Friday, April 29, 2005

Economista frustrado

Caso de la vida real
Un economista narra una experiencia con el sexo opuesto en un club de jazz:

...For in that brief minute of conversation it was established that;

1. She reads The Economist
2. She was a financial manager at a money management firm
3. She had her undergraduate in finance
4. She was getting her masters in economics

The next hour of conversation was tantilizing and insanely intelligent. We talked about econometric modeling. We talked about efficient frontier theory. We talked about Miller-Modigliani. And then she talked about her specialty, behavioral economics.

I love it when chicks talk dirty to me.

...No se pierdan el desenlace de la historia (y los comentarios) en:

Thursday, April 28, 2005

Born to believe

¿Por qué tanta gente "cree" en el papa, el peje, Fox, o hasta en el PRI? La psicología evolutiva ofrece una respuesta:
Tests of faith

Religion may be a survival mechanism. So are we born to believe?

Ian Sample

So why do so many people believe? And why has belief proved so resilient as scientific progress unravels the mysteries of plagues, floods, earthquakes and our understanding of the universe? When the evidence is pieced together, it seems that evolution prepared what society later moulded: a brain to believe.

One factor in the development of religious belief was the rapid expansion of our brains as we emerged as a species, says Todd Murphy, a behavioural neuroscientist at Laurentian University in Canada. As the frontal and temporal lobes grew larger, our ability to extrapolate into the future and form memories developed. "When this happened, we acquired some very new and dramatic cognitive skills. For example, we could see a dead body and see ourselves in that position one day. We could think 'That's going to be me,'" he says. That awareness of impending death prompted questions: why are we here? What happens when we die? Answers were needed.

As well as providing succour for those troubled by the existential dilemma, religion, or at least a primitive spirituality, would have played another important role as human societies developed. By providing contexts for a moral code, religious beliefs encouraged bonding within groups, which in turn bolstered the group's chances of survival, says Pascal Boyer, an anthropologist turned psychologist at Washington University in St Louis, Missouri. Some believe that religion was so successful in improving group survival that a tendency to believe was positively selected for in our evolutionary history. Others maintain that religious belief is too modern to have made any difference.

"What I find more plausible is that rather than religion itself offering any advantage in evolutionary terms, it's a byproduct of other cognitive capacities we evolved, which did have advantages," says Boyer.

Psychological tests Boyer has run on children go some way to proving our natural tendency to believe. "If you look at three- to five-year-olds, when they do something naughty, they have an intuition that everyone knows they've been naughty, regardless of whether they have seen or heard what they've done. It's a false belief, but it's good preparation for belief in an entity that is moral and knows everything," he says. "The idea of invisible agents with a moral dimension who are watching you is highly attention-grabbing to us."

Childish belief is one thing, but religious belief is embraced by people of all ages and is by no means the preserve of the uneducated. According to Boyer, the persistence of belief into adulthood is at least in part down to a presumption. "When you're in a belief system, it's not that you stop asking questions, it's that they become irrelevant. Why don't you ask yourself about the existence of gravity? It's because a lot of the stuff you do every day presupposes it and it seems to work, so where's the motivation to question it?" he says. "In belief systems, you tend to enter this strange state where you start thinking there must be something to it because everybody around you is committed to it. The general question of whether it's true is relegated."


Tuesday, April 26, 2005

Discriminación laboral

Existe una amplísima literatura sobre la brecha salarial entre "blancos y
negros" en los EU que informa el debate de los "civil rights" y demás. Este
paper de Heckman (premio nobel, por cierto) y compañía ilumina el origen de
tales brechas usando a los hispanos como grupo de comparación.

Los hispanos también ganan menos que los blancos... pero, hay
una sorpresa: hispanos con similares niveles de pobreza y educación que
negros, acaban ganando más que éstos, inclusive cuando aquellos no terminan
college... Es decir que el impacto marginal de cada año de educación es
mayor para los los hispanos que para los negros... ¿Por qué?
Aparentemente, por cosas que pasan en su infancia...

La conclusión es clara: si te preocupan estas brechas salariales
cuasi-discriminatorias, hay que atender mejor la educación preescolar y
hacer menos marchas de affirmative action.

