The Monkey Cage

Ultimately, any attempt to simplify lobbying as either fundamentally influential or not influential misses a very basic point: lobbying is a process, a conversation, a multi-dimensional chess game that sometimes never ends.

That’s political scientist, and former Monkey Cage guest-blogger Lee Drutman, over at the PPI blog, Progressive Fix. He is responding to this NY Times blog post about the book Lobbying and Policy Change, by Frank Baumgartner, Jeffrey Berry, Marie Hojnacki, David Kimball and Beth Leech.

See the whole post.

Posted by John Sides at 09:25 PM | Permalink | Comments (0)

The above graph comes from Adam Bonica, a Ph.D. student in political science at NYU. Using political donations to estimate ideology, Bonica plots the ideological distribution of the members of various corporate boards. He writes:

These results challenge conventional beliefs about the political leanings of corporate leaders. Republicans have long been seen as the party of big business. To whatever extent this label should apply, it probably owes more to the party’s policies than the composition of its support base. Although board members from some sectors exhibit conservative allegiances—notably the oil, gas, and coal industries—most corporate boards are either dispersed across the ideological spectrum, or seem to have aligned with the left, as is the case of many of the growth stories of the new economy.

He then offers two hypotheses about the effects of Citizens United. Here is one:

Republicans will not be the clear beneficiaries of Citizens United.

See his post here.

Posted by John Sides at 09:30 AM | Permalink | Comments (1)

We examine the role of political factors in affecting quality of life in the context of the American states. In particular, we ask whether the choices made by voters, as manifested by the governments they elect, and the subsequent public policy regimes those governments establish, determine the degree to which individuals find their lives satisfying. We find that the different ideological and partisan orientations of state governments, as well as a state’s pattern of public policies, have strong effects on satisfaction with life, net of economic, social, and cultural factors. The more a state attempts to insulate citizens against market forces, the greater is satisfaction.

That is from a newly published paper by Ángel Álvarez-Díaz, Lucas González and Benjamin Radcliff. They find that Americans report more satisfaction with their lives when they live in states that have (1) more transfer payments from government to citizens, per capita; (2) more regulation of markets; (3) more liberal state governments; and (4) more Democratic state governments. The analysis controls for state population, income, racial diversity, and social capital; it also addresses concerns that “satisfied” states simply pass more liberal policies. The authors do not attempt to determine directly which of the 4 measures of policies and politics is the more important — i.e., by including them in the same model — but the evidence suggests that policies matter more. Finally, there is some evidence that the effects of these policies and political arrangements are somewhat larger for poorer citizens, although these effects are present even among the wealthiest.

The authors are cautious about drawing normative conclusions from their results:

…they do not provide any overall judgment on whether generous welfare policies are good or bad; whether liberal or conservative, Democratic or Republican, governments are superior; or whether, in sum, human life is best served by the state taking an expansive or minimal role in economic management. These questions are inherently both normative and ideological. As such, they do not have empirical “answers.” We make no pretense of offering any.

They do argue that their evidence means that “politics matters,” in that it affects subjective assessments of how good life is.

Find the article here (gated) or here (ungated pdf).

Posted by John Sides at 10:36 AM | Permalink | Comments (2)

Interpreting frustration over lack of urgency over economic stagnation.

Posted by Andrew Gelman at 10:17 AM | Permalink | Comments (0)

Over here in Europe, the big news in addition to the British Election is the continuing saga of the Greek Debt Crisis. The latest update involves a massive 110 billion Euro rescue package from the EU and the IMF, which may or may not stem worries about Greek default.

One question that always comes up in these types of situations is why not just let the country in question default? The answer, of course, is the dreaded contagion. If Greece defaults, will Portugal and Spain be next? What will happen to the rest of the Eurozone countries? But another way of thinking about contagion involves thinking about exactly who loses money if Greece defaults on its debt obligations. And in this respect, the following figure that appeared in the NY Times over the weekend is especially illustrative, and, in a way, frightening:

So when France and Germany make sure that Greece can pay its debt, they are also rescuing, well, France and Germany. Also makes it clear exactly how contagion could work in practice.

