Will having China as a geopolitical enemy help revitalize the United States?
“Probably not” is the conclusion of my latest Bloomberg column. Here is one excerpt:
The Soviets had a string of leaders who were well-suited to play movie villains. Stalin murdered millions and radiated evil. Khrushchev was more moderate in terms of domestic policy, but in New York he banged his shoe on the table and shouted “We will bury you!” He also moved Soviet nuclear weapons into Cuba. Brezhnev came across as a crusty, malevolent stiff.
Chinese president Xi Jinping, in contrast, looks and acts not much different than many other world leaders. The standing joke in China, though often banned on Chinese social media, is to compare him to Winnie the Pooh because of his posture, his walk and what sometimes appears to be a kind of ambling geniality. As for earlier Chinese leaders, post-Mao, most didn’t have much of a profile in the U.S. at all.
Do read the whole thing. International rivalries can indeed help make countries great, but so far the American rivalry with China is not having that effect, and probably will not anytime soon.
Note furthermore that China’s “low publicity” approach implies the biggest China hawks and warners should be those who know the country relatively well (as opposed to the usual equilibrium where the expats are more sympathetic), a regularity which I believe is born out by the facts (thanks to D. for this point).
To Serve and Collect
My latest paper (co-authored with Michael Makowsky and Thomas Stratmann) is To Serve and Collect: The Fiscal and Racial Determinants of Law Enforcement (forthcoming in the Journal of Legal Studies):
We exploit local deficits and state-level differences in police revenue retention from civil asset forfeitures to estimate how incentives to raise revenue influence policing. In a national sample, we find that local fine and forfeiture revenue increases at a faster rate with drug arrests than arrests for violent crimes. Revenues also increase at a faster rate with black and Hispanic drug arrests than white drug arrests. Concomitant with higher rates of revenue generation, we find that black and Hispanic drug, DUI, and prostitution arrests, and associated property seizures, increase with local deficits when institutions allow officials to more easily retain revenues from forfeited property. White arrests are broadly insensitive to these institutions, save for smaller increases in prostitution arrests and property seizures. Our results show how revenue-driven law enforcement can distort police behavior.
We find that drug arrests, especially of blacks and Hispanics, generate revenues so police have the motive and opportunity to engage in revenue driven policing. What about the means? Arrests for murders or robbery are limited by the number of murders and robberies. Drug arrests, however, are more of a police choice variable, able to be ramped up or down almost at will. Thus, in addition to motive and opportunity, police also have the means for revenue driven law enforcement.
How can we test for this effect? In some states, police get to keep the revenues they collect from forfeitures but these states are not randomly assigned. Thus, we use deficits which are plausibly randomly assigned (relative to our variables of concern) and we identify off of the interaction of the two i.e. the marginal impact of additional budget deficits in states where seizure revenue is retained.
We find that black and Hispanic arrests for drugs, DUI, and prostitution arrests are all increasing with deficits in states where seizure revenues are legally retained while white arrests are broadly insensitive to deficits.
Our identification strategy is somewhat coarse so we are by no means the final word on this issue but surely it is time to forbid police departments from keeping the revenues they collect.
We conclude:
The prospects for justice are dimmed when the probability an individual is arrested varies not only by the character of their transgression but also by the potential windfall they present to the public coffer.
Mike Makowsky has an excellent tweetstorm going into further details.
Comments on *Emergent Ventures, a new project to foment enlightenment*
You can put your comments on the main post here on this post.
*Emergent Ventures*, a new project to help foment enlightenment
As of today, we at Mercatus, led by me, are formally initiating a new project called Emergent Ventures.
Here is the Mercatus press release. Here is my short podcast on the venture. Here is the landing page of the project, for receiving further updates. Here is the GMU press release.
Most importantly, here is the application page, and here is its opening summary:
We want to jumpstart high-reward ideas—moonshots in many cases—that advance prosperity, opportunity, liberty, and well-being. We welcome the unusual and the unorthodox.
Our goal is positive social change, but we do not mind if you make a profit from your project. (Indeed, a quick path to revenue self-sufficiency is a feature not a bug!)
