Results for “rapid test”
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Pritchett’s Postulates and Urbanization

After promoting women’s groups in West Bengal as a route to development a West Bengali woman asked Lant Pritchett:

You all are from countries that are much richer and doing much better than our country so your country’s women’s self-help groups must also be much better, tell us how women’s self-help groups work in your country.

Pritchett’s inability to answer the question led him to what I call Pritchett’s postulates of development, four criteria to decide whether factor X is an important determinant of development.

  1. More developed countries must have more X than less developed countries.
  2. The developed countries must have more X than when they were less developed.
  3. Recent development successes must have more X than development failures.
  4. Countries that are developing rapidly must have more rapid growth of X than those that are developing slowly.

Since more developed countries don’t have noticeably more women’s self-help groups, this idea fails Pritchett’s postulates. Indeed, so do many fashionable development ideas being tested by RCTs which is one reason why Pritchett’s postulates are controversial in the development community.

Paul Romer, however, (whose important blog post led me to Pritchett’s postulates) has a different approach. Instead of dismissing ideas that fail the Pritchett postulates let’s look for ideas that pass them.

Romer provides evidence that urbanization passes all of Pritchett’s postulates. I think he is correct and that suggests that policies to increase the rate of urbanization could have a very big payoff for development.

We are used to thinking about urbanization as a consequence of development but it is surely also a cause. Consider, for example, the micro evidence. It’s not that rich people move to cities, it’s poor people who move to cities to become rich. We also know that cities are engines of innovation.

We can have too much urbanization or too much in one place as when we get a bloated capital city. Nevertheless, it seems that we could speed the rate of urbanization by reducing the cost of urban development – both the obvious costs like improving land allocation in say India but also improving sanitation and air quality in order to lower the health costs of urbanization. Similarly, well planned, efficient, even beautiful cities increase the benefits of urbanization. Urbanization policy in general becomes growth policy.

How else can we increase the rate of urbanization in developing countries?

Unions for Online Education

The Washington Post reports on a new campaign by the Service Employees International Union, the 2nd largest and fastest growing union in the United States, to greatly raise the wages of university teaching adjuncts:

Now, a union that’s been rapidly organizing adjuncts around the country thinks that number [wages, AT] should quintuple. Last night, on a conference call with organizers across the country, the SEIU decided to extend the franchise with a similar aspirational benchmark: A “new minimum compensation standard” of $15,000. Per course. Including benefits.

…At the moment, the $15,000 number sounds even more outlandish than $15 did when fast food workers started asking for twice the federal minimum wage. But organizers argue that if you’re teaching a full load of three courses per semester, that comes out to $90,000 in total compensation per year — just the kind of upper-middle-class salary they think people with advanced degrees should be able to expect. (Most adjuncts teach part-time, which would put them at $50,000 or $75,000 per year.)

Is Sweden an economically overrated country?

In addition to my earlier pick of Chile, I now must nominate Sweden and Norway for this honor.  Both are wonderful countries, and in absolute terms very likely to remain strong performers.  But I think a good deal of that old Nordic magic is slipping away, and this has become more evident in the last few years.

Let’s start with Sweden and maybe I’ll get to Norway another time:

1. The average product of their education system seems to have declined rather rapidly, as measured by test scores.  On PISA they have gone from #4 to #21.

2. Arguably the basic Swedish economic social model is inconsistent with their level of immigration, and I don’t see them switching to a different economic and social model anytime soon.  You can be pro-immigration, and still not think Sweden is honing in on the right mix of domestic policy and immigration policy.

3. Swedish manufacturing seems to be deindustrializing at a faster than expected pace.  And some of Sweden’s most successful sectors are exposed to a lot of competition from emerging markets, in particular because they rely heavily on engineering talent.  Sweden also has a significant presence in financial services, but they are not an obvious future winner in that area.  And do timber, hydropower, and iron — their main commodity exports — have such a promising future?  There are probably few disasters lurking here, but lots of question marks.

4. Sweden doesn’t seem to have a lot of low-hanging fruit left.  Female participation in the labor force already is high, and they already have done lots of liberalization, privatization, and deregulation.  It is not clear where the next generation of policy improvements will come from.  The McKinsey report recommends “increasing government productivity” as a major source of potential gains, but that is hardly easy, even for the Swedes.

