*How Asia Works*
The author is Joe Studwell and the subtitle is Success and Failure in the World’s Most Dynamic Region. That’s an excessively bland title and subtitle, but so far this is perhaps my favorite economics book of the year. Quite simply, it is the best single treatment on what in Asian industrial policy worked or did not work, full of both analysis and specific detail, and covering southeast Asia in addition to the Asian tiger “winners.”
Studwell explains that South Korean policy was based in a notion of “export discipline” and that policymakers were quite ready to see leading chaebol go bankrupt, which indeed they did often. Everything was directed toward export capacity and they didn’t worry about what rate of price inflation, often in double digits, the cheap credit policies might create. It was a gamble on a world-historical scale, noting that South Korea engaged in much more borrowing than did the other Asian tigers. His p.111 account of how Park and his cronies started arresting most of the nation’s leading businessmen, to teach them a lesson and to skew corruption in nation-building directions, is sobering and thought-provoking reading.
Here is one instructive bit of many:
Thailand holds the record for the most consistent import substitution industrialisation (ISI) policy in south-east Asia, running from the early 1950s into the 1980s. Industrial policy also was led by probably the most competent, professional bureaucracy in the region. But, as the Japanese scholar of development Suchiro Akira observed, there was almost no pressure for favoured manufacturers to export…Unlike in northeast Asian states, the Thai bureaucracy never brought export discipline to bear because the Thai generals and politicians who ran the country did not prioritise it.
In other words, industrial policy has to work with the market and rely on market discipline, not try to circumvent such constraints. That is hard to pull off, although clearly it happened in South Korea.
It is also an excellent book on the agrarian pre-histories of East Asian industrialization and why South Korea, Japan, and Taiwan pulled off successful land reforms and Indonesia and the Philippines did not.
I would wish for more coverage of education and labor markets, and the final section on China still awaits me. Think of it as a kind of “tweener” book: too specific and analytic to be truly popular, too broad, historical, and anecdotal to count as formal economic research. That is not a complaint.
Definitely recommended, you will learn lots from it, and it will upset people of virtually all ideologies.
Addendum: Here is a good FT review.
Assorted links
1. The world’s most expensive motor home (is it my imagination, or are links from The Daily Mirror getting better?).
2. Consumption smoothing, for sunlight.
3. The Senator Whitehouse table on austerity is nonsense.
4. Drone delivery of restaurant food (there is no great stagnation).
Options for health care coverage reform
This topic has been reconsidered much as of late, so I thought I would do a summary post on some of the possible options. I suspect I have covered all or most of this ground in 2009 or so, but here goes:
1. Universal health insurance vouchers on exchanges, with means-tested subsidies and also a mandate. The logic of this can work just fine, but it is quite expensive as it would exist in the United States and we end up spending too much on health care. Over time it would be accompanied by say a five percent VAT.
2. Single payer systems. I don’t want to repeat the usual debates, but perhaps we can agree single payer won’t come anytime soon in the United States. I also think they work least well in the land of medical innovation, and best in small countries such as New Zealand, but that consideration doesn’t even rise to the fore here.
3. The Singapore system, involving single payer for catastrophic expenses and health savings accounts for smaller expenditures. To varying degrees you can combine this with forced savings for the HSAs and price controls on service provision, both of which you will find in Singapore. Where “catastrophic” starts can vary as well. This is my first choice, although if you wish to dismiss it as “utopian” for the United States you have a point. I’ll get back to that.
4. One particular path for how ACA could evolve into a (relatively inefficient) form of a Singapore system. Imagine that the mandate becomes fairly narrow with time, while at the catastrophic end insurance companies evolve into (inefficient) public utilities. Health savings accounts are reintroduced through new legislation, perhaps under a Republican administration, and can be supplemented with cash transfers when desired. Here is one discussion of that path.
5. The mandate and subsidized exchanges under Obamacare prove unworkable and eventually they are abandoned either partially or in full, or in some states but not others. Their place is taken by a Medicaid expansion. Coverage is not universal, though it is higher than pre-ACA, and of course coverage under the status quo is not going to be universal either.
