Tuesday, October 25, 2005

Information and election closeness

Some people may like more--rather than less--competitive elections for their own sake.  But we I don't know why. There is some evidence that rational voting behavior MAY turn what seemed to be a lopsided election into a very competitive race--this, because voters who prefer the most popular candidate face a relatively strong free-rider problem, which MAY make them turn out in smaller numbers than advocates of the underdog whose turnout MAY be higher. Obviously, this result depends on the process of information-gathering and expectation-formation of the electorate.
This paper generalizes somewhat that intuition with the striking conclusion that elections with "more informed voters" may yield into "inefficently competitive" races with high turnout, whereas elections with "symmetrically ignorant" voters are "less competitive but more efficent".  (Warning, here efficiency means that the most preferred candidate justly wins with the largest majority; and an inefficent result means that the most preferred candidate wins with a narrow margin, or even worse, that the least preferred candidate wins by chance.)
Curtis Taylor and Huseyin Yildirim
Abstract: We present a theory of strategic voting that predicts elections are more likely to be close and voter turnout is more likely to be high when citizens possess better public information about the composition of the electorate. These findings are disturbing because they suggest that providing more information to potential voters about aggregate political preferences (e.g., through polls, political stock markets, or expert forecasts) may actually undermine the democratic process.
We show that if the distribution of preferences is common knowledge, then strategic voting leads to a stark neutrality result in which the probability that either alternative wins the election is 1/2. This occurs because membersof the minority compensate exactly for their smaller group size by voting with higher frequency. By contrast, when citizens are symmetrically ignorant about the distribution of types, the majority is more likely to win t he election and expected voter turnout is lower. Indeed, when the population is large and voting costs are small, the majority wins with probability arbitrarily close to one in equilibrium. Welfare is, therefore, unambiguously higher when citizens possess less information about the distribution of political preferences

Budgetary Control in 28 countries

Beyond constitutional design at large and economic policy, the devil is in the details of the budgetary process.  This paper has a nice dataset for 28 countries.

Who Controls the Budget: The Legislature or the Executive?
Ian Lienert


Country-specific factors prevent a strong linear relationship between the legislature's budgetary powers and the extent of its separation from the executive. Electoral and voting systems, bicameralism, constitutional and legal constraints, voluntary contracts of political parties, and long-standing traditions all influence the relative budgetary powers of executives and legislatures. Differences in the legislature's budgetary authority in twenty-eight countries with five different forms of government are examined. It is concluded that differences in budgetary powers within a particular form of government are as great as those between different forms of government.
Keywords: Budgets , Legislation , Budgetary policy ,

Thursday, October 20, 2005

Measuring culture

Culture is something like the "final frontier" for the most empirically-minded social scientists.  International migration provides interesting evidence and proxies for beliefs, social capital, and similarly "unobservable" factors.  When you (or your parents) migrate, you bring along your human capital, but most social capital stays behind in your home country... unless you settle in an ethnic neighborhood. 

"Culture: An Empirical Investigation of Beliefs, Work and Fertility"
RAQUEL FERNANDEZ, New York University
ALESSANDRA FOGLI, New York University
Date: May 2005

We study the effect of culture on important economic outcomes by using the 1970 Census to examine the work and fertility behavior of women 30-40 years old, born in the US, but whose parents were born elsewhere. We use past female labor force participation and total fertility rates from the country of ancestry as our cultural proxies. These variables should capture, in addition to past economic and institutional conditions, the beliefs commonly held about the role of women in society, i.e., culture.

Given the different time and place, only the beliefs embodied in the cultural proxies should be potentially relevant to women's behavior in the US in 1970. We show that these cultural proxies have positive and significant explanatory power for individual work and fertility outcomes, even after controlling for possible indirect effects of culture (e.g., education and spousal characteristics). We examine alternative hypotheses for these positive correlations and show that neither unobserved human capital nor networks are likely to be responsible. We also show that the effect of these cultural proxies is amplified the greater is the tendency for ethnic groups to cluster in the same neighborhoods.

