The CSAE Blog

Hi all,

Strange things are happening in the world these days. Rafa and Roger are about to contest an Australian Open final, causing me to check my calendar; England thumped India in a Twenty20, causing me to dig a deep hole in the garden for signs that hell has frozen over; this Sixers are awesome while the Cavs suddenly suck. What the heck is going on? Increasingly, I’m starting to wonder whether we actually are all just in a big computer simulation, and the computer’s running out of RAM. If these links are all just repeats, I blame the RAM. That’s my new mantra: blame the RAM.

1.       We’re about a week into Trumperica now, and what have we learnt? And importantly, what does it look like he’s learnt? Let’s start with Mexico. All through the election, his promise to make Mexico pay for his wall seemed outlandish – how could he do this without significantly damaging the US economy? His first idea, quickly rowed back on, was a tax on Mexican imports – a tariff that would both hit American consumers and American producers hard. But he could hurt Mexico in other ways, too even if they wouldn’t raise much money – Mexico’s economic fortunes are tied to the US by an umbilical cord made up of both trade and remittances. In a way it doesn’t matter whether or not he actually does get the money for the wall this way – politically, he may only need to sell it like that. Similarly, the fact that net jobs created are a tiny proportion of gross jobs created and destroyed in a month probably won’t stop someone, at some point, just citing the stat that looks best. I’ll come back to this point, so bear with me.

2.       But in the interests of questioning my own prior convictions – is there something valid to Trump’s instinctive hatred of trade deals? Dani Rodrik has always been more circumspect than most economists in his approach here, and his analysis of NAFTA is required reading for everyone who thinks that free trade is the obvious answer. I accept his points here, but they beg further questions: if sections of the economy need protections in order to survive, in the answer to offer these protections up and create rents for exploitation? And if so for how long? And do we do it for all sectors or just some? Or do we phase them out slowly and really work at remodelling the economy? I lean towards the last, as do most economists, but I’m realistic enough to know that the average 45 year old isn’t just going to reskill and become a computer engineer. There are real costs, and we need a proper plan for dealing with them.

3.       Relatedly, Rodrik has been busy this month, with a further paper on structural transformation here. Interestingly, his co-authors use a separate paper on which Rodrik is not co-author to refute his argument of premature de-industrialisation.

4.       Recently, I’ve seen a few people asking for evidence of a prior belief they hold (“I think poverty is rising because of neoliberalism, can someone send me proof of this?”), rather than asking a neutral question and seeing what the evidence says (“what’s the best evidence about recent trends in poverty and their causes?”). It’s worrying if this is creeping into actual calls for research proposals though – even if it is only in an advocacy organisation or two for now.

5.       I mentioned the passing of Thomas Schelling in a recent links, focusing on his work on nuclear non-proliferation. Tim Harford considers the insights from his work for Brexit negotiations, concluding that they resemble a game of chicken with similar possible outcomes.

6.       This might have been my favourite article of the week – a book review that digs into the phenomenon of India’s criminal-politicians, suggesting that in the absence of a functioning state, it becomes a stable and rational equilibrium for voters to prefer crooks to the honest men, as it increases their chances of getting services delivered. Meanwhile it also removes the incentive to improve state functioning on the part of the criminal-politicians as their viability depends on their role as deal-makers, and thus in turn on the absence of a rule-based system.

7.       I promised to return to the issue of Trump’s relationship with data (or, more baldly, the truth). Via Tim Harford, I came across this article suggesting that the deep psychology of lying may mean that his approach is not just a good strategy, it will gradually win us all over, even the fact-checkers among us. I don’t buy it, not really. It misses the point that there are very different kinds of untruth and very different ways we respond to them. There’s the vague and difficult to verify ones (“This plan will create millions of jobs, jobs we’ve been losing”) and the concrete and relatable ones (“you’re better off today than you were four years ago”). At the moment, we’re still in the realm of the first kind; but soon, when policies are supposed to turn into reality, the second kind will come into play. Ambiguity will delay realisation; but ambiguity is unlikely to last for ever, or even for very long.

8.        Meanwhile – there’s always satire: “Cake shall henceforth be known as ‘alternative celery.’”: a poem of alternative facts.

 Have a great weekend, everyone!

R

Hi all,

 I’m going to file the motion that it is physically and psychologically impossible to dislike Joel Embiid (yes, I’m aware about 4 readers have any idea who he is – the Philadelphia 76ers centre). How can you dislike a man who dances like this in a lurid red jacket? Capable of this array of skills? It doesn’t hurt that he’s historically good – and this after losing the first two years of his career to injury. Though if we’re talking returns from adversity, the week’s winner is definitely Yuvraj Singh, whose journey back from cancer culminated in a sensational knock of 150 off 127 balls against England yesterday.

 1.       Nothing else is happening today, right? No historic handovers of power or anything like that, right? As Trump takes over the White House, FiveThirtyEight launch a series looking at both how the media reported the election and what is going on in the country that led to this result. On the former, Nate Silver is justifiably harsh on print journalists who went in for an extended session of confirmation bias in covering the election and then turned around and blamed the numbers for their interpretation. He hints at exploring the behavioural biases that warped the analysis in future articles, too. A companion piece focuses on the demographic and political changes that at once made the democrats more popular nationally, less coherent as an ideological movement and less efficient as an electoral one. I love the fact that the article has an author (Claire Malone) and a lead analyst (Harry Enten). The future of journalism?