Más detalles abajo:

Labor Market Discrimination and Racial Differences in Premarket Factors

University College London
University of Chicago
University of Chicago

o bien:

This paper discusses the sources of wage gaps between minorities and
whites. For all minorities but black males, adjusting for the ability that
minorities bring to the market eliminates wage gaps. The major source of
economic disparity by race and ethnicity in U.S. labor markets is in
endowments, not in payments to endowments.

This evidence suggests that strengthened civil rights and affirmative action
policies targeted at the labor market are unlikely to have much effect on
racial and ethnic wage gaps, except possibly for those specifically targeted
toward black males. Policies that foster endowments have much greater

On the other hand, this paper does not provide any empirical evidence
on whether the existing edifice of civil rights and affirmative action
legislation should be abolished. All of our evidence on wages is for an
environment in which affirmative action laws and regulations are in place.

Minority deficits in cognitive and noncognitive skills emerge early and
then widen. Unequal schooling, neighborhoods, and peers may account for
this differential growth in skills, but the main story in the data is not
about growth rates but rather about the size of early deficits. Hispanic children
start with cognitive and noncognitive deficits similar to those of black children.
They also grow up in similarly disadvantaged environments and are likely
to attend schools of similar quality. Hispanics complete much less schooling
than blacks. Nevertheless, the ability growth by years of schooling is much
higher for Hispanics than for blacks. By the time they reach adulthood,
Hispanics have significantly higher test scores than do blacks. Conditional
on test scores, there is no evidence of an important Hispanic-white wage
Our analysis of the Hispanic data illuminates the traditional study of
black-white differences and casts doubt on many conventional explanations
of these differences since they do not apply to Hispanics, who also suffer
from many of the same disadvantages. The failure of the Hispanic-white gap
to widen with schooling or age casts doubt on the claim that poor schools
and bad neighborhoods are the reasons for the slow growth rate of black test
scores. Deficits in noncognitive skills can be explained (in a statistical
sense) by adverse early environments; deficits in cognitive skills are less easily
eliminated by the same factors.

Effective social policy designed to eliminate racial and ethnic inequality
for most minorities should focus on eliminating skill gaps, not on
discrimination in the workplace of the early twenty-first century. Interventions targeted
at adults are much less effective and do not compensate for early
deficits. Early interventions aimed at young children hold much greater
promise than strengthened legal activism in the workplace.

Monday, April 25, 2005

Daron Acemoglu

Daron Acemoglu acaba de ganar la medalla JBC... lo cual es una buena noticia
para el campo de economía política:

"Acemoglu is an extremely broad and productive economist. He has made
valuable contributions to several distinct fields, starting with labor
economics, and successively moving to macroeconomics, institutional
economics, and political economy. His most recent work on the role of
institutions in development and in political economy is especially
innovative, and has already had a large impact on research in these areas.
Although Acemoglu is primarily a theorist, his work is always motivated by
real-world questions that arise when facts are difficult to reconcile with
existing theory.

The Role of Institutions in Economic Development and Political Economy

Acemoglu has several papers that argue that institutions play a more
prominent role in development than was generally accepted. His 2002 QJE
paper with Johnson and Robinson argues that countries that were relatively
rich in 1500 are now relatively poor, a point that is inconsistent with the
view that geography is destiny. The argument, supported by empirical
evidence, is that this is due to colonizing countries treating rich and
densely populated countries differently from poor and sparsely populated
countries. In the former, they followed policies of extracting wealth and in
the latter they followed policies that encouraged investment. Acemoglu’s
2001 AER paper, also with Johnson and Robinson, uses differences in
mortality rates faced by Europeans in different countries to study further
the degree to which different policies lead to different institutions, which
in turn lead to different development paths. Some of the methods and the
conclusions of this paper are still being debated, but this line of
Acemoglu’s work has already stimulated substantial research that rethinks
the development process. In related work on political economy, for example
with Robinson in APSR 2001, he has examined the dynamics of political
processes and the persistence of inefficient policies. This work has been
influential in political science."

