We are conformists who to some extent become regional thinkers
…voters appear to be sorting on non-political neighborhood attributes that covary with partisan preferences rather than explicitly seeking politically congruent neighbors. But, critically, we demonstrate through a simulation study that the estimated partisan bias in moving choices is on the order of five times too small to sustain the current geographic polarization of preferences. We conclude that location must have some influence on political preference, rather than the other way around, and provide evidence in support of this theory.
Unemployment is always about the supply side too
We document that unemployment is increasing with GDP per capita. Furthermore, we show that this fact is accounted for almost entirely by low-educated workers, whose unemployment rates are strongly increasing in GDP per capita, rather than by high-educated workers, whose unemployment rates are not correlated with income.
That is from Ying Feng, David Lagakos, and James E. Rauch. In their core model, reallocating low-education workers to the formal sector makes them harder to reemploy at short notice, in contrast to the informal sector and self-employment. An alternative view, not mutually exclusive, is that in poor societies low-education workers simply have to take jobs, due to extreme need.
You will on Twitter, and in blogs, see various attempts to mock supply-side theories by showing increasing employment, often accompanied by remarks such as “I didn’t know video games were getting so much worse.” Such comments are a mistake and a misunderstanding. Proper supply-side theories do not deny the relevance of the demand-side, and so nor should demand-side theories deny the relevance of the supply-side. It is possible to believe both “supply-side factors made the labor market recovery slower than usual,” and “demand-side forces have at this moment overcome many of those problems.” Just look at the disability rolls. The ability to receive disability kept many people out of the labor force in earlier years, slowing down labor market recovery. Yet it is also true that currently demand-side forces are creating jobs good enough that many of those same people finally are leaving the disability rolls.
The deeper lesson of course is that — outside of the short-run — demand-side forces are supply-side forces. And right now we are out of the short run indeed, at least when it comes to macroeconomic shocks.
Tuesday assorted links
1. Do conservatives prefer nouns?
2. The world’s longest sea bridge in pictures.
3. Wage growth is slower for just about everybody (in the U.S.) (NYT).
4. Preserving the visual history of K-Mart.
5. My podcast with Sean Carroll, with an interlude on cosmology and quantum mechanics and whether we are all doomed really, really soon. Transcript too.
My Conversation with John Nye, what should I ask him?
Soon I will be having a Conversation with my esteemed colleague John V. Nye, one of the smartest people I know. John is an economic historian but also a polymath with broad-ranging interests, including travel, classical music, chess, education, “institutions,” Asian food, the Philippines (his home country), and much more.
So what should I ask him?
In a short number of years this story will sound like madness
Canada installs Chinese underwater monitoring devices next to US nuclear submarine base
- Ocean Network Canada confirms addition of hi-tech sensors built by Chinese scientists to its marine observatories in Pacific Ocean
- US state department has ‘nothing to say’ on matter
Full story here, here is some further context from the piece:
Whatever the devices end up being used for, Chen Hongqiao, a researcher at the Centre for Canadian Studies at Guangdong University of Foreign Studies in Guangzhou, said there was no doubting the sensitivity of the issue.
“Deep sea observation networks are highly sensitive, and closely related to national security,” he said. “Countries don’t open them up to third parties unless there is a high level of trust and confidence.”
The decision to give China such access could have only come from highest corridors of power on both sides, he said.
“Such collaboration is very unusual. The implications go far beyond science, [so] it could have only happened with a nod from the top on both sides.”
Are we exporting Austrian business cycle theory?
We estimate that over a typical U.S. monetary easing cycle, EME [emerging economy] borrowers experience a 32-percentage-point greater increase in the volume of loans issued by foreign banks than do borrowers from developed markets, followed by a fast credit contraction of a similar magnitude upon reversal of the U.S. monetary policy stance.
