Via Adam Tooze, prime-age female labor force participation is increasing in France, Germany, Canada, UK, but declining in US. What gives?
Mental Accounting and Food Stamps
Jesse Shapiro at Brown talks about his research on food stamps:
"It's unusual for economics to make a quantitative prediction — economics is usually about qualitative predictions, like "when prices go up, demand falls." This is an interesting case where we have a very important public policy — the second-biggest means-tested program in the United States, recently enrolling almost one out of every five U.S. households, touching millions of lives — where economic theory says something very different from the rhetoric surrounding the program. And our data say it's not just wrong, it's not that it's 12 percent instead of 10 percent; it's 50 percent instead of 10 percent. It's wrong by a lot. ...
"whereas the textbook view of the program is that out of every SNAP dollar, maybe 10 cents is going to food and the rest going to other things, we find it's more like 50 cents, which is a big difference in terms of the overall impact on households' budgets and spending behavior. We've known for a long time that people categorize money. We think that part of what's going on is that when SNAP comes in, the household sort of puts it in the food part of the budget, rather than say, "Well, let me just take some other money out of that part of the budget and spread it around evenly," the way that the economics textbook says that they should."
Bart Bonikowski on white supremacy in the Harvard Gazette:
"GAZETTE: How much of this is truly organic, how much is a byproduct of social media amplification, and how much is an elaborate trolling of so-called political correctness, the kind of thing encouraged in online communities like 4chan or Reddit? Is there any way to know?
BONIKOWSKI: It’s hard to know how to draw that distinction. Even if some of it is performative, it has very concrete consequences, as shown by the violence and the killing that occurred. ... So the question of how dearly they hold these views, I’m not sure that’s so relevant. In some ways, we could ask the same question about Nazis in the 1930s. How many of them really believed in the ideology, how many of them joined because their friends joined, how many of them were doing it to belong to some sort of community? All of these are interesting pathways from an academic standpoint, but at the end of the day, the movement committed unspeakable atrocities and embroiled the world in a massive war. Here too, there are many pathways toward social-movement mobilization that sociologists have documented, but what matters more in this case are the consequences."
Fatih Guvenen and collaborators have a great chart, using the SSA earnings data. This is for men’s individual earnings. See the link for charts showing 1) stable volatility of one-year individual income changes, 2) income risks skew negative in recessions & positive in booms, and much more.
Glimpses into how US spying works, and intra-governmental wars, via Buzzfeed:
"Treasury Department's Office of Intelligence and Analysis has been illegally rifling through and filing away the private financial records of US citizens … Sources also claimed that OIA has opened a back door to officers from other intelligence agencies throughout the government, including the the CIA and the Defense Intelligence Agency. Officials from those agencies have been coming to work at OIA for short periods of time, sometimes for as little as a week, and thereby getting unrestricted access to information on US citizens that they otherwise could not collect without strict oversight."
I’ve wondered for a while how you get agencies to care more about false positives. They have strong incentives to not end up on the front-pages (“Incompetent Agency X should've prevented bad thing Y”). That is, if they see something that might be bad - a suspected terrorist wiring money, a family that might be abusing a kid, etc. - they have a strong incentive to flag it. Agencies really want to minimize the cases where they say “this isn’t a problem” when in fact there might be a problem. In other words, they care a lot about reducing false negatives. But they have much weaker incentives to care about false positives. Cases where they flag a potential problem, some action is taken, and it turned out that everything was fine. The costs are diffuse. I find this particularly worrisome with respect to privacy. If you posit a) tribal politics that impede the emergence of social consensus driving legislation to protect privacy, and b) that our future revolves around a data-driven service economy, the equilibrium is basically a panopticon.
Martin Ravaillon: The graph shows the mean gain in consumption in the developing world as a whole over 1981-2011 by percentile from the poorest (p=1) to the richest (p=100). “Not only have the absolute gains been greater for the better off, the gains were nearly zero at the very bottom of the distribution for the developing world as a whole."
Megan McArdle: "Some studies suggest that voucher programs do modest good; others suggest that they do very little; and a few suggest that the impacts are actually negative. My overall takeaway from the literature is that voucher programs probably do a little bit of good. But the emphasis is on the word "little"; they are not a cure-all, or even much of a cure for anything. It was reasonable to think, in 1997, that voucher programs could change the world. Now we have two decades of evidence.” She points to peer effects, rather than school quality, driving parental choice (see this new NBER paper). "Perhaps it doesn't make much difference what we do in the schools, because most educational effects are driven by a combination of genetics and home environment."