Projects will either be fellowships or grants: fellowships involve time in residence at the Mercatus Center in Northern Virginia; grants are one-time or slightly staggered payments to support a project.
We encourage you to think big, but we also will consider very small grants or short fellowships if they might change the trajectory of your life. We encourage applications from all ages and all parts of the world.
Imagine you are the next Satoshi, trying to invent “the next Bitcoin.” Or say you are a budding public intellectual, seeking the reach and influence of Jordan Peterson, by building your social media presence. Or an 18-year-old social science prodigy, hoping to fly to Boston to meet a potential mentor. What about moving to Sacramento to write a quality blog covering California state government? I very much hope you will apply for a grant at Emergent Ventures. Most of all, I hope you are applying with ideas that we haven’t thought of yet.
We will be running Emergent Ventures with a minimum of overhead costs and a maximum of attention on upside potential from your projects. This means:
1. The money is given away, not spent on staff or creating a new self-perpetuating bureaucracy. That also keeps our incentives away from self-perpetuation and risk-aversion.
2. There is no committee to screen applications, or to keep the “crazy” ideas from getting to my desk. I will personally review each and every application, albeit with additional refereeing assistance from Mercatus, the Mercatus network, and my own personal network.
3. If you receive money, the “report back” requirements are minimal, typically a 1-2 page report a year or so later, and possibly future reports too. If you can’t show value or progress in a short report, you probably haven’t produced it.
4. The proposal you submit is limited to 1500 words, though with an option of supplementary documents. If you can’t get to the point and explain your plans succinctly, we will not fund you.
5. If you receive a grant, we at Mercatus — and also I personally — will do our very best to help you in your endeavors.
Think of the goal of Emergent Ventures as supporting new ideas and projects that are too difficult, too hard to measure, too unusual, too foreign, too small, or…too something to make their way through the usual foundation and philanthropic process.
If you wish, you also can think of Emergent Ventures as a bet on my own personal judgment. For some time to come, I will be devoting significant time to Emergent Ventures every single day (with a few exceptions, mostly travel-related). Most applications will be processed promptly.
If you are interested, as a donor, in supporting Emergent Ventures, please write to my email. It is a tax-deductible contribution. Within a short period of time we expect to have a total of $4 million lined up, from a very brilliant set of donors, but we hope to do more.
Those of you who are applying should use the main site (not my email), so I hope you will apply here.
If you tweet, write on Facebook, blog, write as a journalist, work as a professor or teacher — I am asking you to please do your best in helping us to publicize this endeavor.
Addendum: For the curious, here is one bit from the application: “…what is one mainstream or “consensus” view that you absolutely agree with? (This is our version of a “trick” question, reversing the now-fashionable contrarianism.)”
Wednesday assorted links
1. The most unwanted song, explanation here. I still like it more than most of what is on the radio. And it is certainly better than the most wanted song.
2. The best albums of the 1980s (was it really so bad?).
3. NASA’s next rockets might say Budweiser on the side. And thwarted markets in everything:
In 1993, a Georgia company called Space Marketing proposed putting a billboard in space so big that it would be visible from Earth. But the plan was met with disapproval from some in Congress, who derided the idea, saying space was a commons that should stay free of advertising.
Edward J. Markey, then a Massachusetts congressman, lamented the possibility of children wishing “upon a falling billboard.”
My Conversation with Michele Gelfand
Here is the audio and transcript, and here is the summary:
Michele Gelfand is professor of psychology at the University of Maryland and author of the just-released Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire Our World. In her conversation with Tyler, Michele unpacks the concept of tight and loose cultures and more, including which variable best explains tightness, the problem with norms, whether Silicon Valley has an honor culture, the importance of theory and history in guiding research, what Donald Trump gets wrong about negotiation, why MBAs underrate management, the need to develop cultural IQ, and why mentorship should last a lifetime.
Here is one excerpt:
COWEN: As you know, it’s a common distinction in cross-cultural analysis to call some cultures individualistic and others collectivistic. How does tightness and looseness differ from that distinction? What do you pick up that, say, the work of Triandis does not?
GELFAND: Actually, Triandis is my mentor. I went to Champaign to work with him. I did a lot of research on collectivism and individualism. For a long time, that was the one dimension that we looked at in cross-cultural psychology.
