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

Castro is Dead

I have always been leery of libertarians, finding that most of them come from one of two infuriating groups: those who pretend negative externalities are trivial and (a much smaller group) those who are open about negative externalities not being trivial but look forward to the opportunity to inflict them on other people.

That said, this post at Popehat (a libertarian blog that focuses on first amendment issues) about Castro and his death is absolutely spot on. Years ago I wrote some of the same things here at Angry Bear, but never this well.

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Will the Soviet Union Survive Until 1984? Part 1

One of the more unique books on my shrinking number of bookshelves (we are in the e-book era after all, so every time we move, fewer hard copies move with us) is called Will the Soviet Union Survive Until 1984? It was written by a Soviet dissident named Andrei Amalrik and published in 1970.

I was thumbing through the book randomly the other day and happened on a passage which happens to be the reason I have never given the book away:

It now became evident that in Soviet law there exists, if I may use the term, a broad “gray belt” – activities which the law does not formally forbid but which are, in fact, forbidden in practice-for instance: contacts between Soviet citizens and foreigners; a concern over non-Marxist philosophies or art inconsistent with the notions of socialist realism; attempts to put out typewritten literary collections; spoken or written criticism not of the system as a whole, which is forbidden under Articles 70 and 190/1 of the Criminal Code, but particular institutions within the system.

This sort of setup – where some topics are de facto illegal – destroys the social fabric in a country. If people know that that saying X will cost them their livelihood, most of them won’t say X. But that doesn’t mean they won’t believe it. In fact, knowing that X cannot be discussed is just going to convince more people that there must be something to it. Refutations of X from those authorized to state what is good and what is true will only serve to make matters worse.

Also, even if X is not true, people will mouth approved denials of X but nobody competent to do so will actually go through the effort of proving X is wrong. After all, in matters like this, the views that are acceptable to hold become progressively narrower and more specific over time. The hero who proves X wrong today is sent to the Gulag tomorrow. Tomorrow, the proof doesn’t show that X is wrong enough.

Worse still for Comrades Yuri and Svetlana who only want to survive and raise their children, sometimes the pendulum swings the other way.

Lysenkoism, a fraud cooked up by a charlatan based on fake data was (rightly) a crackpot idea in 1927. By the mid 1940s it was textbook Soviet Biology and the Trotskyite wreckers, Western stooges and Nazi sympathizers who opposed it had already been processed through the People’s Courts. And then, in the 1960s, another turnabout. Lysenkoism was denounced. But the famines it had caused had still happened, and the biologists, geneticists and (might I add) the statisticians who had called bull&$%# were still dead.

The New Soviet Man was, is, and always will be on the march. Of course, the Soviet Union did make it to 1984. But alas, it had already done so by 1920, if not earlier.

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More From Borjas on Immigration in 1996

More from the 1996 Borjas article on Immigration I cited yesterday. All of this should be familiar to anyone who has been reading my posts. It’s also the same findings for which I keep getting attacked in comments. The funny thing is, numbers are numbers and the results are the same whether I do the analysis or a Harvard professor does it:

Consider the received wisdom of the early 1980s. The studies available suggested that even though immigrants arrived at an economic disadvantage, their opportunities improved rapidly over time. Within a decade or two of immigrants’ arrival their earnings would overtake the earnings of natives of comparable socioeconomic background. The evidence also suggested that immigrants did no harm to native employment opportunities, and were less likely to receive welfare assistance than natives. Finally, the children of immigrants were even more successful than their parents. The empirical evidence, therefore, painted a very optimistic picture of the contribution that immigrants made to the American economy.

In the past ten years this picture has altered radically. New research has established a number of points.