Sunday, April 24, 2005

El triunfo de los nerds

Tenía rato que andaba buscando un articulillo de Krugman donde se defendía de sus detractores (esto es antes de su etapa anti-bush) y proclamaba el triunfo de los "nerds".  Él se refiere a los economistas, pero el razonamiento aplica al más amplio mundo cuant y rat choice por igual.
Aquí les van unos extractos.  La pieza completa está en:
Feliz fin,
Paul Krugman

(...)"Academic economics, the stuff that is in the textbooks, is largely based on mathematical reasoning. I hope you think that I am an acceptable writer, but when it comes to economics I speak English as a second language: I think in equations and diagrams, then translate. The opponents of mainstream economics dislike people like me not so much for our conclusions as for our style: They want economics to be what it once was, a field that was comfortable for the basically literary intellectual.

This should sound familiar. More than 40 years ago, the scientist-turned-novelist C.P. Snow wrote his famous essay about the war between the "two cultures," between the essentially literary sensibility that we expect of a card-carrying intellectual and the scientific/mathematical outlook that is arguably the true glory of our civilization. That war goes on; and economics is on the front line. Or to be more precise, it is territory that the literati definitively lost to the nerds only about 30 years ago--and they want it back.

That is what explains the lit-crit style so oddly favored by the leftist critics of mainstream economics. Kuttner and Galbraith know that the quantitative, algebraic reasoning that lies behind modern economics is very difficult to challenge on its own ground. To oppose it they must invoke alternative standards of intellectual authority and legitimacy. In effect, they are saying, "You have Paul Samuelson on your team? Well, we've got Jacques Derrida on ours."

There are important ideas in both fields that can be expressed in plain English, and there are plenty of fools doing fancy mathematical models. But there are also important ideas that are crystal clear if you can stand algebra, and very difficult to grasp if you can't. International trade in particular happens to be a subject in which a page or two of algebra and diagrams is worth 10 volumes of mere words. That is why it is the particular subfield of economics in which the views of those who understand the subject and those who do not diverge most sharply.

Alas, there is probably no way to resolve this conflict peacefully. It is possible for a very skillful writer to convey in plain English a sense of what serious economics is about, to hide the algebraic skeleton behind a more appealing facade. But that won't appease the critics; they don't want economics with a literary facade, they want economics with a literary core. And so people like me and people like Kuttner will never be able to make peace, because we are engaged in a zero-sum conflict--not over policy, but over intellectual boundaries.

The literati truly cannot be satisfied unless they get economics back from the nerds. But they can't have it, because we nerds have the better claim."

Friday, April 22, 2005

Educación Pública en México

En México nos avergonzamos cada vez que la OCDE revela nuestros pobres
resultados educativos. La educacion es un tema ampliamente estudiado en
todos lados, menos en México... En cuanto al marco teórico y empírico para
analizar la educación pública, creo que estos son buenos puntos de partida:

Eric A. Hanushek Publicly Provided Education

Otros papers interesantes pueden ser:

Edward P. Lazear Educational Production

Zvi Griliches Education, "Human Capital, and Growth: A Personal

Raquel Fernandez & Richard Rogerson "The Determinants of Public Education
Expenditures: Evidence from the States, 1950-1990"

Wednesday, April 20, 2005

Institutions, democracy and growth

Institutions, institutions, institutions. These are some references of a yet unsettled debate... But I don't know which to include in my political economy course!

Do Institutions Cause Growth?
Edward L. Glaeser, Rafael La Porta, Florencio Lopez-de-Silane, Andrei Shleifer
NBER Working Paper No. 10568 (Issued in June 2004)
---- Abstract -----
We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that a) human capital is a more basic source of growth than are the institutions, b) poor countries get out of poverty through good policies, often pursued by dictators, and c) subsequently improve their political institutions.

Income and Democracy
Daron Acemoglu, Simon Johnson, James A. Robinson and Pierre Yared
February 2005

Institutions as the Fundamental Cause of Long-Run Growth
Daron Acemoglu, Simon Johnson and James A. Robinson -
April 2004

Forms of Democracy, Policy and Economic Development
Torsten Persson

Rentas informativas y bienes raices

"Homes owned by real estate agents sell for about 3.7 percent more than
other houses and stay on the market about 9.5 days longer, even after
controlling for a wide range of housing"

¿Y eso es mucho o poco?