2.       You may need to sign in for this, but a very interesting look at the UK’s depreciation post-Brexit. GCSE economics teaches you that a depreciation makes exports cheaper and imports more expensive and  should result in a better trade balance as you export more and buy fewer foreign goods, but it’s a little more complicated than that. Firstly, exporters  haven’t actually been lowering their prices much – instead, they’ve been selling at only slightly lower prices and pocketing the difference from roughly the same sales – which they can do until new firms enter the market to undercut them. But investment requires certainty, which the market has not been offered yet. What’s more, it seems like we’re not importing any less either. In fact, we’re importing more despite price rises, mainly because we can’t substitute what we import with domestic equivalents – there aren’t any. Again, investment is the missing piece of the puzzle. It could still happen, long term. But it might not, too.

3.       On the other hand, when markets are given a much bigger injection of certainty, investment just rockets and if you want evidence, go to California and buy some weed. Once marijuana was legalised, firms invested large amounts of money on bigger plantations, better machinery and new technology, simply because they were protected by the certainty that legal commercial operations tend to enjoy in the developed world – and prices have fallen massively as a result. There’s a lesson here for fragile states. It’s not exactly investment that they lack, it’s certainty. No-one likes unexpected intrusions.

4.       Speaking of money flows, Maya Forstater puts the boot into some seriously shoddy analysis from the Guardian which suggested that illicit financial flows were 24 times the size of aid flows to development countries. It’s worth reading in full, just to get a sense of exactly how many liberties had to be taken with the data and common sense to get to this number.

5.       And speaking of illicit flows, what happens when you clamp down on corruption in a developing country? Well, to start with, the civil service gets in a massive huff as the experience of Nigeria suggests. This chimes with research Clement Imbert presented at DFID the other day, dealing with India.

6.       I found this interesting but not convincing: when Esther Duflo’s address to the American Economic Association demanded that economists become more like plumbers was she calling for economics to return to its roots as something more like a craft than a science? While I think this would be a good thing, I don’t think this is what she really meant. The idea that most economic relationships are always and everywhere true is hard to defend for anyone with more than a passing interest in history, and if that was what Duflo was railing against I’d be quite happy. But actually, I think her aim was a bit more prosaic. It was about implementation. To use the metaphor from the article, in this vision economists are still engineers, using the laws of the world to produce specific outcomes; but they must also learn how to fit their machines in an imperfect space – society, Government, wherever.

7.       Lastly, let’s leave in a good mood, even today. I said a couple of weeks ago that the world is, on most metrics a much better place than it has pretty much ever been. Tim Harford agrees. And if that doesn’t cheer you up, here’s the Bill Evans trio playing Israel. And if even that doesn’t work, go back to the intro and watch Joel Embiid dancing in his red jacket.

Have a great weekend, everyone!

 R

Hi all,

Let it never be said that I don’t admit to my errors (or error, as this might be the first one yet). Last week I suggested that 2016 might not have been especially fatal for celebrities and linked to a pretty middling bit of analysis to back it up. Well, it turns out a slightly deeper look at the numbers doesn’t quite back that up. It’s always good to revisit ones errors and correct the mistakes that lead to them, something that someone needs to urgently communicate to the Sri Lankan cricket team, knee-deep in yet another pathetic capitulation to the less-than-terrifying pace of a second string South African attack. It seems that a Sri Lanka tour abroad these days serves no other purpose than to aggravate me.

1.       Trump has got some perverse ideas (clean your minds, I’m not referring to any unverified dossiers here). His peculiar vision of ‘winning’ at trade involves importing less and exporting more. This assumes that there are some bad, terrible people who import and must be discouraged, and some lovely, shining ones who export and are our great heroes. It turns out, to coin a phrase, it’s a little bit more complicated than that. The major exporting firms are also, mostly, the ones who do most of the importing, and vice versa. Trade isn’t a fight where one side can win and the other loses. It’s a way of organising production and consumption across borders.  That doesn’t mean that everyone gets better off, or that there are no people or firms harmed. It just means that whatever type or level of trade we have (including none), some people will get better off and some will get harmed, and we need to decide which option is the best socially and how to mitigate the distributional effects. Related – what does the economics of golf tell us about who the winners of Trump will be?

2.       Staying on trade for a moment: one of my favourite papers of the last few years, the Atkin et. al. experiment that shows how exporting helps firms become more profitable, more productive and produce higher quality products gets a great, easy explainer from Markus Goldstein here. The innovation of the paper is to generate causal information on the effects of exporting, and then to use logical argument and additional data gathering to prove the causal mechanism through which exporting helps firms get better. This is why Nick keeps going on about why it’s important that we help developing countries develop their export capacities (but doesn’t say they have to restrict imports to do so).

3.       I’m not sure how much weight I’d put on this, but a very clever bit of research used chess analysis to test the hypothesis that women do worse than men in competitive environments. It turns out women don’t do worse in competition but do suffer when they play men, a finding not explainable by their ability. Part of the issue may be that they feel they need to do even better given negative stereotypes. But a really interesting finding is that men in losing positions resign the game later if they’re playing a woman than a man. The piece is decorated with a few spectacularly sexist quotes.