• The relative skills of successive immigrant waves have declined over much of the postwar period. In 1970, for example, the latest immigrant arrivals on average had 0.4 fewer years of schooling and earned 17 percent less than natives. By 1990 the most recently arrived immigrants had 1.3 fewer years of schooling and earned 32 percent less than natives.
• Because the newest immigrant waves start out at such an economic disadvantage, and because the rate of economic assimilation is not very rapid, the earnings of the newest arrivals may never reach parity with the earnings of natives. Recent arrivals will probably earn 20 percent less than natives throughout much of their working lives.
• The large-scale migration of less-skilled workers has done harm to the economic opportunities of less-skilled natives. Immigration may account for perhaps a third of the recent decline in the relative wages of less-educated native workers.
• The new immigrants are more likely to receive welfare assistance than earlier immigrants, and also more likely to do so than natives: 21 percent of immigrant households participate in some means-tested social-assistance program (such as cash benefits, Medicaid, or food stamps), as compared with 14 percent of native households.
• The increasing welfare dependency in the immigrant population suggests that immigration may create a substantial fiscal burden on the most-affected localities and states.
• There are economic benefits to be gained from immigration. These arise because certain skills that immigrants bring into the country complement those of the native population. However, these economic benefits are small — perhaps on the order of $7 billion annually.
• There exists a strong correlation between the skills of immigrants and the skills of their American-born children, so that the huge skill differentials observed among today’s foreign-born groups will almost certainly become tomorrow’s differences among American-born ethnic groups. In effect, immigration has set the stage for sizable ethnic differences in skills and socioeconomic outcomes, which are sure to be the focus of intense attention in the next century.

The United States is only beginning to observe the economic consequences of the historic changes in the numbers, national origins, and skills of immigrants admitted over the past three decades. Regardless of how immigration policy changes in the near future, we have already set in motion circumstances that will surely alter the economic prospects of native workers and the costs of social-insurance programs not only in our generation but for our children and grandchildren as well.

But let us be realistic. You don’t need to be a numbers person to reason any of this out. In the age of Google, all this is fairly obvious to anyone who cares to think about the issue.

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Borjas on Immigration in 1996

George Borjas is out with a new book on immigration. It’s title, “We Wanted Workers” comes from a comment by a Swiss playwright which translates roughly as “we wanted workers but we got people instead.”

I am swamped and haven’t gotten to Borjas’ book yet (truth to tell – there is a lot of stuff higher on my current to do list and time is limited) but he has been pretty consistent for a long time. Here is a lengthy article he wrote for The Atlantic in 1996. This piece may be a good summary of what Borjas keeps noting, and which seems self-evident to me given current immigration policy in the US:

Economic research teaches a very valuable lesson: the economic impact of immigration is essentially distributional. Current immigration redistributes wealth from unskilled workers, whose wages are lowered by immigrants, to skilled workers and owners of companies that buy immigrants’ services, and from taxpayers who bear the burden of paying for the social services used by immigrants to consumers who use the goods and services produced by immigrants.

There is nothing wrong with taking the position that current policies should be continued and even expanded. There is something wrong with denying what that implies. Policies are something we as a country pick. They aren’t handed down from the heavens or etched in stone. If we choose to favor low skilled immigrants and the businesses that employ them over the taxpayer and low skilled workers already in the country, let us at least be honest about it.

Full disclosure – I have structured my affairs so that in general, I benefit from the policies that have been in place over the last few decades. I recognize that many Americans don’t have that option.

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Four Years

It is four years from now. A lot has changed. Some of the changes have been positive, some negative. What are the changes that in retrospect were the most impactful but also should have been among the most obvious a day or two after Thanksgiving 2016?

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Welfare Rates and Stereotypes of Immigrants in Denmark

Here is the introduction to an interesting paper. It covers some similar to ground to some of my recent and upcoming posts but uses data on immigrant groups to Denmark:

Stereotypes, that is, people’s beliefs about groups1, are often assumed to be exaggerated and inaccurate (Jussim, 2012). However, whether this is so is rarely examined. The existing body of research reveals that stereotypes are usually fairly accurate and rarely ex- aggerate real differences (Jussim, 2012; Jussim et al., 2015). Demographic stereotypes tend to be among the more accurate. As far as we know, only one prior (pi- lot) study has examined stereotype accuracy in Den- mark (Kirkegaard & Bjerrekær, 2016a). The study was small (N = 48 after quality control), had a strongly unrepresentative sample but was preregistered. It found that stereotypes were fairly accurate (median correlational accuracy score = .51), but the results are hard to generalize to the overall population. The present study is a replication and expansion of the prior study using a large, nationally representative sample.

