Paul Romer on Ending Poverty

I'm less bullish on charter cities than some of my other colleagues in institutional economics. It seems like institutional arrangements would be sensitive to the prevailing local relative prices and preexisting distribution of property rights (a la North, 1981).

Some Random Links

An interesting short piece on the Isreli-Palestinian conflict (Haushofer, et al.)
A shamelessly self-interested link - somebody buy our house!
Is there a great divergence? (Rodrik)
Summary of an interview by Felix Simon with Larry Summers. Sentences to ponder:

The Treasury bond rate, Treasury note rate for ten years is 2.85 percent. Nobody is failing to invest because 2.85 percent is too much. They are failing to invest because there are no customers in their store. They are failing to invest because their factories are sitting empty. They are failing to innovate because they’re not sure how large the market for the product will be.

We don't need a C.E.O. A country is not a business. We need a policy expert. (Economix)

Economics for kids? (Freakonomics)

Banerjee on Poverty. (Economist)

Debt impacts of new policies GWB vs. BHO.

Some links on institutions and failed states

The long-lasting effects of corrupt institutional history. (Vox; more here)
Oil (resources?) and democracy. (Vox)
Failed states, poor institutions, and poverty. (Freakonomics)

Wage Struggles of Men (and a Link on Helping the Homeless)

Wage struggles of men? (Economix) Forgive me for being cynical, but looking at earnings per capita instead of earnings per worker and concluding that there is some sort of tide against men in the labor market seems hypocritical and sexist. A paper on the gender gap scarcely gets published unless it looks at female earnings on a per worker and per hour basis. This, of course is because many say there is "voluntary" selection into (and more importantly out of) the work force. How concerned should we be if more men are beginning to voluntarily select out of the work force (or begin working fewer hours), as more of their wives work full time? For thirty years women were told that their hours-worked choices were "voluntary" and the bar for showing evidence of a culture of discrimination was set almost impossibly high. Now that things are changing, why are we so quick to feel sorry for the men?

Direct transfers are often better than paternalistic in-kind ones (Jason Kottke)

Some links

Poverty-reduction matters globally. Chalk one up for redistribution, a.k.a. "socialism." It's not just about money. 
American public opinion, then and now.
Happy old people. It beats the alternative.

Some Links: Sometimes, kids will cooperate.

Careful how you try to introduce game theory to your kids. They may seem competitive with each other, but they will cooperate against a common foe. (Marginal Revolution)
Bill Easterly on the new Human Development Indicators: "The HDR addressed [a criticism of the previous human development indicators] by making the problem much worse. Previously we were all whining about differences in the value of life of 70 times between rich and poor – now it’s a differential of 17,000 to one. Sorry, Zimbabweans, UNDP thinks your lives are worth 50 cents. (Aidwatchers)
Lotteries don't have to have a negative sum for their participants. (Freakonomics)
Bayesian Bees. The author suggests 5 lessons we could learn from bees. Here are two:
1. Minimise the leader's influence on the group. Here we humans have much to learn.
2. Seek diverse solutions to the problem. Humans realised only recently that diversity is good for a group.
(Marginal Revolution)

Structural Change

Leaving the unemployment and housing crash that is Las Vegas, measured by one-way U-Haul prices.

One good sentence on subsidies

From Free Exchange:

The upside to cash-benefits is that it forces policymakers to confront the trade-offs involved in delivering a certain subsidy and evaluate whether it makes sense.

Some Links, Featuring Tourette's, Dilbert, and a Baseball Mystery

Advantages to Tourette's (British Psychological Society HT: TC @ MR)?
Dilbert, "cheaper" copies, and teaching managers about opportunity cost (Freakonomics).
Why are there so many power-hitting middle infielders these days (Economix)?
A couple of links on "cap and trade" vs. the carbon tax (Economix and Economist)
Libertarianism explained: a review of Jeffrey Miron's "Libertarianism, from A to Z." (Economix). Here is an interesting excerpt:

Professor Miron writes that “antipoverty spending is the most defensible kind of redistribution,” because “the goal of this redistribution – helping the poor – is reasonable and the costs of a well-designed limited antipoverty program (e.g., a negative income tax set on a state-by-state basis) are modest.”