5. The Swedish central bank seems to have scored an “own goal” by engaging in premature tightening, coming out of the earlier recession.  They’ll make much of that up over time, but still it is a sign the country has lost some mojo.

6. Sweden’s household to debt ratio is about 170%, one of the highest in the world.  This is not only troubling in its own right, but arguably it is a sign debt is being used to make up for a slow accumulation of underlying economic deficiencies, as was the case in the United States.  Furthermore “Four in 10 mortgage borrowers in Sweden are not paying off their debt, according to data collected by Reuters, and those that are repaying the principal are doing so at a rate that would on average take nearly a century.”  They are probably still in the middle of a housing bubble.

7. There is an erosion of support for mainstream Swedish political parties.  You don’t have to approve of those parties to see this as a symptom of a very slight underlying political rot setting in.  The “extreme Right” party has seen a rapid rise in support.

8. A rampaging Putin probably won’t harm them directly, but still recent Russian events raise geopolitical risk in their neighborhood.

Don’t worry, the Swedes will do fine, but they have arrived at officially overrated status.  I was more sanguine about their prospects a few years ago than I am today and I would not invest in their stock market.  If you wish to count their pluses however, they still have a very good system of government, a strong ethic of trust and cooperation, a good ability to change course when necessary, high productivity, a strong presence in information technology, a wonderful export capacity, low public debt, and first-rate proficiency in English, among other virtues.

That all said, the Swedish currency is actually down against the euro since the beginning of the year.

Keynes is slowly losing (winning?)

Paul Krugman has an interesting blog post arguing that Keynes is slowly winning.  But, I must admit, I find it dismaying how little of the contrary evidence is considered.  Let’s say you set out to write a blog post about Keynes losing, what might you cite?:

1. Keynesians predicted disaster following the American fiscal sequester, and the pace of the recovery accelerated.

2. Even Obama and the Democrats are writing down, and seeing through, budgets with declining levels of discretionary spending.

3. The UK saw a rapid recovery, and the BOE kept nominal gdp growing at a good pace, even in the presence of a so-called “liquidity trap.”  This is not mainly due to the UK having “stopped tightening,” nor did the Continental economies which let up on austerity see similar recoveries.  Nor had the Keynesians predicted that letting up on tightening would bring such a strong recovery, Summers for instance had predicted exactly the opposite.

4. Rate of change recoveries in the Baltics — which really did try a kind of radical austerity — have been stronger and more rapid than Keynesians were predicting, even if absolute levels remain less than ideal.

5. France doesn’t seem to have much interest in trying additional government spending, even though their economy is flailing and no other attempted remedies have been successful.

6. Ireland finally is seeing a rapid recovery, albeit one with highly uneven distributional consequences and possibly another real estate bubble.  The “get the pain over with” approach is looking better right now than it did say two years ago.

7. It is the ECB which seems to hold all of the levers in the eurozone, and the Japanese central bank which is making the (possibly failed) splash in Abenomics.  That may be anti-anti-Keynesian, but it’s not exactly Keynesian either.

8 The Chinese have moved to discount rate cuts, and they seem to realize that more fiscal spending will only postpone their day of reckoning in terms of excess capacity.  That’s not an “anti-Keynesian” attitude, given the current features of their economy, but it’s not exactly screaming the relevance of Keynes’s GT either.

9. It looks like Germany actually will support some additional infrastructure spending.  You could call that a Keynesian victory, but more likely it also will be used to shut down further debate.  Here is one estimate of what will be done.  It’s not that much.

10. Japan is in a (supposed) liquidity trap, but negative real shocks have not in fact helped their economy, contra to the predictions of that model (start with here and here).  Nor does anyone think that the bad weather in the first quarter of U.S. 2014 was good for us, although a basic liquidity trap model implies it will boost inflation (beneficially) because the supply restrictions lead to price hikes which tax currency holdings and thus boost AD.  Come on, people, that is weak.

11. A lot of the cited predictions of the Keynesian or liquidity trap model are in fact simple predictions of efficient markets theory (such as on interest rates), predictions of market monetarism or credit-based macro theories (low inflation), or regularities that have held for decades (budget deficits not raising real interest rates).  It’s just not that convincing to keep on claiming these predictions as victories for Keynesianism and in fact I (among many others) predicted them all too.  I never thought I was much of a sage for getting those variables right.