"There’s no value in free college if the colleges lack the resources to educate students. It’s like giving K-12 students vouchers when there are no decent private schools available to to them.” ... "We’ve had an enormous increase in federal financial aid for low-income students, and completion rates are relatively stagnant. Big-picture, something is not working" … "the authors found that spending to improve instruction and academic support has a large positive impact on student enrollment and degree completion." Link.
From the UK, on Voxeu.org: "since the move from a free higher education system to a high-fee, high-aid system, university enrollment has increased substantially, with students from the poorest backgrounds experiencing the fastest increases in participation. Moreover, university funding per head has recovered dramatically since the introduction of fees."
Andrew Dowling, Senior Lecturer in Catalan History at Cardiff, writes:
"the desire for independence is a relatively late development. Until the late 1930s and the onset of Civil War, the Catalan labour movement – which has always been especially strong in Catalonia because of the region's industrialisation – was unique in Europe because of its attachment to anarcho-syndicalism. No city in human history has ever experienced the dominance of anarchism as much as Barcelona. The anarchist movement, unlike Leninist-Marxism, never sought to create an ideology sympathetic to nationalism and remained highly committed to internationalism. The pro-independence movement, therefore, was unable to obtain either the support of the labour movement or the bourgeoisie. As such, the movement for independence was fragmented and weak and continued to be so well into the 1970s. ...
"Today, the struggle for Catalan independence can be considered a middle class revolt. Middle class radicalism rarely occurs, but it is most likely to manifest at times of political alienation. This is exactly what has happened in Catalan society over the course of the 2000s. ... Both before the economic crisis and since, middle-class sectors in Catalan society have seen the erosion of their elevated position as a rich region of Spain. This has challenged the self-perception of middle-class Catalans. With the arrival of the economic crisis in 2008, Catalans became greatly discontented at the financial contribution they made to Madrid, while businesses closed and employment opportunities dwindled. These economic grievances have led to the intensification of alienation from Spain."
Cameron's Road to Brexit
Ivan Rogers lectures at Oxford, lots of interesting bits:
“The political effect of the decision of May 2004 to allow free movement of people into the UK from those [Eastern European] states without the seven year transitional period for which their Accession Treaties provided, of which all the other major western Member States took advantage, was even more critical. … The official internal forecasts we saw of the potential numbers of arrivals were, as one looks back, just laughably low. ...
"Cameron's own crucial decision to take the Tories out of the European People's Party (EPP) Group, and to set up a new Group, the European Conservatives and Reformists (ECR) enthused his parliamentary party. It helped win him the party leadership. He did it because, ultimately, he did not subscribe to the core political goals of the EPP for the EU. But it undoubtedly lessened the Conservatives' influence inside the belly of the beast, in which the backroom deals and manoeuvres of the three "mainstream" Grand Coalition parties largely dictated key appointments and institutional positions on key policy issues. ...
"the mutual misreadings of interests and incentives which we saw in the renegotiation, and we are seeing in even starker form now, stem from the absence of systematic informal political level contacts which build understanding. Not many Tories now intuitively understand Christian Democrats in the way they did 20 years ago. The same is true in reverse."
In an article about the use of evidence in policy-making in development, a group out of HKS includes this intriguing bit: "decision-making depends not only on the quality of evidence that is presented, but also on the context in which this evidence is received. In cases where the policymaker holds strong beliefs and is inclined to discount evidence, an intervention to soften the policymaker’s priors may be more useful than generating rigorous evidence.” This probably applies more widely, not just to policy-makers.
Martin Sandu in the FT: “If the five-year plan was the Soviet bloc’s grand lie, here is that of capitalism: that the market values of financial and other assets accurately reflect the economic value they represent. … the wealth that people thought they possessed did not in fact exist. ... The disorientation and distrust that have followed in both markets and politics was just what one would expect when millions realise they have been living a lie."
New Piketty-Zucman paper, with Novokmet, on Russia (pdf): “There is as much financial wealth held by rich Russians abroad—in the United Kingdom, Switzerland, Cyprus, and similar offshore centers—than held by the entire Russian population in Russia itself.” I’m not sure why they include the Soviet era in their time series - what does the top 10% income share represent in a centrally planned economy with no private property? It doesn’t seem comparable to the top 10% post-communism.
A new paper in Science on the payoffs to Stasi spying: "economic espionage boosted TFP growth in East Germany, helping it close the gap with West Germany by some 8.6% in 1989 ... The effect was especially pronounced in the computing and electronics sector, where espionage reduced the gap between East and West by almost 26%. … According to the new study, the payoff [to spying] may have been as high as €4.6 billion for East Germany in 1988, compared with annual spying expenditures of about €6.4 million."