4.       I’m coming late to this piece, but Max Roser’s plea that we stop saying that 2016 was the worst year ever is absolutely brilliant and full of good insights. One of his thought experiments: what would the news headlines be if we had fifty years between them? Probably not the current shrill ‘TERRIBLE THING HAPPENED YESTERDAY AND WE WANT TO SPARK OUTRAGE ABOUT IT’ that typifies our dailies, but something more like “Humanity vastly better fed, in better health and better educated than ever before. Hooray!”. Read the whole thing.

5.       Thomas Piketty on productivity in Europe, the US and the UK. Apparently we have to work longer to achieve as much. Maybe we should spend less time reading blogs?

6.       I love this. Vox interview Obama about the Affordable Care Act. His grasp of policy detail is just amazing.

7.       And lastly, this one is different to the usual closing dose of Taylor Swift – the collateral damage of Meryl Streep’s attack on Trump at the Golden Globes included Mixed Martial Arts, which she essentially denounced as a white male phenomenon without beauty. I feel compelled to defend it, given the massive racial and national diversity of its participants. As Jack Slack writes here, whether you follow Georgina O’Keefe (art is ‘filling a space in a beautiful way’) or Andre Gide (‘Art begins with resistance’), MMA fits the bill. It’s genuinely internationalist, learning from Thailand, Brazil and Japan, for starters. So yeah, I disagree with her.

 Have a great weekend, everyone!

 R

Hi all,

 Was 2016 a statistical aberration? Did things that were really unlikely continually happen? Did famous people die at a historically unprecedented rate? This seems to be the prevailing narrative at the moment, but if Kahneman and Tversky taught us anything (thanks to my brazen signalling on this e-mail, I did indeed get The Undoing Project for Christmas) it’s that narratives can’t really be trusted. In fact, what’s most likely is that 2016 was a year in which the actual outcome of two major votes was within the margin of error of the polls, but crossed a binary outcome threshold; and a year in which roughly the expected number of famous people died, but the random sample of them that were taken happened to touch some cultural nerves. Should that make us feel good or bad about 2017? Well, 2016 is the year stuff happened. 2017 is the (first) year we’ll live with the consequences. I suppose it all depends on what narrative we build for this year.

 1.       Let’s not leave 2016 just yet, though. Harry Enten covers some of the ground above, but with more rigour and more nuance here, in a piece which looks at all the mistakes he made in his political reportage for 538 in 2016, many of which served to underestimate the odds of Trump. It’s a great, informative exercise, something that everyone should do – reviewing the year that’s gone past and picking out what we can learn from it to do better in the future. I can’t think of anyone, least of all myself, who shouldn’t do so.

2.       It’s not been a great few weeks for foreign aid in the press (when even something as well-regarded as cash transfers comes under fire, it’s a hard week), but here’s something to be optimistic about. Chris Blattman did a study looking at whether ODA in politically dodgy places may prop up bad regimes and finds that it doesn’t. Ok – so it’s only one context, and the findings need to be replicated and explained properly but this is great, and his proposed explanation is plausible – that good aid programmes give people an alternative to chasing after patronage from dubious leaders.

3.       The Bank of England has been taking a shoeing recently, too, which puts aid in good company. Andrew Haldane admitted that the Bank got the immediate response to Brexit wrong (though he noted that he’s still confident in the medium-long term analysis). With their bad press, it’s worth reminding ourselves how strong the Bank’s technical skills are, and how well the bigwigs communicate their ideas. Here’s Haldane’s most recent speech about how the structure of an economy contributes to inequality, and here’s Mark Carney on global inequality, how economics needs to raise its game and the role of monetary policy. It’s brilliant, and I recommend everyone with half an hour read it.

4.       Of course, that kind of detailed analysis won’t make it into the public discourse; this is something we wonks haven’t really mastered yet, how to get the ‘it’s complicated’ point across when others are willing, often mendaciously, to say that it’s really very simple (and by the way, I have all the answers). I’ve not really followed the whole fake news thing, which seems like an offshoot of this tendency, but there’s an excellent long read at 538 about where it comes from, and why fact checking isn’t enough to stymie it.

5.       Ok, the last few links were pretty apocalyptic and depressing (an appropriate start to the year?), so let’s end on a positive note. First, an article about the (all-too-brief) collaboration between Wilson Pickett and Duane Allman (here’s the song it’s about – that solo is ridonkulous); and a great NYT profile of Charles Feeney, perhaps the greatest philanthropist of all time.

 Happy new year, everyone!

 R

Hi all,

 As threatened, this week’s links culminates with a self-indulgent ‘best of 2016’ section. Now, I know talking about the ‘best of 2016’ is a little like celebrating the five best punches to the face I’ve taken, but there’s some merit to the exercise. As Kahneman says, people need a narrative, and a retrospective look at the year is one convenient way of constructing one. One narrative might be that 2016 was a slow, brick-by-brick dismantling of the cultural firmament (Gah. Gah. NOOOOOOOOOO!) but that probably wouldn’t be the most helpful framing. Anyway, before we get to the best of, a few last links for the year.

