Relevant and even prescient commentary on news, politics and the economy.

Sadistic Gods

I was re-reading random parts of Pinker’s The Better Angels of Our Nature and came across this:

In an insightful book on the history of force, the political scientist James Payne suggests that ancient peoples put a low value on other people’s lives because pain and death were so common in their own. This set a low threshold for any practice that had a chance of bringing them an advantage, even if the price was the lives of others. And if the ancients believed in gods, as most people do, then human sacrifice could easily have been seen as offering them that advantage. “Their primitive world was full of dangers, suffering, and nasty surprises, including plagues, famines, and wars. It would be natural for them to ask, ‘What kind of god would create such a world?’ A plausible answer was: a sadistic god, a god who liked to see people bleed and suffer.”  So, they might think, if these gods have a minimum daily requirement of human gore, why not be proactive about it? Better him than me.

I haven’t read James Payne referenced in the paragraph above, but The Better Angels of Our Nature is a very good book which I highly recommend. Still, the second half of this paragraph doesn’t quite ring true for me. Your thoughts?

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A Bleg

Good evening.  Or a fine morning to you, whatever the case may be.   I am working on a project in my spare time.  Some of the data I am collecting might make for good blog posts.

Anyway, there are a few things whose trajectory I’d like to measure historically.  I have come up ideas for most of them, but there are a few for which I wouldn’t mind if somebody had a better idea than the one I came up with.  Here are the ones that are troubling me.  From colonial times to the present, I would like to find proxy variables for:

1. Social cohesion (i.e., how strong it is, and how strong it is perceived to be)

2. Equality under the law (i.e., whether it exists, and whether it is perceived to exist)

3.  Justice

4. Conflict between the Federal Government and the States

5. Conflict between the Executive and Judicial Branch

To use #2 as an example, obviously equality of the law increased with the Emancipation Proclamation, and again, as the suffragette movement gained strength.  One potential measure for this would be percentage of the adult population that is eligible to vote.  However, that leaves out other forms of inequality before the law, including (but obviously not limited to) other discriminatory restrictions on voting.  No measure of any social value will be perfect, but good proxy measures for the five listed above would be appreciated.  Bonus points if the data is readily available going back to the Colonial period.

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A Non-Distortionary Tax

Dead people aren’t allowed to drive.  They aren’t allowed to vote.  They aren’t allowed to testify in court, acquire weaponry, check out books from the library or acquire a pilot’s license.  This makes sense.  After all, dead people don’t have a functioning brain.  As a result, we wouldn’t want them driving or voting or wandering around the local library.  But there is one thing dead people are allowed to do.  They’re allowed to dispose of assets, or rather, to direct how assets should be disposed of.  We call that bestowing an inheritance.

Now, you might argue that the dead people aren’t actually disposing of assets.  Instead, pre-deceased people are disposing of their assets, with the disposal being on hold until expiry is complete.  The time in between can often be measured in many decades.

But this just makes the concept even less logical.   After all, you don’t get to decide that someone else can use your driver’s license when you run out the clock, or vote on your behalf when you croak.

A second, bigger problem is that the concept of inheritance is anti-capitalist.  The beauty of capitalism as described by Adam Smith is that the magic of the free market, guided by the Invisible Hand, moves resources in the direction of their highest marginal product use to society. This works through everyone’s personal greed, or enlightened self-interest.  Each person faces benefits and costs, and they try to maximize the difference between the two.  But for dead people, there are no costs or benefits when disposing of assets.  Cadavers don’t care.  (In that respect, they’re sort of like the honey badger, but quite a bit more so.)

The process of inheritance also causes the Invisible Hand to break down with live people.  A person making decisions in the construction of his/her will or trust bears no cost for their decision.  They might gain a benefit in the form of a sense of satisfaction for taking care of their heirs, or derive some enjoyment from the groveling of would-be heirs, but without a cost, that amounts to a free lunch.  And a free lunch is a violation of the Invisible Hand.  It is, or it generates, an inefficiency.

