The Raj Chetty course “Using Big Data to Solve Economic and Social Problems”
Syllabus, slides, and videos of the lectures, here you go.
Germany fact of the day
Was banning Indian child labor counterproductive?
The authors are Prashant Bharadwaj, Leah K. Lakdawala, and Nicholas Li, and here is the abstract:
While bans against child labor are a common policy tool, there is very little empirical evidence validating their effectiveness. In this paper, we examine the consequences of India’s landmark legislation against child labor, the Child Labor (Prohibition and Regulation) Act of 1986. Using data from employment surveys conducted before and after the ban, and using age restrictions that determined who the ban applied to, we show that child wages decrease and child labor increases after the ban. These results are consistent with a theoretical model building on the seminal work of Basu and Van (1998) and Basu (2005), where families use child labor to reach subsistence constraints and where child wages decrease in response to bans, leading poor families to utilize more child labor. The increase in child labor comes at the expense of reduced school enrollment. We also examine the effects of the ban at the household level. Using linked consumption and expenditure data, we find that along various margins of household expenditure, consumption, calorie intake and asset holdings, households are worse off after the ban.
I’m not trying to talk you into child labor with this post. Rather, you should be less confident in a lot of your moralizing about what is a good policy or an evil policy.
Hat tip goes to Dev Patel.
What I’ve been reading
1. The New Testament, translated by David Bentley Hart, Yale University Press. I’ve spent a good bit of time with this book, and if you own and read a few New Testaments, this should be one of them. It is the most accurate translation conceptually and philosophically, taking care to render the Greek of that period as faithfully as possible. It doesn’t try to make the text “read nice,” nor does it make all of the books sound the same. Of course, with any Bible translation you care both about a) what the authors really meant, and b) what other readers of the Bible thought they were imbibing. By the very nature of its virtues, this volume is weak on b) precisely because it is strong on a), and thus it probably should not be your first translation. Still, if you are tempted, this is more and better than “just another New Testament.”
2. Richard McGregor, Asia’s Reckoning: China, Japan, and the Fate of U.S. Power in the Pacific Century. I am sick of books on these topics, because they tend to repeat the same old same old. This one has fresh content on almost every page, and it is especially strong on explaining how the revisionist history debates in China and Japan fit into domestic politics and also foreign policy.
3. Barry Hatton, The Portuguese: A Modern History. “Portugal largely missed the Enlightenment.” This is the best introduction I know to that charming country. In 1986, Portugal had only 123 miles of highway. It had not occurred to me, by the way, that the 1974 coup was the first Western European revolution since 1848, unless you count the Nazis. Here is a picture showing Portugal as an Atlantic rather than Mediterranean economy. Explanation here.
4. Nils Karlson, Statecraft and Liberal Reform in Advanced Democracies. How did liberal reforms happen in Australia and Sweden? This book tells you about the world, rather than the theory or the taxonomy. There should be many more books of this sort, a study in actual public choice.
Arrived in my pile is:
Barry Eichengreen, Arnaud Mehl, and Livia Chitu, How Global Currencies Work: Past, Present, and Future.
For economic historians I can recommend Bruce M.S. Campbell, The Great Transition: Climate, Disease and Society in the Late-Medieval World.
China fact of the day
China’s 89 unicorns (startups valued at $1bn or more) are worth over $350bn, by one recent estimate, approaching the combined valuation of America’s (see chart 2). And to victors go great spoils. There are 609 billionaires in China compared with 552 in America.
That is from The Economist, mostly about Chinese innovation.
Sunday assorted links
2. New Zealanders worry about their country’s pristine nature, given the onslaught of tourism and globalization. By the way, the NZ election results shows how proportional representation can be a bad system when the checks on nutty party opinion are otherwise weak. Imagine Winston Peters holding the balance of power, and perhaps not even being the nuttiest candidate in the race. This time, the Maori Party went to zero seats, the semi-libertarian ACT won one seat. NYT report here.
4. Ferroequinologists: India has a bunch of them. Recommended.
5. ESPN profile of Hou Yifan. And chess grandmaster Lev Alburt advises the financial community in NYC.
George Will covers *The Complacent Class*
Here is one paragraph:
Although America is said to be — and many Americans are — seething about economic grievances, Tyler Cowen thinks a bigger problem is complacency. In his latest book, “The Complacent Class: The Self-Defeating Quest for the American Dream,” Cowen, professor of almost everything (economics, law, literature) at George Mason University and co-author of the Marginal Revolution blog, argues that the complacent class, although a minority, is skillful at entrenching itself in ways detrimental to the majority.
Here is the whole review.
Solve for the Italian-Libyan equilibrium
Failing to stem the tide of refugees arriving Europe, Italy and the rest of the European Union have agreed to pay Libya’s Government of National Accord (GNA), the UN-backed interim government that is struggling hold control of the country, to keep them from arriving in Italy and instead put them into detention camps in Libya.