 1.       Of course, one way 2016 might seem better in retrospect is if it turns out to be the last complete year in recorded human history. I’m not getting Millenarian, but one can’t deny the End-of-Days-ish vibe of this tweet (does it remind anyone of this great video I linked a few months ago, via Tom C?). It couldn’t come at a worse time, either, given that Thomas Schelling passed away a week or two ago, taking with him a lifetime of practical and theoretical knowledge of how to avoid nuclear war.

2.       Nick Bloom is consistently linked to some of the most interesting and inventive research out there. This time, he’s using data on researchers by sector to measure actual technological productivity. It’s an excellent working paper, finding that it now takes more researchers to make further progress on existing measures of technological advance, thus pointing to declining productivity in innovation. One problem – by definition, the biggest leaps in productivity are where new ideas entirely are devised, and these sectors are systematically different to the ones we know how to measure. So we’ll never really truly be able to measure how innovative we are. Still, a great paper, worth reading.

3.       An excellent note from Lee at CGD, looking at the random and improvable ‘LDC’ classification – something that might take on a very policy-relevant hue if the UK begins negotiating new trade deals post-Brexit.

4.       Branko has been the economist of the year, surely? He’s published the full text of his interview with the New Republic, and he makes it clear that he believes that globalisation has come with costs but that it is a desirable process nonetheless because it is inclusive – it ‘reduces the obstacles between people in the world’. I agree with him. Nevertheless, in 2017 I hope to see a proper consideration of the Tortoise graph, and whether it has overtaken the elephant.

5.       But let’s end (almost) the links with a happy one: the newest utility-scale solar energy is now cheaper than new-built natural gas. This is incredible.

 And now chosen entirely capriciously and with little recourse to consultation or democratic representation, my favourite links of the year, arranged by category.

1.       Over the year, there were a number of superb long reads about economics and the people who studied and shaped it as a discipline. One of the great weaknesses of academic economics as it is taught is the extent to which the history of economics as a discipline of ideas is neglected, though it bears many lessons for current economists. One of the best links of the year was from January, a long article about the Orthodox Jewish economist Nathaniel Leff, and his influence on the study of Brazil’s economy – interesting because of the human drama, but also because it reveals much about the ‘acceptable’ and ‘unacceptable’ ways of doing economics and the political currents that determine the direction of research. Similarly, only a couple of weeks ago, Michael Lewis’s piece on Kahneman and Tversky did much the same. There’s not much new economics in these articles, but much to learn.

2.       I remember describing 2015 as the year of inequality writing. I spoke too soon. 2016 featured a great deal of good new research and good new writing on various aspects of inequality: I recently linked to this write up of Raj Chetty’s most recent piece of brilliance, charting the death of the American Dream, but the NYT also had a great piece in January, in which Justin Wolfers looked at gender inequality and how women do not get any credit for work performed in teams, a terrible outcome for society. Of course Branko’s book came out this year, prompting an excellent review from Chico Ferreira, one inequality guru reviewing another. But there were signs that the limits of the research driving the increasing policy focus on inequality might be being reached: first, 538 pointing out how difficult it is to link inequality with global turmoil, despite the grand claims of many politicians and policymakers, and secondly, the revised elephant-that-is-really-a-tortoise.

3.       There was also a great deal of brilliant research published or covered in the media this year. My favourite was this experiment by Ben Vollaard, which showed that honesty falls dramatically when even a slight cost is introduced. A seemingly frivolous experiment which hints at a profound behavioural insight. Another was the one Chris Woodruff came to DFID to present, on an experiment which both helped explain the low numbers of female managers in Bangladeshi garment factories and to rectify it. I’ve also been waiting for the papers from Stefan’s experiment with Chris Blattman for ages, and was really pleased when Tim Harford covered it here. My favourite job market paper of the year was Guo Xu’s, partly because of his extraordinarily diligent data coding, but also because it’s a very clever way of proving one of those things we all suspect but never had the evidence for. And lastly, getting meta for a moment, Christie Aschwanden’s series about the state of scientific  inquiry was brilliant.

4.       Getting towards the end,  three brilliant opinion pieces, all inspired directly or indirectly by the political upheavals of the year and the standard of the discourse around it. Sarah O’Connor’s piece (and the Andy Haldane speech that inspired it) is superb, and came via Nick Lea: she says the best economist is the one with dirty shoes, the one who goes out to understand the reality his or her spreadsheets depicts. Tim Harford was angrier, I suspect, when he wrote about ‘bullshit’ – and the fact that it remains relevant today makes me even angrier still. Lastly, possibly my favourite piece of writing of the year was Owen Barder’s excellent, impassioned ‘More in Common’ shortly after Brexit. I was looking for a quote to garnish this recommendation with but the only honest way of selling it is to tell you to read it all.

5.       I leave you with three pieces of glorious marginalia: my favourite new poem (I think it was new, but am unsure), Karibu ya Bintou from the DRC, and  the best Taylor Swift gif of the year.

 No links next week, so have a great Christmas and wishing you all a happy and healthy new year.