12. Whether we like it or not, large chunks of Asia still seem to regard Keynesian economics with contempt.  They prefer to stress supply-side factors.

13. At the Nobel level, Mortensen, Pissarides, and Fama do not exactly count as Keynesian material, admittedly Shiller is on the other end of the scale, though even there I am not aware he has a strong record of speaking out on behalf of activist fiscal policy.

14. It is now widely acknowledged that there has been a productivity problem in recent times (or maybe longer), and thus those measurements of “the output gap” are looking smaller all the time.  Again (a common pattern in these points), nothing there implies “Keynes is wrong,” but it does make Keynes less relevant.

15. Where Keynesian views have looked very good is that government spending cuts do — these days — bring steeper and rougher gdp tumbles than was the case in the 1990s.  That is very important, but a) it is increasingly obvious that there is catch-up for countries with OK institutions, and b) correctly or not, the world really hasn’t been convinced there is major upside to expanding fiscal policy.

The point is not that these citations give you a fully balanced view — they don’t!  And it would be wrong to conclude that Keynes was anything other than a great, brilliant economist.  Rather these citations, plus many of Krugman’s points, give you some beginnings for this issue.  It’s not nearly “Keynes’s time” as much as many people are telling us, after all his biggest book is from 1936 and that is a long time ago.  Keynes is both winning and losing at the same time, like many other people too, fancy that.

What I’ve been reading

1. Daniel Schreiber, Susan Sontag: A Biography.  I never tire reading about her, or reading her, for that matter.

2. Richard Bernstein, China 1945: Mao’s Revolution and America’s Fateful Choice.  A very good book on how the Americans had a decent relationship with the Chinese Communists in 1945 and how rapidly that fell apart and why.

3. Paul Vigna and Michael J. Casey, The Age of Cryptocurrency: How Bitcoin and Digital Money are Challenging the Global Economic Order.  A good and useful introduction to the beliefs of those who believe in the subtitle being true.

4. Michael Pye, The Edge of the World: How the North Sea Made Us Who We Are.  The topic is so intriguing to me that I’m going to start this book over again fresh.  My first crack at it yielded no success, as I felt it was too much about Bede and Frisia and didn’t tie together a larger picture.  But I paid extra shipping charges to get it early from the UK (it’s not yet out in America), so perhaps I am not treating sunk costs as sunk…

5. Pramoedya Ananta Toer, This Earth of Mankind, volume one of the Buru Quartet.  These are the greatest books which most educated people never read, and I am giving them a reread.  So far volume one is as good as I remember it, maybe better.  I think of the set as an extended, four-volume meditation, by an Indonesian political prisoner, on what a life really consists of.  Here is a short essay on the quartet.

The economics of population imbalance

That is the topic of my latest column for The Upshot at The New York Times, here is an excerpt:

Unfortunately, regions with rapidly growing populations, like Africa and South Asia, often have lower living standards. In our likely global future, these regions will have more people than they can comfortably support, while many countries in the West and in East Asia will have too few young people for prosperous economies.

As an economist, I see an obvious solution: Relatively underpopulated and highly developed countries could profitably take in young Africans and South Asians — and both sides would gain. Yet it’s far from clear that all nations that could benefit from this policy would entertain it, partly because of persistent racial and cultural bias. There is also the legitimate question of how quickly immigrants can adjust to new environments, especially if they are arriving with weak educational backgrounds as the job market demands ever-stronger skills.

…If you’re not convinced that a declining population is a problem, consider Japan. In terms of real gross domestic product per hour worked, Japan has continued to have good performance, but it has a fundamental problem: The working-age population has been declining since about 1997. And Japan’s overall population has been growing older, so with fewer workers supporting so many retirees, national savings will dwindle and resources will be diverted from urgent tasks like revitalizing companies and otherwise invigorating the economy. Japan has already gone from being a miracle exporter to a country that runs steady trade deficits. Perhaps there is simply no narrowly economic recipe to keep its economy growing; Edward Hugh made this argument in his recent ebook, “The A B E of Economics.”

I am extremely pessimistic that we will manage to achieve any more than a small amount of workable population transfers.  Furthermore potential underpopulation is one of the most serious and underrated problems today, as Robin Hanson argued a few years ago.