The accord signed Feb. 3, provides for Italy to pay €220 million ($236 million) to the Libyan coastal guard and provide training to help them catch the vessels—primarily rubber dinghies. The Libyan coast guard will be charged with sending the boats back to Libya and putting people into camps. The political instability of Libya is such that there would be little guarantee of the conditions in which the migrants would be kept, according to Arjan Hehenkamp, general director of Médicins Sans Frontières (MSF).
Here is one story. In Libya they understand the Coase theorem:
A security source in Libya spoke to Associated Press late last month saying: “Yesterday’s traffickers are today’s anti-trafficking force.”
I believe the size of the Coasean payments will rise. If Libya is paid to halt migrants, and finds this a satisfactory or indeed even profitable arrangement, they also will act to…boost the supply of potential migrants. “Producing potential migrants” will at some point become one of their more significant economic sectors. And the larger the number of bottled up would-be migrants, the more Italy and/or the EU will pay to stop them.
Yet what is Italy otherwise to do? I find it striking how underreported this story has been.
Intellectual fallout from the likely failure of Graham-Cassidy
1. The Democrats were debating single payer while this bill, which they dread, nearly passed (and still has some chance of passing). This was not a random mistake, rather it reflects a more general tendency of the Democratic Party to focus on the wrong kind of expressive values, in a manner which does not seem remediable. We need to re-model what they are, and build this kind of un-educability into the new model.
2. One lesson of Graham-Cassidy failure is that American health care, at the state level, is a race to the bottom not to the top. Recall that the Canadian health care system also leaves key decisions to the provinces + block grants, but American Progressives love the results. Most observers know the American states would not copy the Canadian provinces in their policies, and it is not only because fiscal equalization is weaker to the south. The reality is that spending much more on health care would not make most American states much more desirable places for most people to live in. If it did, Graham-Cassidy would be a better idea than in fact it is and a race to the top would ensue. Better health care would brighten up states all around, attract more population, and increase the revenue going into governor’s coffers.
Democrats and Republicans both find this inadequacy of state-level outcomes difficult to accept, though for opposing reasons. Democrats hate having to recognize that all the extra health care spending might be mainly redistribution rather than remedying a market failure or providing a broad-based social public good. Republicans hate to see that giving states control over health care policy, and allowing them to revise Obamacare, won’t improve those states and probably would make most of them worse.
Of course my points #1 and #2 relate. I agree Graham-Cassidy is a bad idea, but every time I hear the critics say it is heartless, or would “take away” people’s health insurance, or “kill people,” what I really hear is “If we let everyone vote again on Obamacare, with a real time balanced budget constraint, they wouldn’t vote for nearly as much health care next time around.”
Which is why you should not be obsessing over single-payer systems.
Across the board, pondering Graham-Cassidy, including its failure, should make you more pessimistic about economic and social processes.
Saturday assorted links
1. “”Globally more and more men and women are stepping away from clinical (medical) sperm donation environments and choosing to find each other through online connection websites such as the UK-based PrideAngel through which we conducted our study,” said Mr Whyte, from the QUT Business School.” Link here.
2. Does linguistic bias limit English-speaking investment into Quebec?
3. Have I mentioned that Sixthtone.com is a great place to read about China? And on Twitter.
The limits of refrigerator privacy?
It seems we never quite reach them:
Walmart is testing a service that delivers groceries straight to your fridge when you’re not home.
On Friday, the retail giant announced a partnership with August Home, a smart-lock startup, that would allow a delivery person to enter customers’ orders and put groceries away in their refrigerators…
Delivery drivers will have a one-time passcode that allows them to unlock the August smart lock if customers do not answer the door when the delivery team arrives to drop off groceries. They will then drop off packages in the foyer, unload groceries in the fridge, and leave — with the door locking behind them.
Customers get a notification when the driver rings the doorbell. August home-security cameras allow them to watch the entire process from the app if they wish.
Here is the story, via Peter Metrinko.
Is there a Rawlsian argument for redistribution as a form of social insurance?
Here is one presentation of such an argument, but keep in mind these points:
1. The strongest argument for redistribution is when redistribution boosts economic growth and benefits all or most of society. That is by no means always the case, but it is sometimes true and of course it is not a Rawlsian argument.
2. The second strongest argument for redistribution is that it is sometimes intrinsically better if a poor, needy person has a resource, as opposed to a wealthier person having that same resource. That is in fact what most people think, no matter what argument they give you.
3. As we’ll see, the Rawlsian argument is parasitic upon #2, so why not use #2 directly? Admittedly, #2 is a difficult conclusion to establish in a scientific manner, but the Rawlsian gloss, upon examination, makes it weaker not stronger. It does however make the argument look a) more academic, and b) apparently more in line with neoclassical economic modes of thinking.
