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

Protesting Donald Trump

When Barack Obama became President, Republicans in Congress pledged to oppose him tooth and nail. That was a bad idea. It implied that they were hoping the President would fail. This implies one of two things: either they wished ill for the country, or they were completely convinced that Obama was wrong and they were right on every important issue. Giving them the benefit of the doubt, we can assume hubris rather than dislike of country (or worse).

But hubris brings with it its own set of issues as anyone who has read Greek Mythology can attest. If Obama had achieved success, the Republicans would have looked very, very bad, particularly after 8 years of GW Bush. It could have set back the Republican Party for a generation.

Fortunately for Republicans, Obama has come across as inept. The best defense his supporters can conjure up is, in fact, the fact that Republicans didn’t cooperate with him. But even without the help of Congress, there were many things a President can accomplish. As head of the Executive Branch, Obama could have reduced unnecessary spending, graft and corruption, to name initiatives that are always popular and which have been ignored by American Presidents during my lifetime. Even many of the worst run third world countries have managed to produce a leader who does tries that approach for a few years. We are long overdue.

Obama could also have achieved success by placing himself in opposition to the policies of his predecessor which had generated such disastrous outcomes, and which, not incidentally, were supported by the Congressional opposition to Barack Obama. That would have been a no-brainer. But Obama’s approach toward dealing with the Great Recession was to keep doing what GW had been doing, and above all, holding nobody accountable. Mimicking GW and doing nothing to restore faith in the system had predictable results – a lackluster recovery to an economic meltdown.

So Obama saved the Republicans from themselves with his ineptitude. And now we have the spectacle of millions of Americans on the left behaving the same way the Republican Congress did eight years ago. The protesters are counting on Trump to fail as badly as Barack Obama (and GW) did before. And perhaps he will. Trump’s policies aren’t entirely thought out, and shooting from the hip often generates poor outcomes. But luck matters. And so does the ability to communicate, and to bring the crowds to your side. If Trump fails, it will probably be in a very different way than Obama (and GW) did before him. His failures may not look as bad as their failures. Similarly, if Trump’s policies are sufficiently unorthodox, in those areas where he does succeed, the appearance of success may well be magnified. Chewing out Boeing over the bill for the next generation of Air Force one or cowing Ford into keeping a few jobs in the US may be little more than good optics, but good optics create positive morale, and positive morale feeds back on itself. There is also no reason to believe he will stop with Boeing or Ford.

If I were to advise the protesters, it would be like this: wait until Trump has had a chance to fail before you protest. If he does fail, after all, it will come fast and it will come soon. But if he connects with the public, and you oppose him from the beginning, a lot of voters won’t be taking you seriously by the time the next election rolls around.

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The Economist on Diversity and Development

I was looking for information on how cultures affect growth and stumbled on this 12.5 year old article in The Economist:

Diversity and development might seem to sit oddly together. But they are intimately linked, and the report seeks to show that they are not related in the way many people assume. The UNDP’s press release says unambiguously that “there is no evidence that cultural diversity slows development”, and dismisses the idea that there has to be a trade-off between respecting diversity and sustaining peace. Some of the world’s richest and most peaceful countries are historically multi-ethnic, such as Switzerland, Canada and Belgium. And most of the world’s richest countries are now the destination of immigrants from around the world, making America, Britain and other wealthy nations hugely diverse.

I imagine if you make a movie whose cast is perfectly representative of the population of diverse Switzerland or Belgium of a decade ago when this article was written, and the movie was a masterpiece, it would run afoul of #oscarssowhite.

But there is some evidence that diversity has costs. In a recent book, “The Size of Nations” (see article), two economists show that managing ethnic diversity is expensive, as governments must deal with the demands of groups competing for scarce resources. In the United States, a study has shown that people are willing to pay more for services like education if they can live with people more like them in ethnicity and class. In other words, people place a value on being with others like them. Multi-ethnic nations have been breaking apart recently (the Soviet Union, Yugoslavia); few countries have merged during the same period, and those that have were ethnic mates (East and West Germany, North and South Yemen).

