Shantaram
This 936-page romantic canvas of the Indian underworld, and the adventures of one scoundrel therein, is one of the best bad books I have read. Try this passage:
It seemed impossible that a modern airport, full of prosperous and purposeful travellers, was only kilometers away from those crushed and cindered dreams.
It is a must for all lovers of Bombay. Here is information on the author, who was an anarchist, escaped criminal, and heroin dealer before hitting it big. Most of this tale draws upon his life. Buy it here; if you think you might like it you will.
Solow on Schumpeter
Mark Thoma offers some excerpts. I should note that the TNR web-site still refuses to let me — a paid subscriber — in.
Addendum: This link now seems to be working for all.
How to prepare for your trips, culturally
At this point in life the answer is usually that I do nothing other than call up memories of previous cultural consumption. If you are not at that point, Wikipedia is an excellent source for fiction and movies from a country. When it comes to music, consult the various Rough Guides to music; I mean the books, not the mediocre CD collections or the so-so travel guides. Also try the AllMusic guide, either paper or on-line; when it comes to music neither Amazon nor Wikipedia is to be trusted ("why not?" is an interesting question, is it because too many people feel entitled to have an opinion about music?). Bring music on cassette, CD, or iPod, as soundtrack for your trip, and ask your driver to put on Radio East Africa. Finding the best non-fiction books is the hardest category to master. I still prefer shelf browsing at libraries and book superstores.
An MR request is another option. Matt Dreyer asks what I recommend for a trip to Greece and Turkey. Offhand I’ll say Herodotus, the usual Greek classics, Pamuk’s Snow and Istanbul books, Sarkan (a Turkish singer), Sufi music, Greek traditional music from 1930-1950 (there are some wonderful collections, look for the word rembetika), a study of Turkish and also Greek textiles, a picture book on Cycladic art, a book on Greek sculpture at the National Museum in Athens, Norwich on the Byzantine empire, Michael Grant on the ancient world, Lord Kinross on the Ottoman centuries, a biography of Ataturk and there are a few good recent books which survey contemporary Turkey.
Your tips, either general or specific, are of course welcome.
Education as the critical problem behind current inequality
Here is an excerpt from my New York Times column today:
The return for a college education, in percentage terms, is now
about what it was in America’s Gilded Age in the late 19th century;
this drives the current scramble to get into top colleges and
universities. In contrast, from 1915 to 1950, the relative return for
education fell, mostly because more new college graduates competed for
a relatively few top jobs, and that kept top wages from rising too
high.Professors Goldin and Katz portray a kind of race.
Improvements in technology have raised the gains for those with enough
skills to handle complex jobs. The resulting inequalities are bid back
down only as more people receive more education and move up the wage
ladder.Income distribution thus depends on the balance between
technological progress and access to college and postgraduate study.
The problem isn’t so much capitalism as it is that American lower
education does not prepare enough people to receive gains from American
higher education.Bottlenecks currently keep more individuals from improving their education…
Note that education is a fundamental issue behind the kinds of inequality we should worry about most, namely the failure of many poor people to do better over time. It is not the fundamental problem behind every kind of measured inequality, as the column itself explains. It does not, for instance, explain rising gains to the top one percent. Inequality debates too often conflate different phenomena.
Here is a non-gated version of the very interesting Goldin-Katz paper which I cover.
In a dynamic era does educational access have much of a chance of keeping up with technological improvement? Even if we had optimal educational policies, which of course we don’t, modern technology goes "whoosh," education often just pokeys along.
Brad DeLong offers related commentary, though I think he is too quick to accuse Becker and Murphy of confusing the Marshallian scissors. Mark Thoma offers commentary and relevant links. Concerning Krugman’s claims, in general the data (see David Card’s Econometrica 2001 piece, plus the work of James Heckman) still find relatively high returns to additional education.
Contingency
On my first trip to adopt in China, I happened to sit at a table
next to another adopting couple from the United States. They were
older, with no prior children, and had been assigned a three- or
four-year-old girl. If memory serves me correctly, the father was a CEO
of a large firm in New Jersey. They seemed like very nice people. The
child that was assigned to them was very headstrong. She did not want
to go with her adoptive parents and proceeded to throw tantrums,
screaming, throwing things and spitting on and punching them for
several days. They decided they couldn’t go through with it, and the
girl was returned to the orphanage. My understanding is that she would
not be eligible for adoption (at least, not internationally) in the
future.The next day, the couple told me, another three-year-old was brought
over from an orphanage. The first thing she did when she met them was
say, in English, “I love you, Mommy. I love you, Daddy.” The person
who had transported the child from the orphanage had taught her the
words. She had no idea what she was saying, but it didn’t
matter. Needless to say, this little girl went home with them to New
Jersey.
