Javier Aparicio / Public Economics

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2009-12-06T14:23:00.000-06:00

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From blog rant to the press

2009-07-09T13:49:00.000-05:00

Mis “primeras reacciones” a la elección del domingo pasado aparecen (editadas y mejoradas) en El Universal de hoy:

Lo que produjeron los votos

“Con los datos del cierre del PREP todo parece indicar que el PAN obtendrá 71 curules de mayoría relativa, 66 menos que las que obtuvo en 2006. La coalición PRI-PVEM, por otro lado, obtendrá 187 diputaciones de mayoría relativa, 122 más de las que obtuvo hace tres años. La distribución de curules de representación proporcional es algo más complicada, puesto que el PRI llegará al tope de sobrerrepresentación que marca la ley (8%).

Las encuestadoras nos tendrán que explicar por qué casi ninguna pudo anticipar una brecha de más de 8 puntos porcentuales entre PRI y PAN. Más allá, comprender cómo 3 millones de votos se traducen en más de 100 curules de diferencia requiere un análisis más cuidadoso.

Tras nueve años en el poder, el PAN no ha podido construir un aparato electoral para contener la maquinaria priísta estatal. El desplome y/o fractura del PRD beneficiaría relativamente más al PRI que al PAN, esto se sabía hace meses y se pudo haber anticipado durante la campaña. Y al final de cuentas, la crisis económica “que vino de fuera” cobró su factura voto por voto. El ágil equipo de campaña panista de 2006 brilló por su ausencia.”

La jornada electoral transcurrió sin mayores problemas. El PREP 2009 avanzó mucho más rápido porque sólo tuvo que contarse una boleta por ciudadano, en vez de 3, y a mayor abstencionismo, menos votos que contar. Es decir, un llenado y captura de actas más rápido. Al igual que antes, el PREP tiene un sesgo urbano. En la medida en que los votos nulos “por convicción” son urbanos, el PREP sobreestimó el porcentaje de votos nulos en las primeras horas. Por ello, los nulos iniciaron por arriba de 7% y cerraron en 5.4%.

El voto nulo también tuvo consecuencias. Asumiendo que al menos 1% de los anulacionistas podrían haber votado por PSD —su perfil sociodemográfico sugiere que esto es plausible, pues muchos apoyaron a Alternativa/Patricia Mercado en 2006— puede decirse que el movimiento anulacionista hizo perder el registro al PSD.

La izquierda sigue en pleito consigo misma: en 2006 los votos de Mercado pudieron haberle costado la presidencia a López Obrador: Alternativa Socialdemócrata consiguió su registro sólo para quebrantarse pocos meses después. Y en 2009 puede decirse que los anulacionistas eliminaron del mapa al PSD. Por su lado, una vez más los perredistas se partieron en dos o tres fracciones: PRD, PT y Convergencia. Cada líder tiene su partido, pero esto no los ayudará en nada en 2012.

Algunos celebraron haber borrado del mapa un pequeño partido parasitario. Pero que nadie se confunda, el monto de financiamiento público a los partidos no se reducirá un centavo: éste depende ahora del tamaño del padrón, y no del número de partidos, como antes. Tampoco disminuirá el número de spots, ni su aburrimiento, por cierto.

Lo que sí cambiará es la distribución de recursos, tiempos y curules entre los siete partidos sobrevivientes. Al eliminar del cómputo los votos nulos, no registrados, así como los votos del PSD, el porcentaje efectivo de votos y curules de representación proporcional de los otros partidos aumentará en alrededor de 7%. Como bien sabemos, los votos nulos aumentan la sobrerrepresentación de los partidos que mantienen su registro: el porcentaje efectivo de votos del PRI pasó de 36.7 a 39.3% gracias a esto.

¿Es mucho o es poco? Depende de cuánto “te duelan” los diputados de los partidos grandes: Como hay 200 curules de representación proporcional, cada 1% de votos adicionales para un partido equivalen a 2 diputados más. De modo que los 2.6 puntos más que consiguió el PRI tras eliminar los votos inválidos se traducirán en 5 diputados más. Para el PAN, el bono de sobrerrepresentación es menor: unas cuatro curules más. Dicho de manera más sencilla, los cuatro diputados que hubiera ganado el PSD y los 12 del inexistente “partido anulacionista”, se acaban repartiendo entre los partidos con registro, y los partidos más grandes reciben relativamente más curules.

Pero una curul de más o de menos o un pequeño partido de más o de menos quizá no son tan importantes. Las consecuencias importan: el bono de sobrerrepresentación del “movimiento anulacionista” hará más factible que una coalición del PRI y del PVEM consiga la mayoría absoluta en la Cámara de Diputados, o algo muy cercano a ello. Es la misma mayoría que perdió el PRI en 1997 y que muchos consideran una piedra angular de la transición democrática. Viendo a futuro, si el PRI consigue la Presidencia en 2012, no podremos descartar que también cuente con el Congreso. Después de todo, ellos saben cómo hacerlo.”

Elección 2009: primeras reacciones

2009-07-06T01:48:00.001-05:00

1. El PREP 2009 avanza mucho más rápido, y es más amigable, que el PREP 2006. Esto se debe a que las casillas sólo tuvieron que contar 1 boleta para diputados en vez de 3 (presidente, senado, diputados), y a que hay menor participación que en 2006: menos votos que contar conduce a un llenado y captura de actas más rápido.

2. Como siempre, el PREP tiene un sesgo urbano. En la medida en que los votos nulos "por convicción" son urbanos, el PREP sobreestimaría el porcentaje de votos nulos en las primeras horas. Por ello, los nulos iniciaron por arriba de 7% en el PREP y cerrarán abajo de 6%… Pero ojo, casi la mitad de los votos "nulos por error" provienen de casillas rurales, así que los nulos podrían repuntar en la madrugada…

3. Asumiendo que al menos 1% de los anulacionistas podrían haber votado por PSD (su perfil sociodemográfico sugiere que esto no es imposible: muchos de ellos apoyaban a ASDC/Patricia Mercado en 2006), puede decirse que el movimiento anulacionista hizo perder el registro al PSD.

4. La izquierda contra sí misma: En 2006 los votos de Patricia Mercado plausiblemente le "quitaron" la presidencia a AMLO pero ASDC consiguió su registro… para quebrantarse pocos meses después. En 2009, puede decirse que los anulacionistas "le quitaron" el registro al PSD… Mientras tanto, el PRD se parte en 2: PRD y PT.

5. Financiamiento a partidos. Algunos anulacionistas celebran haber borrado del mapa un partidito parasitario. Pero ojo, el monto de financiamiento público a los partidos no se reducirá un ápice (pues este depende hoy del tamaño del padrón, y no del número de partidos, como antes). Tampoco disminuirá el número de spots, por cierto.

6. Aritmética electoral. Lo que sí cambiará es la distribución de recursos y curules entre los 7 partidos sobrevivientes. Algunos "analistas" calculan que el 36% de votos del PRI subirán en 7 puntos (36 + 7 = 43%) gracias a los nulos. Esto es incorrecto e impreciso. En efecto, al elminiar los votos nulos + no registrados + votos del PSD, el porcentaje efectivo de votos (y curules RP) de los otros partidos aumentará, pero "sólo" en alrededor de 7%: 36 x 1.07 = 38.52%, es decir, un aumento de 2.5 puntos porcentuales.

7. ¿Eso es mucho o es poco? Depende de cuanto "te duelan" los diputados: Como hay 200 curules de representación proporcional, cada 1% de votos adicionales equivalen a 2 diputados RP. De modo que los 2.5 puntos más que consigue el PRI tras "eliminar" los votos nulos+NoReg+PSD se traducirán en 5 curules RP adicionales más. Para el PAN, el bono de sobrerrepresentación de los nulos y desaparecidos es menor: 2 puntos más de votos (27.5 x 1.07 = 29.45%), que se traducen en unas 4 curules RP más. Dicho de manera más sencilla: los 4 diputados que hubiera ganado el PSD y los 12 del "partido anulacionista", se acaban repartiendo entre los partidos con registro, y los partidos más grandes reciben relativamente más curules.

8. ¿So what? Pero una curul más o menos para cierto partido, o un partidito más o menos no son tan importantes. Lo realmente importante es que el bono del "movimiento anulacionista" hará más factible que una coalición PRI+PVEM consiga la mayoría de la Cámara de Diputados, o algo muy cercano a ello. ¿Eso es bueno o malo?

Adios spots, bienvenida la reflexión

2009-07-01T10:56:00.000-05:00

He aquí mi cuarta entrega para El Universal sobre las campañas federales de 2009. La campaña no tuvo sorpresas mayores, salvo que las preferencias efectivas prácticamente no cambiaron en los últimos dos meses. So much for the "new model of media access": millions of boring spots and zero debates.

"A partir de mañana comienza el llamado “período de reflexión” en que se suspenden los actos de campaña y mensajes proselitistas, así como la difusión de encuestas en medios tradicionales. Resulta algo paradójico que esto ocurra en el momento preciso en que la información sobre candidatos, plataformas y posibilidades reales de triunfo es realmente importante para que la ciudadanía compare alternativas y decida su voto: hoy sería un buen día para sostener un debate entre candidatos locales o federales, por ejemplo.

...el tricolor tiene una ventaja de 6 puntos porcentuales, misma que se ha mantenido prácticamente sin cambio desde mayo a la fecha. Esto es notable porque, a pesar de lo poco atractivas que han resultado las campañas, sí ha habido un gran número de “eventos sorpresivos” (desde la influenza hasta el Michoacanazo, por ejemplo) los cuales uno esperaría que pudieran afectar las intenciones de voto—y que sin embargo no parecen haber tenido un gran impacto.

Por otro lado, destaca que el porcentaje de indecisos ha aumentado de 21.3 a 28.8% a tan sólo unos días de la elección, cuando lo que normalmente ocurre es que la fracción de indecisos se reduce paulatinamente conforme se acercan los comicios. Y es que no todos los indecisos son sofisticados electores esperando los últimos acontecimientos para decidir su voto: a muchos de ellos simplemente no les interesa la elección ni sus consecuencias.

...una ventaja en las urnas de 6%, o más, del PRI sobre el PAN puede traducirse en una mayor ventaja en el número de escaños de la próxima Cámara de Diputados. Como nuestro sistema electoral es mixto, independientemente de si se vota por un candidato ganador o perdedor en cierto distrito, todos y cada uno de los votos a favor de un candidato registrado tienen un impacto en la composición final de la Cámara.

Una novedad de esta elección intermedia es el llamado movimiento anulacionista. De acuerdo a la misma encuesta, la mayoría de ellos son jóvenes, sobre todo hombres, de entre 18 y 39 años, con estudios de licenciatura o más, y que no se identifican con ninguna de las tres principales fuerzas políticas: se trata de votantes sofisticados que tradicionalmente no votaban o lo hacían por partidos pequeños. Aquí la paradoja radica en que un grupo de votantes sofisticados eligen la alternativa de menor impacto en el resultado electoral propiamente dicho, y que es anular su voto. Hay que votar donde duele y el voto nulo lastima muy poco a los partidos que menos impacto tienen en el proceso político de nuestro país (y favorece un poco a los partidos grandes al aumentar su sobrerrepresentación).

Con la información disponible a la fecha, el PRI se perfila como la primera fuerza de la Cámara de Diputados, el PAN perderá varias decenas de curules, y entraremos a un complicado e inestable juego de coaliciones por controlar la mayoría del Congreso: esta pueda ser el PRI y algún otro partido (como el Partido Verde), o puede ser el PAN con algún grupo de partidos pequeños (como Nueva Alianza y, ¿por qué no?, el Partido Verde).

Hace algunas semanas dijimos en estas mismas páginas que no se requiere una gran cantidad de información para decidir por quién votar: Quienes piensen que el rumbo del país (o en su caso, estado, delegación o municipio) está en buenas manos bajo el partido hoy en el poder hoy, deberían apoyarlo. Quienes piensen lo contrario, deberían apoyar al partido con mejores posibilidades de ser un contrapeso a ese partido. Quienes piensen que el rumbo del país requiere un gobierno sin mayoría en el Congreso, no deben apoyar al PAN. Y quienes piensen lo contrario, deberían apoyarlo. Son preguntas acaso sencillas para cada ciudadano en particular, pero con grandes consecuencias en el agregado. Bienvenida sea la reflexión—¡adiós a los spots!—si tan sólo hubiera más (y mejor) información."

La columna completa está aquí

Mankiw on health care reform in the US

2009-06-28T21:47:00.001-05:00

The Pitfalls of the Public Option, by N. Gregory Mankiw

The New York Times, June 28, 2009

In the debate over health care reform, one issue looms large: whether to have a public option. Should all Americans have the opportunity to sign up for government-run health insurance?

President Obama has made his own preferences clear. In a letter to Senators Edward M. Kennedy of Massachusetts and Max Baucus of Montana, the chairmen of two key Senate committees, he wrote: "I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest."

Even if one accepts the president's broader goals of wider access to health care and cost containment, his economic logic regarding the public option is hard to follow. Consumer choice and honest competition are indeed the foundation of a successful market system, but they are usually achieved without a public provider. We don't need government-run grocery stores or government-run gas stations to ensure that Americans can buy food and fuel at reasonable prices.

An important question about any public provider of health insurance is whether it would have access to taxpayer funds. If not, the public plan would have to stand on its own financially, as private plans do, covering all expenses with premiums from those who signed up for it.

But if such a plan were desirable and feasible, nothing would stop someone from setting it up right now. In essence, a public plan without taxpayer support would be yet another nonprofit company offering health insurance. The fundamental viability of the enterprise does not depend on whether the employees are called "nonprofit administrators" or "civil servants."

In practice, however, if a public option is available, it will probably enjoy taxpayer subsidies. Indeed, even if the initial legislation rejected them, such subsidies would be hard to avoid in the long run. Fannie Mae and Freddie Mac, the mortgage giants created by federal law, were once private companies. Yet many investors believed — correctly, as it turned out — that the federal government would stand behind Fannie's and Freddie's debts, and this perception gave these companies access to cheap credit. Similarly, a public health insurance plan would enjoy the presumption of a government backstop.

Such explicit or implicit subsidies would prevent a public plan from providing honest competition for private suppliers of health insurance. Instead, the public plan would likely undercut private firms and get an undue share of the market.

President Obama might not be disappointed if that turned out to be the case. During the presidential campaign, he said, "If I were designing a system from scratch, I would probably go ahead with a single-payer system."

Of course, we are not starting from scratch. Because many Americans are happy with their current health care, moving immediately to a single-payer system is too radical a change to be politically tenable. But for those who see single-payer as the ideal, a public option that uses taxpayer funds to tilt the playing field may be an attractive second best. If the subsidies are big enough, over time more and more consumers will be induced to switch.

Which raises the question: Would the existence of a dominant government provider of health insurance be good or bad?

It is natural to be skeptical. The largest existing public health programs — Medicare and Medicaid — are the main reason that the government's long-term finances are in shambles. True, Medicare's administrative costs are low, but it is easy to keep those costs contained when a system merely writes checks without expending the resources to control wasteful medical spending.

A dominant government insurer, however, could potentially keep costs down by squeezing the suppliers of health care. This cost control works not by fostering honest competition but by thwarting it.

Recall a basic lesson of economics: A market participant with a dominant position can influence prices in a way that a small, competitive player cannot. A monopoly — a seller without competitors — can profitably raise the price of its product above the competitive level by reducing the quantity it supplies to the market. Similarly, a monopsony — a buyer without competitors — can reduce the price it pays below the competitive level by reducing the quantity it demands.

This lesson applies directly to the market for health care. If the government has a dominant role in buying the services of doctors and other health care providers, it can force prices down. Once the government is virtually the only game in town, health care providers will have little choice but to take whatever they can get. It is no wonder that the American Medical Association opposes the public option.

To be sure, squeezing suppliers would have unpleasant side effects. Over time, society would end up with fewer doctors and other health care workers. The reduced quantity of services would somehow need to be rationed among competing demands. Such rationing is unlikely to work well.

FAIRNESS is in the eye of the beholder, but nothing about a government-run health care system strikes me as fair. Squeezing providers would save the rest of us money, but so would a special tax levied only on health care workers, and that is manifestly inequitable.

In the end, it would be a mistake to expect too much from health insurance reform. A competitive system of private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices. The health care of the future won't come cheap, but a public option won't make it better.

Mercadotecnia Política y Estrategia Electoral - Curso de Verano 2009

2009-06-23T20:51:00.005-05:00

Este verano 2009 impartiré un breve curso de verano sobre marketing político junto con Jorge Buendía y Javier Márquez (de Buendía y Laredo, A. C.)

El objetivo del curso es estudiar diversas herramientas de mercadotecnia política y estrategia electoral, y cómo aplicarlas en el contexto político-electoral de México.

En el curso se analizará, desde un enfoque teórico y metodológico riguroso, la relación entre el sistema electoral, las preferencias de los votantes y la distribución del poder político en México.

Por otro lado, analizaremos diversas técnicas de segmentación del mercado electoral –ya sea basadas en la distribución territorial de preferencias o bien en las diferencias en opiniones y actitudes de ciertos grupos sociales– útiles para el diseño de estrategias de campaña efectivas.

Fechas: Del 7 al 10 de julio, de 16 a 20hrs.

Lugar: CIDE

Informes sobre el curso: javier.aparicio@cide.edu

Inscripciones: manoel.perez@cide.edu

You know you want to be there! (el que no anuncia no vende.)

Homo economicus strikes back

2009-06-22T17:43:00.001-05:00

Is Behavioral Economics Doomed? The ordinary versus the extraordinary
By David K. Levine

"… behavioral economics is all the rage these days. The casual reader might have the impression that the rational homo economicus has died a sad death and the economics profession has moved on to recognize the true irrationality of humankind. Nothing could be further from the truth. Criticism of homo economicus is not a newtopic. In 1898 Thorstein Veblen wrote sarcastically described rational economic man as"a lightning calculator of pleasures and pains, who oscillates like a homogenous globule of desire of happiness under the impulse of stimuli." This description had little to do with economics as it was practiced then – and even less now. Indeed, for a long period of time during the 60s and 70s, irrational economic man dominated economics. The much criticized theory of rational expectations was a reaction to the fact that irrational economic man is a no better description of us than that of a "lightning calculator of pleasures and pains." In many ways the rational expectations model was a reaction to"[t]he implicit presumption in these … models … that people could be fooled over andover again," as Robert Lucas wrote in 1995.

The modern paradigmatic man (or more often these days woman) in modern economics is that of a decision-maker beset on all sides by uncertainty. Our central interest is in how successful we are in coming to grips with that uncertainty. My goal in this lecture is to detail not the theory as it exists in the minds of critics who are unfamiliar with it, but as it exists in the minds of working economists. The theory is far more successful than is widely imagined – but is not without weaknesses that behavioral economics has the potential to remedy."

You can read the whole thing here.

Aritmética del voto nulo

2009-06-16T22:01:00.001-05:00

En 2003 hubo 3.36% de votos nulos y una tasa de participación de 41%. En 2009 la lista nominal será de 77,481,874 votantes. Redondeando estas cifras para 2009 podemos hacer un cálculo rápido del impacto del voto nulo en el umbral de sobrevivencia de un partido político en México.

Con 30 millones de votos (digamos que sin ningún voto nulo), el umbral de sobrevivencia de un partido (2%) son 600 mil votos. Con 31 millones de votos (digamos, incluyendo 1 millón de "nuevos electores" que anulan su voto), el umbral sube a 620 mil votos. Es decir que, por cada millón de votos nulos (3.3% del total), este umbral sube en 20 mil votos.