Another interesting quotation on libertarianism (From Raj Pate's "The Value of Nothing"; HT to Atin Basu and Greg Lippiatt):

"There are two novels that can transform a 14 year old kid's life: The Lord of the Rings and Atlas Shurgged. One is a childish daydream that can lead to an emotionally stunted, socially crippled adulthood in which large chunks of the day are spent inventing ways to make real life more like a fantasy novel. The other is a book about orcs."  

Some Links: Question of the Week

Question of the week: Why do we ascribe any credibility to a person with an undergraduate degree in political science (what is called Government at Harvard) in the area of economics (let alone accounting)? (Menzie Chinn on Robert Samuelson on economics)
Education externalities (Ed Glaser at Economix).
Blogginheads with Glen Loury (HT to MR)
Does unemployment insurance raise unemployment? (And, even if it does, there's a strong argument that longer durations of unemployment facilitate better job matches once a job is found.)

More Semi-Random Links

Here are some links about medium- to long-run ideas about Haiti:
1. Help Haiti idea #1 (importing labor)
2. Help Haiti idea #2 (exporting security and bureaucracy)
3. Help Haiti idea #3 (exporting institutions)
and some lighter links...
4. A song about Paul Krugman. Take with the appropriate portion of salt.
5. A comic about statistics

Three Burning Questions

From Matt Yglesias:

1. Why are we spending a multiple of Afghanistan’s total GDP on fighting a war in the country?
2. Couldn’t more be done, for cheaper, with cash for bribes and development?
3. How is it that it doesn’t take the Taliban years to train competent soldiers?

... But Hayek was Wrong...

When I think about the hyperbolic claims about welfare and tyranny, it reminds me of Hayek's predictions about social welfare states. As Bruce Bartlett (pal of Art Laffer among other supply-siders, and guru of the Reagan tax cuts) points out in an article which partially debunks Hayek's claims:

In 1944, the Austrian economist F.A. Hayek published an extraordinarily influential book, The Road to Serfdom. In it, he argued that liberalism eventually leads to totalitarianism; that is, once a nation has embarked on the creation of a welfare state, there is no natural limit to the size of government until it controls everything, socialism becomes pervasive and political freedom evaporates.

I have my doubts about the extent to which the rank-and-file member of the recent conservative backlash is familiar with the economic philosophy of Hayek, but these are the ideas from which they have taken their intellectual cues. Hayek made a lot of significant contributions to the field of economics, and his ideas about Creative Destruction were revolutionary in their time. However, his argument about social welfare is both a logical fallacy and inconsistent with the empirical evidence of the last 20 years.
Logically, the argument rests on a flimsy and fallacious "slippery slope" argument. As Bartlett notes:

Since Hayek's book appeared, it has been an article of faith among American conservatives and libertarians that every expansion of government is a step on the slippery slope to totalitarianism. National health insurance today, the gulag tomorrow, many of those on the right genuinely believe, often citing Hayek in support.
Consequently, it is axiomatic that Europe, which is much further along the road to a welfare state than the U.S., is also further along the road to socialism and totalitarianism.

But this turns out to be false, both when it comes to Europe, and when it is compared with evidence from the rest of the world. Economies (many of which developed and still have sizable social welfare programs) have been liberalizing the industrial sectors of their economies at a tremendous pace, political and economic freedoms have been extended to more people than ever before, poverty has fallen dramatically, the number and intensity of violent conflicts have subsided considerably, and more countries' political systems are based on democratic institutions than ever before. Empirically, much of this progress on economic, political and social fronts has been credited to globalization and the retreat of government from industry. But even as economists laud these sorts of liberalizations, the mainstream view (advocated by, for example, Bhagwati, Stiglitz, and others) continues to stress the importance of the social safety net to avoid a socialist backlash.
Also, with respect to the "Europeanization" of the US, it is false to assert that European countries are less politically free because of their higher taxes and more pervasive welfare states. Conservative think tanks such as Freedom House and the Heritage Foundation, Consistently rank countries like Denmark, which has an average tax rate of 49% compared with 28% in the US, on a par with the US.
The bottom liine is that the intellectual argument that the 9/12 and teaparty activists have founded their protests on has a number of holes in it.