A quick look at the Human Development Index (HDI), released each year in the report, seems to support the idea that diversity has its costs. In the bottom 35 countries ranked as having “low human development”, all but three are in vastly diverse Africa, where borders drawn by colonialists showed no respect for tribal, linguistic or religious identities. Meanwhile, while single-ethnicity states are rare (just 30 countries in the world do not have a religious or ethnic minority that constitutes at least 10% of the population), they are strongly represented at the top of the HDI: places like Norway, Sweden, the Netherlands, Japan, Ireland and Austria.

The article continues:

The report recommends several political strategies for coupling diversity and development. One is “asymmetrical federalism”—the type of constitutional arrangement seen in Spain and Canada, where regions dominated by a cohesive minority (like Québec or the Basque country) get special local-government powers that others do not. This both recognises the region’s distinct identity and binds it to the central state. After all, the authors point out, most people in Spain’s minority regions see themselves as both Spanish and Basque (or Catalan or Galician)—not just one or the other. Giving those overlapping identities constitutional form can be one way to stabilise a diverse country. However, it can also give rise to resentment among the majority—be they anglophone Canadians or Castilian Spaniards—over the privileges of minorities.

My guess is this works only as long as the Quebecois mostly continue to live in a geographic distinct area. In other words – where diversity however it is measured exists at a macro but is minimized at a micro level. I imagine living and working together in a way that forms elite teams requires an approach that does more to smooth out whatever differences are perceived to exist and treat everyone as the same. (Warning – Youtube & profanity.)

 

The authors of the report argue for several other policies to protect and promote what they call “cultural liberty”, with certain caveats. For example, they support affirmative action, which, they say, has led to an increase in the number of black professionals in America, and has helped ethnic Malays in Malaysia and various minorities in India as well. But they lightly question the wisdom of letting such policies become entrenched, asking for example whether the children of affirmative action’s beneficiaries should themselves be eligible for a helping hand.

I suspect that such programs are very, very hard to dismantle. Differing cultural traits (which necessarily exist as long as people are assisted in keeping apart) will result in different outcomes, and different outcomes are a justification for keeping these programs intact.

The authors also propose treating “cultural goods” differently from other kinds when discussing trade. They give some of the oft-cited statistics about the cultural dominance of a few countries—for example, that America accounts for 85% of films screened worldwide. Their assumption is that, left to raw market forces, products from smaller cultures would be drowned out of the market. But rather than proposing restrictions on, say, importing American films, the authors propose allowing governments to take positive action to boost the production of their local fare. (Some trade agreements treat such support as an illegal subsidy.)

This must work because movies hav a discernible effect on the culture in different countries. That is so very unlike movies more typical goods like the Honda Civic, Sony Walkmen, SAP ERP, AK-47, Google’s search engine and Coca-Cola have had no discernible effect on any country’s culture.

While the report is full of feel-good language and social-science jargon, like “participation exclusion” and “living mode exclusion”, it is an interesting first stab at marrying diversity and development, two subjects not often found side-by-side. The report is, by its own admission, short on data about just how bad the problem of cultural exclusion is around the world. But it estimates, probably not too wildly, that one in seven people in the world is a member of some kind of disadvantaged minority. When engineering a new constitution, founding fathers in Iraq, Afghanistan and other nations under construction, as well as those who would advise them, would do well to take the suggestions of this report to heart.

And I predict that as long as society encourages people to think of themselves as distinct from their neighbors, and their neighbors as distinct from themselves, we will only increase the number of people who are members of what the Economist calls “some kind of disadvantaged minority.”

Updated to include comments on Swiss and Belgian diversity. Also, second blockquote was not originally shown as quote.