So what would be an alternative to inheritance and bequest?  Whatever it is, it would need to fulfill the point of inheritance, which is for someone to benefit their loved ones by bestowing assets on them.  And it turns there is just such a thing:  a gift.  In other words – if you want to give someone something, give it to them.  Now, later, whenever.  But do it when you’re alive.  If you give it to them when you’re dead, you literally had your cake and ate it too.

Actually, to keep the Invisible Hand operating, outright gifts aren’t strictly necessary.  Simply stick the name of the beneficiary on the asset as a co-owner.  Make them part owner of the business you want to pass on to them, or give them check writing and withdrawal privileges on your bank account.

The argument against it – “but I don’t trust that person and I need that money/business/farm/collection of Davy Crockett figurines” – is, quite frankly, disingenuous.  If you don’t trust them with your business or your money when they’re alive, but you do when you’re dead, it’s a sign you don’t care about what happens when you’re dead.  Which is another way to say the Invisible Hand breaks down when it’s pointing at you.

All of which raises one more question – if a more capitalist system was adopted, what would happen to the assets held by a person who died?  Well, if the assets were held jointly, with both parties having equal decision making power, then the surviving asset-holder would simply gain sole control over the asset.  Thus, those who wish to pass their assets on to their children would simply give their children equal rights to their assets while still alive.

But if a single person held an asset in its entirety in its entirety and passed away, then the asset would revert to the government. Call it a tax.  A 100% estate tax.  (Small exceptions could made in the case where the pre-deceased chose to create a trust to benefit minor children, the severely disabled, or other special cases. Or maybe more effective ways to transfer and protect minors and the severely disabled could be found.)

The winner would be government tax coffers.  (More on this in a moment.)  The losers would be those would-be heirs that aren’t quite liked enough or trusted enough by today’s asset holders to receive joint ownership of the property.

Whatever the government collects in this way could be sold off to the highest bidder.  Among other benefits, that reduces the need for other taxes.  And those other taxes are collected from live people.  If the goal of taxes is simply to fund government operations, less taxes need to be collected from the living if some is being collected off the dead.

And here I note that a tax on dead people  has one big advantage over a tax on live people:  it is closer to non-distortionary than any other I can name.  Non-distortionary taxes are taxes that don’t change people’s behavior, and don’t prevent people from doing what they otherwise would do simply to avoid the tax.  Income taxes and consumption taxes and VAT and all other types of taxes in use today cause people to engage in all sorts of acrobatics to pay less in the way of taxes.  But the dead never change their behavior to avoid taxes.  Ever.  And if the pre-deceased want to give their money to their children or their friends or relatives or favorite charity, they can do so simply, out in the open, by passing on assets while they are still alive.

TLDR:  tax the dead, so the living can be taxed less.

A couple notes…

1. Is this essay meant to be taken seriously?  Sort of.  I believe the idea is mostly sound though I’m sure it would benefit from a bit more thought.  But do I think there is a snowball’s chance in Hades that such a proposal has legs?  Nope.  Most people like the “have your cake and eat it too” model, at least when they own the cake.

2. Parts of this post first appeared December 2006.  At the time I wrote it, I was unmarried, had no children and almost no assets.  Now my situation is different along all those dimensions.  And I have less hair.  But I like to think I am still just as adorable as I was back then.  Regardless, the other day I thought about the old post and I asked myself…  do I still feel the same way now that my situation has changed?  So I sat down to write…  and came to the same conclusion. The conclusion was so similar that I inserted a few sentences from the old essay into the new one as it fit quite well.  Is that bad or good?

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Education and Externalities

Some years ago I read this NBER working paper. (Note – a couple years later a slightly modified version appeared in the American Economic Journal but I will quote from the earlier, non-paywalled version since it is available to everyone.)

Here’s the issue, in a nutshell:

In this paper, we use administrative data from the Houston Independent School District and the Louisiana Department of Education to examine whether the influx of Katrina and Rita students adversely affected the academic performance, attendance and discipline of their new peers.