[Hat tip to Athanassios Roussias.]

Posted by Joshua Tucker at 08:56 AM | Permalink | Comments (6)

That is one way to interpret the evidence from a new paper (ungated) by Lawrence Broz on partisan financial cycles, presented at a conference in honor of Peter Gourevitch. The abstract is below:

Financial cycles of boom and bust are as old as finance itself—a fact that has led some observers to infer that human nature may be a fundamental cause of financial cycles. But “politics” also influences financial cycles by way of government policies and regulations. I argue that policies and regulations vary predictably with the partisan character of the government, creating a partisan-policy financial cycle in which conservative, pro-market governments preside over financial booms while left-wing governments are elected to office after crashes. My sample consists of all bank-centered financial crises to hit advanced countries since World War II, including the current “Subprime” crises—a total of 27 cases. I find that governments in power prior to major financial crises are more likely than the average OECD country to be right-of-center in political orientation. I also find that these governments are more likely than the OECD average to be associated with policies that predict crises: large fiscal and current account deficits, heavy borrowing from abroad, and lax bank regulation. However, once a financial major crisis occurs, the causal arrow flips and government partisanship becomes a consequence of crises. I find that the electorate moves to the left after a major financial crisis, and this leftward shift is associated with changes in government partisanship in that direction

Update: See more analysis on the FT blog.

Posted by Erik Voeten at 03:32 PM | Permalink | Comments (2)

Thomas Ferguson and Jie Chen wrote an article tying the recent Massachusetts Senate election to national political trends:

Passage of the health care reform bill has convinced some analysts that the Massachusetts Senate election might be a fluke. In fact, polls taken after the legislation passed show Republicans widening their lead in fall congressional races. This paper takes a closer look at the Massachusetts earthquake. It reviews popular interpretations of the election, especially those highlighting the influence of the “Tea Party” movement, and examines the role political money played in the outcome. Its main contribution, though, is an analysis of voting patterns by towns. Using spatial regression techniques, it shows that unemployment and housing price declines contributed to the Republican swing, along with a proportionately heavier drop in voting turnout in poorer towns that usually provide many votes to Democratic candidates. All these factors are likely to remain important in the November congressional elections.

Continue reading "1, 2, 3, Many Tea Parties?" »

Posted by Andrew Gelman at 04:26 PM | Permalink | Comments (0)

Dave Armstrong writes:

I [Armstrong] recently written a blog post that might be of interest to the Monkey Cage readers concerning the recently released Heritage Foundation Index of Economic Freedom — specifically what they did wrong methodologically and how they could fix it with some original analysis of their data and re-examination of their key conclusions.

Armstrong writes:

Recently, the Heritage Foundation released its 2010 Index of Economic Freedom. No doubt, in the interest of replicability and transparently, Heritage released all of the data required to produce all of their indices. . . . Heritage employs a simple method of using multiple measurements to get a better sense of what is happening with economic freedoms around the world. Their main conclusions are that Hong Kong and Singapore still top the list of most economically free countries and that the US is rapidly and significantly losing economic freedom as it falls out of the seven top “free” economies.

But then:

I [Armstrong] argue that these findings don’t tell the whole story. When a more appropriate model is used to estimate economic freedom, Denmark and New Zealand are found to be the two most free economies and the US, while significantly less free than these top two economies, is not significantly different from the any of the other top 20 economies. While I find that the US does have a lower score this year than last, it is not a statistically significant drop (i.e., from a statistical point of view, economic freedom in the US is not different in 2010 than it was in 2009). In fact, none of the top 20 most free economies is significantly more or less free in 2010 than they were in 2009.

I haven’t read Armstrong’s blog in detail, nor have I seen the Heritage Foundation Index before, but I like the idea of taking this sort of index apart and understanding how it works. Those of you who are interested in this topic can follow up from here.