 R

Hi all,

 We’re coming to the end of the year, but these aren’t quite the last of these you’ll get – I’m still working next Friday, and I’ve been lobbied to do a ‘best links of the year’ post. I like the idea, but it’s going to test my record keeping  to its limits, so if any of you remember a link you particularly liked, jolt my memory and it might get a rerun. I realise I’m depending on people remembering anything I write for more than five minutes, which is a pretty heroic assumption, as we economists say. I’m also quite possibly going to discover that everyone’s favourite links were the Taylor Swift gifs, in which case next week’s links will be amazing. Anyway, this week, no Taylor and lots of economics:

 1.       THE ROBOTS ARE GOING TO STEAL OUR JOBS! I’ve suggested a few times that we aren’t the first generation to have this particular fear, but it’s always been one of those unsupported-but-plausible-sounding statements that politicians are so fond of making until I found this article, via Dietz Vollrath: a timeline of jobs technophobia, stretching back to the 1920s. The Luddites should probably get a shout-out here, too, but I’m not a DJ.

2.       What happens when an elephant falls in the woods, and no-one is around to hear it? Branko Milanovic tweeted an update to his famous elephant graph, using the new 2011 PPP conversion figures (basically the way in which we standardise incomes to account for different prices in different places) and extending the data up to 2011. As my boss pointed out to me, it looks more like a tortoise now, and some of the power of the original graph (demonstrating how the Western middle classes have been hammered for 20 years) has been diminished. Should this change what we think about globalisation and its discontents? That’s a discussion far longer than this e-mail but it has to have some effect.

3.       “The candleflame and the image of the candleflame reflected in the machine as it whined to a halt. He took of his hat and thought upon the declining productivity. The returns to scale were not increasing. They were not increasing.” Apparently a famous article about increasing returns to scale was edited, pro bono by Cormac McCarthy. As a great believed that all economic writing should be clear and jargon-free, I can only imagine how much it was improved for it. (I also kind of hope there’s a sudden burst of violence that comes out of nowhere, but leaves you shaking for days, because that’s pretty what happens in every Cormac McCarthy book).  

4.       I have been lobbied hard to include my now-annual link from Tim Harford about why no-one should buy presents, and why they’re inefficient, even though I don’t fully agree with it myself. But anyway – this is the season to be Grinchy, so here it is; and related, Sheldon explains the same thing in the Big Bang Theory.

5.       Having said that, I’ve been dropping some pretty heavy hints about what I want for Christmas. And, alongside a top-of-the-range Tesla Michael Lewis’ new book is high on the list. Here he is, in conversation with Nate Silver about it, dropping wisdom like “People are drawn, people want to make the world a more certain place than it is. They’re very uncomfortable thinking probabilistically. And they’re very uncomfortable turning to someone for advice or leadership and having that person be at all diffident, at all unsure. They want that person to seem totally certain. So, they want, in a weird way, idiocy from the people who give them advice.” The friend I most often ask for advice, during my 3pm coffee time, puts a confidence interval on almost all of it, which sums up why I ask him, and why modern political discourse gives me a bad case of the facepalms.

6.       Ok. I’m bored of the Worm Wars. I forgot about them. They’re not a thing anymore. But when David Roodman talks statistics and the interpretation of evidence, I’m duty bound to tell you all to listen.

7.       And lastly, for the festive season, what more could you ask for than fewer photos of Donald Trump’s hair? A google extension has been created to turn all photos of him into pictures of kittens, and I think we can all agree that this is a welfare-improving innovation, even if it puts all the manual Trump-Kitten-Painters out of work…

 Have a great weekend, everyone!

 R

Hi all,

 The e-mail server is down here, with no prospects of a resumption any time soon, but I’m still bashing out the links in the hope that the internet pixies will do their magic and send them off into the matrix (as an aside, that was probably the most unrealistic thing about The Matrix – the fact that Neo didn’t try and upload ‘Kung Fu’ to his brain and get a persistent error message along the lines of ‘Error 253. Please contact your system administrator.’] Anyway, if you’re reading this, I’d like to pretend that it’s because in a fit of Andrew Wiles-level creativity, I’ve fixed the problem, but more likely I’ve been shown how to do it by a kindly young person less afflicted by technophobia.

 1.       Speaking of technophobia, I don’t have a Twitter account, and have no intention of ever creating one. Some of you may have noticed that Donald Trump does. It’s stream-of-consciousness, unfiltered character has led some to speculate that an algorithm could be programmed to respond to Trump’s tweets automatically to outplay the market and make money. They’re making progress, and down to 10 seconds in responding to information from the tweets at a level the market can detect. As Nick L pointed out, it took markets 3 minutes to respond to the results of the Italian referendum, which makes me think they’re paying more attention to Trump’s twitter than actual world events. Related, Twitter’s founder spoke about Trump’s use of the platform recently. It’s true it’s given a more direct line to the thoughts of the President  – a bit like visiting an abattoir to see how animals are slaughtered. Probably good for you, but certainly not always pleasant. Sad!

2.       Is anyone out there doing more important research than Raj Chetty and his team looking at inequality in the US? The richness of the data and analysis they’re producing is pretty much unprecedented. They’ve now examined looking at ‘absolute social mobility’ – that is, the proportion of the population which earns more than their parents did at age 30(ish). It’s an extraordinary paper, charting the slow death of the American Dream. The NYT focus on the finding that people born in each successive decade since 1940 are less likely to out-earn their parents. In the 1940s, you had a great chance of doing so, but if you were born in 1980, your chances are no better than a toss-up. The research shows this is mainly due to inequality: the most dramatic finding (scroll down to the second line graph) is that this decline is sharpest for those in the middle of the income distribution. The extremely rich have always been pretty unlikely to achieve it (though this covers only income, and wealth may show a different pattern); and the very poor have always been pretty good at getting a little bit further. But there’s a middle income trap – the middle class no longer can expect to do better on earnings than their parents. 538 link this with some other recent research, too. The original paper is here, for the very keen. Excellent stuff.