There is also this bit, the first sentence of which may remind you of Steve Sailer:

France, Israel and Singapore are three countries where population issues are being discussed quite frankly; all have explicit public policies to encourage more births. And more countries will probably go down this route. Encouraging people to have more children, and generally bidding for human talent, may characterize the economic policies of the future, just as cities and states today bid for football stadiums and factories.

By the way, recent reports indicate that the relaxation of China’s one-child policy have led to many fewer births than were expected.  And this new paper (pdf) indicate that immigrant inflows raise the birth rates of native women by making child care more affordable.

The world’s biggest and most important ideological battle

Religion in China.  That was the topic of a recent excellent Economist article.  Here is one good excerpt:

It is hard even to guess at the number of Christians in China. Official surveys seek to play down the figures, ignoring the large number who worship in house churches. By contrast, overseas Christian groups often inflate them. There were perhaps 3m Catholics and 1m Protestants when the party came to power in 1949. Officials now say there are between 23m and 40m, all told. In 2010 the Pew Research Centre, an American polling organisation, estimated there were 58m Protestants and 9m Catholics. Many experts, foreign and Chinese, now accept that there are probably more Christians than there are members of the 87m-strong Communist Party. Most are evangelical Protestants.

Predicting Christianity’s growth is even harder. Yang Fenggang of Purdue University, in Indiana, says the Christian church in China has grown by an average of 10% a year since 1980. He reckons that on current trends there will be 250m Christians by around 2030, making China’s Christian population the largest in the world. Mr Yang says this speed of growth is similar to that seen in fourth-century Rome just before the conversion of Constantine, which paved the way for Christianity to become the religion of his empire.

In the 1980s the faith grew most quickly in the countryside, stimulated by the collapse of local health care and a belief that Christianity could heal instead. In recent years it has been burgeoning in cities.

Read the whole thing.  You will note that when individuals engage in a “portfolio” approach to religion, social evolution can occur much more rapidly.  Not everyone has to fully convert to Christianity, or to embrace Confucianism wholeheartedly, for those approaches to suddenly acquire much more influence.

Five case studies in politicization

This is a fascinating Scott Alexander take on tribalism and how political issues are framed, starting with Ebola.  As Robin Hanson would say, “politics isn’t about policy.”  Here is the segment on how climate change issues might be marketed to the Right:

Global warming has already gotten inextricably tied up in the Blue Tribe narrative: Global warming proves that unrestrained capitalism is destroying the planet. Global warming disproportionately affects poor countries and minorities. Global warming could have been prevented with multilateral action, but we were too dumb to participate because of stupid American cowboy diplomacy. Global warming is an important cause that activists and NGOs should be lauded for highlighting. Global warming shows that Republicans are science denialists and probably all creationists. Two lousy sentences on “patriotism” aren’t going to break through that.

If I were in charge of convincing the Red Tribe to line up behind fighting global warming, here’s what I’d say:

In the 1950s, brave American scientists shunned by the climate establishment of the day discovered that the Earth was warming as a result of greenhouse gas emissions, leading to potentially devastating natural disasters that could destroy American agriculture and flood American cities. As a result, the country mobilized against the threat. Strong government action by the Bush administration outlawed the worst of these gases, and brilliant entrepreneurs were able to discover and manufacture new cleaner energy sources. As a result of these brave decisions, our emissions stabilized and are currently declining.

Unfortunately, even as we do our part, the authoritarian governments of Russia and China continue to industralize and militarize rapidly as part of their bid to challenge American supremacy. As a result, Communist China is now by far the world’s largest greenhouse gas producer, with the Russians close behind. Many analysts believe Putin secretly welcomes global warming as a way to gain access to frozen Siberian resources and weaken the more temperate United States at the same time. These countries blow off huge disgusting globs of toxic gas, which effortlessly cross American borders and disrupt the climate of the United States. Although we have asked them to stop several times, they refuse, perhaps egged on by major oil producers like Iran and Venezuela who have the most to gain by keeping the world dependent on the fossil fuels they produce and sell to prop up their dictatorships.

We need to take immediate action. While we cannot rule out the threat of military force, we should start by using our diplomatic muscle to push for firm action at top-level summits like the Kyoto Protocol. Second, we should fight back against the liberals who are trying to hold up this important work, from big government bureaucrats trying to regulate clean energy to celebrities accusing people who believe in global warming of being ‘racist’. Third, we need to continue working with American industries to set an example for the world by decreasing our own emissions in order to protect ourselves and our allies. Finally, we need to punish people and institutions who, instead of cleaning up their own carbon, try to parasitize off the rest of us and expect the federal government to do it for them.