6. The status quo of Obamacare.
7. More managed care. We should remove the legal restrictions and barriers which penalized managed care in the first place, as it is a feasible and desirable means of bending the health care cost curve. You will note that this option is not a strictly rival alternative to 1-6, but rather can be combined with them in varying degrees. Still, it seems appropriate to list it as an option.
Now, if I am allowed to be utopian, I favor #3 over the status quo. If I am asked to be less utopian, I see #4, #5, and #7 as some of the better versions of what ACA could evolve into. I would not predict that those options come to pass, nor would I say those options are better than the rather unrealistic version of ACA as envisioned by its proponents, but I think they follow from the dictates of reality as the better options on the table, #3 aside of course. And I do not feel I am being utopian in holding them as alternatives to the status quo. They are not so far away from the status quo in the policy space.
I don’t think ACA in its current form is stable. Too many moving parts, too many margins of danger, too many jerry-rigged incentives, too many “it worked OK in Massachusetts so it has to work at the national level even if it doesn’t appear to be maximizing” requirements, and too little recognition that the whole system is poorly geared for a world of stagnant median wages and rising inequality. The higher is inequality and the lower are lower-tier wages, the harder it is to guarantee near-equal consumption of health care through employment institutions. The greatest single danger to ACA is eventual massive employer-shedding of health care obligations, penalties or no, which at best evolves us into #1, which I do not favor. On top of that there is state shedding of Medicaid obligations, which again pushes us into #1. Most generally, the national health care systems which work are much more consolidated in nature than is the U.S. status quo.
It is a Denkfehler when people write “you don’t have an alternative to ACA” or “the Republicans don’t have a health care plan,” and so on. You can take such pronouncements as leading indicators that ACA is not going well. #3 aside, you can take the relevant alternatives as a mix of #4, #5, and #7. Those are not so much alternatives “given by the Republicans (or whoever else),” as much as they are given by reality. I don’t see “ACA as envisioned by its propnents” as on the table either, so in this sense it is also the Democrats who don’t have an actual health care plan.
I view the real choice before us as #1 vs. some mix of #4, #5, and #7. And in that setting I do not favor #1 and I still can dream of and advocate #3.
Addendum: Here is my earlier post on how to debate health care policy. Let’s see how many of its strictures you all violate.
Betsey Stevenson is headed to the Council of Economic Advisers
A very good pick of course, and her partner Justin Wolfers will visit again at Brookings, or so I am told on Twitter.
Assorted links
1. “Fill the Void” is an excellent social science movie and an excellent movie flat out.
2. Markets in everything: what do you think an LBJ tweet goes for?
3. Is grandpa better off not living with the kids?
4. Update on the German constitutional court and OMT.
5. Cuban funds flopping study.
Benjamin Britten at 100
I very much liked Neil Powell, Benjamin Britten: A Life for Music. Also very good is Paul Kildea, Benjamin Britten: A Life in the Twentieth Century. They are both also useful for understanding English intellectual life during the 20th century, most of all Auden but even Keynes and also the broader history of homosexuality in England. Both are already out in the UK, where I picked them up earlier in the year, and both will make my best of the year list in late November.
Here is a good Anthony Tommasini survey of Britten at 100. I will offer these bits
The Britten pieces you are most likely to enjoy: Serenade for Tenor, Horn, and Strings, that disc has Les Illuminations and Nocturne too and is the single best Britten disc to buy, and also A Ceremony of Carols.
The ones I think are best: Cello Symphony, Winter Words (song cycle), and perhaps Billy Budd. War Requiem. Nocturne is a powerful spare late work. I like Curlew River for its connection to Balinese music, although I would not put it among his best compositions from a strictly musical point of view.
My most significant Britten heresy: I’ve never enjoyed listening to Peter Grimes and I find most of the experience oppressive. More generally, for much of my life I never felt close to Britten’s music, as it made me crave Stravinsky and Mahler instead. But I’ve listened to it quite a bit since January and have enjoyed it more than expected.
Two points: I think he understood the English language better than any other major composer, and how he sets and understands a text is without parallel, in English at least. Furthermore as a conductor or pianist he is superb, try his Brandenburg Concerti or his piano on Schubert’s Winterreise, Peter Pears singing, among other works. Those are two of my favorite recordings in all of classical music.