Posted by Andrew Gelman at 06:46 PM | Permalink | Comments (9)

A new Economist/YouGov poll asked people “If government spending is reduced in order to balance the budget, which of the following government programs should receive lower federal funding than they currently do?” Respondents could check all that apply.

Not surprisingly, as Kevin Drum noted, few people wanted to cut most programs. The exception was foreign aid, which, as The Economist pointed out, makes up a tiny fraction of the budget. Jon Bernstein is skeptical that people would be that opposed to foreign aid if they knew where it went (e.g., a significant chunk to Israel).

I want to suggest that the problem goes even deeper. The programs that make up the largest share of the federal budget are typically the ones that the fewest people want to cut. Consider this graph, in which I attempted to match most of the YouGov categories to a plausible counterpart in Obama’s FY 2010 budget proposal. (I drew on additional stories for information about the budgets for health research and highways. Foreign aid is estimated at 0.5% of the budget.) Of course, Obama’s budget proposal is not the ultimate budget, but the comparison between it and the poll is still instructive:

As you move downward, into categories of spending that are increasingly popular, you get to the largest federal programs, particularly entitlement spending. Really, there is only one area of federal spending — national defense — that is sizable and that even a modest fraction (22%) is willing to cut.

In fact, there is a negative relationship between the budgetary share allocated to a policy area and the fraction who want to cut it. The correlation coefficient between the poll percentages and the budget percentages is -.33 (with or without the obvious potential outlier, foreign aid, included).

If Americans are forced to be specific, their recipe for cutting federal spending would do little to reduce spending.

UPDATE: Annie Lowrey had the same idea.

[Hat tip to Matt Dhaiti for sending me the poll.]

Posted by John Sides at 10:08 AM | Permalink | Comments (20)

Monkey Cage reader Ken Wedding forwarded me this post at The Economist, which piggybacks on Jeff Frankel’s post noting that states where majorities voted for McCain in 2008 received more federal spending per tax dollar in 2005 than did states where majorities voted for Obama. I re-did Frankel’s graph to rely on the actual spending per dollar rather than the state’s rankings, as Frankel did. (For more on why rankings are flawed, see here.)

The question is what this graph tells us, if anything. Here is The Economist:

This leads to situations where states that absorb huge amount of government aid (particularly for agriculture) are hotbeds of Tea Party activity, where voters decry the heavy boot of the federal government on their backs. It’s tempting to make this a huge gotcha point and slam Tea Partiers for cognitive dissonance, but the holding of conflicting beliefs is one of America’s deepest and most common traditions.

And so we add another chapter in this blog’s history of pointing out the ecological fallacy. Once again: from aggregate data, we have absolutely no evidence of whether any individual — whether a Tea Party supporter or not — holds “conflicting beliefs.” Perhaps the vast majority of residents of these states have entirely consonant beliefs: they supported McCain and oppose spending, or support both Obama and spending.

No one is revealed as a hypocrite by this sort of analysis.

Posted by John Sides at 11:39 AM | Permalink | Comments (3)

Instead, the Greek crisis turned into a three-part opportunity for Germany: The country has dramatically boosted its exports thanks to a weak euro, a German is now the front-runner to head the European Central Bank, and it can now justify cracking the whip on the rest of the Eurozone — the group of nations that use the euro.

So conclude Thomas Meaney and my GW colleague Harris Mylonas, writing in the Los Angeles Times. They are a bit bullish on the long-term consequences of the Greek crisis:

What hasn’t yet shattered the EU just might make it stronger.

Find their piece here.

Posted by John Sides at 11:13 AM | Permalink | Comments (1)

Matthew Yglesias points to an interview in which O.G. blogger Mickey Kaus says that, until recently Slate magazine paid him “in the mid-90s.” As Yglesias points out even $80,000 a year is a lot to be paid to write 3-4 blog entries per week. I’m torn between two possibilities:

1. It’s the old-boy’s network. Kaus is friends with Michael Kinsley etc. and they hired him on at a big salary because that’s what friends are for.

