After War
The subtitle is The Political Economy of Exporting Democracy, and the author is Chris Coyne, a former student of mine and now professor at West Virginia University, also blogger at The Austrian Economists. Excerpt:
What do the data indicate regarding the effectiveness of reconstruction as a means of achieving liberal democracy? In short, the historical record indicates that efforts to export liberal democracy at gunpoint are more likely to fail than succeed. Of the twenty-five reconstruction efforts, where five years have passed since the end of occupation, seven have achieved the stated benchmark, resulting in a 28 percent success rate. The rate of success stays the same for those cases where ten years have passed. For those efforts where at least fifteen years have passed, nine out of twenty-three have achieved the benchmark for success, resulting in a 39 percent success rate. Finally, of the twenty-two reconstruction efforts where twenty years have passed since the exit of occupiers eight have reached the benchmark, resulting in a 36 percent success rate.
You can buy Chris’s book here. I view the key analytical point as focusing on the power of on-the-ground expectations to make the reconstruction "game" either a cooperative or combative one. This is a difficult variable to control, but Chris offers a very good look at the best and worst attempts that the United States has made to manipulate these variables and thus export democracy. If you want to know why the Solow model doesn’t seem to hold for Bosnia, or a deeper more analytic sense of why Iraq has been a mess, this is the place to go.
The best two sentences I read this morning
Charge 80% per year on a loan in the U.S. and you’re called a usurer. Charge 80% on a loan in Latin America or Africa and you can be a poverty-alleviation charity.
That is Dean Karlan and Jonathan Zinman, in today’s WSJ, "In Defense of Usury," p.A18. Karlan and Zinman discuss their study showing that micro-credit borrowers in South Africa are better off for receiving the money, even when they pay very high interest rates.
Are Soviet-style price controls returning?
As the New York Times noted last week,
food prices have been on a tear in Russia. With elections approaching,
Vladimir Putin decided pricey potatoes and pierogies just wouldn’t do.
The solution: Soviet-style price controls.
I am a fan of Daniel Gross’s Slate writings, but I don’t think that claim is quite correct. What made Soviet-style price controls Soviet-style was the absence of normal residual claimancy. As David Levy has shown, the resulting incentive was to lower prices to deliberate shortage-inducing levels. Managers would then sell access for favors, often access to goods and services elsewhere. Therefore the incentive was to enforce the price control and limit access to the good. Shortages were virtually everywhere and much of the economy reverted to barter.
Today most Russian firms are private or at least involve residual claimants, and both managers and owners wish to accumulate money not favors. The incentive is to evade price controls, or to adjust the quality of the good to match the new specified price. Most markets will still clear, albeit in inefficient ways. These price controls are hardly a good idea, but their impact won’t be one tenth as bad as the price controls of the older regime. Often the goal of such price controls is simply to lower the measured rate of inflation, or to allow the government to claim it is doing something rather than nothing. I’d be surprised if shoppers at the major Moscow supermarkets notice a major difference.
Rorschach Economics
Gregor Smith of Queen’s University has discovered an amazing new relationship, Japan’s Phillips Curve Looks Like Japan. John Palmer of EclectEcon believes that the result may be systematic as he has discovered that Canada’s Phillip’s Curve looks like Canada.
Obviously these people are crazy. Smith and Palmer clearly do not understand Marshallian
macroeconomics – everyone knows that the Phillip’s Curve looks like this country.
Assorted links
1. Is Buffalo really hopeless?
2. Which paintings sell for more?, Financial Times Deutschland
3. Books to base your life on, by Ryan Holiday
4. One cheer for asset securitization, me on NPR Marketplace
5. Takes on fall books, on Slate, one segment is yours truly on the new Charles Taylor
Rational Expectations
I can report that the sugar high in children begins long before the sugar hits the bloodstream.
Why macroeconomics is not a science
The housing sector is down twenty percent and the price of oil is flirting with $90 a barrel, maybe $100 to come. Yet the quarterly growth rate was just reported at 3.9%, led by surges in consumer spending and exports. It is wrong to think we have turned the corner, but it is also wrong to think the doomsayers have been giving accurate predictions.
The economics of Halloween
A reform proposal from Kevin Hassett: "So let’s do something to reform Halloween. The first step would be for Halloween donors to give kids money instead of candy. Kids could then go to the supermarket the next day and binge on the candies they really like. That solution would get an A-plus in economics."
Linked here. But alas, in-kind transfers are often more efficient than cash gifts, and that holds for public policy as well. (Imagine giving "money to buy kidney dialysis," instead of "kidney dialysis," and see how many people fake kidney disease.) The candy transfer insures that a) mostly young kids do the asking, and b) at some point everyone just stops and goes home. I’ve long wanted to know how much movie attendance rises on Halloween evening, given that the real cost of going is suddenly and temporarily much lower.