Market Distortions when Agents are Better Informed: The Value of Information
in Real Estate Transactions

Steven D. Levitt, Chad Syverson
NBER Working Paper No. w11053

Issued in January 2005

---- Abstract -----
Agents are often better informed than the clients who hire them and may
exploit this informational advantage. Real-estate agents, who know much more
about the housing market than the typical homeowner, are one example.
Because real estate agents receive only a small share of the incremental
profit when a house sells for a higher value, there is an incentive for them
to convince their clients to sell their houses too cheaply and too quickly.
We test these predictions by comparing home sales in which real estate
agents are hired by others to sell a home to instances in which a real
estate agent sells his or her own home. In the former case, the agent has
distorted incentives; in the latter case, the agent wants to pursue the
first-best. Consistent with the theory, we find homes owned by real estate
agents sell for about 3.7 percent more than other houses and stay on the
market about 9.5 days longer, even after controlling for a wide range of
housing characteristics. Situations in which the agent's informational
advantage is larger lead to even greater distortions.

Tuesday, April 19, 2005

The Papal Conclave: How do Cardinals Divine the Will of God?

Este paper contiene y analiza un panel de datos sobre cónclaves recientes... 
Excelente cita: 

"The Germans are on his side as will be the Spanish tomorrow because Franchi has now sided with Pecci; Howard, who up to now has voted for Simeoni, will vote for Pecci tomorrow; as I’m sure Your Eminency is aware, Bilio declared to Barolini that if he were to be elected he would not accept, for he considers it a heavy burden; Monaco and Randi will continue to vote for Martinelli; Franzelin likes Monaco, but he is wasting his time: Your Eminency, you must accept the truth, God has chosen Pecci."

The Papal Conclave: How do Cardinals Divine the Will of God?
J.T. Toman (University of Sydney)
Version: January 5, 2004

In modern times, the College of Cardinals have been locked in the Sistine Chapel with the purported aim to divine the Will of God in the election of the Pope. Between 20 and 60 percent of cardinals vote for the same candidate throughout the conclave, depending on the length of the conclave. For those cardinals that change their voting behavior, they are influenced by both the vote counts and the nightly conversations. However, in unifying the cardinals to one winner the dominant force is the observed vote counts.

Nascar republicans vs. trust fund democrats

Más sobre red states vs. blue states:

Rich Man, Poor Man; Rich State, Poor State

Statistical Modeling, Causal Inference, and Social Science is one of my favorite new blogs. It is primarily written by Andrew Gelman, a professor in the Departments of Statistics and Political Science at Columbia University.

A recent post looks at the difference between red and blue states and red and blue individuals. We all know that in the recent election poorer states tended to vote Republican while richer states tended to vote Democrat. On the basis of the famous maps many people jumped to the conclusion that poorer individuals were voting Republican (Nascar Republicans) while richer individuals were voting Democrat (trust fund Democrats). But the inference is a fallacy, the ecological fallacy. In fact, high-income individuals, as opposed to high-income states, vote Republican with greater likelihood than low-income individuals (the effect is not huge and it may be declining but it is significant).

It's even true that rich counties tend to vote Republican with greater likelihood than poorer counties. Gelman links to this graph which nicely illustrates the ecological fallacy. The three lines show that within each state higher-income counties are more likely to vote Republican but when you look between states the correlation between income and voting Republican is negative. (Click to enlarge).


Libertades económicas y políticas

Becker y Posner tocan un tema recurrente de economía y política:
Ambos sintetizan muy bien los argumentos de la literatura, pero Becker da un paso en falso cuando afirma:
"The path from political to economic freedom, by contrast, is slower and more uncertain.(...) Mexico has had a free press and considerable political freedom for a century or so, but economic freedoms did not begin to evolve until the latter part of the 1980’s."
¡Becker necesita un correctivo!

Why Are We Worried About Income?