Wednesday, October 19, 2005

Party discipline and redistributive preferences

Dos buenos papers para entender, entre otras cosas, las causas y consecuencias de la disciplina partidista y, por otro lado, de dónde vienen (y cuánto tardarán en irse) las preferencias redistributivas del electorado que vivió bajo el socialismo.

(Cualquier relación con la disciplina partidista y el voto duro del PRI no es mera coincidencia...)

"Party Discipline and Pork-Barrel Politics"

BY:  GENE M. GROSSMAN, Princeton University
ELHANAN HELPMAN, Harvard University
July 2005

Polities differ in the extent to which political parties can  pre-commit to carry out promised policy actions if they take  power. Commitment problems may arise due to a divergence between  the ex ante incentives facing national parties that seek to  capture control of the legislature and the ex post incentives  facing individual legislators, whose interests may be more  parochial. We study how differences in "party discipline" shape  fiscal policy choices. In particular, we examine the  determinants of national spending on local public goods in a  three-stage game of campaign rhetoric, voting, and legislative  decision-making. We find that the rhetoric and reality of  pork-barrel spending, and also the efficiency of the spending  regime, bear a non-monotonic relationship to the degree of party  discipline.

"Good bye Lenin (or not?): The Effect of Communism on People's  Preferences"

      BY:  ALBERTO F. ALESINA, Harvard University
           NICOLA FUCHS-SCHUNDELN, Harvard University

 Preferences for redistribution, as well as the generosities of  welfare states, differ significantly across countries. In this  paper, we test whether there exists a feedback process of the  economic regime on individual preferences. We exploit the  experiment of German separation and reunification to establish  exogeneity of the economic system. From 1945 to 1990, East  Germans lived under a Communist regime with heavy state  intervention and extensive redistribution. We find that, after  German reunification, East Germans are more in favor of  redistribution and state intervention than West Germans, even  after controlling for economic incentives. This effect is  especially strong for older cohorts, who lived under Communism  for a longer time period. We find that East Germans' preferences  converge towards those of West Germans, and we calculate that it  will take one to two generations for preferences to converge completely.

Endogenous Soft Budget Constraints

Date: 2005-08-06
By: James A. Robinson, Harvard University
Ragnar Torvik, Norwegian University of Science and Technology
URL: http://d.repec.org/n?u=RePEc:nst:samfok:5605&r=pol
Why do soft budget constraints exist and persist? In this paper we argue that the prevalence of soft budget constraints can be best explained by the political desirability of softness. We develop a political economy model where politicians cannot commit to policies that are not ex post optimal. We show that because of the dynamic commitment problem inherent in the soft budget constraint, politicians can in essence commit to make transfers to entrepreneurs which otherwise they would not be able to do. This encourages such entrepreneurs to vote for them. Though the soft budget constraint may induce economic inefficiency, it may be politically rational because it influences the outcomes of elections. In consequence, even when information is complete, politicians may fund bad projects which they anticipate they will have to bail out in the future.
Keywords: Political Economy; Investment; Development
JEL: H20 H50 O20

Tuesday, October 18, 2005

Congressional Research Service Reports

Este website permite consultar más de 8000 reportes recientes del CRS en todo tipo de temas--seguridad, narco, migración, política económica, etc.  Creo que es una buena fuente de datos para "current events" discutidos en el Congreso de los EU desde la perspectiva de su mismo staff.
About Open CRS

American taxpayers spend nearly $100 million a year to fund the Congressional Research Service, a "think tank" that provides reports to members of Congress on a variety of topics relevant to current political events. Yet, these reports are not made available to the public in a way that they can be easily obtained. A project of the Center for Democracy & Technology, Open CRS provides citizens access to CRS Reports that are already in the public domain and encourages Congress to provide public access to all CRS Reports.

CRS Reports do not become public until a member of Congress releases the report. A number of libraries and non-profit organizations have sought to collect as many of the released reports as possible. Open CRS is a centralized utility that brings together these collections to search.