The Monkey Cage reviews Jennifer Tapan’s book on child malnutrition: "in 2011, undernutrition accounted for over 3 million deaths in children under the age of 5 — accounting for 45 percent of worldwide infant and child mortality."
Can A New Generation in the Banlieues change French Politics? New York Times Magazine:
"His parents weren’t particularly religious, but social dynamics led him, for a time, to delve into Islam. “I would go around talking about values: ‘No, that’s no good. No, this is what Islam is.’ But people allowed me to make my mistakes, let me evolve, realize my errors. I didn’t know who I was yet. Today, if you’re an 18-year-old kid, you talk about Islam like that, you go straight to prison.”
"Reading Kant and Machiavelli helped Bouteghmès look beyond what could be a closed circuit in the banlieues. “France is philosophy,” he told me. It was only through understanding the foundational principles of French Republicanism, and 200-year-old ideas that were in crisis in a modern, multicultural France, that he could see they needed to be adjusted to a new reality. … His parents weren’t keen on his studying philosophy, impractical as it was, and friends from La Courneuve tried to dissuade him, too — studying Western, Christian-based philosophy was, they warned, haram, forbidden. (Everyone in La Courneuve had been affected by fundamentalism, even if there had been fewer departures for Syria from here than from neighboring towns.) …
Women in head scarves had become symbols, flash points, everything except individuals with complicated personal reasons for expressing themselves in a particular way."
The key lesson of the 20th century
Seva Gunitsky of U Toronto at Monkey Cage:
"As late as July 1942, a Gallup poll showed that 1 in 6 Americans thought Hitler was “doing the right thing” to the Jews. A 1940 poll found that nearly a fifth of Americans saw Jews as a national “menace” — more than any other group, including Germans. … These voices welcoming fascism were not marginal radicals but mainstream writers, presidents of major associations and editors of popular journals. In his 1934 presidential address, the president of the American Political Science Association ... argued for abolishing a democracy that allowed “the ignorant, the uninformed and the antisocial elements” to vote. If these reforms smacked of fascism, he concluded, then “we have already recognized that there is a large element of fascist doctrine and practice that we must appropriate.” …
The good news is that the three major factors that drove its expansion are absent today. The first was a major economic depression and social dislocation. … The second factor was fear of communism. … The third factor was the rise of Nazi Germany as an economic and military powerhouse. …
The overall U.S. economy has been performing well, but levels of inequality continue to rise. Wide areas of America are increasingly mired in permanent unemployment and a massive drug epidemic. These are the sorts of economic conditions that drove fascist support in the 1930s. … fear of communism has been replaced by fear of globalists and elite technocrats (still often tinged with anti-Semitism) who supposedly seek to undermine and control the lives of ordinary Americans …. The third factor — the appearance of an ideological rival that seemed to outperform America’s corrupt democracy — is today reflected most clearly in fears over the rise of China. …
More than any appeal to freedom, democracy spread because it promised economic prosperity and political stability. But when democracies failed to deliver, as during the Great Depression, the tide of popular and elite opinion shifted just as readily and just as quickly against democratic institutions. The key lesson of the 20th century is that democracy is more fragile than we might like."
Catherine Rampell at WaPo:
"well-intended, feel-good policies can sometimes backfire, hurting the people you're trying to help. …
"Post-tax" policies, by contrast, involve redistribution of income and wealth through the tax code and social safety net. Think: the earned-income tax credit (EITC), food stamps, housing vouchers, health insurance subsidies. They are about boosting living standards on the back-end, with the taxpayers paying.
"Relative to other rich countries, the United States relies very little on these post-tax tools. If you look at America's income inequality before taxes and transfers, it's not great — but it's still about on par with France, Germany and Finland. If you look at income distribution after taking into account tax and transfer payments, we suddenly become the second-most-unequal developed economy in the world, behind Mexico. In other words, high inequality in the United States says more about our taxing and spending choices than our paychecks. …
"the dearth of excitement for these post-tax policies is a strategic mistake."
Of course, the Democrats' platform has included all of those things for a long time - increase in the EITC, CTC, etc. And it didn’t resonate with people, despite all the evidence. Most people don't pay too much attention to politics, and these are pretty technocratic proposals. Maybe we can get voters excited by telling them they should be excited, but a better strategy might be to meet people where they actually are. The first priority should be figuring out how to win elections. In that regard, Democrats' reluctance to have a more ambitious agenda - where they propose more than targeted policies that could pass Congress - seems like the strategic mistake.