¿Vale la pena "movilizar" 1 millón de votos nulos para subirle el costo a un partidito en 20 mil votos?

Addendum:

A. Dicho de manera más general, si hay 5% o 10% de votos nulos, el umbral de sobrevivencia para los partidos también sube en 5% o 10%. Es por ello que haría falta un muy elevado porcentaje de votos nulos para elevar significativamente el umbral que enfrantan los partidos pequeños.

B. El cálculo anterior es algo simplificado pues asume que todos los votos nulos provienen de "nuevos electores" que de otro modo se hubieran abstenido de votar. El efecto del voto nulo puede ser diferente si, por ejemplo, algunos votantes que pensaban votar por un partido pequeño deciden anular su voto: esto afectaría el numerador del cociente de sobrevivencia (votos por el partido i / total de votos emitidos).

Participación electoral y voto nulo en México, 1997 - 2006

Año	Lista nominal	Votos válidos	No registrados	Nulos	Total	Participación	Nulos/Total
1997	52,208,965	29,251,017	13,977	855,227	30,120,221	57.69%	2.84%
2000	58,782,737	36,782,000	31,461	788,157	37,601,618	63.97%	2.10%
2003	64,710,596	25,738,637	16,359	896,649	26,651,645	41.19%	3.36%
2006	71,374,373	40,588,729	297,989	904,604	41,791,322	58.55%	2.16%
Fuente: www.ife.org.mx

A un mes de la elección

2009-06-09T12:00:00.000-05:00

He aquí mi tercera entrega para El Universal sobre las campañas federales de 2009. Nada nuevo, pero la copio "for the record".

"Para la mayoría de los votantes resulta lógico y natural no prestar mucha atención al
proceso político-electoral hasta que se acerca el momento de tomar dos
decisiones clave: acudir a votar o no y, en caso de hacerlo, qué opción elegir,
y como no se requiere una gran cantidad de información para tomar estas poco
costosas decisiones, basta hacer caso omiso del ruido electoral hasta unos días
antes de la elección.

Antes de este periodo las intenciones de voto reflejan principalmente la llamada afinidad partidista y existe una gran incertidumbre de hacia dónde se inclinarán los votantes indecisos o independientes —si acaso votan, claro está.

Las elecciones intermedias tienden a generar poco interés por parte del electorado: es una contienda con muchos candidatos (baste ver la lluvia de nombres y rostros en los pendones y bardas de cada pueblo o colonia), de quienes poco se sabe y poco se espera, toda vez que casi nadie conoce las funciones de un legislador. El Congreso es un poder colectivo sin nombre propio en el que la atribución de responsabilidad se diluye fácilmente: todo lo malo de la política se debe a la “bancada de enfrente”.

(...)

"Por último, existen ciertas voces a favor de anular el voto este 5 de julio. El argumento, al parecer, estriba en dar una señal fuerte a los partidos políticos del descontento e indiferencia que generan entre un grupo de ciudadanos. Tomarse el esfuerzo de acudir a las urnas y anular el voto resulta una intención acaso encomiable, como lo es el acto cívico de votar por quien sea, pero poco útil en cuanto a sus consecuencias reales. El porcentaje de votos es lo único que importa en una elección, y un voto por un partido rival es mucho más doloroso para cualquier partido que un voto nulo o una abstención."

La columna completa está aquí

Votos nulos en 2003 y 2006

2009-06-08T17:24:00.006-05:00

En las elecciones intermedias de 2003 hubo 896,649 votos nulos (3.3% del total). En 2006 hubo 1,033,665 votos nulos para diputados de mayoría relativa (2.46% del total). Antes de que el movimiento "anula tu voto" se cuelgue la medalla de conseguir más de 1 millón de votos nulos, vale la pena analizar qué estados registraron un mayor porcentaje de votos nulos en 2003 y 2006, respectivamente.

Aquí están las gráficas, ordenadas de mayor a menor tasa de voto nulo.

Porcentaje de votos nulos por estado, 2006.

Porcentaje de votos nulos por estado, 2003.

Votar donde duele

2009-06-08T16:38:00.004-05:00

Mucho se ha hablado del voto nulo como herramienta de castigo "a los partidos". Más allá del valor expresivo (feel good value) de tomarse la molestia de ir a votar... por nadie, vale la pena comentar sobre los efectos observables del voto nulo en México.

El voto nulo cuenta para la tasa de participación (turnout) y para calcular la tasa de votación necesaria para que un partido mantenga su registro de un partido nacional (en México, 2%), pero no cuenta para determinar la asignación de curules por representación proporcional (RP). Esto implica que los votos nulos producen efectos encontrados en la probabilidad de supervivencia de un partido pequeño, por un lado, y en el tamaño de su bancada, si acaso mantiene el registro, por otro.

Veamos un ejemplo con peras y manzanas para ilustrar estos efectos. Consideremos un caso extremo. Si hubiera 10 millones de votos, y 2 millones de votos nulos (20%, una señal fuerte como pocas), cada partido debería conseguir al menos 200 mil votos para mantenerse con vida. Por lo tanto, mientras mayor sea el número de votos nulos, más difícil será librar el umbral mínimo del 2% para cada partido--llamemos a esto efecto umbral.

Sin embargo, una vez superado este umbral, los votos nulos (y los de candidatos no registrados) se restan de la votación total para poder asignar las curules RP entre los partidos "con registro" (como es obvio, los votos nulos no pueden conseguir curules).

Siguiendo con el ejemplo extremo, ¿cuántas curules conseguiría un partido pequeño X--de esos que tanto decepcionan a muchos-- de haber conseguido 300 mil votos (y con ello más del 2% requerido para sobrevivir)?

Restemos 2 millones de nulos y asumamos que cero votos para candidatos "no registrados". Ahora el voto total válido es de 8 millones, y al partido X le corresponderían 3.75% de curules RP, algo así como 7 u 8 curules. Pero, de no haber habido 8 sino 10 millondes de votos válidos (asumamos que ninguno de estos nulos se inclinaría por X), el partido X sólo hubiera recibido 3% de votos y 6 curules RP. Llamemos a esto efecto RP.

Las cifras de este ejemplo son algo exageradas pero el punto central se mantiene: a mayor número de votos nulos, más votos serán necesarios para que cualquier partido sobreviva (a mayor número de nulos, mayor efecto umbral). Sin embargo, aquellos partidos chicos que superen el umbral de 2% de la votación total, acabarán recibiendo más curules RP con relación a las que obtendrían sin los votos nulos (a mayor número de nulos, mayor efecto RP).

El efecto umbral hace la vida difícil a los partidos pequeños. Pero el efecto RP les da más curules a los partidos que sobreviven. Para niveles de voto nulo más realistas, digamos de entre 2 o 3% de la votación total --como los que hemos observado en elecciones pasadas-- el efecto umbral y el efecto RP son muy pequeños y practicamente se cancelan mutuamente. Por eso algunos insistimos con necedad instrumental: ¿de qué sirve anular el voto si, aunque te haga sentir como un gran ciudadano castigador en realidad no lastima a (casi) nadie? Mejor hay que votar donde duele.

Opposing Chavez

2009-05-13T17:42:00.001-05:00

The Price of Political Opposition: Evidence from Venezuela's Maisanta

http://papers.nber.org/papers/W14923

Chang-Tai Hsieh, Edward Miguel, Daniel Ortega, Francisco Rodriguez

In 2004, the Chavez regime in Venezuela distributed the list of several million voters whom had attempted to remove him from office throughout the government bureaucracy, allegedly to identify and punish these voters. We match the list of petition signers distributed by the government to household survey respondents to measure the economic effects of being identified as a Chavez political opponent.

We find that voters who were identified as Chavez opponents experienced a 5 percent drop in earnings and a 1.5 percentage point drop in employment rates after the voter list was released. A back-of-the-envelope calculation suggests that the loss aggregate TFP from the misallocation of workers across jobs was substantial, on the order of 3 percent of GDP.

Electoral Accountability and Corruption

2009-05-13T17:28:00.001-05:00

This is very replicable research… that is, if we only had reelection… and good data on corruption.

Electoral Accountability and Corruption: Evidence from the Audits of Local Governments

April 2009
Claudio Ferraz and Frederico Finan
http://www.nber.org/papers/w14937

Political institutions can affect corruption. We use audit reports from an anti-corruption program in Brazil to construct new measures of political corruption in local governments and test whether electoral accountability affects the corruption practices of incumbent politicians. We find significantly less corruption in municipalities where mayors can get reelected. Mayors with re-election incentives misappropriate 27 percent fewer resources than mayors without re-election incentives. These effects are more pronounced among municipalities with less access to information and where the likelihood of judicial punishment is lower. Overall our findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician’s corrupt behavior.

Elecciones intermedias México 2009

2009-05-11T09:44:00.001-05:00

El Universal del día de hoy, Lunes 11 de mayo de 2009, me publicó un breve artículo sobre las preferencias electorales al inicio de la campaña.

“Apenas comenzaron las campañas oficiales rumbo a la elección de diputados federales y ya es común preguntarnos cómo afectará la influenza el resultado del 5 de julio próximo y, sobre todo, si ésta beneficiará o perjudicará al PAN. Antes de especular vale la pena repasar lo que ha ocurrido en elecciones intermedias recientes. En 1997 el PRI perdió 61 curules; y en 2003 el PAN perdió 59 asientos de los 207 con que contaba. Sucede que es común observar que en elecciones intermedias el partido del Presidente pierde fuerza en el Poder Legislativo por muy diversas razones: por un lado los efectos de arrastre de los candidatos presidenciales están ausentes y, por otro lado, se dice que el electorado hace una especie de referéndum sobre la gestión de un presidente que se desgasta más que sus opositores…”

Pueden leer el resto aquí.

Una columna previa sobre popularidad presidencial, publicada el jueves 2 de abril de 2009, está aquí.

Swine flu, measurement error, and policy responses

2009-04-30T02:54:00.004-05:00

Is the Mexican government overreacting to the swine flu virus outbreak? It is still to soon to know. So far, in the first week of the "contingency", most of the actions taken by the Mexican government have been backed by the WHO, and by a majority of the public opinion.

We also have witnessed a parade of numbers trying to assess the evolution and riskiness of the virus. How can we measure this? An important statistict in epidemiology is the Case Fatality Ratio (CFR = number of deaths / number of cases). The latest figure of "suspected" swine flu-deaths is 159 but only 7 of them have been confirmed as positive cases by laboratory tests. Also, the latest estimate of atypical neumonia cases in this period is about 2500 (April 29th, 2009). Thus, making the extreme assumption that all deaths become positive cases (and keeping all else equal) results in an estimated (upper bound) CFR of 159/2500 = 6.36%. Clearly, these figures will change as more positive cases and/or swine-related deaths occur (see update below).

It is important to note that measurement error on either the numerator or the denominator affect any CFR estimate, thereby making the virus to appear more or less deadly. For instance, if the virus is very contagious but not deadly, the CFR will become approximately close to zero (not too risky a ratio, but consider that seasonal influenza kills 36,000 people in the US every year). On the other hand, if the virus turns more deadly but not very contagious, the CFR will increase (for instance, SARS has a CFR of about 50%, very deadly indeed).

But then again, is the Mexican government overreacting? Do we really need to close schools and restaurants, or should we focus instead on revamping our health services? We don't know yet. Oddly enough, the more deadly this virus becomes (ie, the higher the CFR worldwide), the better our government will look in retrospective for properly reacting to a serious risk.

Alas, if the swine flu virus ends up being more deadly here than elsewhere (ie, with a CFR higher in Mexico than abroad), the worse our overall health system will look and the more off-target the Mexican reaction will be. It may be the case that Mexico's poor health care services and limited coverage turn more deadly than a new found virus. I truly hope to be wrong on this.

Related links:

Swine Flu and the Mexico Mystery: Why does the swine flu seem to be more deadly in Mexico? from Slate
Mexico's High Death Rate Poses Key Question on Virus from the Wall Street Journal
Swine flu: what do CFR, virulence and mortality rate mean? from Effect measure
Swine flu: Questions and answers from the Virology blog
Disease Outbreak News from the World Health Organization.

May 6 Update:
In Mexico: 29 deaths / 942 confirmed cases = 3.07% CFR
In the US: 2 deaths / 642 confirmed cases = 0.311 CFR

Risk Communication in Epidemics

2009-04-29T15:08:00.000-05:00

Great piece on the the hazard vs. public outrage tradeoff.

"Let me tell you the basics of risk communication, and then I want to apply them, a little bit, to bird flu. The fundamental principle of risk communication can be summarized in a number, [which] is the correlation between how much harm a risk does and how upset people get about it. If you look at a long list of risks, and you rank them in order of how upset people get [about them], then you rank them again in order of how much harm they do, then you correlate the two, you get a glorious 0.2.
Those of you who remember your statistics know you can square a correlation coefficient to get the percentage of variance accounted for: If you square 0.2, you get 0.04, or 4% of the variance.
That is, the risks that kill people and the risks that upset people are completely different. If you know that a risk kills people, you have no idea whether it upsets them or not. If you know it upsets them, you have no idea whether it kills them or not."

Read the whole thing by Peter Sandman, Risk Communication Specialist

Comparative trends in US presidential elections 2000 to 2008

2008-10-30T20:35:00.003-06:00

In the final days before the election, pundits and the media will claim that the race "is tightening" and that "you never know what may happen". To be sure, there is never a 100% certainty, yet I believe the financial crisis pretty much settled the 2008 election (I'll let you decide to what extent the crisis was a surprise event). Any supporting evidence? This is what Charles Franklin (Univ of Wisconsin, Madison) wrote on Oct 6th, 2008, almost a month before election day:

"The 2008 campaign had not seen a really big move in preferences until the financial crisis hit three weeks ago today. Since that time, the Obama-McCain margin has shifted almost 9 points in Obama's favor, converting a small McCain lead into a substantial Obama advantage. This swing reversed the gains McCain made with the Republican convention and the week after during which he picked up about 4 points and took the lead for the first time since March.
I wrote earlier that we had not seen a move in 2008 as large as ones we saw in both 2000 and 2004. That is no longer true of 2004, though the current run is not yet as large as the one Gore mounted in 2000.
The Bush counter-assault in 2000, after Gore's surge, was almost eight points, and began at almost the same point in the campaign, about 57 days out. Voters are making up their minds at about the same rate as they did in 2000. If this year follows that pattern, look for some serious decision making over the next two weeks.

These are Franklin's critical graphs:

Sam Wang (Princeton Election Consortium) links to the (even clearer) electoral vote predictions for 2004 here, and for 2008 here. He also commented that:

In 2004, candidate game-shifting events were:

7/26: Democratic convention
8/5-31: Swift Boat Veterans for Truth ad campaign
8/30: Republican convention
9/30: Debate #1
The other debates (10/8, 10/13) had no measurable effect.

In 2008, the game-shifting events have been:

6/7: Hillary Clinton concedes
8/1: McCain's "Celebrity" ad campaign
8/25-9/5: Both conventions and McCain announcement of Palin
9/11-12: Palin on ABC News w/Charlie Gibson, McCain on "The View"
9/26: Obama-McCain debate #1
All of these events were shortly followed by swings.

Public funding and the 2008 election

2008-10-30T19:54:00.000-06:00

This is George F. Will, in today's Washington Post, on some of the campaign finance lessons from the 2008 presidential election:

Call him John the careless

Thursday, October 30, 2008

(...) McCain revived a familiar villain -- "huge amounts" of political money -- when Barack Obama announced that he had received contributions of $150 million in September. "The dam is broken," said McCain, whose constitutional carelessness involves wanting to multiply impediments to people who want to participate in politics by contributing to candidates -- people such as the 632,000 first-time givers to Obama in September.

Why is it virtuous to erect a dam of laws to impede the flow of contributions by which citizens exercise their First Amendment right to political expression? "We're now going to see," McCain warned, "huge amounts of money coming into political campaigns, and we know history tells us that always leads to scandal." The supposedly inevitable scandal, which supposedly justifies preemptive government restrictions on Americans' freedom to fund the dissemination of political ideas they favor, presumably is that Obama will be pressured to give favors to his September givers. The contributions by the new givers that month averaged $86.

One excellent result of this election cycle is that public financing of presidential campaigns now seems sillier than ever. The public has always disliked it: Voluntary and cost-free participation, using the check-off on the income tax form, peaked at 28.7 percent in 1980 and has sagged to 9.2 percent. The Post, which is melancholy about the system's parlous condition, says there were three reasons for creating public financing: to free candidates from the demands of fundraising, to level the playing field and "to limit the amount of money pouring into presidential campaigns." The first reason is decreasingly persuasive because fundraising is increasingly easy because of new technologies such as the Internet. The second reason is, the Supreme Court says, constitutionally impermissible. Government may not mandate equality of resources among political competitors who earn different levels of voluntary support. As for the third reason -- "huge amounts" (McCain) of money "pouring into" (The Post) presidential politics -- well:

The Center for Responsive Politics calculates that, by Election Day, $2.4 billion will have been spent on presidential campaigns in the two-year election cycle that began in January 2007, and an additional $2.9 billion will have been spent on 435 House and 35 Senate contests. This $5.3 billion is a billion less than Americans will spend this year on potato chips.

Migration policy, Media bias, Direct democracy (new papers)

2008-10-30T11:38:00.001-06:00

Do Interest Groups Affect U.S. Immigration Policy?

Date: 2008-10-11

By: Prachi Mishra, Anna Maria Mayda, Giovanni Facchini

http://d.repec.org/n?u=RePEc:imf:imfwpa:08/244&r=pol

While anecdotal evidence suggests that interest groups play a key role in shaping immigration policy, there is no systematic empirical analysis of this issue. In this paper, we construct an industry-level dataset for the United States, by combining information on the number of temporary work visas with data on lobbying activity associated with immigration. We find robust evidence that both pro- and anti-immigration interest groups play a statistically significant and economically relevant role in shaping migration across sectors. Barriers to migration are lower in sectors in which business interest groups incur larger lobby expenditures and higher in sectors where labor unions are more important.

Media Bias and Influence: Evidence from Newspaper Endorsements

Date:2008-10

By: Brian G. Knight and Chun-Fang Chiang

http://d.repec.org/n?u=RePEc:nbr:nberwo:14445&r=pol

This paper investigates the relationship between media bias and the influence of the media on voting in the context of newspaper endorsements. We first develop a simple econometric model in which voters choose candidates under uncertainty and rely on endorsements from better informed sources. Newspapers are potentially biased in favor of one of the candidates and voters thus rationally account for the credibility of any endorsements. Our primary empirical finding is that endorsements are influential in the sense that voters are more likely to support the recommended candidate after publication of the endorsement. The degree of this influence, however, depends upon the credibility of the endorsement. In this way, endorsements for the Democratic candidate from left-leaning newspapers are less influential than are endorsements from neutral or right-leaning newspapers, and likewise for endorsements for the Republican. These findings suggest that voters do rely on the media for information during campaigns but that the extent of this reliance depends upon the degree and direction of any bias.

Does Direct Democracy Reduce the Size of Government? New Evidence from Historical Data, 1890-2000

Date: 2008-10

By: Patricia Funk and Christina Gathmann

http://d.repec.org/n?u=RePEc:upf:upfgen:1123&r=pol

Using historical data for all Swiss cantons from 1890 to 2000, we estimate the causal effect of direct democracy on government spending. The main innovation in this paper is that we use fixed effects to control for unobserved heterogeneity and instrumental variables to address the potential endogeneity of institutions. We find that the budget referendum and lower costs to launch a voter initiative are effective tools in reducing canton level spending. However, we find no evidence that the budget referendum results in more decentralized government or a larger local government. Our instrumental variable estimates suggest that a mandatory budget referendum reduces the size of canton spending between 13 and 19 percent. A 1 percent lower signature requirement for the initiative reduces canton spending by up to 2 percent.