Unfortunately, there is no systematic way to obtain all CRS reports. Because of this, not all reports appear on the Open CRS web site. CDT believes that it would be far preferable for Congress to make available to the public all CRS Reports.

Monday, October 10, 2005

Best graduates vs. best students

All of our students at CIDE should take a look at this nice article:


The social logic of Ivy League admissions

A few excerpts:

"In 1905, Harvard College adopted the College Entrance Examination Board tests as the principal basis for admission, which meant that virtually any academically gifted high-school senior who could afford a private college had a straightforward shot at attending. By 1908, the freshman class was seven per cent Jewish, nine per cent Catholic, and forty-five per cent from public schools, an astonishing transformation for a school that historically had been the preserve of the New England boarding-school complex known in the admissions world as St. Grottlesex.

As the sociologist Jerome Karabel writes in “The Chosen” (Houghton Mifflin; $28), his remarkable history of the admissions process at Harvard, Yale, and Princeton, that meritocratic spirit soon led to a crisis. The enrollment of Jews began to rise dramatically. By 1922, they made up more than a fifth of Harvard’s freshman class. The administration and alumni were up in arms. Jews were thought to be sickly and grasping, grade-grubbing and insular. They misplaced the sons of wealthy Wasp alumni, which did not bode well for fund-raising. (...)
The difficult part, however, was coming up with a way of keeping Jews out, because as a group they were academically superior to everyone else. Lowell’s first idea—a quota limiting Jews to fifteen per cent of the student body—was roundly criticized. Lowell tried restricting the number of scholarships given to Jewish students, and made an effort to bring in students from public schools in the West, where there were fewer Jews. Neither strategy worked. Finally, Lowell—and his counterparts at Yale and Princeton—realized that if a definition of merit based on academic prowess was leading to the wrong kind of student, the solution was to change the definition of merit.
In the wake of the Jewish crisis, Harvard, Yale, and Princeton chose to adopt what might be called the “best graduates” approach to admissions. France’s École Normale Supérieure, Japan’s University of Tokyo, and most of the world’s other élite schools define their task as looking for the best students—that is, the applicants who will have the greatest academic success during their time in college. The Ivy League schools justified their emphasis on character and personality, however, by arguing that they were searching for the students who would have the greatest success after college. They were looking for leaders, and leadership, the officials of the Ivy League believed, was not a simple matter of academic brilliance. “Should our goal be to select a student body with the highest possible proportions of high-ranking students, or should it be to select, within a reasonably high range of academic ability, a student body with a certain variety of talents, qualities, attitudes, and backgrounds?” Wilbur Bender asked. To him, the answer was obvious. If you let in only the brilliant, then you produced bookworms and bench scientists: you ended up as socially irrelevant as the University of Chicago (an institution Harvard officials looked upon and shuddered). “Above a reasonably good level of mental ability, above that indicated by a 550-600 level of S.A.T. score,” Bender went on, “the only thing that matters in terms of future impact on, or contribution to, society is the degree of personal inner force an individual has.
If you are sick and a hospital shuts its doors to you, you are harmed. But a selective school is not a hospital, and those it turns away are not sick. Élite schools, like any luxury brand, are an aesthetic experience—an exquisitely constructed fantasy of what it means to belong to an élite —and they have always been mindful of what must be done to maintain that experience."

Schelling and Aumann

This year's nobel prize in economics was awarded to Thomas Shelling and Robert Aumann. This is a very powerful pair of game theorists. Interestingly enough, you can see that a lot of Schelling's most intriguing work is not very mathematical--although later on, other people provided mathy models of his ideas--and yet, he takes you from very reasonable premises to really counter-intuitive results. Aumamn's work, on the other side, is very mathematically sophisticated... and yet, full of philosophical implications.

Which goes to show you that you can make valuable contributions in social science with or without mathematical sophistication... but you have to be just as smart as Schelling.