Later in the paper:

…the arrival of low achieving peers hurts all native students, but this effect is more negative for low achieving natives in elementary and high achieving natives in secondary schools. By contrast, the arrival of high achieving evacuees benefits everyone, though the biggest benefit is for the low achieving natives.

If you missed that, later on the same page they write:

…we find that high achieving evacuees increase native performance and low achieving evacuees reduce native performance.

But it isn’t just performance…

By contrast, the results for discipline and attendance do show that it is enough to have 1 or 2 misbehaving evacuee children to worsen the attendance and behavior of native kids in elementary schools. In middle- and high-schools, only having many undisciplined kids in a classroom worsens native behavior.

And it isn’t just because more kids = less resources:

These results show no statistically significant effect of the fraction of evacuees on class-size in elementary schools. In middle and high-schools there is little evidence that the influx of evacuees significantly increased class-size, except for class-sizes in social studies which shows a marginally significant effect…. The results once again show no statistically significant effect of the influx of evacuees on either operating or instructional expenditures per student. This is likely because the Federal and State Governments seemed to have reimbursed schools and districts almost fully. Also, interviews with principals in Houston, suggested that schools received substantial aid from a number of foundations around the country.

Jumping to the conclusion, just to repeat the findings in case someone is tempted to misread them:

Non-linear models show that high achieving natives are significantly positively affected by high achieving evacuees and significantly negatively impacted by low achieving evacuees. Low achieving natives also generally benefit from high achieving evacuees and are hurt by low achieving evacuees in terms of their own test scores…

Of course, any parent who isn’t blind knows that a big determinant of the quality of his/her kids’ education is the quality of his/her kids’ peers. Still, its a well constructed and well executed paper. I also happen to think this situation makes a fine allegory for immigration.

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Today’s Taboo, And Where to From Here?

Here is the abstract from a paper that appeared two years ago in Molecular Psychiatry:

Intelligence is a core construct in differential psychology and behavioural genetics, and should be so in cognitive neuroscience. It is one of the best predictors of important life outcomes such as education, occupation, mental and physical health and illness, and mortality. Intelligence is one of the most heritable behavioural traits. Here, we highlight five genetic findings that are special to intelligence differences and that have important implications for its genetic architecture and for gene-hunting expeditions. (i) The heritability of intelligence increases from about 20% in infancy to perhaps 80% in later adulthood. (ii) Intelligence captures genetic effects on diverse cognitive and learning abilities, which correlate phenotypically about 0.30 on average but correlate genetically about 0.60 or higher. (iii) Assortative mating is greater for intelligence (spouse correlations ~0.40) than for other behavioural traits such as personality and psychopathology (~0.10) or physical traits such as height and weight (~0.20). Assortative mating pumps additive genetic variance into the population every generation, contributing to the high narrow heritability (additive genetic variance) of intelligence. (iv) Unlike psychiatric disorders, intelligence is normally distributed with a positive end of exceptional performance that is a model for ‘positive genetics’. (v) Intelligence is associated with education and social class and broadens the causal perspectives on how these three inter-correlated variables contribute to social mobility, and health, illness and mortality differences. These five findings arose primarily from twin studies. They are being confirmed by the first new quantitative genetic technique in a century—Genome-wide Complex Trait Analysis (GCTA)—which estimates genetic influence using genome-wide genotypes in large samples of unrelated individuals. Comparing GCTA results to the results of twin studies reveals important insights into the genetic architecture of intelligence that are relevant to attempts to narrow the ‘missing heritability’ gap.

I’ve been doing some reading in the field, and there’s nothing particularly special about this paper. I picked it because the abstract provided a fair summary of where the literature has been for at least a generation now. In fact, I specifically avoided a couple of papers that would have seemed hair-raisingly controversial to people who haven’t looked at the literature.

My point is simple. Cognitive science and genetics are at a place that is very, very different than most people think. And the science is getting better, faster and more precise. I believe it is, in fact, fair to say that we are in the early stages of a revolution in the biological sciences, particularly where it concerns the study of intelligence and other mental traits.