It’s almost akin to, in personality psychology, only studying extroversion to the neglect of other dimensions, like neuroticism. In cross-cultural psychology, we got a little bit narrow in what we were studying. Collectivism-individualism is related to tightness but distinct.
Part of the problem we’ve had is, we’ve confounded cultures in our research. We’ve been studying East Asia, which is both tight and collectivistic, with the United States and other Western cultures, which tend to be loose and individualistic. So they have been confounded.
But when you think about the off-diagonals of that two-by-two, you can imagine cultures like Germany, Switzerland, Austria that tend to be pretty individualistic. They emphasize privacy. They’re not hugely group and family oriented, but they’re relatively tight. They have strong rules and punishments for deviance.
On the flip side, you can think about Latin American cultures — in our data, that’s Brazil or Spain — that tend to be pretty family oriented and pretty collectivistic, but they’re rather loose.
In a lot of ways, you can disentangle that variation, even if they’re related. They tend to be related about 0.4. That’s found both in modern nations and also traditional societies. At the state level, they also tend to be related but again distinct. Only in that case, it’s about 0.2 or 0.3, the correlation between tightness and collectivism.
And:
COWEN: Overrated or underrated, Staten Island?
GELFAND: [laughs] I would say probably underrated. That’s because I actually am familiar with Staten Island. We have relatives that live there. It’s probably the last undiscovered place around the city. Brooklyn has become a chichi place to live, but Staten Island has not. There’s great delis there. I’ve spent some time there.
And:
COWEN: Putting aside your political views, but just if you observe Donald Trump as a negotiator — as a psychologist, what strikes you?
GELFAND: Donald Trump has a very classic negotiation style. It’s a distributive negotiation style. It’s a win-lose style. It works in certain contexts, especially contexts where there’s one issue or when there’s very little expected future interaction.
What Donald Trump does is, he takes that style to international [laughs] politics where these contexts, the structure of these situations is very different. There’s usually many issues at the table. There’s expected future interaction…His style is really mismatched with the context that he’s in.
Many of the best parts are at or near the end, so do read or listen all the way through. And you can buy Michele’s book here.
Update on Yonas and *Stubborn Attachments*
I thank you all for your pre-orders of my forthcoming book from Stripe Press, Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals (did you notice how the title draws from Liberty Fund?), due out October 16. It is my most philosophic book, most heartfelt book, and least current affairsy book, at least in the last twenty years.
As I explained in an earlier post, all of my receipts from the book are going to Yonas (not his real name), a tour guide in Ethiopia, near Lalibela, who wishes to start a travel business. I met Yonas during my Ethiopia trip last May.
Yonas already has received one installment of the money, due to the great efficiency of Stripe Press and Stripe proper (it is, after all, a payments company). He has bought a plot of land and a house on that land with the money from the pre-orders to date, a modest house by your standards I can assure you but nonetheless a big step up for him. Of course I (and he) hope to sell more copies. Now that he has an effective means of storing and saving wealth, the next step is for him to expand the scope of his travel guide operations, and you can help him in that endeavor, while you at the same time foment enlightenment more generally.
Here is the Amazon link.
So I hope — for several reasons — that you buy and also gift copies of the book. You might have noticed in the post below that Chris Blattman is somewhat skeptical of cash transfers as a means of bettering the lot of the poor, at least relative to his earlier views. But this experiment differs in at least one critical way: Yonas is not randomly selected, rather he is the one person whom I thought would make the best use of the money.
Buchanan and Wagner were right, fiscal policy is fairly pro-cyclical
Our study reveals a mixed fiscal scenery, where more than half of the countries are recently characterized by limited fiscal space, and fiscal policy is either acyclical or procyclical (though not as high the level of 1980s), notably post-GFC becoming even more procyclical in government spending when accounting for net acquisition of nonfinancial assets and capital expenditure (spending components do matter).
That is from a new paper by Joshua Aizenman, Yothin Jinjarak, Hien Thi Kim Nguyen, and Donghyun Park.