Marginal Revolution provides valuable info:

Thomas Schelling

Saturday, October 08, 2005

Heuristics and cognitive biases

Heuristics are efficient devices insofar as they help you solve problems.  They may not help you much to advance the frontier of science, but they still may make you live longer.  Wikipedia points at "Some commonplace heuristics" (from How to Solve It):
  • If you are having difficulty understanding a problem, try drawing a picture.
  • If you can't find a solution, try assuming that you have a solution and seeing what you can derive from that ("working backward").
  • If the problem is abstract, try examining a concrete example.
  • Try solving a more general problem first (the "inventor's paradox": the more ambitious plan may have more chances of success).

But beware of other psychological heuristics:



And, most importantly beware of this long list of cognitive biases.
After you are done reading this you should agree that more likely than not, you are not a reasonable person, so don't trust your--or somebody else's--supposedly  reasonable anecdotes.  And of course, you can fire all of these back to anyone who calls you unreasonable.

Market-oriented reforms that work (or not)

Via Brad DeLong, some words of wisdom (ok, sort of, depending on how though you are with the biases of the author of this op-ed) from Leszek Balcerowicz (of Poland's central bank) on "the Polish escape route from Really Existing Socialism":

The Wealth of Nations: [I]t is so important to analyze which policies work and which ones fail, to generate lasting convergence -- and to bring poor countries out of poverty.... Communism, an extreme form of statism, went farthest to suppress markets and criminalize entrepreneurship. The opportunity costs of this organized folly were enormous: relative per-capita income in Poland, for example, declined from about 100% of that in Spain in 1950 to only 40% in 1990. And with the collapse of the communist system, a great natural experiment began. Looking at its results, one is struck by the huge differences among countries of the former Soviet bloc:
  • In 2004, GDP had increased, relative to 1989, by 42% in Poland, 26% in Slovenia, and 20% in Slovakia and Hungary. In contrast, it declined by 57% in Moldova and 45% in Ukraine. If the shadow economy were included in the calculations, the differences in output would be smaller, but they would still be large.
  • All transition economies have made considerable progress in lowering inflation, yet better long-run growth performance went hand in hand with lower inflation. This confirms that in countries that inherit high inflation, successful disinflation is conducive to long-term economic growth.
  • Foreign direct investment usually follows past economic success and strengthens future economic success. Between 1989-2003, the Czech Republic attracted $3,700 per capita in FDI, Hungary $3,400, the three Baltic countries $1,000-$2,400 and Poland $1,300. FDI inflows per capita to Ukraine and Moldova were only $128 and $210, respectively.
Countries with better economic outcomes tend to achieve better non-economic results as well... energy efficiency... life expectancy... infant mortality....

In terms of GDP growth, it is tempting to look at differences in the initial conditions.... [D]ifferences in initial conditions, however, can explain only a part of the difference.... [D]ifferences in longer-run growth are largely due to more extensive market-oriented reforms and more successful macroeconomic stabilization....

Postcommunist countries that moved more toward a market economy achieved better economic (and non-economic) results than those that implemented fewer market-oriented reforms or none at all.... [N]o poor country has achieved lasting convergence under any of the statist or failed-state systems.... [T]he acceleration of growth does not have to wait until "good" institutions emerge... growth may accelerate during the reform process... [if] reforms increase output and productivity in previously repressed sectors (agriculture in China or the service sector in the Soviet system), or because the previous incentive structure encouraged massive waste (command socialism)....

The common features of the "miracle countries" include low tax-to-GDP ratios due to a lack of extensive welfare states. This tends to increase labor supply and promote private savings.... An extensive welfare state crowds out the voluntary forms of human solidarity, and -- especially in poorer economies -- can obstruct economic growth. This is a warning to those poorer economies which have now much higher public-spending-to-GDP ratios than Sweden, Germany or France did when they had similar income per capita....