Please join our brave men and women in uniform in pushing for an end to climate change now.

The piece is interesting throughout, hat tip goes to MR commentator Macrojams.

The new Obama plan to combat antibiotic overuse

The Obama administration on Thursday announced measures to tackle the growing threat of antibiotic resistance, outlining a national strategy that includes incentives to spur the development of new drugs, tighter stewardship of existing ones and a national tracking system for antibiotic-resistant illness. The actions are part of the first major federal effort to confront a public health crisis that takes at least 23,000 lives a year.

The full story is here.

The Hill has more detail.  It is an executive order:

The president’s directive creates the Task Force for Combating Antibiotic-Resistant Bacteria, co-chaired by the secretaries of Defense, Agriculture and Health and Human Services.

The group is charged with implementing a plan to track and prevent the spread of antibiotic-resistant bacteria, promote better practices for the use of current drugs and push for a new generation of antibiotic medications.

To that end, the White House on Thursday announced a $20 million prize “to facilitate the development of rapid, point-of-care diagnostic tests for healthcare providers to identify highly resistant bacterial infections.”

The added incentive and the timeframe given to the task force indicate the urgency with which the administration is acting, said Dr. Eric Lander, who co-chairs the President’s Council of Advisors on Science and Technology.

“This is a pretty tight timeline to now come up with a national game plan,” Lander said.

There is also this:

In December, the Food and Drug Administration (FDA) unveiled a plan to phase out the use of antimicrobials for the purpose of fattening chickens, pigs or other animals destined for human consumption. But the plan relies in part on voluntary industry cooperation, and advocates argue the government’s efforts are lagging behind even some industry players.

Here is the new full 78 pp. report to the President on antibiotic resistance (pdf).

This initiative — or its failure — is potentially a more important health issue than Obamacare, yet it will not receive 1/1000th of the attention.  Without reliable antibiotics, a lot of now-routine operations would become a kind of lottery.

Here are previous MR posts on antibiotic resistance.  I would note it is difficult to judge such a plan at the current level of detail.  It is better than nothing, but any initial plan is going to be not nearly enough, relative to an ideal.  By the way, Alex tells me there is also a British prize, discussed here.

Alan Macfarlane’s *Invention of the Modern World*

An excellent new book drawn from some 2011 lectures he gave in China.  Macfarlane of course is a highly esteemed historian who has made critical breakthroughs in understanding the medieval roots of later English success, but he also has written extensively on Nepal, Japan, and China, including from anthropological perspectives. His status is high, and his works are generally quite readable, but somehow he has missed out on the recent interest in popular yet serious non-fiction books.

This work is not written as a book (thank goodness), it is more as if he is simply sitting down and telling you what you want to know.  He runs through all of the different factors that helped motivate the Industrial Revolution and the British breakthrough.  Here is one excerpt:

England was part of one of the most war-like civilizations in history.  The constant warfare in Europe was different from the long periods of peace in Japan or China.  The constant recurrent strife led to rapid technological and scientific evolution through a process of Darwinian selectionary  pressures — the survival of the “fittest.”  Guns, boats, navigation, knowledge of physics and chemistry, all rapidly improved.  The ships which crushed the Chinese in the Opium Wars in the nineteenth century were enormously different from the primitive medieval boats which would have been no match for a Chinese armada in the fourteenth century.  So England benefited from the positive effects — but others paid the cost.  Thus, at the battle of Omdurman, the British had six Maxim guns.  The result was 28 British dead, and eleven thousand of their enemies were slaughtered.

…So we need to understand that central imperial phase — the worst of all Empires, except perhaps the rest which were even worse.  The cost in terms of lives destroyed in slavery, opium and conquest is unbearable.  Yet it was also the context which allowed the most massive material and economic transformation in human history since the discovery of agriculture to occur, namely the Industrial Revolution.

His discussion of the importance of the legal system is also very good.  You can buy the book here.

The economic recovery in the United Kingdom

There is an excellent Chris Giles FT article on this topic, here is the bit of greatest interest to some recent debates:

The latest IMF fiscal monitor shows a cyclically-adjusted deficit of 5.9 per cent of national income in 2011, falling only to 5.7 per cent in 2012. This 0.2 percentage point drop in the cyclically-adjusted deficit appears tiny compared with the 2010 vintage of the same IMF document, which shows plans for a 1.4 percentage point decline over the same two years.