Addendum: Here is a new paper on cash vs. in-kind transfers.
The economic value of teeth
Looks and height matter for economic outcomes, so why not teeth?
Healthy teeth are a vital and visible component of general well-being, but there is little systematic evidence to demonstrate any impact on the labor market. In this paper, we examine the effect of oral health on labor market outcomes by exploiting variation in access to fluoridated water during childhood. The politics surrounding the adoption of water fluoridation by local water districts suggests exposure to fluoride during childhood is exogenous to other factors affecting earnings. We find that children who grew up in communities with fluoridated water earn approximately 3% more as adults than children who did not. The effect is larger for women than men, and is almost exclusively concentrated amongst those from families of low socioeconomic status. Of the channels explored, we find that occupational sorting explains 14-23% of the effect, suggesting consumer and employer discrimination are the likely driving factors.
That is by Sherry Glied and Matthew Neidell; here is the paper on-line, note their findings are preliminary not final. Teeth seem to matter less for rich people because they have later chances to cover up — using money of course — for bad childhood teeth. The poor apparently remain stuck with their teeth problems. You might think that childhood exposure to fluoride is just proxying for quality of county and thus county human capital in some way, but the fluoride/earnings correlation seems to hold up even when variables are used to adjust for county quality. Can you dissent from a paper that writes:
…the anecdotes described above suggest that people who lack teeth may have trouble finding jobs.
I thank a loyal MR reader for the pointer.
Addendum: Here is Caplan (and Blinder) on the economics of teeth.
Borjas on Indoctrination
According to FIRE, The Foundation for Individual Rights in Education:
The University of Delaware subjects students in its residence halls to
a shocking program of ideological reeducation that is referred to in
the university’s own materials as a “treatment” for students’ incorrect
attitudes and beliefs….The university’s views are forced on students through a
comprehensive manipulation of the residence hall environment, from
mandatory training sessions to “sustainability” door decorations.
Students living in the university’s eight housing complexes are
required to attend training sessions, floor meetings, and one-on-one
meetings with their Resident Assistants (RAs). The RAs who facilitate
these meetings have received their own intensive training from the university, including a “diversity facilitation training” session at which RAs were taught, among other things,
that “[a] racist is one who is both privileged and socialized on the
basis of race by a white supremacist (racist) system. The term applies
to all white people (i.e., people of European descent) living in the
United States, regardless of class, gender, religion, culture or
sexuality.”
George Borjas writes:
Why am I super-sensitive to this? Because as a young boy I myself went through a one-year course in ideological reorientation. I attended an elite elementary Catholic school in Havana. Castro took over, the Catholic school was shut down, and I got transferred to a revolutionary school where the entire day was spent teaching Marxist-Leninist ideology. Luckily, this lasted only a year and I continued my education in Miami (where the entire school day was instead spent talking about the upcoming football game). I am certain that the blind zealotry that I saw in the young teacher’s eyes that year turned me off from that particular way of viewing the world for the rest of my life. One can only hope that many of the students forced to attend the re-education programs at Delaware and other universities react in the same way.
I’d be interested to hear from anyone with first hand experience of the University of Delaware program.
Clive Crook is blogging
Here, some of the early posts are responses to Krugman and DeLong. Clive has been the FT’s Washington columnist since April 2007 and is formerly of The Economist.
Assorted Links
- The
Impact of Milton Friedman on Modern Monetary Economics. A nice review by Edward Nelson and Anna Schwartz of Friedman’s thought and influence over monetary policy that also, in the author’s words, sets the record straight on Paul Krugman’s ‘Who was Milton Friedman.’
- The world may be getting smaller but big Americans are sinking the boats at Disney’s It’s a Small World.
- The Ayn Rand Lexicon is now online.
Carmen Laforet
Nada, her book, is even better, a true case of a rediscovered classic, now out in a first-rate English translation.
America fact of the day
America has 62 percent of the world’s [scientist] stars as residents, primarily because of its research universities which produce them.
Here is the paper, and, addended, here are non-gated versions.
School Choice: The Findings
This new Cato book is a good introduction to the empirical literature on vouchers and charter schools. For my taste it places too much weight on standardized tests, but admittedly that is the main way to compare educational results over time or across countries. I believe the lax nature of government schooling in the U.S. often leaves the upper tail of the distribution free to dream and create, but I would not wish to push that as an argument against vouchers. If you’re interested in bad arguments against vouchers, and their rebuttals, Megan McArdle offers a long post.