Please forgive any odd formatting. Through the miracle of the modern US service economy I am without internet except for my phone and will remain so at least through the weekend. It also means that I only went through the paper on my phone. Still, I am not seeing anything obviously wrong with the paper. I like that they made their data available, were crystal clear on methodology, and pre-registered what they were going to be doing before they did it. My only quibble is that their “large” sample only contained 484 observations once they cleaned up the data. There is wrong with 484 observations. I often work with much less, but I wouldn’t call that a large sample.

Here is the abstract, which I think is more clear after you read the introduction reproduced above.

A nationally representative Danish sample was asked to estimate the percentage of persons aged 30-39 living in Denmark receiving social benefits for 70 countries of origin (N = 766). After extensive quality control procedures, a sample of 484 persons were available for analysis. Stereotypes were scored by accuracy by comparing the estimates values to values obtained from an official source. Individual stereotypes were found to be fairly accurate (median/mean correlation with criterion values = .48/.43), while the aggregate stereotype was found to be very accurate (r = .70). Both individual and aggregate-level stereotypes tended to underestimate the percentages of persons receiving social benefits and underestimate real group differences. In bivariate analysis, stereotype correlational accuracy was found to be predicted by a variety of predictors at above chance levels, including conservatism (r = .13), nationalism (r = .11), some immigration critical beliefs/preferences, agreement with a few political parties, educational attainment (r = .20), being male (d = .19) and cognitive ability (r = .22). Agreement with most political parties, experience with ghettos, age, and policy positions on immigrant questions had little or no predictive validity. In multivariate predictive analysis using LASSO regression, correlational accuracy was found to be predicted only by cognitive ability and educational attainment with even moderate level of reliability. In general, stereotype accuracy was not easy to predict, even using 24 predictors (k-fold cross-validated R2 = 4%). We examined whether stereotype accuracy was related to the proportion of Muslims in the groups. Stereotypes were found to be less accurate for the groups with higher proportions of Muslims in that participants underestimated the percentages of persons receiving social benefits (mean estimation error for Muslim groups relative to overall elevation error = -8.09 %points). The study was preregistered with most analyses being specified before data collection began.

I imagine they separated Muslim groups because those are relatively recent and numerous in a country like Denmark, and despite laws to the contrary, often stereotyped. But not necessarily discriminated against:

It can be seen that even the most extreme nationalists in this sample are still not biased against Muslim groups in their ratings because the regression line does not cross 0.

There are a few figures in the article (I will let you look them up) that could have come from my recent posts, even though it looks at welfare by national origin in Denmark and I have been looking at income levels by national origin in the US. Looking at a graph, It seems that countries whose emigrants perform well in the US perform well in Denmark, and those that do poorly in one country do poorly in the other. At a glance the big difference seems to be the lack of Central American immigrants in Denmark in large enough numbers to show up in their graph.

In their conclusion, they find that on aggregate, Danish stereotypes vis a vis how different groups of immigrants to Denmark tend to be dependent on welfare tend to be pretty accurate.

So what does this article plus my posts imply about the economy? The degree to which countries produce emigrants who are culturally well adapted to contribute to the economy can vary dramatically. Immigrants can add to or subtract from productivity. One of the arguments for increased immigration is that the dwindling birth rate in many Western countries means those countries will require an influx of immigrants to keep their economies humming. But the data implies that this only works if immigration is done selectively. Otherwise, immigration can exacerbate issues in the economy.