That’s not my favorite measure of fiscal stance, but it is the one most commonly cited.  What we see is that “austerity didn’t get much worse,” to borrow the language of many of the Keynesians.  It remains a mystery to me how this could account for the British recovery, as for instance expressed by Krugman:

Finally, Britain is growing much faster right now than I expected. Fundamental model flaw? I don’t think so. As Simon Wren-Lewis has pointed out repeatedly, the Cameron government essentially stopped tightening fiscal policy before the upturn, which means in effect that the “x” in my equation didn’t do what I thought it would. On top of that, there was a drop in private savings, which is one of those things that happens now and then.The point is that the deviation of British growth from what a standard Keynesian model would have predicted, while real, wasn’t out of line with the normal range of variation-due-to-stuff-happening; nothing there that warranted a major revision of framework.

I would say the fiscal stance of the British government stayed more or less the same, and a rapid recovery came, because the labor market was flexible and market economies have a natural (though in my view not universal) tendency to mean-revert and put unemployed resources back to work.  Furthermore the UK had a relatively loose monetary policy, which sustained nominal values, even in light of a supposed liquidity trap.  (The hypothesis that the relatively high inflation rate came from a VAT hike didn’t last long.)

I took the Keynesian position on Britain to be “they are in a liquidity trap, and possibly secular stagnation, so they will just sit there and not experience any natural tendency toward major recovery, at least not for a long time.”  If the current Keynesian position (would it now be the New New Old Keynesian view?) is “in the absence of additional negative shocks, even in a liquidity trap market economies have a natural tendency to mean-revert and put unemployed resources back to work pretty quickly,”…well, I guess I am more of a Keynesian than I used to think.

Addendum: The article also offers this:

UK officials have no time for such comparisons, based on “spurious cyclical adjustment”. The Treasury said: “It’s interesting how the people who have started saying that we eased up on austerity are the very same people who just a few months earlier were accusing us of doggedly sticking to it. We have been consistent and stuck to the plans we set out.”

The independent Office for Budget Responsibility provides data with which to arbitrate this dispute. On the public spending side, there is no evidence of a secret stimulus. Public expenditure in 2012 and 2013 was a little lower than the level planned in 2010.

Its data also show there were no significant changes to the UK tax system in 2012-13, so no deliberate stimulus. Tax revenues, by contrast, were much weaker than expected as the economy stagnated, showing the strength of the automatic stabilisers in Britain.

Measures of the degree of fiscal tightening that do not rely on tax revenues, but changes in the tax system, such as those from the OBR or the independent Institute for Fiscal Studies, still show as much austerity in 2012 and 2013 as they did in 2010.

Sorry guys, but I have to call this one for some version of the classical hypothesis.  And by the way, I still think the UK recovery is relatively fragile, but not for reasons which have much to do with traditional Keynesianism.

Is American politics ruled by gridlock?

My latest New York Times column is here, and here is one excerpt:

Consider the financial crisis of 2008 and 2009. Coordinated actions by the Federal Reserve, the Treasury and Congress geared up rapidly, were decisive by global standards and received a fair amount of bipartisan support. In contrast, the euro zone is still discussing how to manage its bailouts or whether to start a program of quantitative easing, which the Federal Reserve will begin to wind down in January. And Japan, after letting problems with bad banks fester for decades, is only now using monetary policy to fight deflationary pressures.

After that initial decisiveness in the financial crisis, America did indeed slow down in policy innovation. Bailouts and our activist central bank have become extremely contentious factors in the nation’s politics, and there has been bitter fighting over how to set into motion the Dodd-Frank financial reform law.

Lunging and lurching forward with big changes, then enduring periods of backlash, consolidation and frustration, is often a better description of our political system than is “gridlock,” which is too unidimensional a concept to capture the reality.

At other times, because political flexibility is a fundamental part of the American system, it doesn’t feel as though we are defeating gridlock as much as bypassing it. Fracking — hydraulic fracturing — is reshaping the American energy sector, in part because of previous federal support for research and development, and in part because of regulatory tolerance: Many of the relevant changes took place through agencies like the Energy Department. In contrast, much of Europe is refusing to proceed with fracking at all. The American breakthrough has generated economic headlines, but rarely is it cited as an example of political success.