Keywords: Direct Democracy, Fiscal Policy, Switzerland

Myths about the 2008 crisis

2008-10-22T12:02:00.001-05:00

Three economists at the Federal Reserve Bank of Minneapolis, Chari, Christiano and Kehoe, point out to Four Myths about the Financial Crisis of 2008 (it's a short paper and full of graphs).

"Clearly, the United States and the world economy are undergoing a major financial crisis. Interbank borrowing and lending rates have risen to unprecedented levels relative to U.S. Treasury Bills. Several major financial institutions have failed. These real problems have also been associated with four widely-held myths about the nature of the financial crisis and the associated spillovers to the rest of the economy. The financial press and policymakers have made four claims about the nature of the crisis:

Bank lending to nonfinancial corporations and individuals has declined sharply.
Interbank lending is essentially nonexistent.
Commercial paper issuance by nonfinancial corporations has declined sharply and rates have risen to unprecedented levels.
Banks play a large role in channeling funds from savers to borrowers.

Here we examine these claims using data from the Federal Reserve Board. At least based on data up until October 8, 2008, we argue that all four claims are false."

So yes, it looks like capitalism will survive... On the other hand, a summary of the US real estate market adjustment process is here.

Undecided voters

2008-10-21T20:23:00.002-05:00

A funny but perhaps true flowchart from 235.com.

"The race for president between Barack Obama and John McCain has been going on for close to 17 years now, and yet still—still!—there are some voters who haven't made up their minds about whom to vote for. Who are these undecideds, and what could possibly be going on in their tiny, tiny brains?"

The real estate bubble and the adjustment

2008-10-21T10:59:00.001-05:00

A summary from Calculated Risk (check out the link to see nice graphs).

"I'm frequently asked if I'm more concerned today than I was in 2005. There are reasons for concern: the credit markets have seized up, many financial institutions are insolvent, consumer spending and investment in commercial real estate is starting to decline, export growth appears to be slowing, the unemployment rate is rising ... and the economy is clearly in a recession. There are huge and scary downside risks today, but I'm actually more sanguine now than I was in 2005. If you think back to 2005, we were standing at the precipice, and there was no where to go but over the cliff.

Housing starts have collapsed by more than half since 2005. This decline seemed obvious and inevitable in 2005, and now most of the adjustment has already happened. Which was better for the economy looking forward? To be standing at the edge (in 2005) or to be much nearer the bottom in 2008?

Just like for housing starts, new home sales have collapsed by more than half since 2005. The good news is starts of single family homes built for sale have fallen below new home sales, and new home inventory is declining (although existing home inventory is still near record levels). Once again the bulk of the adjustment is now behind us.

(House price / income ratios are back to 2003 levels.) Although I believe there are more price declines ahead (and therefore more homeowners with negative equity and more foreclosures), prices are much more reasonable today than in 2005.

The price adjustments were inevitable, and progress is being made."

Throw the bums out

2008-10-15T08:26:00.000-05:00

A nice summary on voter irrationality from Larry Bartels:

"While voters are busy meting out myopic, simple-minded rewards and punishments, political observers are often busy exaggerating the policy content of the voters’ verdicts. The prime example in American political history may be the watershed New Deal election of 1936. Having swept into office on a strong tide of economic discontent in 1932, Franklin Roosevelt initiated a series of wide-ranging new policies to cope with the Great Depression. According to the most authoritative political scholar of the era, V. O. Key, “The voters responded with a resounding ratification of the new thrust of governmental policy”—a stunning 46-state landslide that ushered in an era of Democratic electoral dominance.24

The 1936 election has become the most celebrated textbook case of ideological realignment in American history. However, a careful look at state-by-state voting patterns suggests that this resounding ratification of Roosevelt’s policies was strongly concentrated in the states that happened to enjoy robust income growth in the months leading up to the vote. Indeed, the apparent impact of short-term economic conditions was so powerful that, if the recession of 1938 had occurred in 1936, Roosevelt probably would have been a one-term president.25

It’s not only in the United States that the Depression-era tendency to “throw the bums out” looks like something less than a rational policy judgment. In the United States, voters replaced Republicans with Democrats in 1932 and the economy improved. In Britain and Australia, voters replaced Labor governments with conservatives and the economy improved. In Sweden, voters replaced Conservatives with Liberals, then with Social Democrats, and the economy improved. In the Canadian agricultural province of Saskatchewan, voters replaced Conservatives with Socialists and the economy improved. In the adjacent agricultural province of Alberta, voters replaced a socialist party with a right-leaning party created from scratch by a charismatic radio preacher peddling a flighty share-the-wealth scheme, and the economy improved. In Weimar Germany, where economic distress was deeper and longer lasting, voters rejected all of the mainstream parties, the Nazis seized power, and the economy improved. In every case, the party that happened to be in power when the Depression eased went on to dominate politics for a decade or more thereafter. It seems far-fetched to imagine that all these contradictory shifts represented well-considered ideological conversions. A more parsimonious interpretation is that voters simply—and simple-mindedly—rewarded whoever happened to be in power when things got better.

Stupid? No, just human. And thus—to borrow the title of another current bestseller, by behavioral economist Dan Ariely—“predictably irrational.” That may be bad enough."

GOTV and likely voters

2008-10-13T19:13:00.002-05:00

Via realclearpolitics--This is what the the Washington Post wrote on Sunday:

Sen. Barack Obama's campaign intends to avoid a (2004) repeat by building an
organization modeled in part on what Karl Rove used to engineer Bush's victory:
a heavy reliance on local volunteers to pitch to their own neighbors,
micro-targeting techniques to identify persuadable independents and Republicans
using consumer data, and a focus on exurban and rural areas. But in scale and
ambition, the Obama organization goes beyond even what Rove built. The campaign
has used its record-breaking fundraising to open more than 700 offices in more
than a dozen battleground states, pay several thousand organizers and manage
tens of thousands more volunteers.

And this is what Gallup has to say regarding how this get out the vote strategy may affect its survey-weighting methods:

Likely Voter Estimates
"Obama's current advantage is slightly less when estimating the preferences of likely voters, which Gallup will begin reporting on a regular basis between now and the election. Gallup is providing two likely voter estimates to take into account different turnout scenarios.
The first likely voter model is based on Gallup's traditional likely voter assumptions,which determine respondents' likelihood to vote based on how they answer questions about their current voting intention and past voting behavior. According to this model, Obama's advantage over McCain is 50% to 46% in Oct. 9-11 tracking data.
The second likely voter estimate is a variation on the traditional model, but is only based on respondents' current voting intention. This model would take into account increased voter registration this year and possibly higher turnout among groups that are traditionally less likely to vote, such as young adults and racial minorities (Gallup will continue to monitor and report on turnout indicators by subgroup between now and the election). According to this second likely voter model, Obama has a 51% to 45% lead over McCain. "
(Click here to see how the race currently breaks down by demographic subgroup.)

And for the "registered voters" sample, the figures are 50% Obama, 43% McCain. This means that the different weighting method leads to three different forecasts, with margins of victory ranging from a 4 to 7 percent lead in favor of Obama. With sampling errors of roughly 2%, the weighting method will be crucial in predicting heavily contested states such as Virginia.

Populist revolts

2008-10-01T13:29:00.000-05:00

An historical vignette from Andrew Selgman’s blog

Mavericks of the past

Phil Klinkner writes:

History doesn't repeat itself, the saying goes, but it does rhyme.

To me [Klinkner], the recent House defeat of the financial bailout bill echoes the defeat of the national sale tax in 1932. The Depression dried up federal revenues, so the Hoover administration proposed a national sales tax to raise money. Business and the leadership of both parties favored the bill, but the public was overwhelmingly opposed. Liberal Republican Fiorella LaGuardia led a bipartisan revolt against the bill. House Speaker John N. Garner (D-TX) actually left the speaker's chair to go into the well and plead with his fellow Democrats to pass the bill. Garner normally had tight control on his party, but not this time. The bill was defeated 153-223.

In both cases, an unpopular Republican administration put forward a proposal to deal with an economic crisis, supported by the Democratic leadership in the House and the vast majority of the business community. Nonetheless, a bipartisan populist revolt sent it down to defeat.

And, Phil forgot to mention, James Garner was Maverick.

Poll of polls

2008-09-30T10:53:00.002-05:00

This is an up to date poll of polls for the 2008 National Presidential General Election.

Maps and more in depth analysis at pollster.com

Y is not about X

2008-09-23T21:32:00.001-05:00

Is everything about status? These are some sentences of wisdom from Robin Hanson at Overcoming Bias.

Clothes aren't about Comfort
Marriage isn't about Romance
Talk isn't about Info
Charity isn't about Helping
Church isn't about God
Medicine isn't about Health
Consulting isn't about Advice
School isn't about Learning
Research isn't about Progress
Politics isn't about Policy

High school students are easily engaged to elect class presidents, even though they have little idea what if any policies a class president might influence. Instead such elections are usually described as "popularity contests." That is, theses elections are about which school social factions are to have higher social status. If a jock wins, jocks have higher status. If your girlfriend's brother wins, you have higher status, etc. And the fact that you have a vote says that others should take you into account when forming coalitions - you are somebody.

Civics teachers talk as if politics is about policy, that politics is our system for choosing policies to deal with common problems. But as Tyler Cowen suggests, real politics seems to be more about who will be our leaders, and what coalitions will rise or fall in status as a result. Election media coverage focuses on characterizing the candidates themselves - their personalities, styles, friends, beliefs, etc. ...As with high school class presidents, we care about policies mainly as clues to candidate character and affiliations. And to the extend we consider policies not tied to particular candidates, we mainly care about how policies will effect which kinds of people will be respected how much.

For example, we want nationalized medicine so poor sick folks will feel cared for, military actions so foreigners will treat us with respect, business deregulation as a sign of respect for hardworking businessfolk, official gay marriage as a sign we accept gays, and so on. This perspective explains why voters tend to prefer proportional representation, why many refuse to vote for any candidate when none have earned their respect...

Also related: Cowen's relative status and ideology is here.

...and yes, perhaps this blog is not about "scholarly ideas" but about using whatever I think is interesting as a signal...

The mother of all bailouts

2008-09-22T01:16:00.001-05:00

The draft of the LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE MORTGAGE-RELATED ASSETS in the US is so short even I could understand most of it. These are some excerpts of note (y algunos comentarios al vuelo):

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation: (1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties; (2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts; (3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them; (4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and (5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--(1) providing stability or preventing disruption to the financial markets or banking system; and (2) protecting the taxpayer.

(Comparado con la detallada lista de "acciones necesarias", los "consideraciones" son breves y ambiguas: ¿cómo se mide la estabilidad financiera y/o la protección del contribuyente?)

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

(Nótese que, de ser aprobada esta iniciativa, el primer reporte de resultados se entregaría en diciembre--pasada la elección presidencial y antes de que Bush deje el poder.)

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.

(Nótese que el gobierno puede comprar o vender más de 700mil mdd, pero el "balance diario" nunca podrá exceder dicho monto.)

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

(Ojo, estamos hablando de poderes discrecionales sobre 700mil mdd.)

The complete proposal text is here.

Taleb on the Limits of Statistics

2008-09-21T22:00:00.003-05:00

Taleb's classical metaphor: "A turkey is fed for a 1000 days—every days confirms to its statistical department that the human race cares about its welfare 'with increased statistical significance'. On the 1001st day, the turkey has a surprise."

Some quotable quotes from Taleb's essay:

"Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the "logic of science"; it is the instrument of risk-taking; it is the applied tools of epistemology; you can't be a modern intellectual and not think probabilistically—but... let's not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now.

"By the "narrative fallacy" the turkey economics department will always manage to state, before thanksgivings that "we are in a new era of safety", and back-it up with thorough and "rigorous" analysis. And Professor Bernanke indeed found plenty of economic explanations—what I call the narrative fallacy—with graphs, jargon, curves, the kind of facade-of-knowledge that you find in economics textbooks. This is the find of glib, snake-oil facade of knowledge—even more dangerous because of the mathematics. (...) I have nothing against economists: you should let them entertain each others with their theories and elegant mathematics, and help keep college students inside buildings. But beware: they can be plain wrong, yet frame things in a way to make you feel stupid arguing with them.

What Is Wise To Do (Or Not Do) In The Fourth Quadrant

(NB: The 4th quadrant basically refers to heavy-tailed or unknown probability distributions with complex or nonlinear payoffs)

1) Avoid Optimization, Learn to Love Redundancy. Psychologists tell us that getting rich does not bring happiness—if you spend it. But if you hide it under the mattress, you are less vulnerable to a black swan. (...) Biological systems—those that survived millions of years—include huge redundancies. (...) Historically populations tended to produced around 4-12 children to get to the historical average of ~2 survivors to adulthood.

2) Avoid prediction of remote payoffs—though not necessarily ordinary ones. Payoffs from remote parts of the distribution are more difficult to predict than closer parts. A general principle is that, while in the first three quadrants you can use the best model you can find, this is dangerous in the fourth quadrant: no model should be better than just any model.

3) Beware the "atypicality" of remote events. There is a sucker's method called "scenario analysis" and "stress testing"—usually based on the past (or some "make sense" theory).

4) Time. It takes much, much longer for a times series in the Fourth Quadrant to reveal its property. At the worst, we don't know how long. Things that have worked for a long time are preferable—they are more likely to have reached their ergodic states.

5) Beware Moral Hazard. Is optimal to make series of bonuses betting on hidden risks in the Fourth Quadrant, then blow up and write a thank you letter.

6) Metrics. Conventional metrics based on type 1 randomness don't work. Words like "standard deviation" are not stable and does not measure anything in the Fourth Quadrant. 70-90% of the Kurtosis in Oil, SP500, Silver, UK interest rates, Nikkei, US deposit rates, sugar, and the dollar/yet currency rate come from 1 day in the past 40 years.

Tracking the 2008 US presidential election

2008-09-21T15:11:00.004-05:00

This is an up to date graph of the Obama and McCain contracts at intrade.com:

This is Obama's contract (more details here):

This is McCain's contract (more details here):

This is what the latest polls say

And this is how the red/blue/purple state map looks like

What makes people vote republican? (morality vs. policies)

2008-09-10T01:40:00.001-05:00

Aunque estoy poco capacitado para evaluar la originalidad del argumento, este ensayo me parece bastante interesante. If he is right, are (some sort of) political scientists also missing an important point? Saludos!

WHAT MAKES PEOPLE VOTE REPUBLICAN?

By Jonathan Haidt

What makes people vote Republican? Why in particular do working class and rural Americans usually vote for pro-business Republicans when their economic interests would seem better served by Democratic policies? We psychologists have been examining the origins of ideology ever since Hitler sent us Germany's best psychologists, and we long ago reported that strict parenting and a variety of personal insecurities work together to turn people against liberalism, diversity, and progress. But now that we can map the brains, genes, and unconscious attitudes of conservatives, we have refined our diagnosis: conservatism is a partially heritable personality trait that predisposes some people to be cognitively inflexible, fond of hierarchy, and inordinately afraid of uncertainty, change, and death. People vote Republican because Republicans offer "moral clarity"—a simple vision of good and evil that activates deep seated fears in much of the electorate. Democrats, in contrast, appeal to reason with their long-winded explorations of policy options for a complex world.

Diagnosis is a pleasure. It is a thrill to solve a mystery from scattered clues, and it is empowering to know what makes others tick. In the psychological community, where almost all of us are politically liberal, our diagnosis of conservatism gives us the additional pleasure of shared righteous anger. We can explain how Republicans exploit frames, phrases, and fears to trick Americans into supporting policies (such as the "war on terror" and repeal of the "death tax") that damage the national interest for partisan advantage.

But with pleasure comes seduction, and with righteous pleasure comes seduction wearing a halo. Our diagnosis explains away Republican successes while convincing us and our fellow liberals that we hold the moral high ground. Our diagnosis tells us that we have nothing to learn from other ideologies, and it blinds us to what I think is one of the main reasons that so many Americans voted Republican over the last 30 years: they honestly prefer the Republican vision of a moral order to the one offered by Democrats. To see what Democrats have been missing, it helps to take off the halo, step back for a moment, and think about what morality really is.

(...)

If Democrats want to understand what makes people vote Republican, they must first understand the full spectrum of American moral concerns. They should then consider whether they can use more of that spectrum themselves. The Democrats would lose their souls if they ever abandoned their commitment to social justice, but social justice is about getting fair relationships among the parts of the nation. This often divisive struggle among the parts must be balanced by a clear and oft-repeated commitment to guarding the precious coherence of the whole. America lacks the long history, small size, ethnic homogeneity, and soccer mania that holds many other nations together, so our flag, our founding fathers, our military, and our common language take on a moral importance that many liberals find hard to fathom.

Unity is not the great need of the hour, it is the eternal struggle of our immigrant nation. The three Durkheimian foundations of ingroup, authority, and purity are powerful tools in that struggle. Until Democrats understand this point, they will be vulnerable to the seductive but false belief that Americans vote for Republicans primarily because they have been duped into doing so.

JONATHAN HAIDT is Associate Professor of Psychology at the University of Virginia, where he does research on morality and emotion and how they vary across cultures. He is the author of The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom.

El ensayo completo (y un debate en torno al mismo) están aqui:

http://www.edge.org/3rd_culture/haidt08/haidt08_index.html

Obama vs. McCain

2008-09-06T02:28:00.001-05:00

A few notable paragraphs of Obama speech at the Democratic National Convention (August 28th, 2008). His criticism of McCain is a bit more nuanced than Palin--because you don't want to go ballistic with McCain the hero.

"Tonight, I say to the American people, to Democrats and Republicans and Independents across this great land - enough! This moment - this election - is our chance to keep, in the 21st century, the American promise alive. Because next week, in Minnesota, the same party that brought you two terms of George Bush and Dick Cheney will ask this country for a third. And we are here because we love this country too much to let the next four years look like the last eight. On November 4th, we must stand up and say: "Eight is enough."

Now let there be no doubt. The Republican nominee, John McCain, has worn the uniform of our country with bravery and distinction, and for that we owe him our gratitude and respect. And next week, we'll also hear about those occasions when he's broken with his party as evidence that he can deliver the change that we need. But the record's clear: John McCain has voted with George Bush ninety percent of the time. Senator McCain likes to talk about judgment, but really, what does it say about your judgment when you think George Bush has been right more than ninety percent of the time? I don't know about you, but I'm not ready to take a ten percent chance on change.

The truth is, on issue after issue that would make a difference in your lives - on health care and education and the economy - Senator McCain has been anything but independent. He said that our economy has made "great progress" under this President. He said that the fundamentals of the economy are strong. And when one of his chief advisors - the man who wrote his economic plan - was talking about the anxiety Americans are feeling, he said that we were just suffering from a "mental recession," and that we've become, and I quote, "a nation of whiners."
(…)
Now, I don't believe that Senator McCain doesn't care what's going on in the lives of Americans. I just think he doesn't know. Why else would he define middle-class as someone making under five million dollars a year? How else could he propose hundreds of billions in tax breaks for big corporations and oil companies but not one penny of tax relief to more than one hundred million Americans? How else could he offer a health care plan that would actually tax people's benefits, or an education plan that would do nothing to help families pay for college, or a plan that would privatize Social Security and gamble your retirement? It's not because John McCain doesn't care. It's because John McCain doesn't get it.