3.       These ideas link in some way to this flawed but interesting post from Dietrich Vollrath, asking if people would be willing to accept less income in favour of more evenly distributed work (not income, mark – more people having jobs, even if income inequality remains high). It’s interesting, because I think many economists essentially see some of the rollback on globalisation as essentially making this trade-off. It’s flawed because, as a colleague pointed out to me, the logic might not hold. The trade-off is only an apparent one – one would expect unemployment to be temporary, as we find stuff for people to do (especially if wages fall); and secondly with sufficient redistribution you might expect many people to accept the lack of a job and spend their time doing other things. I’m not so sure – we know that short-term unemployment might turn in to long term unemployment as human capital erodes; and as Keynes said ‘in the long run, we’re all dead’. And I do think there is intrinsic utility to work, though it’s not necessarily large.

4.       Speaking of trade-offs, The NIESR suggest that reducing immigration might add around £100-200 quid a year to the paypacket of low-income workers, but at the cost of around 6% of GDP. Well, that’s what the report says, but I’ll be darned if you could work that out from some of the media coverage.

5.       Of course, migration might be a triple-win with the right structure. CGD have been good on this topic, and here’s a thoughtful piece from Caitlin McKeown and Theo Talbot.

6.       I loved this: apparently, Chinese tourists are flocking to Kidlington. As someone who has been to Kidlington, I feel like there should be a huge sign on the road in saying “回头！这是一个陷阱!” (I take no responsibility for the accuracy of the Google translate services I just used, by the way – but apologies if it accidentally came out with something rude). On a more serious note, Brautigam and co. have looked at whether African firms are learning from Chinese investment in this paper.

7.       And lastly, scroll down to page 20 here for a magnificent rant from Nick Crafts on the role of experts in public discourse and policy making. I would like to quote the whole thing, but I particularly loved this line: “[Anti-intellectualism] is really bad news for the general public because ignorance is not bliss — especially in the context of the making of economic policy”. He also goes on to make a point that Christopher Godden, who spoke after dinner at our last economics conference also made: economists must also engage with the public; we can’t just complain that they don’t listen to us. It’s not always comfortable to step out of the echo chamber, but it’s very, very important.

 And bang on cue, the internet is back. Someone clearly wanted their links. Have a great weekend, everyone!

 R

Hi all,

It seems like every week I’m opening these e-mails with a reference to the death of a beloved artist of some description. While the economist in me is aware that it’s purely an artefact of the fact that many cultural icons for people my age being roughly the same age, and thus prone to dying off in clusters, in the spirit of last week’s links, it’s hard not to put a narrative on it – 2016 as the year in which many good things died. I should clarify that I’m talking about Andrew Sachs today, a German Jewish migrant who fled the Nazis in the 1930s and became a British icon for playing Spanish low-skilled worker with a ropey understanding of English. I can only reiterate my insistence that someone repair to Brighton forthwith and bubble-wrap Nick Cave. If he goes, who else will come up with similes as amazing as ‘my heart tumbled like the stock exchange’?.

1.       Of course the other fellow who did some mortal-coil shuffling in the last week was Fidel, causing massive awkwardness as a number of global leaders tried to acknowledge his death without accidentally suggesting that they admired him (Trudeau and Zuma bucked the trend – with Zuma’s response being informed by the extensive support Castro gave the anti-apartheid struggle). No-one ever accused Branko Milanovic of not having the courage of his convictions, though, and Castro’s death prompted two very good pieces from him. The first considers communism in historical perspective, noting that it went against two fundamental human impulses that ultimately defeated it (the impulse to be free, and the impulse to acquire things). The second develops the themes he introduces here and considers whether the 20^th Century was primarily a long story about globalising capitalism or a shorter story about the conflict between capitalism and communism.

2.       Speaking of Branko, this piece about his famous elephant graph questions whether the popular interpretation of the graph – that globalisation has exacerbated inequality – is the correct story to draw from it. It’s very good, but it’s worth noting that it was always those whose frame of reference was restricted to the rich, Western countries who peddled this narrative most strongly. More internationally minded commenters immediately saw the main implication of the graph: the world’s poor, for whatever reasons, have been converging towards Western incomes, on aggregate.

3.       A friend in Zimbabwe has been telling me about his attempts to secure and transact business in the new kinda-currency that Zimbabwe has just launched. It’s either one of the craziest or one of the most brilliant pieces of macroeconomics ever, the monetary equivalent of facon. What is it? Technically, the notes are just pieces of paper that correspond to real, existing US dollars. If those real dollars exist, and the central bank has them (even electronically), and – crucially – everyone trusts that this is true and won’t be abused, then Zim bond notes should simply be avatars for real dollars and function in exactly the same way. If the Central Bank resists the urge to print more than they can back up with real US dollar deposits, and the economy is managed effectively, this may wind up being a way back to Zimbabwe having a functioning domestic currency again. How do we guage whether the market believes this will happen? Well, one indication is whether there is anything other than a 1:1  exchange rate between the Zim bonds and the US Dollar. Early indications are not good. Economists should be getting the popcorn out now – this is going to be fascinating.