Do read the whole column.  Two other examples are the building of the surveillance state and the shift toward ever-tougher forms of intellectual property protection, and the spread of that philosophy to other nations through the form of treaties.  Sometimes we could use more gridlock, although I recognize that many people prefer to rail against it.

If you would like to read a defense of the gridlock view, here is Ornstein and Mann, noting that they confuse polarization with gridlock and don’t consider most of the examples and comparisons I raise.  Their argument is closer to “we shouldn’t feel very good about how things have been running,” which I have no problem accepting.  Here is Summers, responding to their critique., though he is more optimistic about the consequences of periodic non-gridlock than I am.  Here is the original Summers Op-EdMany other contributions to the political science literature either predate the recent wave of rather considerable policy reform, focus on Congress, or focus on whether polarization is preventing us from addressing income inequality.   I don’t intend those points as criticisms, simply a note that many of those pieces and books do not bear so directly on my thesis.

England fact of the day

From Sarah O’Connor and Chris Giles, this one is a bruiser:

The earnings of recent English graduates have deteriorated so rapidly since the financial crisis that the latest class is earning 12 per cent less than their pre-crash counterparts at the same stage in their careers. They also owe about 60 per cent more in student debt.

As Britain starts to emerge from the downturn, a Financial Times analysis of student loan data exposes the damage done to a generation of graduates, for whom a degree has all but ceased to be a golden ticket to a decent job. Tuition fees in England almost tripled last year to a maximum £9,000 a year.

…Each cohort of graduates since the financial crisis is earning less than the one before. New graduates who earned £15,000 or more in 2011-12 – enough to start repaying their loans – were paid on average 12 per cent less in real terms than graduates at the same stage of their careers in 2007-08.

This real terms fall is three times as deep as the decline in average pay for all full-time workers over the same period.

From the FT there is more here.

Learning to Compete and Cooperate

What drives individualism and competitiveness as opposed to collectivism and cooperation? Leibbrandt, Gneezy and List have a great paper studying this question with an ingenious List2experiment. LGL study two types of fishermen in Northeastern Brazil. The two types live within ~50km of one another but one type are lake fishermen and the other sea fishermen. Lake fishing favors individual fisherman in small boats while sea fishing favors team production on larger boats.

LGL ask the fisherman to participate in a simple experiment, throw 10 tennis balls into a bucket. The participants choose how they are paid, 1 monetary unit per successful attempt or 3 units per successful attempt if they have more successes than an unknown competitor (chosen randomly and without their knowledge to avoid social effects; in case of a tie they are paid 1 unit per success). Fishermen could earn 1-2 days of income for less than an hour of work depending on how successful they were and the payment scheme chosen.

Perhaps you won’t be too surprised to learn that 45.6% of the lake fishermen chose to compete compared with just 27.6% of the sea fishermen. What makes the paper great is all the secondary tests the authors do to understand this result at a deep level. The result, for example, is not due to differences in throwing ability or risk preferences.

You might suspect that the different choices about whether to compete or not are driven by cultural differences. But that too is incorrect. The authors, for example, show that women–who do not fish in either the sea or lake villages–do not show differences in the choices to compete (both chose to compete less than the men but at the same rates in lake or sea villages).

List 3Instead, what the authors demonstrate is that differences in the choice to compete or not appear to be learned differences. First, the lake villagers who chose to compete are among the most successful lake fishermen–that is, they have learned that competition increases income. In the sea villages there is no correlation between choosing to compete and fishing income.

Finally, and most tellingly, there is a dose-response relationship between competition and learning. In particular, the choice to compete or not increases with fishing experience with the experienced lake fisherman choosing to compete more and the experienced sea fishermen choosing to compete less (as shown at left).

The paper appears on the surface to be affirming the importance of cultural differences and to be agreeing with the kind of literature that stresses the idea of self-interest and individualism as western and contingent. Yet, in fact, the paper is suggesting that at a deeper level so-called cultural differences may not be transmitted down through the generations but instead are learned responses to very particular production techniques. Note that such learned responses may change rapidly as production techniques change and that the sea and lake villages are both unusual in the modern world in relying on just one dominant production technique with few other options for learning.

More generally, learning needs to be added to incentives, genetics, and culture as an independent yet entangled determinant of choice.