Reforms are frequently announced, but not implemented, or they may be implemented initially but then reversed or seriously amended. In such cases, criticizing the failure of market reforms is misplaced. Market-oriented reforms may well fail -- if they are incomplete in critical ways. One example would be introducing a fixed exchange rate regime without fiscal discipline. Argentina's recent collapse reminds us that fiscally irresponsible politics may undermine the results of genuine market reforms. Market-oriented reforms may also fail to generate lasting convergence if some of their crucial elements are badly structured, e.g. a serious miscalculation of the initial level of a fixed exchange peg or a bad incentive structure in the bankruptcy law. None of these problems validate the search for a "Third Way" solution.... They are merely hurdles to be overcome on the path to a full-fledged market economy

Wednesday, October 05, 2005

Columbia econ department hires in bulk

Columbia se puso a contratar new faculty al mayoreo este año:


New Faculty 2005-2006
Arriving From
Patrick Bolton (joint with Business School)Princeton
Yeon-Koo CheWisconsin
Pierre-André ChiapporiChicago
Janet CurrieUCLA
W. Bentley MacLeod (joint with SIPA)USC
Bernard SalaniéEcole Polytechnique
Edward VytlacilStanford
Stefania AlbanesiDuke Fuqua Business School
Kate HoHarvard
Wolfram Schlenker (joint with SIPA)UCSD


Aquí está el chisme con más detalle:

To cash in on the hottest academic trend, Columbia bought in bulk.
Who They Hired
Columbia added seven renowned scholars to its economics department in just one year.
Who They Might Hire
The buying spree's not over.
A Closer Look at Sunspot Theory
How it could rewrite the rules of recruiting.

Monday, October 03, 2005

Sistema electoral en México: incentivos perversos

Hoy tuve una brevísima entrevista con el programa Zona Abierta de Televisa (jueves 6 de octubre). De manera muy concreta me preguntaron sobre las deficiencias del sistema electoral y de partidos en México. Preparé unas notas como para cinco minutos--pero al final de cuentas me pidieron sintetizar mis ideas en 45 segundos. Esto fue lo que intenté decir:

La transición política mexicana ha permitido una competencia real entre partidos, erigir un árbitro electoral confiable y un mecanismo para dirimir controversias. Sin embargo, las reglas del juego del sistema electoral producen incentivos perversos.
  1. El modelo de democracia subsidiada y sobre-regulada produce partidos rentistas y no atrae a los políticos con mejores proyectos o cualidades personales, sino a aquellos que son más hábiles para “moverse” dentro de sus partidos y en la “grilla” en general. Los políticos pueden ser perdedores y aún así allegarse recursos importantes y hasta una curul.
  2. Los partidos grandes tienen más incentivos para generar una estructura paralela de financiamiento y negociar para sí mayores subsidios desde el Congreso, que para diversificar o transparentar sus fuentes de financiamiento.
  3. Los partidos chicos tienen escasos incentivos para intentar crecer: su tamaño reducido les permite allegarse recursos cuantiosos a pesar de sólo contar con “candidatos perdedores”—pero con curul. Su representatividad y contribución al debate público es mínima—pero son empresas financieramente rentables.
  4. En cuanto a la creación de nuevas opciones políticas, es más fácil que resabios autoritarios como el SNTE y otros sindicatos públicos logren crear un partido político nuevo, a que otros grupos de la sociedad civil logren organizarse exitosamente.
  5. Para lograr ser candidato, un pre-candidato potencial tiene más incentivos para congraciarse con la dirigencia de su partido—quienes a final de cuentas controlan el dinero público y el proceso de nominación—que para lanzar propuestas o iniciativas novedosas para el electorado.

En suma, esto reduce la capacidad de innovación del sistema político y facilita que “los peores cuadros” asciendan al poder. Por ello, el surgimiento de una “nueva clase política” nos parece tan lento.

Mis otras notas hablaban sobre la relación IFE-partidos, el debate entre financiamiento público vs. privado, y la sobre-regulación de la competencia política--pero eso tendrá que esperar a mis siguientes 60 segundos.