So what is going on? Why does the science seem so alien in 2017 America? To quote no less an authority than Steven Pinker:

Irony: Replicability crisis in psych DOESN’T apply to IQ: huge n’s, replicable results. But people hate the message.

As a complete outside, I wouldn’t dare argue the science with Pinker. Still, his statement is partly wrong. Sure, most people hate the message.  But some people love it.  The people who love the message love it because they can use it to justify the hatred in their heart. The rest of us hate it because we understand what it implies. If intelligence and other personality traits are largely heritable, people aren’t a blank slate. It casts doubt on many of our cherished myths. More disturbingly, it almost implies people have some sort of destiny, one that wouldn’t be out of place in a Gattaca world, or worse, a Brave New one.

Of course, if something along those lines were the case, it would be useful for the majority of the body politic – say, the center left, the center, and the center right - to develop ideas and policies for how to deal with it in a way that fits our values. Instead, a monopoly on that sort of discussion has been granted to the haters… and you can well imagine the policies they have in mind. For everyone else, such topics are now mostly taboo. They can be discussed in a lab setting, in technical terms, but woe betide anyone, including a biologist who translates them into the vernacular.

But what if it turns out that the actors, attorneys, community activists, educators, HR professionals, journalists and liberal arts professors are wrong? What if the world’s most pre-eminent cognitive researchers, geneticists and neurobiologists know the science better than they do?  What if traits like intelligence and behavior are transmitted very much as described in the scientific literature?  I know. It sounds nuts. But what if? What would we do then? In such a world, what policies should we set? And how do we ensure that those are the policies that actually do get enacted?

Update. Corrected link to abstract.

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A Brief History of South Africa, A Briefer History of Pre-Columbian America And How to Think About Justice

I’m no expert on South Africa, but I did some reading and pieced together a brief history of the country’s last 50,000 to 150,000 years. It begins with the San. Depending on who you ask and what evidence they are looking at, the San people have been in Southern Africa for somewhere between 50,000 to 150,000 years. For most of that time, the San and a related population, the Khoi Khoi (more on them below) have been the only people in Southern Africa. As a result, the Khoisan (as the San and the Khoi Khoi are sometimes collectively called) are somewhat genetically distinct;. The San seem to have split off from the rest of human race somewhere around 80,000 to 100,000 years ago. At one time, the Khoisan were most populous group of people on earth.

In the West, the San are sometimes referred to as Bushmen, and are perhaps best known for their click languages or their appearance in The Gods Must be Crazy. They maintained a Stone Age hunter gatherer culture, and tended to live in small groups.

Somewhere between 2500 and 2000 years ago, the Khoi Khoi (aka KhoeKhoe, aka KhoiKhoi, aka Khoi) began expanding out of their home territory of Namibia and into what is now South Africa. By that point in time, the Khoi Khoi were pastoralists, and they were more sophisticated and lived in larger groups than the San. Nobody was writing history in that region back then, so the precise nature of the interactions between the two groups are unknown. Nevertheless, archaeological evidence is clear: very quickly the Khoi Khoi ended up living in the the choice real estate and the San abandoned those areas to live in the mountains.

Around 1800 years ago or so, the leading edges of the Bantu Migration reached the southern edges of Africa. (I use the word “Bantu” with some trepidation. From what I can tell, it was a pejorative term in Apartheid South Africa and still used that way by those who feel the end of Apartheid was a mistake. On the other hand from my perusal of the literature, elsewhere in Africa the word “Bantu” seems to have no negative connotation. More than that, the word is widely used by the scientific community and is the most precise description of the population in question.)

The Bantus were tribes originating in or around Ghana. Around 5,000 years ago or so, Bantu groups began radiating out from their ancestral home. The Iron Age Bantu tribes were more advanced than the San and Khoi Khoi. The result was that several Bantu groups, the Nguni and the Sotho-Tswana, carved out territories for themselves in areas that had previously been inhabited by the San or the Khoi Khoi. Nevertheless, the displacement of the existing population moved slowly.