My model for how the Fed thinks about withdrawing QE
Bernanke believes QE works, but having been caught off-guard once before, in 2007-2008, he doesn’t fully trust his own judgment. He fears some risk of bubbles, or excess private disintermediation, in either case resulting from low interest rates. He lets Tarullo and Stein carry related messages to the markets to signal possible fears without having to endorse them.
Let’s say he assigns these risky scenarios a fairly small p = 0.05. Still, another financial collapse would be a disaster, all the more for political economy reasons. Bernanke has spent down his own political capital and these days Republicans are more likely to be obstructionists. Fear of that disaster leads him to withdraw QE sooner than his “most likely to be true” opinion thinks prudent. Economists respond by defending the “most likely to be true” opinion, and by arguing moralistically rather than probabilistically. That doesn’t convince Bernanke, because said economists can only convince him that they are likely right, not that he should obliterate his p = 0.05 fear of being wrong. The current policy course continues, early withdrawal from QE is contemplated, and economists complain all the more. Outside observers find it hard to understand the disconnect.
Here are some related probabilistic considerations from Brad DeLong.
How critical are the early years of life?
“Early intervention” to benefit children is one of those sacred cows which I consider unproven and which also is cited in far too malleable a fashion. Here is a new paper by Alan Rushton, Margaret Grant, Julia Feast, and John Simmonds, probably gated for many of you, but worth a read if you can.
The abstract is too wordy, but the study is a follow-up on one hundred Chinese girls who first lived in Chinese orphanages, were later adopted into the UK, and who now are 40 to 50 years old. The orphanage involved deprivation and even some malnutrition (55% of sample). There was basic medical care and supervision, although no general one-to-one caregiver relationship.
Of the initial hundred children, 98 were still alive and 72 of those responded to the survey, which also involved extensive follow-up interviews.
Most entered the orphanage very early, in the first year of life, with a mean of three months old. Age at exit varied between eight months and 83 months, with a mean of 23 months, and with a mean of 20 months spent in the care of the orphanage.
Compared to a general sample of adopted British women, and also UK non-adopted women, the adopted Chinese women did not appear to be at greater risk of mental illness, nor did they appear to have elevated health risks. There were no statistically significant differences when it came to “life control” or “life satisfaction.”
This single study is hardly dispositive, but it should raise some skeptical eyebrows. Recovering from a bad start, in this data set, appears eminently possible, provided of course that the environment improves.
Addendum: Here are some observations on Gerard Debreu’s early life (jstor).
For the pointer I thank a loyal MR reader.
A simple public choice theory of universal surveillance
Let’s say that everything is known about everybody, or can be known with some effort. The people who have the most to lose are powerful people who have committed some wrongdoing, or who have done something which can be presented as wrongdoing, whether or not it is. Derelicts with poor credit ratings should, in relative terms, flourish or at least hold steady at the margin.
It is not obvious that the President, Congress, and Supreme Court should welcome such an arrangement. Nor should top business elites. More power is given to the NSA, or to those who can access NSA and related sources, and how many interest groups favor that?
Therein lies a chance for reform.
Assorted links
1. Japanese Excel spreadsheet artist.
2. How quickly are plastic 3-D printed pistols spreading?
3. Outcomes of medical emergencies on commercial airline flights.
4. It seems that more people are renting tires, at net price 3x-4x retail. Think of it as “first world microcredit.”
Big Data, Big Government, Big Brother
In addition to monitoring who you call and when, your email, and your internet searches the government also has access to all of your credit card purchases. We usually don’t think about purchases as communication but what people buy says more about most people than does their email. Buying behavior can be used to predict all manner of information about your political views, affiliations, sexual activity, marriage quality and much more.
Where this all is leading
I.B.M.’s Watson, the supercomputing technology that defeated human Jeopardy! champions in 2011, is a prime example of the power of data-intensive artificial intelligence.
Watson-style computing, analysts said, is precisely the technology that would make the ambitious data-collection program of the N.S.A. seem practical. Computers could instantly sift through the mass of Internet communications data, see patterns of suspicious online behavior and thus narrow the hunt for terrorists.