And this:
This result is robust across different geographies and industries, and holds for U.S. and non-U.S. lenders, including those with little direct exposure to the U.S. economy. EME local lenders do not offset the foreign bank capital flows, and U.S. monetary policy affects credit conditions for EME firms, both at the extensive and intensive margin. Consistent with a risk-driven credit-supply adjustment, we show that the spillover is stronger for riskier EMEs, and, within countries, for higher-risk firms.
That is from a new NBER working paper by Falk Bräuning and Victoria Ivashina.
*Stubborn Attachments* opening week
I thank all of you buyers and reviewers for making the opening week of Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals such a success.
The book hit #1 in 4 Amazon browse subcategories over the last week:
– Macroeconomics
– Commerce
– Philosophy
– Theory of Economics, and also Comparative Economics
Why the U.S.-Saudi relationship has proven so enduring
That is the topic of my latest Bloomberg column, note I am continuing to see a larger backlash on the Saudi issue than one might have expected. The bigger underlying question is this: given all that has happened, so why is the United States still such an ally of the Saudis? It’s longstanding and thus not just about Trump’s possible business dealings. It’s also not just about the oil, here is one excerpt:
One feature of the geography of Saudi Arabia is that its major oil fields stand apart and can be taken over without controlling the major Saudi cities. That is one reason why the Saudis were so wary of Saddam Hussein.
That risk means the Saudis are especially dependent on American military protection. In turn, the U.S. knows it has a lot of leverage over the Saudis, and therefore making deals with the Saudis involves easier enforcement and lower transaction costs. The same cannot be said of deals with Iran. So in the Saudi-Iran rivalry, the U.S. ends up siding with the Saudis.
Historically, Iran has been a very difficult country to capture or control, and the population has fought fiercely to defend Iranian territorial integrity. Iran doesn’t need American protection to the same degree as do the Saudis, and so Iran is more willing to be prickly or openly hostile to the U.S.
Iran shared a border with the former Soviet Union (though not Russia) and shares Caspian Sea rights with Russia, and the two countries often have had close and cordial relations. Iran also is easier than Saudi Arabia for China to reach with its One Belt, One Road initiative, which aims to build close ties with the countries to its west. In sum, Iran is going to diversify its geopolitical bets, which pulls it away from the U.S., even if the issues surrounding nuclear weapons and support for terrorism somehow were resolved.
And this:
Of course, the Saudis have abused their position. They are dependent on the U.S., but they also know America has few other potential regional partners for cooperation on such a large scale. And so the Saudis have engaged in human-rights abuses over the decades, figuring it may harm but will not irrevocably damage relations with America.
There is more at the link, analytical throughout.
Monday assorted links
1. Who gained and lost the most from the Seattle minimum wage hike? (NYT) Paper here.
4. Is the Saudi influence machine running out of steam?
5. Actors are digitally preserving themselves to continue working beyond the grave: “The suite of services that the company offers actors includes a range of different scans to capture their famous faces from every conceivable angle—making it simpler to re-create them in the future. Using hundreds of custom LED lights arranged in a sphere, numerous images can be recorded in seconds capturing what the person’s face looks like lit from every angle—and right down to the pores.” And:
“Digital Domain has scanned signature hairstyles, wardrobes, and props as well. The total process takes up to two days and generates five to 10 terabytes of data, depending on the extent of detail being recorded. The full selection of services can cost a million dollars.”
*First Man* and the great stagnation
I enjoyed this movie, although I would not describe it as a must-see. It is best for showing the rickety and claustrophobic nature of the moon landing program.
Three points struck me in particular, both concerning progress. First, the space shots in this movie are not better than those of Stanley Kubrick in his 1968 film 2001: A Space Odyssey. There are even several Kubrick homage shots, and they don’t look any better than the originals, and arguably somewhat worse. Perhaps most cinematic progress has come in shooting or better yet constructing dense scenes, but that does not apply to space.