For over two decades, he's subscribed to that old, discredited Republican philosophy - give more and more to those with the most and hope that prosperity trickles down to everyone else. In Washington, they call this the Ownership Society, but what it really means is - you're on your own. Out of work? Tough luck. No health care? The market will fix it. Born into poverty? Pull yourself up by your own bootstraps - even if you don't have boots. You're on your own.

Well it's time for them to own their failure. It's time for us to change America."

Palin goes negative

2008-09-04T10:05:00.001-05:00

I really like (some of) the smears and negative campaigning that we have heard in both the Democratic and Republican convention. If nothing else, they make it easy for even the most undecided or uninformed voters to contrast and ponder each candidate's strenghts and weaknesses. Obviously, you have to hear both sides. VP candidates are the official attack dogs in presidential campaigns. These two are excerpts from Sarah Palin speech at the RNC that I particularly liked:

"Before I became governor of the great state of Alaska, I was mayor of my hometown. And since our opponents in this presidential election seem to look down on that experience, let me explain to them what the job involves. I guess a small-town mayor is sort of like a "community organizer," except that you have actual responsibilities. I might add that in small towns, we don't quite know what to make of a candidate who lavishes praise on working people when they are listening, and then talks about how bitterly they cling to their religion and guns when those people aren't listening."

"I've noticed a pattern with our opponent. Maybe you have, too. We've all heard his dramatic speeches before devoted followers. And there is much to like and admire about our opponent. But listening to him speak, it's easy to forget that this is a man who has authored two memoirs but not a single major law or reform — not even in the state senate. This is a man who can give an entire speech about the wars America is fighting, and never use the word "victory" except when he's talking about his own campaign. But when the cloud of rhetoric has passed ... when the roar of the crowd fades away ... when the stadium lights go out, and those Styrofoam Greek columns are hauled back to some studio lot — what exactly is our opponent's plan? What does he actually seek to accomplish, after he's done turning back the waters and healing the planet? The answer is to make government bigger..."

Coming soon: my fav excerpts from the DNC speeches...

The political power of daugthers

2008-07-26T19:27:00.001-05:00

Daughters and Left-Wing Voting

Andrew J. Oswald (University of Warwick and Cornell University) Nattavudh Powdthavee (University of London and University of York)

From the paper introduction:
“In remarkable research, the sociologist Rebecca Warner and the economist Ebonya Washington have shown that the gender of a person’s children seems to influence the attitudes and actions of the parent.
Warner (1991) and Warner and Steel (1999) study American and Canadian mothers and fathers. The authors’ key finding is that support for policies designed to address gender equity is greater among parents with daughters. This result emerges particularly strongly for fathers. Because parents invest a significant amount of themselves in their children, the authors argue, the anticipated and actual struggles that offspring face, and the public policies that tackle those, matter to those parents. In the words of Warner and Steel (1999), “child rearing might provide a mechanism for social change whereby fathers' connection with their daughters undermines … patriarchy”. The authors demonstrate that people who parent only daughters are more likely to hold feminist views (for example, to favor affirmative action). By collecting data on the voting records of US congressmen, Washington (2004) is able to go beyond this. She provides persuasive evidence that congressmen with female children tend to vote liberally on reproductive rights issues such as teen access to contraceptives. In a revision, Washington (2008) argues for a wider result, namely, that the congressmen vote more liberally on a range of issues such as working families flexibility and tax-free education.
Our aim in this paper is to argue, with nationally representative random samples of men and women, that these results generalize to voting for entire political parties. We document evidence that having daughters leads people to be more sympathetic to left-wing parties. Giving birth to sons, by contrast, seems to make people more likely to vote for a right-wing party. Our data, which are primarily from Great Britain, are longitudinal. We also report corroborative results for a German panel. Access to longitudinal information gives us the opportunity -- one denied to previous researchers -- to observe people both before and after they have a new child of any particular gender. We can thereby test for political ‘switching’. Although panel data cannot resolve every difficulty of establishing cause-and-effect relationships, they allow sharper testing than can simple cross-section data. The paper checks that our result is not an artifact of family stopping-rules, discusses the predictions from a simple economic model, and tests for possible reverse causality.”

Also related:

Washington, Ebonya. (2008) “Family socialization: How daughters affect their legislator fathers’ voting on women’s issues.” American Economic Review, forthcoming.

Abstract. “Economists have long concerned themselves with environmental influences, such as neighborhood, peers and family on individuals' beliefs and behaviors. However, the impact of children on parents' behavior has been little studied. Parenting daughters, psychologists have shown, increases feminist sympathies. I test the hypothesis that children, much like neighbors or peers, can influence adult behavior. I demonstrate that the propensity to vote liberally on reproductive rights is significantly increasing in a congress person's proportion of daughters. The result demonstrates not only the relevance of child to parent behavioral influence, but also the importance of personal ideology in a legislator's voting decisions as it is not explained away by voter preferences.”

Set Theory 101

2008-05-28T01:21:00.003-05:00

I found this on a good friend's website. Not only it is very true but it could also help teach some basic lessons in set theory, trade offs and the pareto frontier. Enjoy.

Lant Pritchett - Let their people come

2008-04-29T23:53:00.000-05:00

Acaba de salir un libro sobre los beneficios potenciales de una mayor movilidad internacional de la mano de obra (léase migración). La premisa de Lant Pritchett--economista de MIT, profesor de Harvard e investigador del World Bank--es sencilla: en el mundo actual, las ganancias de una mayor movilidad laboral son mucho mayores que las ganancias de disminuir, aun más, las barreras al comercio internacional.

¿Por qué? Imperfectos como lo son, los aranceles y tarifas promedio del mundo ya son relativamente bajos. En cambio, las barreras migratorias siguen siendo gigantescas y socialmente costosas. ¿Evidencia? Los diferenciales en precios de bienes y servicios entre un país rico y uno pobre son de, digamos 30 a 40% (ie, el precio de una ipod o una big mac alrededor del mundo no difiere demasiado). Sin embargo, los diferenciales en salarios entre un pais rico y uno pobre llegan a ser de más del 500%, es decir, de un orden de magnitud superior.

In short, in today's world, being pro-migration is much more pro-poor than being pro-trade.

El libro está disponible en linea aqui:
http://www.cgdev.org/content/publications/detail/10174

Dixit (non) system of work

2008-04-19T18:06:00.000-05:00

This is Avinash Dixit advice on keeping research simple and papers short:

"Over the last two decades the average length of economics papers has increased quite a lot. Advances in word-processing technology have greatly reduced the cost of producing words, but not the cost of producing ideas, with the result economists should expect -- massive substitution.

My ideal is neatly captured in a question Frank Hahn posed to an author. As an editor of the Review of Economic Studies, Hahn asked the author to cut down his paper from 40 pages to its essential core of three pages. When the author wrote a long and indignant letter, Hahn responded in two sentences: "Crick and Watson described the structure of DNA in three pages. Kindly explain why your idea deserves more space."
(...)
I have saved for the end the most important lesson I have learned from my experience, and which I believe has very general validity. Maintain a youthful sense of freedom to choose problems and the directions of work on them. Imagine yourself at twenty-three, not yet labeled or confined to a particular "field," and not yet pressured to produce something quickly for the approaching tenure review. Try to preserve this mental frame in your research, even as your body, and the part of your mind dealing with other matters, continue to age and decay.

Unfortunately, in the US most academics do not regain this freedom until they are thirty-five, by which time it is too late for many of them to be twenty-three. Their research brain is beyond rejuvenation, and it is time for them to leave the research frontier and join the conference circuit or the policy community."

Democracy and revolution

2008-02-20T10:16:00.001-06:00

A no-nonsense quote of the day from Tyler Cowen in his NYT column:

It's an Election, Not a Revolution

This election is certainly important. But based on the historical record, it isn't likely to result in a major swing in economic policy. Fundamentally, democracy is not a finely tuned mechanism that can be used to direct economic policy as a lever might lift a pulley. The connection between what voters want, or think they want, and what ultimately happens in the economy, is far less direct. (...)

Rather than being cynics, we should be realists. Democracy is reasonably good at some things: pushing scoundrels out of office, checking their worst excesses by requiring openness, and simply giving large numbers of people the feeling of having a voice. Democracy is not nearly as good at others: holding politicians accountable for their economic promises or translating the preferences of intellectuals into public policy.

THAT might sound pessimistic, but it's not. Many Americans will be living longer, finding new sources of learning and recreation, creating more rewarding jobs, striking up new loves and friendships, and, yes, earning more money. Just don't expect most of these gains to come out of the voting booth or, for that matter, Washington.

Tracking the 2008 US Presidential election

2008-02-13T10:26:00.003-06:00

Aquí están las últimas encuestas de Gallup:
http://www.gallup.com/poll/election2008.aspx

Y las cotizaciones de los betting markets:

Iowa electronic market
2008 U.S. Presidential Vote Share Market
2008 U.S. Presidential Winner Takes All Market
2008 U.S. Democratic Convention Winner Takes All Market
2008 U.S. Republican Convention Winner Takes All Market

Intrade:
Democratic to win Dem convention
Obama to win presidency

Social science and the public

2008-02-03T13:12:00.000-06:00

This is Robin Hanson (at Overcoming Bias) on how much social scientists know and how little of it makes it to public or political debates.

Social scientists know lots.
As a physics student and computer science researcher, I assimilated the usual "hard science" perception that "social science" is an oxymoron -- no one knows much about it, so your opinion is as good as anyone's. When I finally decided I needed social science credentials, to turn my institution hobby into a career, I focused on experimental economics, the only sort a hard scientist could trust, and Caltech, with impeccable hard science credentials. But I was soon thoroughly convinced: social scientists know tons.

Why then do so many people think otherwise? Many say it is because social scientists are stupid, or the social world is too complex or uncontrollable. Better answers are that social expertize conflicts with our overconfidence about familiar experience, or with our democratic ideology that everyone's political opinions should get equal weight. But the best answer, I think is that most public talk by social experts reflects little social science. That is, what social experts say in legal or congressional testimony, or in newspapers or magazines, mostly reflects what they and we want and expect to hear, instead of what expert evidence reveals.

(…) social scientists have data and theory giving powerful insight into a great many social issues, at least to those with open minds. Open minded social scientists talking privately can make great intellectual progress. But powerful forces are eager to distort the messages social scientists give the public on important topics. Academics with deserved reputations for careful accurate work on obscure academic topics tend to adopt different standards when writing editorials or advising politicians. Even if most academics would not do this, those selected for such roles usually do.

(…) a mechanism that could cut through this fog and tell the public what honest social scientists really think might have great social value, at least if the public could be shamed into listening to them.

New Hampshire and momentum in presidential primaries

2008-01-14T21:08:00.000-06:00

Las elecciones primarias en USA apenas comienzan pero ya arrojan resultados interesantes. He aquí una especulación sobre las encuestas en New Hampshire y, por otro lado, teoría y evidencia sobre el "momentum" durante las primarias de 2004.

What was going on with the New Hampshire polls?

Before Iowa, Hillary was beating Obama in NH by like 20 points, or at least double digits. After Iowa, Obama got this huge surge in the polls. You can see the time series here. It's a mystery why the polls were so wrong. I think it comes down to:

First - Erikson, Panagopoulos, and Wlezien wrote a paper showing that the Gallup poll overestimates fluctuation in the electorate when using the likely voter screen early in the election. In a nutshell, what happens is this: because the Gallup poll (and most other polls) are interested in interviewing "likely voters" only, they ask a series of screening questions at the beginning of the poll to gauge the respondents' interest in the election. They then have some formula to determine who is a "likely voter", and they throw out the remainder of the results. This paper examined the results that were thrown out along with the poll and found that, when something is going wrong for a candidate, their supporters are less enthusiastic and therefore less likely to be considered "likely voters" during this screening process. As a result, many of the supporters of the "losing" candidate just aren't counted in the poll, because pollsters think they're not going to vote. This makes fluctuations in polling seem more dramatic than they actually are. () This means Obama was never actually leading in NH, and all this talk about "something happened in the last 24 hours" is all a load of BS.

Second - survey weighting. Whenever a pollster does a survey, they need to make the poll representative of the voting electorate. (They) essentially guess what the demographic makeup of the electorate is going to be. Usually this is done on historical data and census data, but it's always really hard in primaries because they're not very consistent. So the pollster will first try to get this breakdown in who they actually talk to, and if they can't, they'll then "weight" the survey to simulate the expected breakdown. ()The pollsters probably saw how weird the electorate was in Iowa (i.e. so many people turned out, and so many young people), that they probably tried to compensate by weighting young people a ton in the following polls to NH. Now, we know that young people support Obama disproportionately. If the pollsters overcompensated for young people, then Obama's support was artificially strengthened in the polls.

MOMENTUM AND SOCIAL LEARNING IN PRESIDENTIAL PRIMARIES

Brian Knight and Nathan Schiff (NBER Working Paper 13637)

http://www.nber.org/papers/w13637

Do outcomes of primaries depend upon the sequencing of states? Do sequential, relative to simultaneous, systems lead to different outcomes in terms of the selection of candidates? In our view, the key distinction is that sequential, relative to simultaneous, elections provide late voters with an opportunity to learn about the desirability of the various candidates from the behavior of early voters. This opportunity for late voters to learn from early voting returns can in turn lead to momentum effects.

We develop and estimate a simple model of voter behavior under sequential elections. In the model, voters are uncertain about candidate quality, and voters in late states attempt to infer private information held by early voters from voting returns in early states. Candidates experience momentum effects when their performance in early states exceeds voter expectations. The magnitude of momentum effects depends upon prior beliefs about the quality of candidates held by voters, expectations about candidate performance, and the degree of variation in state-level preferences. Our empirical application focuses on the 2004 Democratic primary. We find that Kerry benefited substantially from surprising wins in early states and took votes away from Dean, who stumbled in early states after holding strong leads in polling data prior to the primary season.

The estimated model demonstrates that social learning is strongest in early states and that, by the end of the campaign, returns in other states are largely ignored by voters in the latest states. The voting weights implied by the estimated model demonstrate that early voters have up to 20 times the influence of late voters in the selection of candidates, demonstrating a significant departure from the ideal of "one person, one vote."

Finally, we simulate the election under a number of counterfactual primary systems and show that the race would have been much tighter under a simultaneous system and that electoral outcomes are sensitive to the order of voting. While these results are specific to the 2004 primary, we feel that they are informative more generally in the debate over the design of electoral systems in the United States and elsewhere.

Labor market institutions

2007-11-02T10:05:00.001-06:00

Next spring, in my political economy course, I want to cover some major public policy areas: education, health, pensions, poverty-alleviation, taxation, energy, trade and competition policy, and obviously, labor regulation. This would be a nice reading assignment:

Labor Market Institutions Around the World
Richard B. Freeman
NBER Working Paper No. 13242, July 2007

The paper documents the large cross-country differences in labor institutions that make them a candidate
explanatory factor for the divergent economic performance of countries and reviews what economists
have learned about the effects of these institutions on economic outcomes. It identifies three ways
in which institutions affect economic performance: by altering incentives, by facilitating efficient bargaining,
and by increasing information, communication, and trust. The evidence shows that labor institutions
reduce the dispersion of earnings and income inequality, which alters incentives, but finds equivocal
effects on other aggregate outcomes, such as employment and unemployment. Given weaknesses
in the cross-country data on which most studies focus, the paper argues for increased use of micro-data,
simulations, and experiments to illuminate how labor institutions operate and affect outcomes.

http://www.nber.org/papers/w13242.pdf

Campaign Advertising and Election Outcomes

2007-10-19T12:28:00.000-05:00

The recent electoral reform in Mexico will surely change the use of TV and radio ads in political campaigns. Will this make "media effects" larger or smaller? The Brazilian experience seems to say larger.

Campaign Advertising and Election Outcomes: Quasi-Natural Experiment Evidence from Gubernatorial Elections in Brazil


By:	Bernardo S. da Silveira (Department of Economic, New York University) João Manoel Pinho de Mello (Department of Economics, PUC-Rio)
URL:	http://d.repec.org/n?u=RePEc:rio:texdis:550&r=pol
Despite the "minimal effects" conventional wisdom, the question of whether campaign advertising influence elections outcome remains open. This is paradoxical because in the absence of a causal link from advertising to candidate performance, it is difficult to rationalize the amounts spent on campaigns in general, and on TV advertising in particular. Most studies using US data, however, suffer from omitted variable bias and reverse causality problems caused by the decentralized market-based method of allocating campaign spending and TV advertising. In contrast with received literature, we explore a quasi-natural experiment produced by the Brazilian electoral legislation, and show that TV and radio advertising has a much larger impact on election outcomes than previously found by the literature. In Brazil, by law, campaign advertising is free of charge and allocated among candidates in a centralized manner. Guber natorial elections work in a runoff system. While in the first round, candidates' TV and radio time shares are determined by their coalitions' share of seats in the national parliament, the two most voted candidates split equally TV time if a second round is necessary. Thus, differences in TV and radio advertising time between the first and second rounds are explored as a source of exogenous variation to evaluate the impact of TV advertising on election outcomes. Estimates suggest that a one percentage point increase in TV time causes a 0.241 percentage point increase in votes. Since TV advertising is the most important item in campaign expenditures, this result sheds light on the more general question of the effect of campaign spending on elections outcome.
Keywords:	Campaign Expenditures, Election Outcomes, Endogeneity, Quasi-Natural Experiments
JEL:	G12 C22 C53 E44

Rational chimps?

2007-10-09T22:25:00.000-05:00

Luego de 20 mil años (o más) de evolución, científicos alemanes comprueban que los chimpancés juegan con más egoísmo juegos de ultimátum que los homo sapiens. ¿Cómo interpretar esta evidencia? Algunas posibilidades:

a) Los modelos de teoría de juegos son para chimpancés.

b) Los humanos son "rule utilitarians" mientras que los chimpancés son "act utilitarians"

c) Los chimpancés juegan "one shot strategies" mientras que los humanos como si fuera un juego repetido.

d) Los chimpancés tienen horizontes muy cortos o son más impacientes que los humanos.

e) Los chimpancés no tienen noción alguna de "justicia" o no han desarrollado la convención social de reciprocidad.

Noten que empíricamente es muy difícil distinguir cuál es el mecanismo subyacente pues las opciones anteriores nos llevan a una predicción similar.

Chimps choose more rationally than humans

LEIPZIG, Germany, Oct. 8 (UPI) -- German researchers have demonstrated chimpanzees make choices that protect their self-interest more consistently than do humans.

Researchers from the Max Planck Institute of Evolutionary Anthropology in Leipzig studied the chimp's choices by using an economic game with two players. In the game, a human or chimpanzee who receives something of value can offer to share it with another. If the proposed share is rejected, neither player gets anything.
Humans typically make offers close to 50 percent of the reward. They also reject as unfair offers of significantly less than half of the reward, even though this choice means they get nothing.
The study, however, showed chimpanzees reliably made offers of substantially less than 50 percent, and accepted offers of any size, no matter how small. The researchers concluded chimpanzees do not show a willingness to make fair offers and reject unfair ones. In this way, they protect their self interest and are unwilling to pay a cost to punish someone they perceive as unfair.

The study appeared in the Oct. 5 issue of the journal Science.

Il liberismo è di sinistra?