Para documentar nuestro optimismo de largo plazo...
Why Are We Worried About Income? Nearly Everything that Matters is Converging
Charles Kenny
The World Bank, Washington, DC, USA
World Development
Volume 33, Issue 1 , January 2005, Pages 1-19

Convergence of national GDP/capita numbers is a common, but narrow, measure of global success or failure in development. This paper takes a broader range of quality of life variables covering health, education, rights and infrastructure and examines if they are converging across countries. It finds that these measures are converging as a rule and (where we have data) that they have been converging for some time. The paper turns to a discussion of what might be driving convergence in quality of life even as incomes diverge, and what this might mean for the donor community.

Belief in a Just World and Redistributive Politics

Benabou y Tirole ofrecen un modelo de preferencias (ideológicas/religiosas/etc) endógenas.  Desconozco los méritos o novedad del modelo en si, pero creo que es un avance significativo que economistas de este calibre ya estén entrando en estos temas hasta ahora fuera del "mainstream".

Belief in a Just World and Redistributive Politics

by Roland Benabou, Jean Tirole - #11208 (EFG PE)


International surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate. At the same time, social ethnographies and experiments by psychologists demonstrate individuals' recurrent struggle with cognitive dissonance as they seek to maintain, and pass on to their children, a view of the world where effort ultimately pays off and everyone gets their just deserts.

This paper offers a model that helps explain: i) why most people feel such a need to believe in a "just world"; ii) why this need, and therefore the prevalence of the belief, varies considerably across countries; iii) the implications of this phenomenon for international differences in political ideology, levels of redistribution, labor supply, aggregate income, and popular perceptions of the poor.

The model shows in particular how complementarities arise endogenously between individuals' desired beliefs or ideological choices, resulting in two equilibria. A first, "American" equilibrium is characterized by a high prevalence of just-world beliefs among the population and relatively laissez-faire policies. The other, "European" equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state.

More generally, the paper develops a theory of collective beliefs and motivated cognitions, including those concerning "money" (consumption) and happiness, as well as religion.

Easterly vs. Sachs

Easterly reseña (negativamente) a Jeffrey Sachs
THE END OF POVERTY - Economic Possibilities for Our Time

1. Easterly ataca:
Jeffrey D. Sachs's guided tour to the poorest regions of the Earth is enthralling and maddening at the same time -- enthralling, because his eloquence and compassion make you care about some very desperate people; maddening, because he offers solutions that range all the way from practical to absurd. It's a shame that Sachs's prescriptions are unconvincing because he is resoundingly right about the tragedy of world poverty.

Social reformers have found two ways to respond to this complexity; Karl Popper summed them up best a half-century ago as "utopian social engineering" versus "piecemeal democratic reform." Sachs is the intellectual leader of the utopian camp.

To Sachs, poverty reduction is mostly a scientific and technological issue (hence the technical jargon above), in which aid dollars can buy cheap interventions to fix development problems.

But Sachs's anti-poverty prescriptions rest heavily on the kindness of some pretty dysfunctional regimes, not to mention the famously inefficient international aid bureaucracy.

Sachs was born to play the role of fundraiser. And it's easier to feel good about his sometimes simplistic sales pitch for foreign aid if it leads to spending more dollars on desperately poor people, as opposed to, say, wasteful weapons systems.

The danger is that when the utopian dreams fail (as they will again), the rich-country public will get even more disillusioned about foreign aid."

2. Y Sachs responde:
William Easterly, who reviewed my book The End of Poverty (Book World, March 13), is notorious as the cheerleader for "can't-do" economics. For years as a World Bank staffer, he watched failed programs during the era of World Bank "structural adjustment lending" and reached the erroneous conclusion that any bold effort to help the poorest of the poor would fail. He wrongly made the Bank's shortcomings into a general theory. The World Bank has since moved on, but Easterly has not.

Easterly's simplistic approach fits well with many conservatives in Washington, who would rather blame the poor than help them. Somehow the world's poorest people are made out to be our enemy. According to this upside-down worldview, the people dying of malaria are out for our money -- all $3 per year that it would cost each person in the rich world to help Africa mount an effective control program!

Easterly's charge that I am utopian gets it backward. Easterly's World Bank experience made him into a dystopian, seeing the worst in everything and expecting failure everywhere.

Sunday, April 17, 2005

Mission Statement

Maybe it is time for me to start collecting somewhere on the web the papers, potential research, and incomplete thoughts I ran into everyday. So here it is.

More later.