In the 18th and 19th centuries, though, the pace picked up. On the one hand, there was the arrival of the Europeans. Sometimes the Dutch and English found virgin territory, but often they simply ousted established Khoi Khoi or Bantu tribes. At the same time, one Bantu tribe, the Zulu, under King Shaka, began a period of rapid expansion. Shaka was cruel but effective, and the Zulu quickly subjugated other Bantu and Khoi Khoi tribes alike. (One of the few benefits of being forced into the worst land was that the San, in general, weren’t subjected to much interaction with Shaka’s Zulu or even the Europeans.)

Eventually the Europeans defeated, subjugated, and marginalized the Bantu tribes, which in turn had defeated, subjugated, and marginalized the Khoi Khoi before them, who in turn had defeated, subjugated and marginalized the San who were the first people in the area.

Fast forward a bit, to a few decades ago. The afore-mentioned Apartheid came to an end. This was brought about through secret meetings between leaders of the European-descended groups and the leaders of one of the most populous Bantu groups, the Xhosa tribe. The South African system has, since then, been run more or less democratically, though it should be noted that the the same party, the African National Congress or ANC (sometimes referred to locally as the Xhosa Nostra in an obvious allusion to the Mafia) seems to win all the relevant elections despite representing less than half of the Black population, let alone the San, Khoi Khoi or Whites.

So how should one think about all of this? Apartheid is obviously horrible system and it is tremendously unfair.  That, incidentally, is the most charitable description I have for it.  Leaving aside allegations of impropriety by the ANC, one person one vote seems, on the face of it, to be the fairest way to run a country. And now, if never before in the last 150,000 years, South Africa does have (in fact or in appearance) such a system.

On the flip side, consider this from a different perspective that is popular these days: the perspective of racial justice. Its a useful perspective since it was a term people used to define the struggle against Apartheid. Maybe I’m missing something, but from that point of view, the current outcome is only fair if the San don’t count. Otherwise, the power, the land, and the resources of today’s South Africa would be hands of the San, the original residents of the area and the victims of 2,500 years of oppression at the hands of pretty much everyone else.

That won’t happen. At this point, the San population continue to face discrimination.  Few of them are left.  There might be 10,000 in South Africa, and maybe 100,000 in all of Southern Africa. Nor is the South African government showing much concern toward the San. For example, South Africa has eleven official languages, but none of them are San languages. Or Khoi Khoi languages, for that matter.

Now let’s change gears and bring this a bit closer to home. We can do a similar look at the history of the Americas, though the time frames are compressed.   The latest genetic research of which I am aware seems to suggest the possibility that in many (most? just shy of all?) places in the Americas, the populations that were present when the Europeans arrived had, ahem, replaced earlier populations that had previously resided in the same areas. The less polite description for what happened (time and again) is genocide.

Now, there’s an old expression in Brazil: Ladrão que rouba ladrão tem cem anos de perdão. Loosely translated – a thief who robs from another thief deserves 100 years worth of pardons. Personally, I disagree with this proverb. But I also strongly disagree with the idea that we can somehow achieve justice by giving unearned advantages to descendants of yesterday’s perpetrators simply because their ancestors have since fallen victim to more effective perpetrators. If we start out with realistic notion that just about all of us are the descendants of both perpetrators and victims, the rule for achieving justice becomes obvious:  try to arrange for everyone to start out on as equal a footing as possible, and then let each person rise and fall according to his or her own merits.

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Banishing Racism From Racism

In the last few months I have gotten accused of racism a few times at this blog. I don’t think I am misrepresenting my accusers by stating that their claim is based primarily because of my views on a) immigration and b) the differences between the economic performance of different countries. The two issues actually collapse into one. I have stated repeatedly that I believe that culture is a key factor affecting the difference in economic outcomes (and many social outcomes) between countries. Furthermore, I have stated that people carry culture with them when they move, so a wise immigration policy would select immigrants whose culture is both compatible and likely to generate positive economic results and limited friction.

I claim no credit for these ideas, mind you. Outside of some quarters, the idea that culture is a driver economic growth is widespread, long standing, well established and supported by data. I find it stunning that anyone would question the importance of culture in driving growth and the assimilation of immigrants.