Of course, the challenge with an ambitious agenda that's focused on eliminating poverty is that Americans have traditionally been suspicious that those in need are responsible for their own poverty, and hence not deserving of aid. Maybe that’s changing, but I’d like to see evidence of shifting attitudes first. Which brings us back to square 1, where no one knows what to do. Maybe a battle cry for eliminating child poverty, like Tony Blair in 1999, is the right approach; at least the moral deservingness problem seems less salient here.
Heroin Inflection Point
New paper out of Notre Dame, via Jennifer Doleac:
"We attribute the recent quadrupling of heroin death rates to the August, 2010 reformulation of an oft-abused prescription opioid, Oxycontin. The new abuse-deterrent formulation led many consumers to substitute to an inexpensive alternative, heroin. Using structural break techniques and a difference-in-differences analysis, we find that opioid consumption stops rising in August, 2010, heroin deaths begin climbing the following month, and growth in heroin deaths was greater in areas more likely to substitute from opioids to heroin. The reformulation did not generate a reduction in combined heroin and opioid mortality—each prevented opioid death was replaced with a heroin death."
From the Intercept, Extreme Vetting is Taking Shape:
"ICE’s hope is that this privately developed software will help go far beyond matters of legality to matters of the heart. The system must “determine and evaluate an applicant’s probability of becoming a positively contributing member of society, as well as their ability to contribute to national interests” and predict “whether an applicant intends to commit criminal or terrorist acts after entering the United States.” …
"The initiative appears to be chiefly aimed at what ICE calls “nonimmigrants,” a term for foreign nationals seeking “temporary entry to the United States for a specific purpose.” Interested contractors were told their system must be capable of scraping not only “data in various law enforcement databases” and “other government agency computer systems” (including FALCON, an immigration database created by Palantir) but will extensively exploit anything that can be found on the public internet. ….
"while the FBI has been tripped up when attempting similar data-mining operations against American citizens, an operation focused on non-citizens would be less likely to face such obstacles [from the ACLU]."
The vague language here - who defines whether someone's a contributing member to society, etc. - is particularly worrying. It also seems technically challenging - how do you know if a person in database A is the same person as in database B (e.g., Jose Martinez vs. Jose S. Martinez). Linking on individuals without error strikes me as a hard problem. In other words, if the linking is error-prone, individuals would suffer repercussions they don’t deserve, with little recourse (“computer says no”).
Rory Sutherland at Edge, lots of interesting bits:
"If you can change people's focus, attention, and their status currencies so they derive more pleasure from what already exists, rather than from what has to be created to sate their demands, you can essentially increase wealth without increasing consumption. That seems to me a rather important finding. … a megastar can turn up at the Oscars in a Prius and no one would think there was anything remotely weird about it. If you generally define wealth not in purely financial terms but in the number of choices people can freely and enjoyably make, well, by essentially enabling people to have a modest car without any stigma being attached to it, that's a pretty useful thing you've just done in terms of wealth creation. …
"It seems obvious that people instinctively increase the variance of things as they buy more of them. When people do small weekly shops, they go to a greater variety of shops than they do when they do one enormous £150 shop every ten days. … Now, what seems interesting to me is that no one has applied this thinking to recruitment. If you want greater diversity of recruitment, hire people ten at a time. When you hire people for one job, one at a time, you're very risk-averse, and you go for someone close to the expected norm. If you're hiring ten graduate recruits, you're looking for breadth. This happens without any quotas, without any conscious affirmative action. … This is borne out by the fact that the partners in accounting firms show much less diversity than the graduate recruits do. You appoint partners one at a time, and you hire graduates en masse."
Nathan Heller in the New Yorker:
"In the thirties, the linguist George Kingsley Zipf had posited that a word's frequency is inversely proportional to its rank in the frequency table - the third most common word would show up one-third as often as the most common word, and so on - and the Brown corpus and others have appeared to bear this out. Zipfian projections are inexact, especially far down the table, but the curve seems to hold broadly. It is unclear why."
Alvin Chang of Vox on those who leave and those who stay in their hometowns:
"People who stayed at home tend to be younger, whiter, and more male. This is a group that has gotten their fair share of privilege in this country. And in broad, sweeping statistics, it's a group that holds more regressive views toward marginalized people, including immigrants, minorities, and women. And yes, these factors likely played a bigger part in Trump winning the presidency than economic reasons. But in that same sweeping vein, it's also a group that didn't get the bulk of resources growing up, a group that was encouraged into a life path that kept them near home, and a group that is now suffering."