2007-10-06T13:33:00.000-05:00

In Mexico the so called right-wing ruling party wants to raise higher tax revenues (to increase social spending, for instance), to allow private investments in energy (to promote growth and employment)--and many more so called neoliberal reformsall of which the lefty oppositon party adamantly oppose. Granted, such means and ends are somewhat debatable but remind me again which party is more concerned about the poor? Indeed, the "left vs. right-wing" policy label brings more confusion than clarity in many countries. This VoxEU short op-ed by Alesina and Giavazzi (authors of The future of Europe, MIT 2006) is right on the mark. (By the way, I will surely refer back to VoxEU, the new and notable blog with "research-based policy analysis and commentary from Europe's leading economists", in my political economy class.)

Why the Left should learn to love liberalism

By Alberto Alesina and Francesco Giavazzi (5 October 2007)

"Anti-reformists in Europe claim to be protecting Europe's weak and poor. Nothing could be further from the truth. Labour-market flexibility, deregulation of the service industry, pension reforms and greater competition in university funding might harm the interest of well-connected, privileged citizens but it would open up opportunities for Europe's youth and disadvantaged groups. A real left-wing agenda would embrace reform.

Continental Europe is in the midst of a burning discussion about the pros and cons of market-friendly reforms and greater economic liberalism. We all know what the package contains competition, labour-market flexibility, liberalisation of services, lower taxes, and privatisations.

The traditional debate runs as follows. These reforms are "right wing" policies. They may increase efficiency perhaps even economic growth but they also tend to increase inequality and to be detrimental for the poorest in society. Therefore and here comes the typical "socially compassionate" European argument be very careful moving in that direction. Governments should proceed cautiously and be ready to backtrack at any point.

Much of this reasoning is fundamentally wrong. Labour-market flexibility, deregulation of the service industry, pension reforms and greater competition in university funding is not anti-equality. Such reforms shift financing from taxpayers to the users themselves and, as such, tend to eliminate rents. They tend to increase productivity by basing rewards on merit rather than on being an insider. They tend to open up opportunities for younger workers who are not yet well-connected. Pursuing pro-market reforms does not imply facing a trade-off between efficiency and social justice. In this sense, pro-market policies are "left wing", if that means reducing the economic privileges enjoyed by "insiders".

Read the whole thing.

Should Economists Rule the World?

2007-09-28T23:06:00.000-05:00

"Should Economists Rule the World?
Trends and Implications of Leadership Patterns in the Developing World, 19602005"

Anil Hira, Political Science, Simon Fraser University.

International Political Science Review, Vol. 28, No. 3, 325-360 (2007)

Abstract: This article examines more carefully the oft-made hypothesesthat (1) "technocrats" or politicians with an economics backgroundare increasingly common and (2) that this "improvement" in qualificationswill lead to improvements in economic policy. The article presentsa database on the qualifications of leaders of the world's majorcountries over the past four decades. The article finds thatwhile there is evidence for increasing "technification," thereare also distinct and persistent historical patterns among Asian,African, Middle Eastern, and Latin American leaders. Using statisticalanalysis, the article finds that we cannot conclude that leadershiptraining in economics leads to better economic outcomes.

Por supuesto, no podemos dar crédito alguno a este análisis: obviamente este tipo de cosas no se pueden medir estadísticamente. El autor, un politólogo, está sesgado por su agenda "anti-economista". Lo que pasa es que los políticos y los poderes fácticos no permiten a los economistas implementar "fist best policies". Es toda una conspiración... :-)

Sullivan's liberal mantra

2007-09-28T21:09:00.000-05:00

A bit of motivational reading, for a change...

Life, Liberty and the Pursuit of Happiness - by Andrew Sullivan
Link (audio version included)

"I believe in life. I believe in treasuring it as a mystery that will never be fully understood, as a sanctity that should never be destroyed, as an invitation to experience now what can only be remembered tomorrow.

(...) I believe in liberty. I believe that within every soul lies the capacity to reach for its own good, that within every physical body there endures an unalienable right to be free from coercion. I believe in a system of government that places that liberty at the center of its concerns, that enforces the law solely to protect that freedom, that sides with the individual against the claims of family and tribe and church and nation, that sees innocence before guilt and dignity before stigma. I believe in the right to own property, to maintain it against the benign suffocation of a government that would tax more and more of it away. I believe in freedom of speech and of contract, the right to offend and blaspheme, as well as the right to convert and bear witness.

(...) I believe in the pursuit of happiness. Not its attainment, nor its final definition, but its pursuit. I believe in the journey, not the arrival; in conversation, not monologues; in multiple questions rather than any single answer. I believe in the struggle to remake ourselves and challenge each other in the spirit of eternal forgiveness, in the awareness that none of us knows for sure what happiness truly is, but each of us knows the imperative to keep searching. I believe in the possibility of surprising joy, of serenity through pain, of homecoming through exile.

(...) And I believe in a country that enshrines each of these three things, a country that promises nothing but the promise of being more fully human, and never guarantees its success. In that constant failure to arrive -- implied at the very beginning -- lies the possibility of a permanently fresh start, an old newness, a way of revitalizing ourselves and our civilization in ways few foresaw and one day many will forget."

Krugman on political journalism

2007-09-21T12:46:00.000-05:00

Paul Krugman has a blog now: "The conscience of a liberal". Which is good news because, unlike his NYT column, the blog does not require a paid subscription. For starters, I agree with his criticism of political journalism (which is slightly related to the troubles "narrative explanations in general).

What I Hate About Political Coverage

Warning: this is a bit (actually, more than a bit) of a rant.

One of my pet peeves about political reporting is the fact that some of my journalistic colleagues seem to want to be in another business – namely, theater criticism. Instead of telling us what candidates are actually saying – and whether it’s true or false, sensible or silly – they tell us how it went over, and how they think it affects the horse race. During the 2004 campaign I went through two months’ worth of TV news from the major broadcast and cable networks to see what voters had been told about the Bush and Kerry health care plans; what I found, and wrote about, were several stories on how the plans were playing, but not one story about what was actually in the plans.

There are two big problems with this kind of reporting. The important problem is that it fails to inform the public about what matters. In 2004, very few people had any idea about the very real differences between the candidates on domestic policy. It remains to be seen whether 2008 is any better.

The other problem, which has become very apparent lately, is that this sort of coverage often fails even on its own terms, because the way things look to inside-the-Beltway pundits can be very different from the way they look to real people.

El enfoque Nirvana

2007-09-17T15:18:00.000-05:00

En muchos debates de política pública, aunque menos de lo que uno desearía, es común recurrir a criterios de eficiencia (también llamado criterio costo-beneficio) para evaluar arreglos institucionales. Como tantas cosas, el uso descuidado de los criterios de eficiencia puede conducir a razonamientos falaces. En un famoso paper de 1969, Harold Demsetz criticó duramente el enfoque de eficiencia usado por algunos economistas (en particular, su argumento iba contra Kenneth Arrow, premio nobel de economía). Demsetz llamó a esto el "Nirvana approach".

La idea básica es que si uno compara los arreglos institucionales del mundo real con una "norma ideal" (a menudo inexistente o irrealizable) es muy fácil concluir que el mundo real es ineficiente. Como sabemos, un enfoque comparado más útil consiste en evaluar los arreglos institucionales alternativos del mundo de real y, quizá usando la norma ideal como criterio, concluir que el arreglo que menos discrepe de esta norma es second-best efficient.

La sutil distinción entre estos enfoques es importante pues mientras el Nirvana approach te lleva a concluir que (casi) todo el mundo es ineficiente, el segundo enfoque te permite hallar (algunos) casos relativamente eficientes, dadas las restricciones del mundo real.

Según Demsetz, el Nirvana approach puede conducir a tres falacias adicionales:

The grass is always greener fallacy. Una vez que detectas una ineficiencia en el mundo real (digamos, una falla de mercado) inmediatamente asumir que una intervención (gubernamental, colectiva, divina, oenegera, etc.) puede llevarte a un mundo mejor. El problema es suponer que una alternativa aún no examinada es necesariamente superior al statu quo.

The fallacy of the free lunch. Suponer que tal intervención puede llevarse a cabo sin costos sociales significativos o sin distorsión alguna en los incentivos (a veces perversos) del mundo real. El problema es que si estos costos son más elevados que la ineficiencia detectada, a veces lo eficiente es dejar las cosas tal y como están.

The people could be different fallacy. Suponer que la mentada ineficiencia del mundo real desaparecería por arte de magia si tan sólo la gente fuera "mejor" (o más consciente, altruista, civilizada, sensata, educada, etc.) El problema es que es poco probable que la naturaleza humana cambie.

Las primeras dos falacias casi siempre aparecen juntas en muchos argumentos populares y académicos, mientras que la tercera puede aparecer sola o acompañada. Por otro lado, noten que la argumentación de Demsetz puede conducir a conclusiones conservadoras. En cualquier caso, sería deseable que nuestros analistas consideraran este tipo de problemas a la hora de evaluar el mundo o hacer propuestas de política para mejorarlo.

Referencia: Demsetz, Harold (1969). "Information and Efficiency: Another Viewpoint", Journal of Law and Economics 12(1), p. 1-22.

Los ricos cada vez son MENOS ricos...

2007-09-17T14:59:00.000-05:00

Si comparamos la riqueza, en el mejor momento de sus vidas, de los multimillonarios norteamericanos y la traemos a valor presente (dólares de 2006), John D. Rockefeller sería varias veces más rico que Bill Gates. Estos son algunos datos:

	Riqueza*	Ratio vs. Rockefeller
John D. Rockefeller (1839-1937)	305.3	1.0
Andrew Carnegie (1835-1919)	281.2	1.1
Cornelius Vanderbilt (1794-1877)	168.4	1.8
Richard Mellon (1858-1933)	82.3	3.7
Sam Walton (1918-1992)	58.6	5.2
Henry Ford (1863-1947)	54.3	5.6
Bill Gates (1955- )	53	5.8

*Cifras en "2006 US billion dollars"

Una lista más detallada está aquí: The all-time richest Americans. Estas cifras provienen de All the Money in the World -- How the Forbes 400 Make -- And Spend -- Their Fortunes, de Peter W. Bernstein y Annalyn Swan.

Evolutionary psychology and human nature

2007-08-26T14:15:00.000-05:00

Ten Politically Incorrect Truths About Human Nature

"Human nature is one of those things that everybody talks about but no one can define precisely. Every time we fall in love, fight with our spouse, get upset about the influx of immigrants into our country, or go to church, we are, in part, behaving as a human animal with our own unique evolved nature—human nature.
This means two things. First, our thoughts, feelings, and behavior are produced not only by our individual experiences and environment in our own lifetime but also by what happened to our ancestors millions of years ago. Second, our thoughts, feelings, and behavior are shared, to a large extent, by all men or women, despite seemingly large cultural differences.
Human behavior is a product both of our innate human nature and of our individual experience and environment. In this article, however, we emphasize biological influences on human behavior, because most social scientists explain human behavior as if evolution stops at the neck and as if our behavior is a product almost entirely of environment and socialization. In contrast, evolutionary psychologists see human nature as a collection of psychological adaptations that often operate beneath conscious thinking to solve problems of survival and reproduction by predisposing us to think or feel in certain ways. Our preference for sweets and fats is an evolved psychological mechanism. We do not consciously choose to like sweets and fats; they just taste good to us.
The implications of some of the ideas in this article may seem immoral, contrary to our ideals, or offensive. We state them because they are true, supported by documented scientific evidence. Like it or not, human nature is simply not politically correct."

Read the whole thing!

Social science and the public

2007-07-29T14:26:00.000-05:00

Fabio Rojas, a Sociologist at orgtheory.net discusses why does sociology have such a bad reputation? I believe these sort of concerns apply, perhaps to different degrees, to the disarray of disciplines we now call social science:

"I am always shocked at our profession’s poor public image. Basically, the educated public barely knows that sociology is actually a real social science, and among those that do, sociology has a fluffy image. (...) This is frustrating because we study important questions and we actually come up with some good answers. So here are some hypotheses about why we have such poor PR:

Politics: As a group, we simply are too far from the average person in political outlook. People write us off as kooks.
Great Books: At the undergraduate level, we teach too much from old, musty texts. It gives the impression that sociology is like English lit class - a tedious exercise in decoding the writings of dead guys. Not real science.
No science: Although sociology is taught as an empirical social science at the graduate level, many undergraduates don’t get this at all. We should turn intro soc into a version of intro econ (core theories + exercises in analytical reasoning).
We hate math: I’m not talking about statistics, I’m talking about the near absence of formal theory building in sociology. It’s relegated to various small pockets like formal soc psych, math soc, networks, rational choice, etc. The average sociologist doesn’t acquire formal theory as a tool. At a deep level, most insight in social science is not mathematical, but by completely tossing math, we throw out something that is quite useful and brings credibility.
No Levitts: For some reason, we fail to produce people who act as the spokesperson of sociology. We have no Levitts, Krugmans, Friedmans, etc. Why are economists so friggin’ good at producing prominent public intellectuals, while sociology goes for *years* between NY Times op-eds? What do we do to suprress the production of PR savvy sociologists? Of course, we occasionally make the news with a clever article or book, but we fail to gain a permanent slot in public discussion. Why?
The problem is social problems (not the journal!): By emphasizing social dysfunction, we become associated with dysfunction. A basic finding in the study of the professions is that the prestige of your clients is a big predictor of your prestige. Also, if that’s what the average college student takes away from sociology - that it’s the field of social problems - then that’s the image they’ll have about us for the rest of our lives.
Post-modernism: This one isn’t our fault, but a lot of people make the link “hard French guys= sociology.” And yes, we all owe much to Bourdieu, but the overwhelming bulk of modern sociology is regular scientific hypothesis testing and thick description. The public thinks that we just sit around and play word games.
Bad recruits: Let’s admit it - the kids who scores a perfect SAT score doesn’t immediately rush to sociology. We just don’t get the best recruits. This point was made in Halliday and Janowitz’ Sociology and Its Publics in the chapter on recruitment into sociology. We spend too much time trying to fill large lecture halls of intro soc and not enough time going for totally high caliber students. The result - the field suffers as a whole."

Also related, Fabio ponders What is “public sociology?”

"Here are some different versions of “public sociology” that I could imagine:

Publicity: In this model, you don’t do anything different, but you just make a better effort at explaining yourself to people. “Newsworthiness” is your goal.
Applied work: You switch from basic science research to policy driven work. Public sociology is sociology that tells you if program X makes a difference. If you take this view of public sociology seriously, then sociology quickly veers into social work and public policy studies.
Problem advocacy: You use social science research techniques to draw attention to your personal causes.
“Social problem” research: You do basic science, but on topics you deem politically relevant.
Political selections of theory: I think this is closer to what Burawoy raises in “The Critical turn to Public Sociology.” You study the same things as other folks, but you substitute theories inspired by your political view. E.g, you dump stratification research and go to Marxian class analysis."

IMHO, at the core of these problems lie two basic trade-offs:

1. Passion versus method. Some (lots of?) people enter social sciences with a genuine concern to make a difference on the issues they care the most (call it the we gotta do something! spirit). But there is a trade off between passionate advocacy and cold-minded research. Not many of us are willing to take evidence that runs against our deeply held beliefs (at least not immediately)--which one of the many reasons why its is useful to stick to a defensible research method: when making a judgement call during research you have to trust your method rather than your instincts because the former are less value-ladden than the latter.

2. Broad versus focused discourse. Some people enter social sciences because they want to be the next hot public intellectual, that is, they want to be famous within more or less sophiticated circles (call it the barely sophisticated spotlight spirit). But then again, there is a trade off between the sort of discourse that will get you media attention or put your book in bestseller lists (if you don't believe this, check out any non-fiction bestseller list in the world) and the dismal stuff that will make the grade in peer reviewed journals and/or get you the recognition of the few hundreds of people that share your research interests.

Of course, there is some middle ground and a handful of scholars are able to move back and forth between popular and narrow outlets. A tad more of them start narrow and then go public as they get older and famous: by the time these scholars become famous, they already made their mark in academia, if at all. But the vast majority pick their fields early on and just stick to it in order to exploit the gains from specialization.

Future research: Foreign soccer players / Narco-campaigning

2007-07-26T23:42:00.000-05:00

If I had infinite (ok, just twice more) time I would like to investigate the following:

What is the effect of limiting the number of foreign players in soccer leagues? A cross-country study.

Ideally, this should be a panel with TSCS variation on the legal limits variable.
DepVar: domestic players competitiveness (measured by performance of the country-i team on FIFA tournaments through time)
IndepVars: Number of foreign players allowed or average foreigners enrolled, initial competitiveness, GDP per capita, number of teams in top tier league or number of large stadiums per country... etc.

Logic: if foreign players crowd out domestic talent, local teams should underperform when more foreigners are allowed. But if foreign players raise competitive standards and complement local talent (think of the self-selection and screening effects on the pool of domestic players), then national teams may become more competitive in the presence of foreigners.

Comment: I am not enough of a sports fan to care a lot about this--but whatever the finding, it would give a good economics lesson to all those sports-pundits out there.

Narco-campaigning? Drug money and local democracy in México (or Colombia for that matter)

This also has to be a panel where some localities become "treated" by drug dealers.

DepVar: Turnout or closeness in local elections.

IndepVars: Some sort of index of drug dealing activity at the local level (maybe proxied by drug-related crime?), typical political controls within state and municipality, two-way fixed effects, etc.

Logic: Ok, we know/suspect that drugdealers may want to buyout local authorities. They can do this at the electoral or post-electoral stage. If they give out money to candidates, and we assume some common campaigning technology, you could expect (i) that the extra money leads to higher turnout (compared to state and municipal averages), or (ii) maybe more lopsided elections returns. If the effect is significant it would be indirect evidence of "narco-campaigning". If the effect is not significant, we would still face many possibilities: either narco campaigning is not affecting election outcomes because drug dealers don't care much about the electoral stage (vis a vis post-electoral maneuvering)--or maybe drug dealers giving is indistinguishable from other donors elsewhere, or maybe candidates optimize their spending to just about what they need to win, and pocket the rest, etc. (yes, there are many explanations for any nonsignificant outcome!).

Comment: Getting a good proxy for drug-activity may be hard (but who knows, maybe the AFI got some data at hand). But the real downside is worse: if the narc variable turns out to be positive and significant, your life is in danger.

In defense of dangerous ideas

2007-07-25T20:26:00.000-05:00

Steve Pinker lists a good number of unsettling ideas (all ripe for research if you are brave enough):

Do women, on average, have a different profile of aptitudes and emotions than men?
Were the events in the Bible fictitious -- not just the miracles, but those involving kings and empires?
Has the state of the environment improved in the last 50 years?
Do most victims of sexual abuse suffer no lifelong damage?
Did Native Americans engage in genocide and despoil the landscape?
Do men have an innate tendency to rape?
Did the crime rate go down in the 1990s because two decades earlier poor women aborted children who would have been prone to violence?
Are suicide terrorists well-educated, mentally healthy and morally driven?
Would the incidence of rape go down if prostitution were legalized?
Do African-American men have higher levels of testosterone, on average, than white men?
Is morality just a product of the evolution of our brains, with no inherent reality?
Would society be better off if heroin and cocaine were legalized?
Is homosexuality the symptom of an infectious disease?
Would it be consistent with our moral principles to give parents the option of euthanizing newborns with birth defects that would consign them to a life of pain and disability?
Do parents have any effect on the character or intelligence of their children?
Have religions killed a greater proportion of people than Nazism?
Would damage from terrorism be reduced if the police could torture suspects in special circumstances?
Would Africa have a better chance of rising out of poverty if it hosted more polluting industries or accepted Europe's nuclear waste?
Is the average intelligence of Western nations declining because duller people are having more children than smarter people?
Would unwanted children be better off if there were a market in adoption rights, with babies going to the highest bidder?
Would lives be saved if we instituted a free market in organs for transplantation?
Should people have the right to clone themselves, or enhance the genetic traits of their children?