But it is important to always be willing to question one’s beliefs, so I am going to do that here and now. So… how would we show that culture is not a determinant in how well a country does? I can think of a few possible tests but I want to avoid data at this time and just talk it through.

If we do that, we could start by defining “countries that do well.” In general, these would be countries that are stable, pleasant to live in, and relatively wealthy. Over the past few decades, if someone were to make a list of such countries, it would probably look more or like this (in no particular order): the US, Canada, Northwest Europe, Switzerland, Scandinavia, Australia, New Zealand, Japan, South Korea, Singapore and, until China began applying a heavier thumb, Hong Kong. Those also happen to be the countries that would attract the most foreigners interested in being citizens, so this quick and dirty list should pass a basic smell test. (If some of these nations don’t have much of an immigrant population and don’t rank on high on the destination of potential immigrants, it is because they are very selective about the who they let in as opposed to being shunned by would be immigrants.)

So what do these places have in common? It isn’t natural resources. Just ask the Japanese. (Plus, in countries outside of the list above, being blessed by nature somehow correlates with suffering from the “Resource Curse.”) It isn’t Democracy as we know it. That’s a relatively new thing for South Korea, Hong Kong was ruled by foreigners for most of the last century, and then, of course, there’s Singapore. It isn’t coming into the post-WW2 period wealthy; quite a few countries on the list were in miserable shape in 1945. It isn’t a matter of exploiting other countries (which Americans of a certain bent are always fond of claiming is the US’ secret) – South Koreans will proudly tell you that the country has never invaded anyone in well over 2,000 years. Switzerland, too, is proudly neutral. The Scandinavians have also been pretty pacifist for well over a century as well. Small government? As much as libertarians like to claim Singapore for their own, ignoring the massive government participation in the economy (think Temasek, Singapore Airlines, Mediacorp, Singtel, Singapore Power, etc.). Nor did Japan, Inc. qualify. Something about about geography and environmental factors that these countries have in common? Nope and nope.

To be blunt, there doesn’t seem to be a factor or group of factors that can be applied to these countries but not to countries that are “developing.” I also hesitate to go with supernatural explanations, particularly since, as I learned about four decads ago (long before the stupid movie was made), Deus é Brasileiro. Besides, there is no such thing as empirical theology. For completeness, I should also say the Guns, Germs and Steel explanation got a few things right about the past. However, unless I missed something, Papua New Guinea is not is not putting out the performance you’d expect from the world’s smartest people in the Internet Age, which should go some way toward invalidating Diamond’s hypothesis.

On the other hand, I can describe a few cultural factors that distinguish these countries from others. For instance, these countries have (or had) reputations of being the home of people who were, on average, diligent, frugal, studious, and punctual among other traits. I presume those traits are largely learned, I might add.

And just like that, I slipped back into my sinning ways. So let us assume that like Winston Smith, I really would prefer to believe something that presently I don’t. Perhaps my reasons are not as noble as Smith’s. Maybe I am only concerned because I know that cultures change, and I wonder about the direction in which ours is currently headed. But regardless of my motives, how do I convince myself?

Tell me, please, what are the factors that explain economic and social performance so well that we can dispense with culture entirely as an explanation?

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The C-Span Ranking of Presidents

C-Span just released a ranking of US Presidents based based on a survey of historians, journalists and other scholars. Obama came in 12th.

Here is the survey’s description of the process used to generate the rankings:

C-SPAN’s academic advisors devised a survey in which participants used a one (“not effective”) to ten (“very effective”) scale to rate each president on ten qualities of presidential leadership: “Public Persuasion,” “Crisis Leadership,” “Economic Management,” “Moral Authority,” “International Relations,” “Administrative Skills,” “Relations with Congress,” “Vision/Setting An Agenda,” “Pursued Equal Justice for All,” and “Performance Within the Context of His Times.”