Both the N.S.A. and the Central Intelligence Agency have been testing Watson in the last two years, said a consultant who has advised the government and asked not to be identified because he was not authorized to speak.
There is more here, pointer is from Claudia Sahm.
Do U.S. tech companies now have legal troubles in the EU?
Laws in this area can be tricky to interpret, so digest this caution, but I found this analysis from Bloomberg BusinessWeek of interest:
The Safe Harbor scheme (not recognized by the Germans, incidentally) allows U.S. tech firms such as Google to self-certify, to say that they conform to EU-style data protection standards even if their country’s laws do not. It’s not quite that simple—these companies really do need to jump through some hoops before they claim compliance; just ask Heroku—but it does largely come down to trust.
EU data protection regulators have already called for the system to be toughened up through the introduction of third-party audits, but frankly it now looks like the whole system is in tatters. U.S. companies claiming Safe Harbor compliance include Google, Yahoo, Microsoft (MSFT), Facebook, and AOL (AOL), all of which now appear to be part (willingly or otherwise) of the NSA’s PRISM scheme.
As EU data protection rules don’t say it’s OK for foreign military units to record or monitor the communications of European citizens—heck, even local governments aren’t supposed to be doing that—the Safe Harbor program now looks questionable to say the least. A lot of people have already pointed to the U.S. Patriot Act as a threat, and now the effects of that legislation are plain to see.
The update at the beginning of the article reads:
I’ll admit I am shocked to have received this response from the European Commission’s Home Affairs department to my request for comment, with particular regard to the impact on EU citizens’ privacy: “We do not have any comments. This is an internal U.S. matter.”
I don’t see kicking U.S. tech companies out of Europe as a promising way of starting U.S./EU free trade negotiations. One possible legal “out” is discussed here. If anyone is going to drive this issue forward, it is likely the European public, who of course still can insist on tougher standards. Here is one description of Safe Harbor policies. The tech companies themselves may fear a loss of international competitiveness, or that Safe Harbor standards will be toughened, you will find a discussion of commercial worries and their potential impact here.
The innovations issue of *The New York Times*
You will find it here, and clicking through the side show of previous innovations, and their history, is fascinating. I enjoyed this part of the accompanying write-up from Hugo Lindgren:
On his blog, Marginal Revolution, Cowen furthers his point by declaring sarcastically that “there is no great stagnation” and providing links to silly products or applications of technology, like a machine that tosses popcorn into your mouth from up to 15 feet away. It’s called The Popinator. Someone thought this up — first as a marketing stunt, but now they’re trying to make an actual product. Someone also thought up the Ostrich Pillow, a big, comfy thing that you can stick your head into and nap in public places. My favorite of Cowen’s collection is a gun for shooting salt pellets at insects — the Bug-A-Salt! I also like the remote-controlled cockroach, a technology which has not yet been commercialized. But maybe one day.
Cowen’s point is that under the hood of our hallowed free market is a bazaar of nutty, half-cocked ideas which do not advance the greater cause of humanity one tiny bit. But there’s another interpretation, too, which is: The sheer volume and range of these inventions demonstrate a rapidly growing range of problem solvers with the tools to turn their ideas into tangible things.
You can read about the history of the ant farm here.
Restrictions on student athlete transfer
When an athlete chooses to transfer, three sets of rules can be involved: those of the NCAA.; those of the conference in which the university competes; and those that accompany the national letter of intent, a contract that athletes sign while still in high school to announce their intention to attend a university.
“It’s entirely slanted to the coach’s side,” said Don Jackson, a lawyer who runs the Sports Group in Montgomery, Ala., and who has represented dozens of athletes attempting to transfer to a university of their choice. “Once the student-athlete signs that national letter of intent, it’s essentially a contract of adhesion. They have limited rights.”
Universities have long sought to block student-athletes from transferring to a rival program. Alabama’s football team, for example, would not be expected to let a star player go to Auburn. But the impulse to limit the student-athlete’s options has been heightened to the point that coaches are now blacklisting dozens of universities.
From the NYT, here is more, none of it pretty, but of course lower-tier universities will claim they are making big investments in improving the quality of diamonds in the rough. The funny thing is — if I may sound Caplanian for a moment — no one at these schools seems to demand similar restrictions on transfers of the students.