4.       Let’s talk about people who do have credibility for a moment, though. Nate Silver and 538 might be the only political commentators who came out of the US election with any credit – they were consistently better at reading the true likelihood of a Trump win from the polls than anyone else, as this rating of the pollers and predictors suggests. Underlying that has been Silver’s uncanny ability to recognise when he’s been lucky and where he can improve – even when he was getting everything right, he was looking for flaws he could exploit for more accuracy later. He’s still thinking about that now. This is a lesson in good practice for researchers and policy makers everywhere.

5.       One of the best blog series’ of the year is Development Impact’s sequence of blogs by young economists entering the academic job market with their best papers. This one has been my favourite so far: on the costs of patronage and nepotism, using British appointments in Colonial India and a truly heroic bit of data coding.

6.       Also via DI – Jishnu Das is apparently getting hate mail for some of his brilliant research into healthcare provision in India. This strikes me as a bit like that moment where Carmen Sandiego trots across your screen – you must be on the right track.

7.       Lastly, two links (one hilarious) about the academic idiosyncracy and malpractice. First, The Economist on the idiosyncracy: the rise of multiple-authored papers, explained as basically a response to the pressure to publish. Secondly, a hilarious article looking at the use of fake names, fake referees and fake journals to bolster academic careers. Sometimes it’s malign, as when Hyung-In Moon peer reviewed his own papers. Sometimes it’s harmless as when Polly Matzinger began to co-author papers with her Afghan hound to avoid using the passive voice. And sometimes it’s just hilarious, as when ‘Stronzo Bestiale’ (I’ll let you translate that yourselves) was introduced as a co-author from a prestigious-sounding university to boost the publication prospects of William G. Hoover’s research.

Have a great weekend, everyone!

R

Hi all,

 The downside of going away for three and half weeks is that a huge amount can change during that time and I can’t get all my frustration and anger out in the form of pithy comments, passive-aggressive economic analysis and gallows humour, so brace yourselves and excuse me for the extended sequence of links, rants, and incoherent marginalia that makes up this week’s email. A framing comment: no matter what political changes we experience there is always space to act: to mitigate bad things (at the margin at least) and to fight wrong-headed ideas (sometimes more effective than p*ssing in the wind). The only thing we don’t have any answer to (yet) is death, so losing both Leonard Cohen and William Trevor in quick succession feels like a particular blow.

1.       How do we fight wrong-headed ideas, though? This is probably the defining question of 2016 – it’s underlay much of what I’ve read, it’s been the recurring theme of my own introspections (when my mind isn’t just a muddle of Taylor Swift gifs and random cricket statistics) and it’s come up repeatedly in  discussion with my friends and colleagues. Steven Pinker has a great deal of faith in the power of reason. Sad as I am to say it, I don’t think he’s right, or at least, right now there seems to be a definite trend of reason being trumped by … something else. Alex Evans has a book coming out shortly which suggests that we lack an overarching narrative for our changing times; Duncan Green argues something similar here. There are also moments in this completely brilliant article (read it all) by Michael Lewis about Daniel Kahneman and Amos Tversky’s partnership and research which suggest the same: “No one ever made a decision because of a number. They need a story.”, Kahneman says. I think this must be part of it, but probably isn’t all of it. Part of the problem is that the myths or stories we’ve believed for years are wrong: in particular the one almost every country has, the myth of its own exceptionalism. Maybe what we need to understand first is that we’re mostly not exceptional (collectively or individually), we never were, and what determines most of our lives is forces far bigger than ourselves on the one hand, and pure random chance on the other. The historian in me rebels against this, but the idea is worming its way around my head.

2.       Kierkegaard once wrote that ‘life must be lived forwards, but can only be understood backwards’. When we have enough distance to look back and understand it, what will we say about the election of Donald Trump and the failure of many conventional methods to predict it? Andrew Gelman has a rundown of some of the possible causes for the polls being wrong here, but I preferred this response on the day itself from Nate Silver: that 2% seemed like a huge, epochal shift, and it might prove to be, but he points out that not much had to change for the country that elected Obama to elect Trump. Related: Planet Money look at what Trump can actually do in his first 100 days, and how much concrete a 1000 mile wall would actually need. (Transcript)

3.       Speaking of myth and inaccuracy, here’s the story (and truth) behind the UN’s oft-cited and always-wrong claim that 75% of Liberian women were raped.

4.       Needing to wash my eyes out after the first three links, here’s Dietz Vollrath going on a geekrant about the misuse and abuse of productivity figures. Long rant short: productivity tells us absolutely nothing about the financial health or performance of businesses in a country.

5.       I liked this NYT piece on the slow-burn disaster that is Zimbabwe’s economy as it runs out of cash (not money, literally hard currency), but it dramatically downplays the risks of this for the poor and for their longer term prospects in its eagerness to focus on the novelty of a zero-cash economy.

6.       While we’re on the subject of economic disasters, it’s hard to think of a worse situation than the one Chavez and Maduro engineered in Venezuela. Planet Money investigated the fallout and it’s pretty harrowing at times. (Transcript.) Maduro, of course, has decided to go straight to the root of the problem – attacking the economists who have pointed out the insanity of his economic policy.