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Education – Close to Home Edition

This email just arrived from the Long Beach Unified School District (LBUSD), where my son is currently enrolled in one of the elementary schools:

Long Beach Unified is conducting a survey of all students, staff and parents on the culture and climate of our schools. The surveys, all of which are available for review on our website, are an important part of our accountability plan. Your input is very valuable so please watch your in-box tomorrow for an email titled “Long Beach Unified School District Parent Survey”. If you do not receive an email, log into your ParentVUE account and click on the tab, Core Parent Survey, in order to complete the survey. The survey is available in English, Spanish, Khmer, Chinese, Tagalog, Korean and Arabic and takes 5-10 minutes to complete. Thank you.

On the LBUSD home page, though, Parent Guidelines are only available in English, Spanish and Khmer. Apparently the district is changing rapidly or they’d have the Parent Guidelines in Chinese, Tagalog, Korean and Arabic.

Just for reference, Ed-Data, run by the California Department of Education, provided data on the “Languages of English Learners” at the school my son attends:

Number of Students by language from ed-data dot org

 

For reference, in 2015-16 there were 3 under Arabic, 3 under Filipino, and 6 under Vietnamese.  Nine are “all other”, which is just under the 11 figure for Khmer.  Also for reference, there are about 1,000 students in total at the school.

Anyway, I have no conclusions, or anything else to add.  I just found the data to be interesting.

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Net Migration and Economic Growth Around the World – 1958 to the Present

In my last post, I used World Bank data to look at the effect of net migration on economic growth. Net migration is defined by the World Bank as the number of immigrants (coming into a country) less the number of emigrants (leaving the country). I showed that net migration as a share of the population in 2012 (the last year with for which this data has been reported so far) is negatively correlated with growth of PPP GDP per capita from 2012 to 2015. In other words, countries where the share of immigrants as a percent of the population was larger grew more slowly than countries with a smaller proportion of immigrants.

The natural question is… does this relationship hold over a longer period of time? In this post, I will show that the answer is yes.

As to data… I will use three series compiled by the World Bank: net migration, population, and PPP GDP per capita. Net migration data is reported every fifth year beginning in 1962, and it covers five years of activity. In other words, the net migration figure for 1962 is the sum total net migration for the years 1958 through 1962. Similarly, the net migration figure for 1967 is the total for the years from 1963 through 1967. Population is available annually going back to 1960. PPP GDP per capita is available annually, but only begins in 1990. To maximize the use of the available data, and still avoid situations where growth could be leading immigration, I looked at total migration from 1958 to 1992 as a share of the population in 1992, and compared it to growth in PPP GDP per capita from 1993 to 2015.

In other words, I took a look at (roughly) the percentage of the population that had migrated over 34 years, and compared that to the growth rate from the following year to 2015, which is a period of 22 years.

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Net Migration and Economic Growth Around the World

This post uses data from the World Bank to look at the effect of migration on countries around the world. I will begin by looking at all countries for which the World Bank has data, then drill down.

So to begin, the data used in this post:
1. Net migration, by country available here. The most recent data is from 2012. Net migration is defined as the “total number of immigrants less the annual number of emigrants, including both citizens and noncitizens. Data are five-year estimates.” As an example, the US reportedly had net migration of 5,007,887 (i.e., positive) in 2007 through 2012, while Bangladesh had a figure of -2,226,481 (i.e., negative) in the same years. That should fit with your intuition.

2. PPP GDP per capita. Data available here. The last year for which data is available is 2015.

3. Data on population through 2015.

I started by looking at immigration relative to the size of the population. I assumed that the net migration figure was the same in each of the five years. (I know – not correct, but reasonable.) I then divided the Net Migration from 2012 by Population from 2012. I then compared that to the annualized growth in PPP GDP per capita from 2012 to 2015. In other words, I looked at the Net Migration as a share of the Population in 2012 and the growth rate in the subsequent three years. I put both series up on a scatter plot.