That is from Steve Levitt, in one of his best posts.
Cell phone monies
I heard a report that in northern Tanzania they are using cell phone credits in lieu of traditional money. If you want to pay for something, just make a call to the provider and transfer cell phone credits to the other trader’s account. Why should those credits be any less liquid than currency? They are easier to store and transfer and just about everybody uses them.
Monetary economics in Africa is very, very difficult. It must start with the presumption that money is the asset with the highest carrying costs, if only because your relatives find it so easy to take away from you.
Markets in Everything
Funeral insurance group Monuta is to cut funeral costs by €150 if the
deceased is an organ donor. Monuta, the biggest funeral insurance group
in the country [the Netherlands], said it was responding to calls by the Kidney
Foundation.
Thanks to Dave Undis at Lifesharers for the pointer.
The Legacy of Max Weber
This obscure but interesting Ludwig Lachmann book is now available on-line for free. I studied with Lachmann at NYU when I was very young, and he helped make me more contrarian. This short book is about how institutions coordinate plans, and how the sociological legacy of Weber is an indispensable component of any theory of Hayekian spontaneous order. From that description alone, you ought to know whether or not you will like it.
Why does America have tipping?
Back in the days of Fifty Questions, a loyal MR reader asked:
I am interested in the economics of tipping. This seems appropriate, since you seem to eat out a lot. Why in the United States is the pay of waitstaff structured as it is as compared to elsewhere, where tipping is less expected?
The best way to understand tipping is to go to a restaurant you will never patronize again. Once your meal is over, when she is not looking, leave your tip not on your table but rather on another table she served. That way she still gets her money and you have in no way ripped her off.
That is psychologically tough to do. You fear the waitress will think you are a lout and a deadbeat. Of course in no-tipping countries, or for that matter non-tipping sectors, this dilemma does not arise.
The real question is why America is structured so that waiters and waitresses can sell feel-good services ("you are a generous tipper and a fine man") to strangers, in return for money. In other words, how did waiters end up as fundraisers, noting that the final Marshallian incidence may lower their wages by the amount they receive in tips? Most cross-cultural explanations of tipping start with the agency problem between diners and servers ("can you bring my drink now?"), but I believe that is the wrong approach. I view tipping as correlated with effective fundraising in other areas, and Americans as being especially willing to set this additional fundraising arena in motion.
Articles of total wisdom, part II
Robin Hanson’s health care petition
Whereas, our single clearest data point regarding the marginal value of this spending, the US-funded RAND health insurance experiment,
where from 1974 to 1982, 7700 subjects were randomly assigned to 3 to 5
years of free or not free medicine, found no significant evidence of a
substantial health effect of more medicine, confirming the usual results of continuing aggregate health–medicine correlation studies,
We the undersigned petition the US to
publicly conduct a similar experiment again soon, this time with at
least ten thousand subjects treated for at least ten years, which
should be feasible for a half billion dollars, or one part in forty
thousand of annual medical spending. Whatever other purposes such an
experiment pursues, it should try to make clear the aggregate health
effects of variations in aggregate medical spending, variations induced
by feasible regimes of quality control, including free patient choice
induced by a varying aggregate price.
Here is the link. I doubt if upping the number of subjects will much change the results. As long as we are playing mad scientist, I would prefer some disaggregated tests, namely:
1. How much better off are the poor uninsured if they get health insurance? (Financially much better off but in health terms only slightly better off is my current guess, and yes there is already some evidence here.)
2. How much less healthy would the well-insured be if they had to consume thirty percent less health care?
3. How much healthier would we be if we retargeted expenditures to some commonly recommended areas, such as pre-natal care and prescription drugs?
And my favorite is:
4. How much would health care cost if we simply banned all health insurance and modified forms thereof?
Except possibly for #1, these are not easy experiments to run, and yes computational modeling would beg the relevant questions. But I think #3 — or even the thought thereof — poses the biggest problem for Robin’s worldview that medicine doesn’t do us much good. Robin is a real world innovator, a hands-on, duct tape kind of guy, so he can’t retreat into the claim that we cannot possibly parse current expenditures more effectively. Lots of health care does lots of good, and from there we can pick up the ball and run with it.