Surveys were distributed to historians and other professional observers of the presidency, drawn from a database of C-SPAN’s programming, augmented by suggestions from the academic advisors. Ninety-one agreed to participate. Participants were guaranteed that individual survey results remain confidential. Survey responses were tabulated by averaging all responses in a given category for each president. Each of the ten categories was given equal weighting in arriving at a president’s total score.

I looked through the overall rankings and some of the rankings by category. Having co-authored a book on ranking Presidents, I have a lot of quibbles with the rankings. But many of them would be controversial. So I thought to myself – is there a simple way to decide whether this list has merit?

Here’s what jumps out at me. Take a gander at the list by economic management. Note that Teddy Roosevelt came in 4th place in that category. (First, second and third were Washington, Lincoln and Clinton. I find that to be borderline insane in and of itself. However, since Washington and Lincoln are names the public can recognize and Clinton was recent, I will not discuss them so as to avoid controversy.) TR also came in 4th in that category in the two previous surveys in 2009 and 2000 so it seems that ranking is pretty stable.  The, ahem, experts surveyed seem to be pretty sure TR belongs right up there.

Now here’s the problem. TR was President from September 1901 to March 1909. He did some effective things on the economy – some of his Square Deals, the Trust Busting, regulation, etc.  But… his outcomes were not very good. For instance, there was a fly in the ointment – the recession from September 1902 to August 1904. That would seem to cast doubt on his economic performance. But… that isn’t the problem with ranking TR as fourth best on the economy. There was another recession from May 1907 to June 1908. And that was no ordinary recession. The Panic of 1907 occurred in October of 1907, close to the middle of that recession. And who saved the day? Was it TR and his administration? Was it their policies? Nope. It was JP Morgan. Yes. That JP Morgan.

And the aftermath of the recession wasn’t pretty either. Data from that era isn’t great, but by all accounts, there was a big spike in unemployment, bankruptcies, etc.

The US economy is not worse than that of Zimbabwe in 2017. And yet, something along those lines would need to be true if TR turned in the fourth best economic performance among all US Presidents. I am no historian, but to me, any survey placing TR in fourth place for economic performance is indistinguishable from parody. It is enough for me to conclude that those responsible for this nonsense simply have no idea what they are doing.

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Resettling Refugees – A Thought Experiment

Consider a country with a vicious ongoing multi-sided Civil War which includes some amount of deliberate large scale civilian extermination.  You know the sort of thing: Syria today is just the most recent example, but there are other well-known examples from the last few decades.  To keep things generic, let us refer to the various sides in the Civil War as A, B, C, etc.

Militias from each group have been caught massacring civilians from the other group.  Or maybe the evidence points toward only one side being responsible for such atrocities.  Truth to tell, nobody in the US really has a firm and unbiased grasp of what is going on.  If this sounds like the vast majority of wars since 1945, it should.

Now, let us say that the US has a pre-existing immigrant population from Group A.  For whatever reason, they have mostly settled in  Lincoln, NE.  (I picked Lincoln completely at random.  I understand some Thai and Burmese refugees have settled in Lincoln, but I would say that for the most part, the city doesn’t have a strong connotation with refugees among the general public.).   Lincoln now has a neighborhood called “Little X” where “X” is the capital of the country with the ongoing Civil War.   

If the Civil War results in more people from Group A are admitted to the US as refugees, it is natural to relocate them or at least encourage them to live in Lincoln.  But what if refugees from Group B are also admitted in not-insignificant numbers?  Groups A and B have a long history of distrust, and are vicious enemies in the current Civil War.  And if there is one thing Americans have managed to figure out about the ongoing war that is accurate, it is that there are some horrific atrocities going on.

So…  should it be the policy of the US government to try to settle the new refugees from Group B in Lincoln, NE?  There would be scale economies due to similar language, culture, food, and possibly even religion.  Or should it be the policy of the US government to try to get the refugees to settle somewhere far away from Lincoln, NE to minimize the possibility of conflict and ill will?  And does your answer change if we manage to learn that both sides are not equally at fault?  For example, do we make the same decision vis a vis Lincoln, NE if Group B was responsible for all or most of the atrocities and committed them against A, or vice versa?  You can assume that all the refugees are properly vetted and that none of them are known to have been involved in committing the atrocities.  