Before I put up the graph, I would also note that I did leave some data out. It goes without saying that if a country did not report information, I did not include it. Additionally, countries reporting zero net migration were left out. After all, even North Korea has escapees, er, migrants, even if they won’t admit to it. Otherwise, everything went into the pot leaving a sample of 176 countries. Here’s what the relationship between Net Migration (from as a share of the Population in 2012 and the growth in PPP GDP per capita from 2012 to 2015 looks like for them:

Figure 1.  Net Migration div Pop 2012 v. Growth from 2012 to 2015, 176 Countries 20170112
Figure 1

The correlation is -0.32. That is, countries with higher Net Migration as a share of their Population tended to perform less well over the subsequent three years. In other words, it is better to give than to receive, at least when it comes to migrants.

Of course, if we want to understand the effect of Net Migration in the US and other Western Countries, perhaps it makes sense to narrow things down. The next graph uses only countries deemed to be “High Income” by the World Bank. I also restricted the sample to countries with populations exceeding 1 million people to avoid trying to learn life lessons based on recent happenings in Monaco or Andorra. Here’s what that looks like:

Figure 2.  Net Migration div Pop 2012 v. Growth from 2012 to 2015, 44 Countries 20170112
Figure 2

The population sample dropped from 176 countries to 44, and the correlation tightened up a bit to -0.48.

Frankly, I think the sample still needs cleaning up. Most of the points on the graph look bunched up because there are a few countries with very, very high Net Migration. For example, Oman is at 6.8%(!!!!), Qatar 3.6%, Kuwait 3.0% and Singapore 1.5%. These are mostly special cases, even for high income countries, and I would venture to say, provide very few lessons on immigration that are applicable to the US or most of the West. Limiting the sample to countries with Net Migrants to Population under 1.4%, the graph now looks like this:

Figure 3.  Net Migration div Pop 2012 v. Growth from 2012 to 2015, 40 Countries 20170112 - with corrected axis
Figure 3

This doesn’t change the outcome much, but it makes things easier to see. If desired, we can cut out one more outlier – this one on account of excessive economic growth. The point on the far right side of the graph is Ireland, bouncing back (in PPP GDP) from the monster collapse in 2007-8. Removing Ireland as well gives us this:

Figure 4.  Net Migration div Pop 2012 v. Growth from 2012 to 2015, 39 Countries 20170112 - with axis corrected
Figure 4

The absolute value of the correlation drops, but the fact remains: we are still left with a negative correlation between Net Migration as a percentage of the Population in 2012 and the growth in PPP GDP per capita between 2012 and 2015. We can do a bit more pruning, but frankly, the data simply refuses to support Holy Writ. Sure, these graphs don’t prove that immigration is bad for growth. However, they make it very, very hard to argue that immigration had a positive effect on growth during the past few years. Of course, that isn’t what we hear from our betters.

I will follow up this post with looks at other periods for which data is available from the World Bank. Meanwhile, I put together a spreadsheet that allows the user to make changes to the dates or downselect the data through income level, population, etc. It’s a bit large, but I will send it to anyone who contacts me for it within a month of the publication of this post.  I can be reached at mike and a dot and my last name (note – just one “m” in my last name) and the whole thing is at gmail.com.

 

Updated about fifteen minutes after original posting.  Figures 3 and 4 needed an additional significant digit on the Y-axis.

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Graduation 2010 – Daviess County, KY

An acquaintance was talking about a program called Graduation 2010 which was implemented in public schools in Daviess County, KY (total county population just south of 100K). Here’s an article from 2003:

Michelle Hancock doesn’t need to read brain research books. She reads her children.

One got in on the start of an experimental brain-building program in Owensboro, Ky., and one only experienced part of it.

Eleven-year-old Adam Hancock is in the first target class. He’s due to graduate in 2010. The program started when he was in kindergarten with special brain research-based programs in foreign language, music, art, exercise and chess. He knows some Spanish words, he reads music, he plays chess — and his brain just works differently from his older sister Tori’s, says Hancock.

“Adam is much more of a planner than his sister. He has got to know what he’s doing ahead of time. He thinks things over, then makes his move,” his mother says.

“It could be just a difference in personalities, but I have to think the chess has something to do with it.

“He’s getting things that Tori wasn’t exposed to. When kids are younger, that’s when their brains supposedly absorb like sponges.”