For more on Robin’s revisionist health care views just scroll through the last week’s entries on his blog.
Markets in truly *everything*
The University of Nottingham Business School is now offering an MBA in corporate social responsibility.
Here is more.
The cultural foundations of capitalism
Sahil, a loyal MR reader, asks:
I
read your blog post about Roger Scruton’s new book, which you praised
for giving a "good sense of just how much cultural background is needed
to sustain liberty." That’s an interesting notion. Do you have
recommendation for books that examine this very idea in a more
systematic way? I’m sure they’re out there, and I’d be interested to
read them.
I’ll offer a few suggestions: all of Max Weber, the books by Lawrence Harrison, Alan MacFarlane on English individualism, Jonathan Israel on the Dutch Republic, Joseph Conrad, Levi-Strauss’s Triste Tropiques, Rene Girard on Christianity, anything good on English history, Hoskyns on Russian history, Albion’s Seed, IQ and the Wealth of Nations, Gilbert Freyre on Brazil, de Tocqueville, Sarmiento on Argentina, Louis Hartz, and John Gunther on America. The book "The Influence of the African-American Tradition on the American Ideal of Liberty" remains to be written. Nor have I scratched the all-important and largely non-European notions of liberty from the Nordic regions, which fed into the English success.
Pro-commercial norms are not scarce, as is evident here in Zanzibar. But those norms get you only to a medieval standard of living; as Mancur Olson stressed, they do not on their own support the structures of large-scale capitalism. It is harder to convince people to place larger abstract ideas above immediate duties to friends, family, and clan, but that is indeed the central feature of the problem.
Comments are open, what do you all recommend?
The NBA study of referee bias
As a response to Justin Wolfers and Joseph Price, the NBA financed a study supposedly showing there is no racial bias in refereeing. Here is a WSJ analysis of that study. Here is part of what they found:
Columbia University statistician Andrew Gelman, who has blogged
about the Wolfers-Price study and participated in a conference call
with Segal and me, said, “What the statistics tell you is that there’s
a pattern in the data that’s not explainable by chance.” University of
California-Irvine statistician Hal Stern told me the NBA’s study “can’t
be said to disprove the Price-Wolfers analysis.”Meanwhile,
the NBA’s study didn’t include players who weren’t called for any
fouls, making Segal’s results “suspect,” according to Mr. Gelman. Mr.
Fluhr responded, “I’m not sure if you’re looking at non-calls, it would
affect the data.” He added that Segal had the data necessary to
incorporate such players, but didn’t consider the data relevant,
instead only focusing on foul calls. Messrs. Wolfers and Price included
all players who appeared in the games they examined.
The NBA does promise to examine non-calls and redo some of the results. I do not think we have yet gotten to the bottom of this, but my "haven’t read anything but the initial study" intuition (and Steve Levitt’s comments; see also Voxbaby) is that the result of bias will hold up.
Thanks to Chris Masse for the pointer.
Addendum: Wolfers claims the NBA study supports his results.
Wolfowitz at the World Bank
In an excellent piece, Sebastian Mallaby writes:
…the biggest misconception about the bank is that it needs the goading
force of Wolfowitz to fight graft in poor countries. Even before
Wolfowitz arrived in 2005, the bank was trying to plug leaks in
government budgets, reform civil services and back new anti-fraud
units: From 2000 to 2004 the bank’s lending to improve public-sector
governance grew 11 percent annually. Wolfowitz’s goal was to take these
anti-corruption efforts to the next level. The instinct was noble; the
implementation horrible.
As an outsider it is hard to judge many aspects of Wolfowitz’s tenure. I take his continuing unwillingness to resign to be the biggest argument against his managerial abilities. He has lost the public relations battle and can no longer be effective. Why should he want the job any more? The obvious hypothesis is that he is emotionally committed to a losing battle, and is not placing much weight on the long-term interests of the institution he is running.
Addendum: Chris Masse points me to this good article on the crisis facing the World Bank. I would add that the real "corruption" problem is that the Bank’s board expects lucrative "development" contracts to be given to national firms of France, Germany, U.S., etc. In the final analysis the Bank has a strong incentive to push through loans, whether it should or not. Recipient nations have learned how to game this system very well. I believe this more or less legal form of corruption is well understood by Wolfowitz and his ultimate goal was to challenge the institution at its core.