This essay was first posted at Edge (www.edge.org) and it is the Preface to the book 'What Is Your Dangerous Idea?: Today's Leading Thinkers on the Unthinkable,' published by HarperCollins.

Where do the super wealthy come from?

2007-07-25T12:26:00.000-05:00

...Not from Wall Street nor Main Street, at least not as many as you would have thought, that is.

Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?
by Steven N. Kaplan, Joshua Rauh
http://papers.nber.org/papers/W13270

Abstract:
We consider how much of the top end of the income distribution can be
attributed to four sectors -- top executives of non-financial firms
(Main Street); financial service sector employees from investment
banks, hedge funds, private equity funds, and mutual funds (Wall
Street); corporate lawyers; and professional athletes and
celebrities. Non-financial public company CEOs and top executives do
not represent more than 6.5% of any of the top AGI brackets (the top
0.1%, 0.01%, 0.001%, and 0.0001%). Individuals in the Wall Street
category comprise at least as high a percentage of the top AGI
brackets as non-financial executives of public companies. While the
representation of top executives in the top AGI brackets has
increased from 1994 to 2004, the representation of Wall Street has
likely increased even more. While the groups we study represent a
substantial portion of the top income groups, they miss a large
number of high-earning individuals. We conclude by considering how
our results inform different explanations for the increased skewness
at the top end of the distribution. We argue the evidence is most
consistent with theories of superstars, skill biased technological
change, greater scale and their interaction.

Bayesian articles in JSTOR

2007-06-14T23:03:00.000-05:00

De pura curiosidad hice unas busquedas en JSTOR sobre artículos con el keyword "bayesian" en el titulo o bien en el abstract, publicados entre 1980 y hoy dia, en diferentes grupos de journals. Estos son los resultados:

JSTOR search: for « (ab:(bayesian) OR ti:(bayesian)) AND ty:FLA AND (year:[1980 TO 3000]) in multiple journals »

Journal group Number of hits

Statistics (23 journals) 1641

Economics (52 journals) 333

Philosophy (26 journals) 109

Political Science (43 journals) 30

Sociology (46 journals) 23

Public Policy & Administration (11 journals) 1

La lista habla por si sola. No cabe duda que la onda bayesiana ha conquistado amplio terreno entre los estadísticos y que no le va tan mal en economía. Los hits en filosofia son toda una sopresa pero consideren que esta lista incluye journals de filosofia de la ciencia.

En Ciencia Política y Sociología apenas está haciendo su caminito--lo cual en parte explica el fervor con que predican su evangelio los bayesianos (please, please, this is THE WAY!! stop doing OLS and MLE!!). En cuanto a PP&A mejor me ahorro el comentario.

Otra interpretación es que aún le faltan sus añitos para que esto cuaje en el mainstream de CP--por ejemplo, cuando aparezca software amigable, tipo stata, que haga estas cosas. Otra interpretación es que hay grandes rendimientos por treparse al vagón justo ahora... Food for thought...

Miscellaneous papers

2007-06-05T18:09:00.000-05:00

On political economy: 1. Swedish social scientists are more right leaning than American ones. 2. Long lasting democracy impacts growth more than you think. 3. Now, under the right circumstances, killing your country leader produce institutional change and moves to democracy. 4. Finally, perceptions of corruption are a poor indicator of corruption actual incidence. Read on!

The Political Opinions of Swedish Social Scientists
Berggren, Niclas (The Ratio Institute), Jordahl, Henrik (IFN), Stern, Charlotta (SOFI, Stockholm University)
URL:     http://d.repec.org/n?u=RePEc:hhs:ratioi:0112&r=pol
We study the political opinions of Swedish social scientists in seven disciplines. A survey was sent to 4,301 academics at 25 colleges and universities, which makes the coverage of the disciplines included more or less comprehensive. When it comes to party sympathies there are 1.3 academics on the right for each academic on the left—a sharp contrast to the situation in the United States, where Democrats greatly dominate the social sciences. The corresponding ratio for Swedish citizens in general is 1.1. The most left-leaning disciplines are sociology and gender studies, the most right-leaning ones are business administration, economics, and law, with political science and economic history somewhere in between. The differences between the disciplines are smaller in Sweden than in the more polarized U.S. We also asked 14 policy questions. The replies largely confirm the pattern of a left-right divide – but overal l the desire to change the status quo is tepid.

The growth effect of democracy: Is it heterogenous and how can it be estimated?
Torsten Persson and Guido Tabellini
URL:     http://d.repec.org/n?u=RePEc:igi:igierp:322&r=pol
We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously underestimated the growth effects of democracy. In particular, we find an average negative effect on growth of leaving democracy on the order of -2 percentage points implying effects on income per capita as large as 45 percent over the 1960-2000 panel. Heterogenous characteristics of reforming and non-reforming countries appear to play an important role in driving these results.

Hit or Miss? The Effect of Assassinations on Institutions and War
Benjamin F. Jones and Benjamin A. Olken
URL:     http://d.repec.org/n?u=RePEc:nbr:nberwo:13102&r=pol
Assassinations are a persistent feature of the political landscape. Using a new data set of assassination attempts on all world leaders from 1875 to 2004, we exploit inherent randomness in the success or failure of assassination attempts to identify assassination's effects. We find that, on average, successful assassinations of autocrats produce sustained moves toward democracy. We also find that assassinations affect the intensity of small-scale conflicts. The results document a contemporary source of institutional change, inform theories of conflict, and show that small sources of randomness can have a pronounced effect on history.

How Much Do Perceptions of Corruption Really Tell Us?
Weber Abramo, Claudio
URL: http://d.repec.org/n?u=RePEc:zbw:ifwedp:5566&r=pol
Regressions and tests performed on data from Transparency International Global Corruption Barometer 2004 survey show that personal or household experience of bribery is not a good predictor of perceptions held about corruption among the general population. In contrast, perceptions about the effects of corruption correlate consistently among themselves. However, no consistent relationship between opinions about general effects and the assessments of the extent with which corruption affects the institutions where presumably corruption is materialized is found. Countries are sharply divided between those above and below the US$ 10,000 GDP per capita line in the relationships between variables concerning corruption. Among richer countries, opinions about institutions explain very well opinions concerning certain effects of corruption, while among poorer countries the explanatory power of institutions for the effects of corruption falls. Furthermore, tests for dependence applied between the variables in the sets of respondents for each of 60 countries also show that, for most of them, it is likely that experience does not explain perceptions. On the other hand, opinions tend to closely follow the trend of other opinions. Additionally, it is found that in the GCB opinions about general effects of corruption are strongly correlated with opinions about other issues, as much as to justify the hypothesis that it would suffice to measure the average opinion of the general public about human rights, violence etc. to accurately infer what would be the average opinion about least petty and grand corruption. The findings reported here challenge the value of perceptions of corruption as indications of the actual incidence of the phenomenon.

Revising homo economicus from within

2007-05-30T21:41:00.000-05:00

If you believe that the homo economicus caricature is just too obscure and dismal, you are probably right: people cooperate much more than what a simple PD game predicts... But before you run away searching for an "heterodox answer", you should probably read two nice papers by Samuel Bowles and Herbert Gintis on the compelling evidence for "other-regarding, process-regarding, and endogenous preferences" sorts of behavior.

	Homo Economicus and Zoon Politikon: Behavioral Game Theory and Political Behavior Oxford Handbook of Contextual Political Analysis, 2006
	The Evolutionary Basis of Collective Action Oxford Handbook of Political Economy, 2006

By the way, this is Gintis on the false promise of post-autistic / heterodox economics:

"In June 2000, several Parisian economics students circulated a petition calling for the reform of their economics curriculum. Their complaint was the inability of the neoclassical economics they were studying to satisfy their need for a deep understanding of the operation of real-life economies. They called for a reform of the university curriculum that would tolerate analytical diversity and foster critical dialogue across contrasting approaches to economics. (...) This reform movement has grown in Europe, under the rubric of "post-autistic economics."

(...) the post-autistic economics critique is incapable of leading to positive change in how economics is done and taught. The central critique is that neoclassical economics does not describe real-world economies, and must be replaced by or supplemented with other approaches. This is just wrong. While the elementary courses are far from the real world, advanced courses in such areas as labor, international finance, macroeconomic policy, economic development, law and economics, environmental economics, and so on, are quite real-world. If an undergraduate students left with a degree in economics that allowed them to understand The Economist and the Journal of Economic Perspectives, the level of economic awareness in the world would be considerably higher. If the undergraduate curriculum does not bring students to this level, the curriculum is, to my mind, faulty. Perhaps less stress on arcane theories that are relevant only to professional economists should be replaced by a more historical, institutional, and hands-on approach to microeconomic and macroeconomic issues. But, this is a critique of pedagogy, not of economic theory.

Neoclassical theory has displaced other approaches around the world because it is currently the only promising approach to economics. Marxism, Keynesianism, Institutionalism, Syndicalism, Austrian economics, and the like developed strongly for a while and then foundered. They certainly do not present analytically interesting alternatives to neoclassical economics. It is not an accident that all over the world, including India, Japan, China, and many countries in Latin America, the reform of higher education has involved the introduction of modern neoclassical economic theory. With all its flaws, it is the only credible starting point for serious economic analysis.

Neoclassical economics has profound problems, but they can only be addressed from within, not by embracing any "heterodox" alternative that I know of. The pleas for democracy, toleration, and pluralism by the "heterodox" is simply an admission that they can't win the intellectual battle by having better theories, only by having more troups. "

Direct democray and conservative policy

2007-05-29T22:07:00.000-05:00

Some uncommon(?) wisdom from John Matsusaka (USC), author of For the Many or the Few: The Initiative, Public Policy, and American Democracy (U. Chicago Press, 2004).

Direct Democracy and Social Issues
John Matsusaka
Entrydate: 2007-05-29 18:49:17
Keywords:   Direct democracy, initiative, social issues, representation

Abstract:   This paper explores the connection between the initiative process--the most potent form of direct democracy--and social issues by examining laws on seven social issues in all 50 American states. Initiative states are 18 percent more likely than noninitiative states to choose a conservative than a liberal policy on the median issue after controlling for public opinion, demographic, and regional variables. The conservative shift is majoritarian: initiative states are 8 percent more likely than noninitiative states to choose laws that reflect the majority's preference. The initiative effect does not appear to depend on the institutional features that scholars and reformers often discuss.
http://polmeth.wustl.edu/retrieve.php?id=693

Direct Democracy and Public Employees
John Matsusaka
Entrydate: 2007-05-29 18:51:41
Keywords:   Direct democracy, public employees, initiative, patronage, interest groups

Abstract:   In the public sector, employment may be inefficiently high because of patronage, and wages may be inefficiently high because of the strength of public employee interest groups. This paper explores whether the initiative process, a direct democracy institution of growing importance, can control these political economy problems, as proponents and some research suggests. Based on a sample of 500+ cities in 2000, I find that when public employees are allowed to bargain collectively, driving up wages, the initiative appears to cut wages by about 5 percent but has no measurable effect on employment. When public employees are not allowed to bargain collectively and patronage is a problem, initiatives appear to cut employment but not wages.
http://polmeth.wustl.edu/retrieve.php?id=694

A brief summary of Matsusaka's work is available here: "Direct Democracy Works" Journal of Economic Perspectives, Spring 2005. [PDF]

World income distribution, poverty, and inequality

2007-05-20T11:26:00.000-05:00

La semana pasada discutimos, en mi clase de economía política, temas de pobreza y desigualdad a nivel global y cross-country. Estos son algunos de los materiales:

Xavier Sala i Martin. 2006. "The World Distribution of Income: Falling Poverty and Convergence, Period", Quarterly Journal of Economics, Vol. 121, No. 2: 351-397. (Sobre todo las secciones I, III y IV).
Xavier Sala i Martin & Brian Sowndon. 2006. "The Enduring Elixir of Economic Growth: Xavier Sala-i-Martin on the Wealth and Poverty of Nations", by Brian Snowdon, World Economics, Vol. 7, No 1.

Powerpoint sobre el "State of the World" de Xavier Sala-i-Martin.

Presentación flash de la distribución mundial del ingreso y de países selectos, basado en el trabajo de Sala-i-Martin (2006) .

Ed Glaeser. 2006. "Inequality" en: Weingast & Wittman (eds.), Handbook of Political Economy, Cap. 34, págs. 84-102.

Ann Harrison. 2006. "Globalization and Poverty", NBER working paper no. 12347.

HOW TO MEASURE POVERTY AND INEQUALITY?

Syllabus y powerpoints de un curso corto sobre "Inequality, Poverty and Income Distribution" impartido por Frank Cowell, director of the Distributional Analysis Research Programme at the London School of Economics, and editor of Economica.

WHAT WORKS IN POVERTY ALLEVIATION?

Esther Duflo, del Poverty Action Lab de MIT, quiere salvar al mundo con ayuda del método científico y los diseños experimentales. Veanla responder la pregunta: Fighting Poverty: What Works? (35min video). No dejen de ver los ambiciosos projectos del centro.

BUT CAN WE REALLY DO IT?

Conozcan a Jeffrey D. Sachs, Director of The Earth Institute, Professor of Sustainable Development, Health Policy and Management at Columbia University, and fomer Director of the UN Millennium Project. He is author of The End of Poverty: Economic Possibilities for Our Time.

Special Interests and The Myth of the Rational Voter

2007-05-12T12:52:00.000-05:00

This is Bryan Caplan on his latest book, The Myth of the Rational Voter, on The Wall Street Journal:

Special-Interest Secret

By BRYAN CAPLAN
May 12, 2007; Page A11
Mr. Caplan, an associate professor of economics at George Mason University, is the author of "The Myth of the Rational Voter: Why Democracies Choose Bad Policies" (Princeton University Press, 2007).

http://online.wsj.com/article_email/SB117893365787300771-lMyQjAxMDE3NzE4MjkxMzIzWj.html

Behind every policy that does more harm than good, there's a special interest that favors it anyway. The steel tariff was bad for consumers, steel-using industries and foreign steel producers, but the steel lobby still pushed for it. Farm subsidies are bad for both taxpayers and unsubsidized farmers, but in 2002 the American farm lobby got a 70% increase in government support. The minimum wage is bad for consumers, employers and low-skill workers who get priced out of their jobs, but unions are hard at work to raise it again.

When special interests talk, politicians listen and the rest of us suffer. But why do politicians listen? Social scientists' favorite explanation is that special interests pay close attention to their pet issues and the rest of us do not. So when politicians decide where to stand, the safer path is to satisfy knowledgeable insiders at the expense of the oblivious public.

This explanation is appealing, but it neglects one glaring fact. "Special-interest" legislation is popular.

Keeping foreign products out is popular. Since 1976, the Worldviews survey has always found that Americans who "sympathize more with those who want to eliminate tariffs" are seriously outnumbered by "those who think such tariffs are necessary." Handouts for farmers are popular. A 2004 PIPA-Knowledge Networks Poll found that 58% agree that "government needs to subsidize farming to make sure there will always be a good supply of food." In 2006, the Pew Research Center found that over 80% of Americans want to raise the minimum wage. It is safe to assume, then, that few people want to abolish it. These results are not isolated. It is hard to find any "special interest" policies that most Americans oppose.

Clearly, there is something very wrong with the view that the steel industry, farm lobby and labor unions thwart the will of the majority. The public does not pay close attention to politics, but that hardly seems to be the problem. The policies that prevail are basically the policies that the public approves.

No wonder special interests so often get their way. They do not have to force their policies down the public's throat, or sneak them through Congress unnoticed. To succeed, special interests only need to persuade politicians to swim with the current of public opinion.

Why would the majority favor policies that hurt the majority? There is a good reason. The majority favors these policies because the average person underestimates the social benefits of the free market, especially for international and labor markets. In a phrase, the public suffers from anti-market bias.

Economists have spent centuries explaining how markets channel greedy intentions into socially desirable results; how trade is mutually beneficial both within and between countries; how using price controls to redistribute income inflicts a lot of collateral damage. These are the lessons of every economics textbook. Contrary to the stereotype that they can't agree, economists across the political spectrum, from Paul Krugman to Greg Mankiw, see eye to eye on these basic lessons.

Unfortunately, most people resist even the most basic lessons of economics. As every introductory teacher of the subject knows, students are not blank slates. On the first day of class, they arrive with strong -- and usually misguided -- beliefs about economics. Convincing students to rethink their anti-market views is no easy task.

The principles of economics are intellectually compelling; but emotionally, they fall flat. It feels better to believe that greedy intentions imply bad consequences, that foreigners destroy our prosperity and that price controls are a harmless way to transfer income. Given these economic prejudices, we should expect policies like steel tariffs, farm subsidies and the minimum wage to be popular.

None of this means that special interests don't matter, but it does put their activities in a new light. Special interests do not have to sneak behind the majority's back; they just need to ask for the right favor in the right way. The steel lobby could have demanded a big handout from the federal government. But that would have struck many voters as welfare for the rich; steel-makers can't expect the same treatment as farmers, can they? Instead, the steel lobby took the crowd-pleasing route of blaming foreigners and asking for tariffs. Tariffs were less direct than a naked subsidy from Washington, but they enriched the steel industry without alienating the majority.

If special-interest legislation were fundamentally unpopular, public relations campaigns would be futile. They would serve only to warn taxpayers about plans to pick their pockets. Since the public shares interest groups' critique of the free market, however, there is room for persuasion. Left to its own devices, the public is unlikely to spontaneously fret about the plight of the steel industry. But a good public relations campaign can -- and often does -- change the public's mind. Once the public actively supports an interest group, even politicians who would prefer to leave the market alone find it awkward to block government intervention.

In many cases, though, a public relations campaign is overkill. Special interests can make money by maneuvering around the indifference of the majority. Even though most people are protectionists, for example, they are fuzzy about specifics. Which industries need protection? How much? Should we use tariffs, quotas or what? To most citizens, these are mere details; within broad limits, they will accept whatever happens. As far as special interests are concerned, however, these details mean the difference between feast and famine. When it is time to determine details, special interests have a lot of influence -- in large part because no one else cares enough to quibble.

In a monarchy, no one likes to blame the king for bad decisions. So instead of blaming the king himself, critics point their fingers at his wicked, incompetent and corrupt advisers. While this is a good way to keep your head, it is hard to take seriously. Kings often make bad decisions; and in any case, if his advisers are hurting the country, isn't it the king's fault for listening to them?

In a democracy, similarly, no one likes to blame the majority for bad decisions. So instead of blaming the majority, critics point their fingers at special interests. But this too is hard to take seriously. The majority often makes bad decisions; and in any case, if special interests are hurting the country, isn't it the majority's fault for listening to them?

We often ponder special-interest politics in order to solve a mystery: "Why aren't policies better?" Realizing how many bad policies are here by popular demand turns this question upside down. The real mystery is not why policies aren't better. The real mystery of politics is why policies aren't a lot worse.

Unions: heroes or a XXth century bubble?

2007-05-08T20:26:00.000-05:00

An Alternative Theory of Unions
by Paul Graham

"People who worry about the increasing gap between rich and poor generally look back on the mid twentieth century as a golden age. In those days we had a large number of high-paying union manufacturing jobs that boosted the median income.