Second, I walked to my (non-fancy) car and turned on the ignition right after watching the movie. It was immediately striking how much better and more reliable was the software in my car than in the whole well-funded moon program. In this sense technological progress has been immense. That said, most cars in operation today are not that much better than cars from 1969, and they perform more or less the same functions, albeit more safely. Improving car manufacture is not that hard, but improving the usefulness of cars in our daily lives is where the problem lies. So this supports the “the consumer space is already filled out” interpretation of the great stagnation.
Third, perhaps it is the very absence of the internet and advanced information technology that made the moon program possible. When Armstrong arrives at the moon, you realize it is pretty boring and it has not so much to offer, either in 1969 or today. Would they have gone to such trouble if there had been better problems to work on? Well before the end of the movie, I found myself wanting to check my email and refresh my Twitter feed.
By the way, this movie has bombed at the box office, perhaps not a good sign for the revival of adventure in contemporary culture.
*Frederick Douglass: Prophet of Freedom*
Although it can never really be measured, he may also have been, along with Mark Twain, the most widely traveled American public figure of his century…It is likely that more Americans heard Douglass speak than any other public figure of his times. Indeed, to see or hear Douglass became a kind of wonder of the American world. He struggled as well, with the pleasure and perils of fame as much as anyone else in his century, with the possible exceptions of General Ulysses S. Grant or P.T. Barnum. Douglass’s dilemma with fame was a matter of decades, not merely of moments, and fraught with racism.
That is from the new David W. Blight biography of Douglass, outstanding in every way, appearing to rave reviews, and slated for the top tier of the year’s “Best of 2018” non-fiction list.
17-minute Tyler Cowen talk on charter cities
This was for Mark Lutter’s Center for Innovative Governance Research.
Sunday assorted links
2. How rent control can raise rents (you need to read through a bit).
A new “ideal” proposal for immigration reform
The IDEAL policy creates a long-term visa program in which 3mm immigrants are selected to live in the U.S. per year.
The IDEAL policy is simple and includes the following details:
- Immigrants pay $30,000 for a five-year live/work visa renewable for an additional five years at no additional cost contingent upon each IDEAL immigrant proving to be a net asset to the U.S. economy.
- At the end of ten years, immigrants whose impact to the U.S. is net positive are eligible for citizenship. Immigrants with a net negative impact will be asked to leave the U.S. Acceptance and impact will be determined by a pre-determined scoring system.
- IDEAL visa-holders are ineligible for any government benefits until attaining full citizenship and IDEAL visa-holders will be required to secure health insurance through an employer or through other means during those ten years.
Each applicant is given an acceptance score and ranking based on the following criteria:
- Age;
- Education level;
- English language proficiency;
- Existing job offers from one or more U.S. companies;
- Previous successful U.S. work history; and
- Willingness to live in a IWC (Immigrant Welcoming Community).
An Immigrant Welcoming Community meets all of the following criteria:
- An urban or rural community in the bottom 25% of U.S. income;
- A community that has suffered population losses over the preceding decade; and
- A community that opts-in to the IDEAL program via local government consent.
Here is the full website.
Memphis
A few days ago, a few of you thought I was dumping on Memphis. I did say the city is not an economic development success story, but it is perhaps my favorite place to visit in the American South. It has the best musical traditions, for instance generating Jerry Lee Lewis, Elvis, Carl Perkins, and Johnny Cash, all at more or less the same time, with many others later including Lonnie Mack, Isaac Hayes, and Booker T. It is one of the classic barbecue cities, most of all for ribs. Beale Street remains a wonderful place to hear music, as it is not nearly as ruined by tourists as Broadway in Nashville or Bourbon Street in New Orleans. It is also one of the American cities most likely to look as if it is still 1963, or is that 1957? Finally, Memphis is the starting off point for a drive down Highway 61 into the heartland of the Mississippi Delta, one of the essential American journeys and yes you still can hear rural blues music there.
If you have never done a three-day Memphis trip, I would strongly urge this upon you.