The article goes on:

That research is infused into the Daviess County school system’s classes, creating what internationally recognized author and brain-based education consultant David Sousa calls “a lighthouse district” among the nation’s schools.

Sousa, author of “How the Brain Learns,” served as a consultant to the school district. He spoke at community meetings, helped train teachers and has watched the program progress.

“It’s a well-organized, well-thought-out plan that’s been working for six years now,” he says. “We’re beginning to see more schools changing their programs (to reflect brain research), but Daviess County was one of the first.”

The program emphasizes major research areas in brain/education science: the well-accepted “window of opportunity” for foreign language learning that closes around age 12, the connection between making music and ability in mathematics, and the development of what Sousa calls higher order problem solving using chess and other challenging games and teaching methods.

It also incorporates a fitness program and expanded arts programs including dance and professional performances.

There’s a strong emphasis on parent involvement and a program wherein corporations adopt a class for those students’ full 13 years in school, acting as mentors, and participating in class-room and community projects with the students.

Every Daviess County teacher has received brain-based training.

From kindergarten on, children are exposed to nongraded Spanish language lessons, music and keyboard labs, dance and chess lessons to encourage critical thinking skills.

“I see a difference in the way these children respond to learning, and children 10 years ago,” Stacy Harper says. “These students are much more involved in their learning process.”

She’s read about the brain research findings, but the students prove it every day, she says.

“You can see, they’re developing those connections. We do Spanish videos two or three times a week, and we’re learning together. It’s so much easier for the kids to learn Spanish than for me as an adult. Now is the opportunity for them.”

Children who learn early increase their learning capacity forever, says Daviess County Superintendent Stu Silberman. That’s a staggering concept that educators can’t afford to ignore, he added.

Sadly, I have found very little on this program online. The name of the program doesn’t help: “Graduation 2010” is a bit too generic. Nevertheless, it is hard to escape the conclusion that if the program did work, it would be touted more widely. So it probably didn’t work. (Note: the state of KY did experience a large increase in graduation rates from 2010 to 2013, but since Daviess County is so small I imagine the two facts are largely unrelated.)

Anyway, since I have a school-aged child, I have started paying more attention to children’s education. An awful lot of well-meaning and and logically-sounding ideas and concepts seem to have been tried over the years, only to be overtaken by the next generation of ideas and concepts. Other than parental involvement, time and effort, have any of these new approaches rolled out by the educational complex really helped? (This is a question, not a statement.)

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Issues Affecting Economic Growth – Gored Oxen Edition

I write about issues I believe affect economic growth. For example, over the years, I have written a lot about taxes. And here’s a simple graph showing why:

Tax Rates v Growth in Real GDP per capita

What we see is that tax rates at any given time seem to be related to the growth rate of real GDP per capita over the next decade. What is more, the correlation is positive. That is to say, growth tends to be faster when tax rates are higher, and not lower. This of course contradicts popular belief, particularly among Republicans. However, since economic growth is important for the quality of life of all Americans, getting this right matters. Unfortunately, over the past few decades, government policy has gradually moved us in a direction that inhibits growth.

Of course, it could be the relationship between tax rates and future growth shown in the graph is a spurious correlation. But that is unlikely, since it is very easy to explain why (up to a certain point) higher tax rates would lead to faster economic growth. Additionally, even people who get the direction of the correlation wrong are certain a correlation is there. But… if it ever does turn out that the relationship is spurious, we won’t find that out by keeping our head in the sand.

Another topic I have been writing on a lot lately is immigration. Here’s what a graph looking at the foreign born population in certain years and the growth rate of real GDP per capita over the next ten years:

Foreign Born Population v. Growth in Real GDP per capita

The correlation between the share of the population that is foreign born and the growth rate is negative, which indicates that as the foreign born share rises, growth falls. The correlation between these two variables, at least in the post WW2 era, is stronger than the correlation between tax rates and growth. This of course contradicts popular belief, particularly among Democrats. However, since economic growth is important for the quality of life of all Americans, getting this right matters. Unfortunately, over the past few decades, government policy has gradually moved us in a direction that inhibits growth.