7.       Ok – I’ve just read all of this back, and I think it’s probably the all-time most depressing links ever. I’m going to end it on two slightly more positive notes. First, I spent a few days in Chengdu on my holiday, selected almost entirely due to the writing of Fuschia Dunlop and her efforts to popularize Sichuan food around the world, so I was delighted that Tyler Cowen conducted a fantastic long interview with her. A must-read for people who love food, and especially people who don’t yet love offal.

8.       And lastly, a couple of years ago I nearly burst with excitement when the 76ers selected Joel Embiid with the number 3 pick in the NBA draft despite knowing he would not be able to play for a year (if ever) after suffering a fractured foot, a notoriously difficult injury for big players to recover from. He was worth that risk because he was clearly that good. Well, it’s been two years, but he’s finally started to play, and my god has he been worth the wait – virtually every minute has been riveting. It’s been a very long time since a rookie has looked this good. It’s not much, but at least it’s optimistic.

 Have a great weekend, everyone!

 R

Hi all,

I’m absconding from the office for almost a month next week (the result of basically forgetting to take any real holiday this year and needing to use up my leave days before the end of the year), so this is the last links round-up till the back end of November. Stay your tears, though –  this round-up is a bit of a monster – plenty of reading for the next few weeks. A month’s gap isn’t that long, anyway – Chuck Berry’s next album will be his first in 38 years, and will almost certainly be the most awesome rock album featuring a nonagenarian ever.

 1.       STOP STEALING MY CONSUMER SURPLUS! I cannot be the only person driven to a rage by self-checkout counters in supermarkets, though I may be more unusual in mentally picturing that area under the demand curve but above the equilibrium price being gradually eroded by the disutility of having to do someone else’s job less well than they can. Planet Money has the story behind the creation of the self-checkout (transcript), and it’s fascinating: a machine that was designed to do things faster and more efficiently ultimately failed in its objective because products and people are essentially messy – it’s hard for a machine to process them in a standard way. Which segues nicely into…

2.       Tim Harford (who features heavily this week) unwittingly provides me with the greatest piece of confirmation bias and self-justification I could have asked for, and timed it perfectly. My team moved offices this week, and I had what I thought would be the time-consuming and deeply depressing task of clearing out my locker. Anyone who has seen inside it will tell you it’s like opening a fridge in Ghostbusters – a portal to a dimension ruled by chaos. Well, it turns out, this is all a symptom of productivity and efficiency. I just shove stuff in when I’m done for the day, and find it again when I need it. Over time, all the most commonly used things churn at the top – the detritus settles at the bottom. The mess is actually an efficient system that provides me with the visual cues I need to prioritise my work – and the proof was in the move. It took me about 20 minute – I sorted through the top layers and chucked away everything else. The real truth may be that I’m constitutionally incapable of tidiness, but I like Tim’s explanation better.

3.       There’s another kind of apparent randomness he wrote about this week – random research. The Ig Nobel prize, given out to esoteric and weird research came in for some serious praise, with Harford pointing out that such random research often leads to findings of lasting and serious importance – including research that revealed that incompetent people are often unaware that they are incompetent (there’s a sentence that’ll make people anxious). There really is something to this – both the IMF and (I think) the Bank of England have researchers who are given free rein to write papers about anything, including cricket. The idea is that in thinking about all kinds of things, they’ll stumble on something – an insight, a method – that will provide the key to unlocking a policy relevant, real-world puzzle.

4.       Speaking of random research, this FiveThirtyEight article examines the economics of Ikea and is worth a close read – it is full of fascinating insights into how the global economy has changed over the last forty years – and a few little hints on what changes are still to come.

5.       Much less random research: I continue to be amazed by David Evans’ ability to read virtually everything that has ever been written, understand it, and then summarise it in a machine gun salvo of pithy observations – this time on education research. Heroic.

6.       The World Bank (thanks in no part to CGD and particularly their spectacular attempt to scrape all the data off PovCalNet) have finally started publishing median incomes as a basic indicator for all the countries they have data for. I could not confirm that the first draft of the press release was entitled: “Justin, please stop screwing with our servers”.

7.       I would say that Alan Winters has forgotten more about trade than I will ever know, but I doubt Alan Winters has forgotten anything about trade. Anyway, here he is with his take on the mood in Europe around Brexit. All impressions, and much can still change.

8.       Related, Theo Talbot suggests that post-Brexit, Britain should change the classification of students, taking them out of the long-term immigration figures – for the sake of exports. I like the idea, but it doesn’t look to be flying politically; the problem seems to be a perception that the rules around student visas are being gamed. If it’s going to fly, it might need to be combined with a different way of assessing criteria (or a correction of that perception, if it’s wrong). Related, again: Tarek Hassan on the impact of refugees on long term FDI.

9.       A short piece of political economy 101 – Alex de Waal on the dangerous potential consequences of trying to bankrupt a kleptocracy. Robert Bates made this point a decade ago – it’s shocking that we still haven’t learnt it.

10.   And finally, from the Department of Random Research I have no idea about the application of  – FiveThirtyEight looks at the strange community of speedrunners – people who can complete Super Mario World in under 5 minutes. Fascinating and very, very odd.

 Have a great month, everyone!

R