full review at The New Rambler.
The eternal quest for a free lunch, in this case Escudella
There is eventually a noisy video at the link, my apologies. I am not sure what is exactly the best translation of “recuerda” in this context, but the article involves Andreu Mas-Colell asserting that even after Catalonian independence the government in Madrid is obligated to pay for pensions in Catalonia. That obligation is a legal one which (supposedly) international tribunals will enforce.
The fine points of the conditional and the subjunctive are important for interpreting that article, and perhaps some of those are escaping me. But I don’t take the journalist to be reporting a prediction that Madrid actually will pay for those pensions, only that they have such a legal obligation, combined with the assumption that this law will reign supreme and the issue therefore won’t be a problem for Catalonia. There is no mention of the current Spanish law essentially forbidding Catalonian secession or even direct consideration of such.
I have a question. Of all the economists who have endorsed or indeed fought hard for Catalonian independence (Galí, Mas-Colell, Sala-i-Martí, Antràs, Boix, Ventura, etc.), who offers the best and clearest account of what the associated costs would be? Please leave your answer in the comments, or if you wish email me.
Here are photos of Escudella.
For the pointer I thank Gerardo Gonzalez.
What I’ve been reading
1. Lavinia Greenlaw, A Double Sorrow. A deeply sad but very affecting poem, based loosely on Chaucer’s Troilus and Cressida. Here is a useful review of the work, and unlike many poems it is very easy to read.
2. Gillen D’Arcy Wood, Tambora: The Eruption that Changed the World. This 1815 volcanic eruption in Indonesia had a bigger impact on global history than you might think. Be afraid, be very afraid.
3. Lillian Faderman, The Gay Revolution: The Story of the Struggle. A good, readable, even-tempered treatment of what the title promises. I learned a good deal about the 1940s and 50s most of all, recommended. It is 816 pp. but never a drag. I am surprised it is not being reviewed more prominently.
4. Andrew Wender Cohen, Contraband: Smuggling and the Birth of the American Century. A good look at how America really ran its nineteenth century trade policies, full of good anecdotes and examples.
5. Peter Frankopan, The Silk Roads: A New History of the World, it is out already in the UK, which was my source. My main objection to this book is the overselling in the subtitle. It is a nice, readable account of Silk Road history and the importance of Eastern land transport for global economic history. I liked it, but didn’t feel it revised my worldview in any big way or even tried to. The material on the twentieth century struck me as too familiar. Here is one useful review.
I read about thirty pages of the new Salman Rushdie. While it was better than expected, I didn’t feel compelled to continue; it is odd to tell a rationalist story through magical realist means. Hanya Yanagihara’s A Little Life is turning out to be one of the year’s sensations. I’ve read about one hundred pages and seems to be of high quality but its themes don’t grab me (New York City, child abuse), and it is taking too long to become conceptual. And for another recent novel on child abuse themes, don’t forget the new Rafael Yglesias.
Sunday assorted links
1. Your personal tear-wiper (Japan). And the culture that is golf. I’ll never play, or for that matter watch.
2. Claims about Canadian Mounties and Canadian hockey players and Canadian violence (pdf).