Thought US taxes were progressive?

Wait till you see this. And, by the way, it's from the conservative Ludwig von Mises Institute, not some hippie liberal thinktank. This is why a negative income tax on income below a certain threshhold (first proposed by Milton Friedman) would be a better way to flatten out the income distribution than lump-sum cash subsidies.

Life Expectancy Arguments

Data coming out is convincing me more and more that we do get better quality health care in the US. For example, Tyler Cowen at MR cites a study comparing life expectancy at birth and life expectancy conditional on reaching age 65 for the US and the Netherlands:

At birth, someone living in the Netherlands can expect to live 2.35 years longer than someone born in the US, but at age 65, the difference is reversed, and someone living in the US can expect to live 0.4 years longer than someone living in the Netherlands. This difference can be explained by assuming that semi-socialized health care is better for young and worse for old people, or, at least as likely, different policies are not the main cause of the difference

Sources: CDC national vital statistics 2004, www.cdc.gov/nchs/data/nvsr/nvsr56/nvsr56_09.pdf and RIVM 2007 levensverwachting, www.rivm.nl/vtv/object_document/o2309n18838.html (in Dutch)

So, the question still remains on distribution. Is it better to increase the likelihood that citizens are able to reach the age of 65 or that those who do (either because they are congenitally wealthier or healthier) live even longer? There are a lot of interesting tradeoffs in the debate, and the politicians are not focusing on any of them because the old conflicts over class and culture play better to less affluent voters (remember more than half of all Americans have below-average incomes).

Why doesn't the South Support Health Care Reform?

Economically, they should, because they're more likely to need it (8 of the "top" 10 and 10 of the "top" 13 fattest states are in the south), and more likely to not have it (13 of the top 14 highest incidences of poverty are southern states). Yet (and I have no data on this) it seems southerners get a real bug where it don't belong when they hear about health care reform. Hmmm

Why do Southern States have a Low HDI?

This was an interesting post on Andrew Gelman's stats blog. Basically, it talks about a new way of thinking about "human development" in the US by state, and compares it to an old way - the inverse of the distance to the Canadian border. What's about as interesting was this comment to a Catherine Campbell post at Economix:

Tom Friedman has often observed that poorly educated, unemployed youth in
Arab countries turned to fundamentalism. He blames the inefficient kleptocracies
that run these countries for these backward attitudes.
Is something like this
happening in the solid Republican states?

Hmmm.

Milton Friedman and Richard Nixon: World Renowned Socialists

Why hasn't anyone mentioned the fact that Friedman and Nixon advocated a Family Assistance Prgram Negative Income Tax system to supplement and reform welfare and create incentives for poor families to work.

This week in The Economist

More wind from a gas company blowhard. T. Boone Pickens wants to go to wind for lighting our homes and gas for transportation. Do we really need to transition to natural gas for our cars or will we be clever enough to make the transition once to electric?

Measuring poverty. Federal poverty line: 20,444 for a family of four, which has been relatively stable in real terms since 1968. Proposed level for New York City using a new methodology: 27,138. That means 23% of New York's population is poor, up from 19%. I don't have any real thoughts on this - changing the numbers doesn't do much to change the problem.

Teachers' Unions. Sure, teachers' unions can be part of the solution, but will they and should they? Teachers' unions fight for higher wages and equal for their people and oppose anything that would make it easier for the boss to cut employees loose. The result is social pressure not to try too hard and make your peers look bad, and mediocre teachers being the most vocal folks in union meetings. But that's some of what education in America needs - more pay for good teachers and less job security for bad ones.

China's Economic Constitution. I'm a little cynical, but this will probably be like the contract law for workers' rights - it'll hit the books but no one will enforce it, and few among the public will even know about it. For those of you saying "contract law for worker rights in China?"... exactly.

Defending Sweatshops

Along the lines of Recycling...

Penn & Teller: Defending Sweatshops