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The Unfinished Parable of the Shepherd and the Starving Wolf Cubs

In the wilderness, far from anyone else, a shepherd and his flock come across a den of starving wolf cubs. A couple of days earlier, the shepherd found the body of an adult female wolf.  The female wolf was probably the cubs’ mama, and it looked like it had gotten killed by a bear.

The small orphans look pitiful, and they will surely die within the day if they have no food. The only food the shepherd has that the wolves will eat are his sheep, all of which he has raised from birth.

You are merciful. You are also the shepherd. Which act of social eugenics do you perform?

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The Effect of Stress on the Brain and the Gender Pay Gap

This story has been widely reported:

Earlier research has shown that girls who experience trauma are more likely to go on to develop PTSD than boys. Why this should be the case is another question awaiting an answer.

A team of researchers recently set out to investigate potential reasons behind this gender difference in more detail. Their results were published earlier this week in the journal Depression and Anxiety.

To gather an understanding of the brain changes that take place in PTSD, researchers took MRI scans of 59 participants aged 9-17.

Of the participants, 30 had trauma symptoms (14 girls and 16 boys); five of these individuals had experienced one period of trauma, while the others had experienced two or more episodes or had experienced chronic trauma. The remaining 29 participants had not experienced trauma (15 girls and 14 boys) and were used as the control group.

The traumatized individuals and the controls were all of similar ages and IQs.

Once the MRI scans were analyzed, there were no differences found between the girl’s and boy’s brains in the control group. However, in the trauma group, significant differences were uncovered.

These striking gender differences were found in a region of the insula – a deep fold in the brain thought to be important in a range of processes, including homeostasis and emotion.

Differences in how adult men and women handle stress has been studied many times before as well – here is one example:

The interactions between emotion-processing areas like the right temporal pole, insula and inferior fontal gyrus also differed by gender. The researchers looked at a measurement called functional connectivity, which reveals the extent to which brain areas simultaneously become active. Men showed less functional connectivity between these areas when stressed, while women showed more. It seems that when women are stressed, social and emotional areas of the brain go on alert, perhaps reflecting a tendency to reach out. The same areas in men’s brains seem to disengage.

The researchers don’t know whether these brain differences are innate or a product of socialization, and they can’t yet say if the decreased activity in stressed men causes them to actually become less engaged and empathic, or if they compensate in some other way. However, Mather said, other research does find gender differences in the way men and women act when stressed. The current study meshes with those findings, she said.

I’m no physiologist, but if I read this correctly, these researchers would say that on average there are differences in how men and women would react to difficult situations in a stressful environment, like that in many workplaces. My guess is that if pressed a step further, these researchers would say that on average there are differences in the rate of successful outcomes in the workplace for people who are otherwise alike in skill and experience but who differ by gender. Now, these physiologists are not economists nor do they operate in the corporate world, but I wonder whether they would expect there to be a gender pay gap, and, if the answer was yes, would they expect that pay gap to differ quite a bit from industry to industry. Would they say that on average there are some jobs at which men would do better than women, and other jobs for which women outperform men?  Would their answers to questions like these be progressive?

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The Bottom 10 Performing Immigrant Groups in the US – Lessons Learned

In my last post, I looked at the top ten immigrant groups by country of origin to the US, ranked by their per capita income in the US. In this post, I want to look at the bottom ten countries. Here’s some information on those countries (data sources mentioned at the bottom of the post):

Post 3, Figure 1 - Bottom 10 Countries by Immigrant Income - Corrected
(click to embiggen)
(note – this is a corrected table. Thanks to reader Mike B for pointing out the error in the last column of the table.)

The first thing to note is that Saudi Arabia is an outlier. Based on median age, education, and income, the composite Saudi immigrant described by this table is either a graduate student, a layabout, or something in between. Many Saudis may be receiving income from sources that are not accounted for in this table; from my limited experience, Saudi expats I have come across seem to receive a stipend, which is born out from other sources, though it seems those stipends are getting cut due to falling oil prices.

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