A new study out of GMU, reported on in the Economist:
"Cold spells hit medieval agriculture hard: a one-degree Celsius fall in temperatures reduced the growing season by up to four weeks. Lower yields caused widespread economic pain: up to 57% of people relied on farming for work in medieval England, for instance. The authors find that a fall in average temperatures of only a third of a degree increased the probability of a pogrom or expulsion by 50% over the next five years. They argue that violence against Jews was not simply caused by religiously-motivated anti-Semitism: “The Jews were convenient scapegoats for social and economic ills.”
China accounts for 27.3% of world carbon emissions, compared to 16% for the US.
The New York Review of Books:
"between 2007 and 2014, 25 percent of the rent-stabilized apartments on the Upper West Side of Manhattan were deregulated. … Not long ago a rent-stabilized building would sell for ten or at most twelve times its rent roll—the amount of money, before expenses, that it generates in a year. Today, it sells for perhaps thirty or forty times that amount, or ten times what the rent roll would be after regulated tenants have been dislodged. The clearing out of rent-stabilized tenants has become such a common real estate practice that it is added to a building’s value even before the fact. Landlords have found enough loopholes in tenant protection laws to make widespread displacement a viable financial strategy. A building in Crown Heights with one hundred stabilized units and a rent roll of $1.2 million might now fetch $40 million or more—and every tenant must be forced out for the investment to be recouped."
Via Andrew Gelman & Kevin Lewis, a new paper by Ryan Masters, Andrea Tilstra, and Daniel Simon:
"We examine trends in all-cause and cause-specific mortality rates among younger and middle-aged US White men and women between 1980 and 2014, using official US mortality data. . . .
"Trends in middle-aged US White mortality vary considerably by cause and gender. The relative contribution to overall mortality rates from drug-related deaths has increased dramatically since the early 1990s, but the contributions from suicide and alcohol-related deaths have remained stable. Rising mortality from drug-related deaths exhibit strong period-based patterns. Declines in deaths from metabolic diseases have slowed for middle-aged White men and have stalled for middle-aged White women, and exhibit strong cohort-based patterns.
"We find little empirical support for the pain- and distress-based explanations for rising mortality in the US White population. Instead, recent mortality increases among younger and middle-aged US White men and women have likely been shaped by the US opiate epidemic and an expanding obesogenic environment."
I'm skeptical of the article’s framing around big generational differences - we study cohorts not “generations,” as there’s too much variation within “generations.” Plus, there's hedging around the magnitude of the effects, which is unfortunate (“much of this [mental health] deterioration can be traced to their phones.” Really- “much”?). But the graphs are cool and the trends seem stark. Note the shifting y-axes though. “The intro of iPhone” might be related to the trends, or it might not be. The decline in adequate sleep, for instance, occurs between 2012 and ’15, well after the introduction of smartphones. Not enough sleep seems like a direct contributor to mental health problems, and it's not obvious that smartphones are a cause here. I would be curious to read more on selection into heavy smart phone usage.
Brooke Harrington on trusts:
"Trusts contribute to financialization in three main ways: by consolidating the power of the investor as the central figure in the global economy; by facilitating the dominance of Anglo-American finance; and by increasing the autonomy of finance from the nation-state system. …
"Like corporations, trusts are structures for holding and managing assets. But unlike firms, trusts are not legal entities in their own right: thus, they cannot be sued, they cannot go bankrupt, and they are often lightly regulated, if at all. In most places, they are not registered, are not taxed, and are not subject to any public accounting or reporting requirements. ...
"No one knows how many trusts exist in the world, or what kinds of assets they contain. ... trusts are essentially invisible: what little we know about them comes from data leaks like the Panama Papers, or lawsuits that put trust documents into the public record. However, the advantages of these features in a global market economy can hardly be overstated. In essence, trusts allow assets to be moved around the world, accumulating wealth or being parceled out to different recipients, with a minimum of restrictions and legal friction. By creating strategic obscurity around assets and their ownership, it becomes virtually impossible to impose limitations or accountability—and easy to do all manner of things that are not permitted to corporations. …
For both firms and private individuals, offshore trusts are attractive because legal ownership can be attributed to trustees based in states where tax and regulatory compliance costs are low to non-existent. This gives trusts an immense competitive advantage in terms of transaction costs over firms, which are subject to much more tax and regulatory scrutiny.”
This is my notepad.