 

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The End of the Japanese Miracle… and the American One

Scott Alexander at Slate Star Codex has a very good post on cost disease. It definitely betrays a strong libertarian or conservative bias, but is nevertheless, worth reading.

The piece that resonates with me is posted below. It has some good insights, one or two that are questionable (for anyone not firmly ensconced on the right), but overall it methodically works its way to one hell of a punch-in-the-gut truth in last sentence.

Imagine if tomorrow, the price of water dectupled. Suddenly people have to choose between drinking and washing dishes. Activists argue that taking a shower is a basic human right, and grumpy talk show hosts point out that in their day, parents taught their children not to waste water. A coalition promotes laws ensuring government-subsidized free water for poor families; a Fox News investigative report shows that some people receiving water on the government dime are taking long luxurious showers. Everyone gets really angry and there’s lots of talk about basic compassion and personal responsibility and whatever but all of this is secondary to why does water costs ten times what it used to?

I think this is the basic intuition behind so many people, even those who genuinely want to help the poor, are afraid of “tax and spend” policies. In the context of cost disease, these look like industries constantly doubling, tripling, or dectupling their price, and the government saying “Okay, fine,” and increasing taxes however much it costs to pay for whatever they’re demanding now.

If we give everyone free college education, that solves a big social problem. It also locks in a price which is ten times too high for no reason. This isn’t fair to the government, which has to pay ten times more than it should. It’s not fair to the poor people, who have to face the stigma of accepting handouts for something they could easily have afforded themselves if it was at its proper price. And it’s not fair to future generations if colleges take this opportunity to increase the cost by twenty times, and then our children have to subsidize that.

I’m not sure how many people currently opposed to paying for free health care, or free college, or whatever, would be happy to pay for health care that cost less, that was less wasteful and more efficient, and whose price we expected to go down rather than up with every passing year. I expect it would be a lot.

And if it isn’t, who cares? The people who want to help the poor have enough political capital to spend eg $500 billion on Medicaid; if that were to go ten times further, then everyone could get the health care they need without any more political action needed. If some government program found a way to give poor people good health insurance for a few hundred dollars a year, college tuition for about a thousand, and housing for only two-thirds what it costs now, that would be the greatest anti-poverty advance in history. That program is called “having things be as efficient as they were a few decades ago”.

I should note that the spending examples cited in the above paragraphs have numerical support earlier in Alexander’s post. But the problem with the post is the lack of a satisfactory answer to the question it raises: what caused the massive declines in efficiency we saw in many vital parts of the US economy?

And here I am pleased to say I can help. I actually provided an answer to that question in a post I wrote six years ago explaining why Japan grew so rapidly after WW2 and what policy changes led to the end of its rapid rise.

I encourage you to read my post, but it comes down to this: the Japanese Miracle ended when its fabled bureaucracy became far less of a test- and performance-based meritocracy.  This was done with the noble cause of broadening inclusion, which of course, was severely lacking in the old system.  But the baby was thrown out with the bathwater.  The new system ended up just as unfair as the old one, but in very different ways.  Unfortunately, it also became a lot less efficient.  Test scores turned out to be positively correlated with performance.   Highly correlated.  It didn’t take long for the public to notice the change.  The deference once afforded to entities like MITI dwindled and died.  Soon the ministries could no longer command the respect they needed to actually run the economy, much less the competence to do it well.  But the now enfeebled bureaucracy could still influence events.  It went on to buy into Reaganomics (tax cuts, smaller government, and a trade policy that was less export oriented). Put another way: Japan Inc. started hiring suckers, and predictably the suckers got suckered.

The parallels with the US are obvious. That isn’t to say  all is doom and gloom for either Japan or the US. Both countries remain rich, prosperous, and innovative. But Japan no longer inspires the world as it once did. The Japanese Miracle ended decades ago. And I have a real fear that America’s best moment may also in the past. Policies that elevate mediocrity achieve just that.  And they are awfully hard to reverse.

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