...In a rapidly growing market, you don't worry too much about efficiency. It's more important to grow fast. If there's some mundane problem getting in your way, and there's a simple solution that's somewhat expensive, just take it and get on with more important things.

...Difficult though it may be to imagine now, manufacturing was a growth industry in the mid twentieth century. This was an era when small firms making everything from cars to candy were getting consolidated into a new kind of corporation with national reach and huge economies of scale. You had to grow fast or die. Workers were for these companies what servers are for an Internet startup. A reliable supply was more important than low cost.

If you looked in the head of a 1950s auto executive, the attitude must have been: sure, give 'em whatever they ask for, so long as the new model isn't delayed.

People who think the labor movement was the creation of heroic union organizers have a problem to explain: why are unions shrinking now? The best they can do is fall back on the default explanation of people living in fallen civilizations. Our ancestors were giants. The workers of the early twentieth century must have had a moral courage that's lacking today.

In fact there's a simpler explanation. The early twentieth century was just a fast-growing startup overpaying for infrastructure. And we in the present are not a fallen people, who have abandoned whatever mysterious high-minded principles produced the high-paying union job. We simply live in a time when the fast-growing companies overspend on different things. "

Growth in Latin America: abandon all hope?

2007-05-05T15:22:00.000-05:00

Crises and Growth: A Latin American Perspective
Sebastian Edwards
NBER Working Paper No. 13019 , April 2007

In this paper I use historical data to analyze the relationship between crises and growth in Latin America. I calculate by how much the region's GDP per capita has been reduced as a consequence of the recurrence of external crises. I also analyze the determinants of major balance of payments crises. The main conclusion is that it is unlikely that Latin America will, on average, experience a major improvement in long run growth in the future. It is possible that some countries will make progress in catching up with the advanced nations. This, however, will not be the norm; most Latin American countries are likely to fall further behind in relation to the Asian countries and other emerging nations. Not everything, however, is grim. My analysis also suggests that fewer Latin America countries will be subject to the type of catastrophic crises that affected the region in the past. Latin America's future will be one of 'No crises and modest growth.' "

Colonial institutions matter, Brazilian style

2007-05-05T15:09:00.000-05:00

Rent Seeking and the Unveiling of ‘De Facto’ Institutions: Development and Colonial Heritage within Brazil
Joana Naritomi, Rodrigo R. Soares, Juliano J. Assunção
March 2007

Abstract
This paper analyzes the roots and implications of variations in de facto institutions, within a
constant de jure institutional setting. We explore the role of rent-seeking episodes in colonial
Brazil as determinants of the quality of current local institutions, and argue that this variation
reveals a de facto dimension of institutional quality. We show that municipalities with origins
tracing back to the sugar-cane colonial cycle – characterized by a polarized and oligarchic
socioeconomic structure – display today more inequality in the distribution of land.
Municipalities with origins tracing back to the gold colonial cycle – characterized by an overbureaucratic
and heavily intervening presence of the Portuguese state – display today worse
governance practices and less access to justice. Using variables created from the rent-seeking
colonial episodes as instruments to current institutions, we show that local governance and
access to justice are significantly related to long-term development across Brazilian
municipalities.

Trade policy

2007-05-04T08:51:00.001-05:00

Dani Rodrik and Tyler Cowen debate about trade policy desirability...

Should economists be debating politics?

http://rodrik.typepad.com/dani_rodriks_weblog/2007/05/should_economis.html

Question for Dani Rodrik

http://www.marginalrevolution.com/marginalrevolution/2007/05/my_question_for.html

The devil is in the details. Here is Rodrik again:

"is there any chance that we could actually move in the direction that I would like to see (which is not necessarily and always the unconditional free trade direction) without doing more damage than good?

The fact that we do not live in autarky is prima facie evidence that we are not at a corner solution where the political-economy equilibrium is concerned. That means that even relatively small changes in institutional design—with corresponding changes in incentives for political agents—can have important implications for the outputs of the political game. We actually have some control over how the political game is to be played, and therefore over the amount of rent-seeking that will be generated in equilibrium.

Here is one example where this generally works to our advantage. To prevent congressional log-rolling in tariff setting, we allow Congress to delegate the details of trade policy negotiations to the President (in the form of trade negotiating authority), with Congress limited to an up-or-down vote on the entire package. It is generally agreed that this delivers better trade policy than in the absence of delegation.

And here is another example where it works to our disadvantage (and does so again by design). Anti-dumping proceedings are explicitly designed to favor import-competing firms and to provide protection where none is really needed on sound economic grounds. That is because the government is instructed to determine whether firms are “injured,” but not whether the imposition of duties would engender greater hurt elsewhere. Their outcomes would be significantly different if we allowed beneficiaries of trade (consumers and downstream firms) to have standing in these proceedings."

Finally, Rodrik gives me a nice quote of the day:

"Scratch any strongly-held view about free trade, and you will find (typically) unexamined political assumptions underneath."

Robert Fogel, nobel activist

2007-04-12T21:44:00.000-05:00

This is an excerpt from an interview with 1993 nobel laureate Robert Fogel:

RF: There’s a large gap in your academic CV from 1948, when you finished your undergraduate degree, to the mid-1950s, when you enrolled in graduate school. What were you doing during that period?

Fogel: When I graduated from college, I had two job offers. One was from my father, to join him in the meat-packing business. That would have been quite lucrative. The other was as an activist for a left-wing youth organization. I chose the latter and worked as an activist from 1948 to 1956. At the time I was making that decision, my father told me: “If you really believe in that cause, come work with me. You will make a much higher wage and you could give your extra income to hire several people instead of just yourself.” I thought, well, that makes some sense. But I was convinced that this was a way to get me to change my views or at least lessen my commitment to an ideological cause that I found very important. Yes, the first year, I might give all of my extra money to the movement, but every year I would probably give less, and finally reach the point when I was giving nothing at all. I feared I would be co-opted. I thought this was my father’s way of indoctrinating me.

So I went to work as an activist. At first, I thought what I was doing was important. But over time, I started to become disillusioned. The Marxists had predicted a depression in 1947-1948. That didn’t happen, so they said, it will happen the next year. But it never came. So by the early 1950s, I began seriously reconsidering my position. I had been drawn to Marxism because I thought of it as a science. But it was pretty clear that its “scientific” predictions were wildly off the mark. I was ready to leave the movement, but then McCarthyism started to heat up and that led me to hesitate. I stayed a few more years to fight against McCarthyism. But by 1955 and 1956, the horrors that had occurred under Stalin, which we had all heard about but didn’t really believe, were confirmed by Khrushchev. That was the breaking point in a sense. I began to rethink my views and especially my involvement with Marxism. So I decided that I needed to receive more serious training in economics and the social sciences generally and went to Columbia.

RF: Did the failures of Marxism to accurately analyze the economic situation in the United States influence you to pursue work that was heavily data driven and empirical?

Fogel: There is no doubt about that. As I said, Marxism was sold as a science, but it became clear that it was not. It was more of an ideology than anything else. My early experiences made me very skeptical of ideologues of any persuasion. I’m willing to be surprised, to accept seemingly radical ideas, but there better be data to back up those claims, and Marxism could not provide that type of evidence.

Coasian bargains and structural reforms

2007-04-10T19:04:00.000-05:00

The (im)possibility of political Coasian bargains?

The fact that second generation reforms have stalled since divided government came about in Mexico, poses the crucial question of why, if the net benefits of these reforms are so high, political key players cannot successfully bargain to implement them? A related question is how come the PRI was able to push reform in so many areas, while current government faces gridlock? The puzzles of political Coasian bargains actually permeate policy-making everywhere and deserve some clarification here.

A simplified Coasian bargain looks like this: “If the long run net efficiency gains of policy A exceed transaction costs B, policy A should be implemented”. Under ideal situations, when property rights are well defined, and as long as transaction costs are low enough, such bargains should be made. If they are not made, we pose two possible explanations:

1. Property rights of reform are not well defined. Reforms imply clear political costs to key players, as well as economic costs to specific groups. Following Olson (2000), the beneficiaries of the status quo (reform) are concentrated (diffuse) whereas its burden is diffuse (concentrated). If the economic and political payoffs are not easily transferable between transacting parties, bargains are more difficult: how do you translate future economic payoffs into present value political compensation?

2. Lack of credible commitment devices. A hypothetical contract, where reforms are agreed upon in exchange for some political and economical compensation, requires credible commitments, and equally important, they need to be enforceable. In private bargains, it is easy to rely on explicit contracts and third party enforcement. But in matters of public policy, such explicit contracts are rare, and the likely enforcer, the electorate, faces collective action problems.

In the case of Mexico, the inability of legislators to be reelected in consecutive terms, for instance, limits the time horizons of the political bargains that can credibly be made. In the PRI era, centralized policymaking allowed for some political bargains, but they also faced limits and trade offs, which often turned into unsustainable policies. It is possible that as political competition consolidates, some commitment devices will develop in the current PMP arenas—but such devices are not here yet.

Testing Huntington... they will be assimilated

2007-04-09T20:25:00.000-05:00

Testing Huntington: Is Hispanic Immigration a Threat to American Identity?
Jack Citrin, Amy Lerman, Michael Murakami, and Kathryn Pearson

Abstract
Samuel Huntington argues that the sheer number, concentration, linguistic homogeneity, and other characteristic of Hispanic immigrants will erode the dominance of English as a nationally unifying language, weaken the country’s dominant cultural values, and promote ethnic allegiances over a primary identification as an American. Testing these hypotheses with data from the U.S. Census and national and Los Angeles opinion surveys, we show that Hispanics acquire English and lose Spanish rapidly beginning with the second generation, and appear to be no more or less religious or committed to the work ethic than native-born whites. Moreover, a clear majority of Hispanics reject a purely ethnic identification and patriotism grows from one generation to the next. At present, a traditional pattern of political assimilation appears to prevail.

http://www.apsanet.org/imgtest/PerspectivesMar07Citrin_etal.pdf

The Improving State of the World

2007-04-03T11:31:00.001-05:00

These are a few key points from the new book The Improving State of the World: Why We're Living Longer, Healthier, More Comfortable Lives on a Cleaner Planet, by Indur M. Goklany:

• The rates at which hunger and malnutrition have been decreasing in India since 1950 and in China since 1961 are striking. By 2002 China’s food supply had gone up 80%, and India’s increased by 50%. Overall, these types of increases in the food supply have reduced chronic undernourishment in developing countries from 37% in 1970 to 17% in 2001, despite an overall 83% growth in their populations.
• Economic freedom has increased in 102 of the 113 countries for which data is available for both 1990 and 2000.
• Between 1970 and the early 2000s, the global illiteracy rated dropped from 46 to 18 percent.
• Between 1897-1902 and 2001-2003, the U.S. retail prices of flour, bacon and potatoes relative to per capita income, dropped by 92, 85, and 82 percent respectively. And, the real global price of food commodities has declined 75% since 1950.

And these tables and charts are much more telling:

1. Infant Mortality Rates
2. Life Expectancy
3. Global Poverty
4. Overall Improvement in Human Well-Being

The Changing Face of Economics

2007-03-29T18:07:00.000-06:00

This is David Colander in his intro to The Making of an Economist, Redux:

"(...) looking at the profession today, I am convinced that it is quite different than it was in the mid-1980s, when Arjo and I first sat over drinks and lamented the state of the profession. The commitment to theorems and proofs has declined, and there is a much stronger empirical branch of economics. Natural experiments and instrumental variables are now central to an economist’s training. Behavioral economics has advanced enormously, and the macro that is done is fundamentally different from the macro that was done in the 1980s; advanced time-series statistics, such as cointegrated structural VARs and calibration, are commonplace, where they were hardly known before. What were taken as requirements of research in the 1980s are no longer requirements in the 2000s; the holy trinity of greed, equilibrium, and rationality has been replaced by a looser trilogy of purposeful behavior, sustainability, and enlightened self-interest. I could extend the list enormously, but there is no need to do that here. My point is simply that economics has changed and will continue to change, making it impossible to call the existing profession neoclassical any longer."

Acemoglu vs. Glaeser on WSJ

2007-03-14T21:51:00.000-06:00

Political economy economy heavy-weights Daron Acemoglu (MIT) and Ed Glaeser (Harvard) go at it on the issue of education, democracy and growth... It's a nice debate with lots of links to recent papers--very helpful for students, I think.

Is Democracy the Best Setting
For Strong Economic Growth?
March 13, 2007

http://online.wsj.com/public/article_print/SB117330214622129995-wXADlsfRHp9Z34RAyyVjN_w1yBI_20080311.html

Ed Glaeser writes: Rich countries are stable democracies. Poor countries tend to be political basket cases, careening between brutal dictatorships and unstable semi-republics. The relationship between democracy and wealth might suggest democracy naturally leads to prosperity. This view is comforting and also gives us another reason to enthusiastically try to export democracy globally.

While I yield to no one in my passion for liberty, the view that democracy is a critical ingredient for economic growth is untenable. There is no robust statistical relationship to back it up, and Robert Barro actually found² democracy reduces growth, once he statistically controls for the rule of law.

It is, however, true that growth rates vary much more under dictatorships³ than under democracies. Anti-development autocrats, such as Mobutu Sese Seko⁴ or Kim Jong Il⁵, are about the worst thing for economic growth, other than civil war. But many of the best growth experiences have been in less-than-democratic regimes that invest in physical and human capital such as Lee Kwan Yew's Singapore⁶ or post-Mao China. Some dictators are even better than democrats at restraining the growth-killing practice of expropriating private wealth. I think the relationship between democracy and wealth reflects the power of human capital -- education -- to make countries both rich and democratic. If you put enough smart people together, they'll figure out how to govern themselves and gravitate towards democracy⁷.

* * *

Daron Acemoglu writes: I agree with Ed on many points. In the postwar era, it's true that democracies haven't grown faster than autocratic regimes. Plus, there are clear examples of fast growth under dictatorships; see South Korea under Gen. Park Chung Hee⁸. So, why haven't democracies been more successful? I believe the answer lies in recognizing two things. First, there are different kinds of democracies. And second, it's important to consider that economic growth and democracy have a very different relationship over the long term -- that is for periods as long as 100 years -- than over the short or medium term.

Many societies counted as "democratic" using standard measures are really "dysfunctional democracies" where traditional elites dominate politics through control of the party system, political influence, vote buying, intimidation and even assassination. Colombia, which has had regular democratic elections for the past 50 years, is a typical example⁹. In others, democratic institutions survive, but there is significant in-fighting between ethnic groups, religious groups or social classes. The situation in Iraq would be the most extreme -- but not a unique -- example. Finally, many democracies suffer economically from populist and irresponsible macroeconomic policies, which are often adopted after transitions from repressive dictatorships and during periods when politics are turbulent and conflicts over wealth distribution are strong.

On the second point, it's true that autocratic regimes can generate growth for certain periods of time by providing secure property rights and good business conditions to firms aligned with political powers. But modern capitalist growth requires not only secure property rights, but also creative destruction, that is, the entry of new firms with new ideas and technologies that replace the successful firms of the past. Creative destruction requires a level playing field, which democracies are better at providing because they have more equal distributions of political power than autocracies or monarchies.

So, if we look beyond the past 60 years, we see that it was the U.S., with its democratic institutions, that created the environment for new businesses to enter, flourish and spur the industrial growth of the 19th century. There were many rich autocracies and repressive regimes in the 18th century, including places like Cuba, Haiti and Jamaica. But it was the U.S. that grew rapidly over the next two centuries while these autocratic regimes stagnated¹⁰.The relationship between human capital and democracy that Ed raises is fascinating. But I will return to that in a little in the context of the causes of democracy.

...read the whole thing here:

http://online.wsj.com/public/article_print/SB117330214622129995-wXADlsfRHp9Z34RAyyVjN_w1yBI_20080311.html

Handbook of Political Economy

2007-03-07T20:12:00.000-06:00

Hace sólo unos meses salió el Oxford Handbook of Political Economy (Oxford Handbooks of Political Science), editado por Barry R. Weingast y Donald Wittman.

Son 54 capitulos y más de 1000 paginas de gloriosos surveys del field. ¿Cómo deglutirlo en 2 semanaas? Fácil: Pones a 26 estudiantes de Economía Política a leer 2 capitulos cada uno y publicar summaries en el blog del curso, con todo y referencias a los 5 seminal papers de cada tema:

http://econpolitica.blogspot.com/

Creo que es una forma amena de llevar el Handbook a las masas... así sea de manera imperfecta.

Prosperity paradox?

2007-02-04T21:50:00.000-06:00

Not quite, says Daniel Ben-Ami. Today's world looks, on average, like an utopian dream from a mere 100 years ago.

There is no 'paradox of prosperity'
So what if material progress doesn't always make us happy? It's still a good thing, and here's why.
Daniel Ben-Ami
http://www.spiked-online.com/index.php?/site/printable/2678/

Contemporary critics of consumerism and popular prosperity are obsessed with what they see as a paradox. A central theme of their arguments is that economic growth does not make people happier. In their view, the pursuit of mass affluence is at best futile and is probably responsible for making humanity miserable. Often the growth sceptics argue that the pursuit of material goods is akin to a disease: they say the developed world is suffering from 'affluenza' or 'luxury fever' (1). Typically they conclude we should not attempt to become richer and often they argue for the pursuit of alternative social goals such as mental well-being.

But there is reason to question whether breaking the connection between prosperity and happiness is the killer blow that the critics assume. The growth sceptics seem to ignore the possibility that greater affluence could be immensely beneficial even if it does not necessarily make people happier. Nor do they understand that the propensity for human beings to be unhappy with their lot could have a good side. The striving for a better life is an important motor force of progress. The arguments the happiness pundits advance to show that prosperity does not lead to enhanced well-being are also dubious. And the policies they often propose to make people happier tend to be authoritarian.
(...)
Fortunately a new book by Indur Goklany, an American economist, examines the data in great detail. Its title clearly sums up the argument: The Improving State of the World: Why we're Living Longer, Healthier More Comfortable Lives on a Cleaner Planet (Cato 2007). Goklany's book takes a similar line to The Skeptical Environmentalist (Cambridge 2001) by Bjørn Lomborg, a Danish statistician, which infuriated environmentalists when it was first published (7).

There is an immense amount of detail in Goklany's book but some of the key statistics are worth reiterating:

Life expectancy, which for much of human history was 20-30 years, increased from a worldwide average of 31 in 1900 to 66.8 in 2003. For the high income countries it has reached 78.5 years.
Infant mortality (death of infants before the age of one per 1,000 live births) was typically over 200 before industrialisation. That is over a fifth of babies died before reaching their first birthday. The worldwide average has fallen from 156.9 in the early 1950s to 56.8 in 2003. In the developed world the average is 7.1.
Improving health. The onset of chronic diseases is typically happening several years later than in the past. For example, white males aged 60-64 in America are two-and-a-half times more likely to be free of chronic disease than their counterparts a century ago.
Air quality. Despite the common prejudice that economic development leads to air pollution the evidence in the developed world overwhelmingly suggests that air quality is improving. For example, the traditional pollutants have declined in America for several decades.

The fact that the trend is improving does not mean that everything is perfect. There are many instances, particularly in the developing world, where things could be far better. But to the extent there are still problems they constitute an argument for more development rather than less. If the developing world could reach the current living standards of the developed world, that would be a start. Billions of people would be much better off.

New books for a new year

2007-01-05T00:52:00.000-06:00

I spent the holidays in the U.S. so I had time to update my bookshelves with some volumes I wanted to get for a while...

POLITICAL ECONOMY

The Oxford Handbook of Political Economy (Oxford Handbooks of Political Science) By: Barry R. Weingast and Donald Wittman (eds.).