Chris Blattman is becoming more skeptical of cash transfers
His new paper is with Nathan Fiala and Sebastian Martinez:
In 2008, Uganda granted hundreds of small groups $400/person to help members start individual skilled trades. Four years on, an experimental evaluation found grants raised earnings by 38% (Blattman, Fiala, Martinez 2014). We return after 9 years to find these start-up grants acted more as a kick-start than a lift out of poverty. Grantees’ investment leveled off; controls eventually increased their incomes through business and casual labor; and so both groups converged in employment, earnings, and consumption. Grants had lasting impacts on assets, skilled work, and possibly child health, but had little effect on mortality, fertility, health or education.
And here is my earlier Conversation with Chris Blattman, in which a similar result is discussed.
Tuesday assorted links
1. The wisdom of Martina Navratilova (NYT).
2. Evan Osnos profile of Mark Zuckerberg (New Yorker).
3. Some observations on the economics of bookselling.
4. Conversations are typically limited to a maximum of four people.
5. The new science of seeing around corners.
6. A cathedral of lies, waste, and destruction.
7. Men receive more tennis point penalties than do women, in three major categories.
What has and has not changed in Guangzhou
That is the topic of my latest Bloomberg column, here is the opener:
I hadn’t been to Guangzhou in more than 30 years, and I wanted to see what I would remember.
And here is one bit:
How about the train ride between Hong Kong and Guangzhou? In 1988 I saw lone farmers plowing the field with their oxen. These days the journey brings you through Shenzhen, China’s tech capital, where many iPhones are assembled and which has eclipsed Guangzhou as a source of economic dynamism.
And yet I cannot conclude that Guangzhou is altogether a story of change and change alone.
That all said, Guangzhou is no longer an economic leader in China. Overall it struck me that Guangzhou has become a bit of an economic backwater, albeit at an enormous size and decent (compared to the rest of China) standard of living.
And what do the investors think?
We survey a representative sample of U.S. individuals about how well leading academic theories describe their financial beliefs and decisions. We find substantial support for many factors hypothesized to affect portfolio equity share, particularly background risk, investment horizon, rare disasters, transactional factors, and fixed costs of stock market participation. Individuals tend to believe that past mutual fund performance is a good signal of stock-picking skill, actively managed funds do not suffer from diseconomies of scale, value stocks are safer and do not have higher expected returns, and high-momentum stocks are riskier and do have higher expected returns.
That is from a new paper by James J. Choi and Adriana Z. Robertson.
Taxes and innovation: shout it from the rooftops
We find that taxes matter for innovation: higher personal and corporate income taxes negatively affect the quantity, quality, and location of inventive activity at the macro and micro levels. At the macro level, cross-state spillovers or business-stealing from one state to another are important, but do not account for all of the effect. Agglomeration effects from local innovation clusters tend to weaken responsiveness to taxation. Corporate inventors respond more strongly to taxes than their non-corporate counterparts.
That is from a new NBER paper by Ufuk Akcigit, John Grigsby, Tom Nicholas, and Stefanie Stantcheva, via Adam Ozimek.
What is tragedy? (response to a query)
So what is tragedy?
“A work is a tragedy, Aristotle tells us, only if it arouses pity and fear. Why does he single out these two passions?” That seems wrong to me. For one thing, it is overly subjectivist. Why start with the passions of the audience? What do they know?
I think of a tragic story as embodying a few elements:
1. The downfall represents some kind of principle.
2. Some aspects of the downfall are, in advance, quite expected in the objective sense.
3. The actual story combines both inevitability and surprise in a somewhat contradictory manner. (I reintroduce the subjective ever so slightly here.)
4. The villain probably should have some sympathetic and/or charismatic qualities.
5. There should be a quite particular logic to how the actual events unfold, as they might be related to the above-mentioned principles in #1.
6. A confluence of aesthetic and metaphysical and personality-linked forces should “conspire” to bring about the final outcome. There should be a melding and a consilience to the evolution of the story.
Some near-perfect tragedies are Don Giovanni, The Empire Strikes Back, The Sopranos (evokes nostalgia in me rather than fear or pity), and King Lear, among other works of Shakespeare. Don’t forget Homer, Melville, and the Bible.
Just stay away from Aristotle on this one.