4. Most political philosophers, or indeed most philosophers, are not Rawlsians, even if they have been influenced by Rawls, which is frequently the case. So why should you, if you’re an economist, be a Rawlsian? Is it that you read Rawls and the critics, sided with Rawls, and then sat down to derive its implications? Or did you find it a convenient rationalization for something you already believed or wanted to believe?
4b. Rawls is almost always invoked selectively, rarely being applied across national borders or across the generations, cases where it yields screwy results. Rawls himself hesitated to approve of economic growth, because it does not maximize the well-being of the original “worst off” generation, which of course has to do some saving. He had sympathies with the idea of Mill’s stationary state. It’s fine to reject those conclusions, as indeed you should, but again maybe you’re not really a Rawlsian. You are a selective Rawlsian, if that.
4c. Most people — rightly I might add — believe just as much in redistribution or maybe more when the position of the unfortunates is certain in advance. How many times have you heard social immobility cited as a problem that requires redistribution for its solution? That argument is fine on its own terms, but again we’re back to #2. The funny thing about econo-Rawlsians is that they want to cite the uncertainty of the wealth distribution as a reason for redistribution, and then they wish to turn around and cite the certainty of the wealth distribution as yet another reason for redistribution!
Yes, maybe you can apply a Rawlsian transform to those situations with certain allocations, using a “…but*if* these people were all behind a veil of ignorance…” But look, a Rawlsian transform is appropriate with only some probability, so if you adhered to Rawls as the “most likely correct moral theory,” you still in these cases of certain distributions ought to believe in less redistribution. But that is not how people’s opinions are structured, nor is it how they should be structured, so in other words again we are not really Rawlsians but rather again motivated by #2.
5. When it comes to redistribution as social insurance, the biggest problems with the Rawlsian method is this. People have all sorts of preferences across the distribution of income. Some are merit-related, some liberty-related, some non-Rawlsian-fairness related, some insurance-related, maybe even some rooted in prejudice. The list of motives and reasons is long. As the veil is typically used by economists, it strips away all of those preferences but…the preference for insurance. So it is no wonder that the final construct produces an argument for insurance. You get out of the construct what you put into it.
6. If you already believe in #2, #5 won’t bother you much. But #2 is doing the real work here.
7. Almost everyone stops applying #2 at some point or margin. For instance, do you always and everywhere favor boosting the scope of the Obamacare mandate? It would save lives. If you don’t favor increasing the mandate, are you a despicable killer? In fact what I observe is people taking the status quo, and its current political debates, as a benchmark of sorts, and choosing sides, yet without outlining the “stopping principles” for their own recommendations. That’s a pretty sure sign a person is not thinking about the issues clearly.
8. Even #2, which I think of as a kind of “brute egalitarianism,” isn’t as straightforward as you might think. We do not always apply it to people in other countries, wealthy people who are poor in net terms because they are about to die, ugly men who cannot get sex, and many of the disabled. Just about everyone is more of a particularist, situation-based egalitarian than they like to let on.
In sum, the arguments for (some limited) redistribution are stronger than the arguments for Rawls.
London’s Uber ban is a big Brexit mistake
That is the title given to my latest Bloomberg column. Excerpt:
The new Britain appears to be a nationalistic, job-protecting, quasi-mercantilist entity, as evidenced by the desire to preserve the work and pay of London’s traditional cabbies. That’s hardly the right signal to send to a world considering new trade deals or possibly foreign investment in the U.K. Uber, of course, is an American company, and it did sink capital into setting up in London — and its reputational capital is on the line in what is still Europe’s most economically important city. This kind of slap in the face won’t exactly encourage other market entrants, including in the dynamic tech sector that London so desperately seeking.
I should note that I prefer London cabs, because of their higher quality service, noting that the people most hurt by this ban are from lower-income groups.
Friday assorted links
2. Ramesh defends Graham-Cassidy.
3. The most disturbing pieces of music ever? What about Bernd Alois Zimmerman?
4. Markets in everything (OMG)
5. “Hapaxes are not limited to Latin.”
Another Cost of Global Warming
This paper documents a small but systematic bias in the patent evaluation system at the United States Patent and Trademark Office (USPTO): external weather variations affect the allowance or rejection of patent applications. I examine 8.8 million reject/allow decisions from 3.5 million patent applications to the USPTO between 2001 and 2014, and find that on unusually warm days patent allowance rates are higher and final rejection rates are lower than on cold days. I also find that on cloudy days, final rejection rates are lower than on clear days. I show that these effects constitute a decision-making bias which exists even after controlling for sorting effects, controlling for applicant-level, application-level, primary class-level, art unit-level, and examiner- level characteristics. The bias even exists after controlling for the quality of the patent applications. While theoretically interesting, I also note that the effect sizes are relatively modest and may not require policy changes from the USPTO. Yet, the results are strong enough to provide a potentially useful instrumental variable for future innovation research.
From a paper by Balázs Kovács, here. Hat tip Kevin Lewis.