Principled Agents?: The Political Economy of Good Government (Lindahl Lectures on Monetary and Fiscal Policy) By: Timothy Besley
Economic Origins of Dictatorship and Democracy By: Daron Acemoglu, James A. Robinson

I will be using the Oxford Handbook as one of the main sources for my political economy class this spring term--taking the place of Mueller's previous compilation: its several chapters provide an up to date survey on what has become a quite large literature. Besley and Acemoglu/Robinson will only be suggested readings--these two volumes comprise something like the most current theoretical framework for political/institutional economics.

ECONOMETRICS

Microeconometrics: Methods and Applications By: A. Colin Cameron, Pravin K. Trivedi

Quoting from the authors' website:
"Distinguishing features include emphasis on nonlinear models and robust inference, as well as chapter-length treatments of GMM estimation, nonparametric regression, simulation-based estimation, bootstrap methods, Bayesian methods, stratified and clustered samples, treatment evaluation, measurement error, and missing data."

This volume has very nice supplement materials available on the web:

http://cameron.econ.ucdavis.edu/mmabook/mma.html

GENERAL INTEREST

Knowledge and the Wealth Of Nations: A Story of Economic Discovery By: David Warsh

Stumbling on Happiness By: Daniel Gilbert

ECONOMIC THOUGHT

The Cambridge Companion to Adam Smith (Cambridge Companions to Philosophy) by Knud Haakonssen

Hayek's Challenge: An Intellectual Biography of F. A. Hayek by Bruce Caldwell

Do Economists Agree on Anything? Yes

2006-12-07T14:28:00.000-06:00

This is from Mankiws's blog:

Robert Whaples surveys PhD members of the American Economic Association and finds substantial agreement on a wide range of policy issues. For example:

87.5 percent agree that "the U.S. should eliminate remaining tariffs and other barriers to trade."
85.2 percent agree that "the U.S. should eliminate agricultural subsidies."
85.3 percent agree that "the gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged."
77.2 percent agree that "the best way to deal with Social Security's long-term funding gap is to increase the normal retirement age."
67.1 percent agree that "parents should be given educational vouchers which can be used at government-run or privately-run schools."
65.0 percent agree that "the U.S. should increase energy taxes."

And, finally, the topic that generates the most consensus:

90.1 percent disagree with the position that "the U.S. should restrict employers from outsourcing work to foreign countries."

One issue that fails to generate consensus is the minimum wage: 37.7 percent want it increased, while 46.8 percent want it eliminated.

Econometrics: A Bird's Eye View

2006-12-07T14:24:00.000-06:00

This is a survey on economtrics for the New Palgrave Dictionary of Economics and Law, 2nd ed. (forthcoming).

Econometrics: A Bird’s Eye View
by John F. Geweke, Joel L. Horowitz, Hashem Pesaran (November 2006)

Abstract:
As a unified discipline, econometrics is still relatively young and has been transforming and expanding very rapidly over the past few decades. Major advances have taken place in the analysis of cross sectional data by means of semi-parametric and non-parametric techniques. Heterogeneity of economic relations across individuals, firms and industries is increasingly acknowledged and attempts have been made to take them into account either by integrating out their effects or by modeling the sources of heterogeneity when suitable panel data exists. The counterfactual considerations that underlie policy analysis and treatment evaluation have been given a more satisfactory foundation. New time series econometric techniques have been developed and employed extensively in the areas of macroeconometrics and finance. Non-linear econometric techniques are used increasingly in the analysis of cross section and time series observations. Applications of Bayesian techniques to econometric problems have been given new impetus largely thanks to advances in computer power and computational techniques. The use of Bayesian techniques have in turn provided the investigators with a unifying framework where the tasks of forecasting, decision making, model evaluation and learning can be considered as parts of the same interactive and iterative process; thus paving the way for establishing the foundation of “real time econometrics”. This paper attempts to provide an overview of some of these developments.
PDF: Discussion Paper No. 2458

The Impact Evaluation Gap

2006-11-28T19:30:00.000-06:00

Policy evaluation is the kind of stuff we rarely address properly in universities. If nothing else, this is an area were the dismal science can really shed light and prove to be useful.

When Will We Ever Learn? Improving Lives Through Impact Evaluation

Download (PDF, 536 KB) 05/31/2006

Each year billions of dollars are spent on thousands of programs to improve health, education and other social sector outcomes in the developing world. But very few programs benefit from studies that could determine whether or not they actually made a difference. This absence of evidence is an urgent problem: it not only wastes money but denies poor people crucial support to improve their lives.

This report by the Evaluation Gap Working Group provides a strategic solution to this problem addressing this gap, and systematically building evidence about what works in social development, proving it is possible to improve the effectiveness of domestic spending and development assistance by bringing vital knowledge into the service of policymaking and program design.

In 2004 the Center for Global Development, with support from the Bill & Melinda Gates Foundation and The William and Flora Hewlett Foundation, convened the Evaluation Gap Working Group. The group was asked to investigate why rigorous impact evaluations of social development programs, whether financed directly by developing country governments or supported by international aid, are relatively rare. The Working Group was charged with developing proposals to stimulate more and better impact evaluations. This report, the final report of the working group, contains specific recommendations for addressing this urgent problem.

Casillas rurales vs. urbanas en el PREP

2006-11-22T00:20:00.000-06:00

La semana pasada estuve en un seminario sobre el PREP en el IFE. En una de las mesas en las que participé surgió la pregunta: "¿Cómo sabemos si la demora de las casillas rurales en verdad tuvo un impacto significativo en el flujo de datos del PREP?"

En el análisis de estadística descriptiva que hice meses antes era obvio que las casillas urbanas llegaron antes, en promedio, que las rurales... y que este sesgo ayudaba a explicar la ventaja inicial (y decreciente) de Calderón sobre AMLO durante la duración del PREP.

¿Cómo podemos verificar esto estadísticamente, más allá de las gráficas? Comparemos el tiempo promedio de cada tipo de casillas en ingresar al PREP:

. by casilla: summ horasdec (# horas que tardó cada casilla en ingresar al PREP)

----------------------------------------------------------------------

-> casilla_rural = 0 (casillas urbanas)

Variable | Obs Mean Std. Dev. Min Max

-------------+--------------------------------------------------------

horasdec | 85221 5.115121 2.764698 0 24.87

-> casilla_rural = 1 (casillas rurales)

horasdec | 32066 7.436029 3.501121 0 24.9

Como vemos las casillas urbanas llegaron 7.43 - 5.11 = 2.32 horas antes que las rurales. La varianza de las casillas rurales es mayor, además. ¿Será una diferencia significativa? Podemos hacer un t-test de medias o bien una regresión:

Dep Var: num. de horas que tarda casilla en aparecer en el PREP...

IndepVar: Dummy casilla_rural/urbana

. regress horasdec casilla_rural

Source | SS df MS Number of obs = 117287

-------------+------------------------------ F( 1,117285) =14093.54

Model | 125504.017 1 125504.017 Prob > F = 0.0000

Residual | 1044431.6117285 8.90507397 R-squared = 0.1073

-------------+------------------------------ Adj R-squared = 0.1073

Total | 1169935.62117286 9.97506622 Root MSE = 2.9841

------------------------------------------------------------------------------

horasdec | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------

casilla_ru~l | 2.320909 .0195501 118.72 0.000 2.282591 2.359226

_cons | 5.115121 .0102222 500.39 0.000 5.095085 5.135156

------------------------------------------------------------------------------

Como se aprecia, las casillas rurales "nada más" están a 118 errores estándar de distancia de las urbanas... Pero seamos más rigurosos: Veamos si la dummy rural sobrevive al controlar por 32 dummies estatales--a la mejor la heterogeneidad estatal elimina la dicotomía rural/urbano:

. areg horasdec casilla, abs(edo)

Number of obs = 117287

F( 1,117254) =12373.15

Prob > F = 0.0000

R-squared = 0.1945

Adj R-squared = 0.1942

Root MSE = 2.835

------------------------------------------------------------------------------

horasdec | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------

casilla_ru~l | 2.228325 .0200327 111.23 0.000 2.189061 2.267589

_cons | 5.140433 .009926 517.88 0.000 5.120978 5.159888

-------------+----------------------------------------------------------------

edo | F(31, 117254) = 409.380 0.000 (32 categories)

El coeficiente de diferencia entre casillas rurales y urbanas baja de 2.3 a 2.2 horas. Pero si esto aún no nos convence, podemos controlar por 300 dummies distritales--quizá la heterogeneidad distrital elimina o absorbe la dicotomía rural/urbano:

. areg horasdec casilla, abs(edodist)

Number of obs = 117287

F( 1,116986) = 4269.59

Prob > F = 0.0000

R-squared = 0.3432

Adj R-squared = 0.3415

Root MSE = 2.5629

------------------------------------------------------------------------------

horasdec | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------

casilla_ru~l | 1.373901 .0210263 65.34 0.000 1.33269 1.415112

_cons | 5.37403 .0094366 569.49 0.000 5.355535 5.392526

-------------+----------------------------------------------------------------

edodist | F(299, 116986) = 140.532 0.000 (300 categories)

Como vemos, resulta que aún controlando por heterogeneidad distrital, el factor rural añade 1.37 horas de demora promedio frente a las casillas urbanas. Es decir, al interior de cada distrito, las casillas rurales demoraron 1.37 horas más en ser procesadas que las urbanas. En los tres casos analizados arriba, este impacto es estadísticamente significativo a niveles (muy) inferiores al 1%.

Sobra decir que este no es el análisis más exahustivo posible, pero sí es el análisis más básico y sencillo que podemos hacer con los datos del IFE disponibles a la fecha. Con más datos, podría estimarse un modelo mucho mejor especificado.

World economic history in a snapshot

2006-11-13T17:52:00.000-06:00

In case you have not been paying attention lately, this is the economic history of the world over the last 3000 years:

This is from Gregory Clark’s A Farewell to Alms: A Brief Economic History of the World (forthcoming in 2007 from Princeton). You can find some sample chapters, and lots of related papers, in his website at the Institute of Governmental Affairs at UC-Davis. Here’s an excerpt from the book’s intro:

The basic outline of world economic history is surprisingly
simple. Indeed it can be summarized in one diagram: figure 1.1 (see above).
Before 1800 income per person – the food, clothing, heat, light,
housing, and furnishings available per head - varied across societies
and epochs. But there was no upward trend. A simple but
powerful mechanism explained in this book, the Malthusian Trap,
kept incomes within a range narrow by modern standards.
Thus the average inhabitant in the world of 1800 was no better
off than the average person of 100,000 BC. Indeed, most
likely, consumption per person declined as we approached 1800.
The lucky denizens of wealthy societies such as eighteenth century
England or the Netherlands managed a material life style equivalent
to the Neolithic. But the vast swath of humanity in East and
South Asia, particularly in Japan and in China, eked out a living in
conditions that seem to have been significantly poorer than those
of cavemen.

(…)

The Industrial Revolution, a mere 200 years ago, changed
forever the possibilities for material comfort. Incomes per person
began a sustained growth in a favored group of countries around
1820. Now in the richest of the modern economies living standards
are 10-20 times better than was average in the world of
1800. Further the biggest beneficiary of the Industrial Revolution
has so far been the poor and the unskilled, not the typically
wealthy owners of land or capital, or the educated. Within the
rich economies of our world there is not only more for everyone,
but lots more for the bottom strata.

US 2006 Election Results--Democrats strike back

2006-11-08T21:37:00.000-06:00

These are results from CNN as of this evening.

33 at stake, 1 undecided

51 Dem, 50 GOP needed for majority

PARTY	NOT UP	TOTAL	GAIN/LOSS
GOP	40 seats	49	-5
DEM	27 seats	50	5
IND	0 seats	0	0

Updated: 1:18 p.m. ET

435 at stake, 10 undecided (yielding Republican)

218 needed for majority

PARTY	TOTAL	GAIN/LOSS
GOP	196	-28
DEM	229	29
IND	0	-1

Updated: 4:21 p.m. ET

36 states at stake, MI undecided (yielding Republican)

PARTY	NOT UP	TOTAL	GAIN/LOSS
GOP	6 states	21	-6
DEM	8 states	28	6
IND	0 seats	0	0

Updated: 1:19 p.m. ET

This graph on recent US election history is from the Washington Post:

Republicans have controlled both chambers since 1994, except during a brief period when the Democrats held the Senate.

De Long on NAFTA and Mexico

2006-10-18T19:11:00.000-05:00

De Long is not alone in wondering about the so-called Mexican puzzle (neoliberal reforms without large enough growth). Also, Tyler Cowen offers some possibilities here. Both are missing the big omitted variable here: Rule of law. Two more: we are a rather young democracy and interest groups are stronger than we think.

Has Neo-Liberalism Failed Mexico? / J. Bradford DeLong

Six years ago, I was ready to conclude that the North American Free Trade Agreement (NAFTA) was a major success. The key argument in favor of NAFTA had been that it was the most promising road the United States could take to raise the chances for Mexico to become democratic and prosperous, and that the US had both a strong selfish interest and a strong neighborly duty to try to help Mexico develop.

Since NAFTA, Mexican real GDP has grown at 3.6% per year, and exports have boomed, going from 10% of GDP in 1990 and 17% of GDP in 1999 to 28% of GDP today. Next year, Mexico’s real exports will be five times what they were in 1990.

It is here – in the rapid development of export industries and the dramatic rise in export volumes – that NAFTA made the difference. NAFTA guarantees Mexican producers tariff and quota-free access to the US market, the largest consumer market in the world.

Without this guarantee, fewer would have invested in the capacity to satisfy the US market. Increasing trade between the US and Mexico moves both countries toward a greater degree of specialization and a finer division of labor in important industries like autos, where labor-intensive portions are increasingly accomplished in Mexico, and textiles, where high-tech spinning and weaving is increasingly done in the US, while Mexico carries out lower-tech cutting and sewing.

Such efficiency gains from increasing the extent of the market and promoting specialization should have produced rapid growth in Mexican productivity. Likewise, greater efficiency should have been reinforced by a boom in capital formation, which should have accompanied the guarantee that no future wave of protectionism in the US would shut factories in Mexico.

The key word here is “should.” Today’s 100 million Mexicans have real incomes – at purchasing power parity – of roughly $10,000 per year, a quarter of the current US level. They are investing perhaps a fifth of GDP in gross fixed capital formation – a healthy amount – and have greatly expanded their integration into the world (i.e., the North American) economy since NAFTA.

But the 3.6% rate of growth of GDP, coupled with a 2.5% per year rate of population and increase, means that Mexicans’ mean income is barely 15% above that of the pre-NAFTA days, and that the gap between their mean income and that of the US has widened. Because of rising inequality, the overwhelming majority of Mexicans live no better off than they did 15 years ago. (Indeed, the only part of Mexican development that has been a great success has been the rise in incomes and living standards that comes from increased migration to the US, and increased remittances sent back to Mexico.)

Intellectually, this is a great puzzle: we believe in market forces, and in the benefits of trade, specialization, and the international division of labor. We see the enormous increase in Mexican exports to the US over the past decade. We see great strengths in the Mexican economy – a stable macroeconomic environment, fiscal prudence, low inflation, little country risk, a flexible labor force, a strengthened and solvent banking system, successfully reformed poverty-reduction programs, high earnings from oil, and so on.

Yet successful neo-liberal policies have not delivered the rapid increases in productivity and working-class wages that neo-liberals like me would have confidently predicted had we been told back in 1995 that Mexican exports would multiply five-fold in the next twelve years.

To be sure, economic deficiencies still abound in Mexico. According to the OECD, these include a very low average number of years of schooling, with young workers having almost no more formal education than their older counterparts; little on-the-job training; heavy bureaucratic burdens on firms; corrupt judges and police; high crime rates; and a large, low-productivity informal sector that narrows the tax base and raises tax rates on the rest of the economy. But these deficiencies should not be enough to neutralize Mexico’s powerful geographic advantages and the potent benefits of neo-liberal policies, should they?

Apparently they are. The demographic burden of a rapidly growing labor force appears to be greatly increased when that labor force is not very literate, especially when inadequate infrastructure, crime, and official corruption also take their toll.

We neo-liberals point out that NAFTA did not cause poor infrastructure, high crime, and official corruption. We thus implicitly suggest that Mexicans would be far wose off today without NAFTA and its effects weighing in on the positive side of the scale.

That neo-liberal story may be true. But it is an excuse. It may not be true. Having witnessed Mexico’s slow growth over the past 15 years, we can no longer repeat the old mantra that the neo-liberal road of NAFTA and associated reforms is clearly and obviously the right one.

Evidence on Flat Taxes

2006-10-18T17:45:00.000-05:00

This is from London's New Economist blog:

IMF: Flat taxes have no Laffer curve effect
http://neweconomist.blogs.com/new_economist/2006/10/imf_flat_tax.html

Flat taxes are associated with a reduction in personal income tax, and "in no case does there ..appear to have been a Laffer effect". That is the most striking conclusion from a new study by IMF economists Michael Keen, Kevin Kim and Ricardo Varsano in The "Flat Tax(es)": Principles and Evidence (Working Paper No 06/218). The authors summarise the paper thus:

Discussion of these quite radical reforms has been marked, however, more by assertion and rhetoric than by analysis and evidence. This paper reviews experience with the flat tax, seeking to redress the balance. It stresses that the flat taxes that have been adopted differ fundamentally, and that empirical evidence on their effects is very limited.

This precludes simple generalization, but several lessons emerge: there is no sign of Laffer-type behavioral responses generating revenue increases from the tax cut elements of these reforms; their impact on compliance is theoretically ambiguous, but there is evidence for Russia that compliance did improve; the distributional effects of the flat taxes are not unambiguously regressive, and in some cases they may have increased progressivity, including through the impact on compliance; adoption of the flat tax has not resolved common challenges in taxing capital income; and it may have strengthened, not weakened, the automatic stabilizers. Looking forward, the question is not so much whether more countries will adopt a flat tax as whether those that have will move away from it.

The impact of a flat tax on work incentives "is not clear cut in principle, and there is no evidence that it has been strong in practice." Likewise, the distributional effects of movement towards a flat tax "are potentially complex", especially for reforms that involve an increase in the basic tax-free amount.

Keen, Kim and Varsano argue that although "the question has received little attention in the debate, ..movement to a flat tax may plausibly strengthen the automatic stabilizers, not weaken them." They also find the introduction of a flat tax has been a useful signal of reform:

The flat tax has commonly—almost universally—been adopted by new governments anxious to signal a fundamental regime shift, towards more market-oriented policies. In several cases, the signal appears to have been well-received. Where no such reputation needs to be acquired, the appeal of the flat tax is consequently less.

The authors conclude by questioning the political sustainability of the move towards flat taxes:

What remains unclear is the sustainability of the flat tax. Structurally, the flat taxes that have been adopted do not provide a coherent framework for dealing with the difficulties that almost all countries now perceive in taxing internationally mobile capital income.

...Political economy considerations point towards the adoption of rate schedules that tend to benefit middle income earners: exactly the group that tends to lose most from the adoption of a second wave flat tax. Moreover, the very spread of the flat tax in itself undermines its value as a signal: it may prove too easy to mimic. While there will no doubt be new members of the flat tax community, in some respects the more interesting question is whether there will be any defections.

Most flat tax structures benefit lower and/or upper income earners at the expense of those on middle incomes - a point I have made before. Such tax structures are hard to 'sell' to predominanatly middle class swinging voters in marginal electorates. In the end it is likely to be the median voter that stops the flat tax movement advancing.