Of course, it could be the relationship between the percentage of the population that is foreign born and future growth shown in the graph is a spurious correlation. But that is unlikely, since it is very easy to explain why (up to a certain point) having less immigration would lead to faster economic growth. Additionally, even people who get the direction of the correlation wrong are certain a correlation is there. But… if it ever does turn out that the relationship is spurious, we won’t find that out by keeping our head in the sand.

If it seems to you that I have written almost exactly the same thing about taxation and immigration, it isn’t your imagination.  I did a copy and paste of a big chunk of the first half of the post to the second half and changed a few words.  The fact is, the analysis is very similar. The only difference is whose ox is getting gored. A grown up is willing to look the data in the eyes and follow it where it goes.

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Culture Matters – Oil Curse Edition

The concept of the so-called Oil Curse is that countries that have an abundance of oil tend to be basket cases – undemocratic, kleptocratic, and poorly developed.  The Oil Curse is a special case of of what is sometimes called the Resource Curse.

Of course, not every country rich in oil has suffered from the Oil Curse.  Norway is a prime example of a nation that has benefited greatly from finding oil, but it is almost the exception that proves the rule.

On the other hand, if you think about it more broadly, there are plenty of other exceptions.  The big one is England.  Historians seem to think one of the reasons that the Industrial Revolution began there is because England had plenty of easily accessible coal and iron.  Which is to say, England struck oil, or at least the 18th century version of it.  Similarly, the oil boom that began in Titusville, PA around 1860 did great things for the US economy.

So what causes oil to be a curse for some countries but a boon to others?  One explanation commonly brought up is exploitation, particularly by Western oil companies.  I am no historian, but I don’t think this is right.  Many of the Oil Curse countries chose to go it alone, though some did so after expropriating the initial investments made by foreigners.

I think countries that appear to fall prey to the Oil Curse or any other Resource Curse don’t actually do so.  Instead, they are basket cases before the discovery of whatever resource, and they remain basket cases after.  On the other hand, countries that have functional economies that encourage innovation tend to find stumbling upon a resource to be a blessing.

Put another way…  having a culture that is conducive toward positive outcomes matters a lot.  And it seems to me that England on the verge of the Industrial Revolution, the US before 1860, and Norway before it stumbled on oil have a lot, culturally in common.  And the cultural traits those three cases have in common don’t seem to be shared by Oil Curse countries.

As I keep pointing out, the data shows that culture is a strong determinant of economic outcomes..

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Immigration, Democrats, Republicans and the NY Times

Tom Cotton, the junior United States Senator from Arkansas had a piece in the NY Times:

President-elect Trump now has a clear mandate not only to stop illegal immigration, but also to finally cut the generation-long influx of low-skilled immigrants that undermines American workers.

Yet many powerful industries benefit from such immigration. They’re arguing that immigration controls are creating a low-skilled labor shortage.

“We’re pretty much begging for workers,” Tom Nassif, the chief executive of Western Growers, a trade organization that represents farmers, said on CNN. A fast-food chain founder warned, “Our industry can’t survive without Mexican workers.”

These same industries contend that stricter immigration enforcement will further shrink the pool of workers and raise their wages. They argue that closing our borders to inexpensive foreign labor will force employers to add benefits and improve workplace conditions to attract and keep workers already here.

I have an answer to these charges: Exactly.

Higher wages, better benefits and more security for American workers are features, not bugs, of sound immigration reform. For too long, our immigration policy has skewed toward the interests of the wealthy and powerful: Employers get cheaper labor, and professionals get cheaper personal services like housekeeping. We now need an immigration policy that focuses less on the most powerful and more on everyone else.

Wasn’t this the Democrat’s position not long ago? When and why did that change?

 

Update…

1.  If it isn’t clear, Cotton is a Republican

2. The bolded section was part of Cotton’s piece, but I chose to bold it as I felt it was worth a special highlight.

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