2. Kaus really is worth it: some analysis of hits reveals that he’s actually bringing in $80,000 worth of readers each year.

I guess #2 is probably correct—Slate is a web-business, after all. I’m reminded of the dictum that the most effective strategy for being a successful blogger is to have started blogging before the end of 2003. (Before that point, the blogosphere was small enough that everybody linked to everybody else.)

The other thing that Yglesias’s note made me realize was how much of a bubble I live in. $80,000 sounds like so little that I wondered where Kaus gets the rest of his income. Really, though, lots of people are doing just fine on less than $80/year. Kaus actually wrote a book many years ago arguing that, rather than aiming for equality of incomes, we should aim for a society in which you can live comfortably without a lot of money.

Posted by Andrew Gelman at 04:20 AM | Permalink | Comments (10)

I’ve only met Eliot Spitzer once, back when he was the state Attorney General. I was part of a group presenting the findings of a study of racial patterns of police stops in the city. (See here for a writeup of our findings.) Spitzer asked a few questions during the meeting, and I was impressed by his intelligence. Maybe that’s how people feel after meeting Bill Clinton, I dunno.

Recently, I had an opportunity for another interaction with Spitzer, this time indirectly, when Sarah Binder, John Sides, and I wrote a brief discussion of an article he wrote in the Boston Review on government’s proper role in the market. Spitzer argues for a clearer definition of the role of government as a setter and enforcer of rules in the financial marketplace; as he puts it, “even though private companies compete, only government can ensure that there is competition. Everybody in business wants to be a monopolist. There’s nothing wrong with wanting more market share. That’s how you make money.” He has lots of good stories:

When an investment bank does an IPO, and the IPO is hot—the stock is going to jump on that first day of sale—they give some of these hot stocks to the CEOs of their clients. Why? To keep them happy, so they stay as clients. As attorney general I said that should not be permitted; it violates the fiduciary duty of the CEO to the company. If the investment bank wants to give away something of value to keep a company as a client, it should give it to the shareholders, not the CEO. There’s an uglier term for spinning: commercial bribery. In 2002 we negotiated a global deal and outlawed it. People got outraged. One extremely powerful regulator today, a Peter-Principle-on-Steroids survivor, asked me then, “Don’t CEOs have any rights anymore?”

Spitzer makes a pretty convincing case that the current system (in which rich dudes pass multibillion dollar favors back and forth to each other) isn’t good. I mean, sure, we all help out our friends, but I think there’s a difference between giving your brother-in-law the contract for paving your parking lot, and these big-money financial deals.

I think the conservative argument against Spitzer’s position would be that, sure, it would be great to have an impartial referee but that, realistically, the government is itself a special interest, and that in the economic realm businesses might need more protection from the government than from each other. I’m guessing that, in response to this particular argument, Spitzer might say that, yes, government corruption (or simply inefficiency or even well-meaning but obstructive regulations) are indeed a concern, but that such concern can best be addressed by more clearly defining the role of government intervention in the financial system, rather than by first denying such a role and then rushing in with the occasional trillion-dollar bailout.

Continue reading "My second interaction with Eliot Spitzer" »

Posted by Andrew Gelman at 10:00 AM | Permalink | Comments (2)

Brendan Nyhan links to this hilariously bad graph from the Wall Street Journal:

It’s cute how they scale the black line to go right between the red and blue lines, huh? I’m not quite sure how $7.25 can be 39% of something, while $5.15 is 10%, but I’m sure there’s a perfectly good explanation . . .

Follow the above link for more details. As Brendan notes, the graph says essentially nothing about the relation between minimum wage laws and unemployment (“Any variable that trended in one direction during the current economic downturn will be correlated with the unemployment rate among teens or any other group.”) and he also helpfully graphs the unemployment trends among the general population, which has a similar upward trend.

This is not to say that increases in the minimum wage are necessarily a good idea—that’s not my area of expertise. I’m talkin here about a horrible graph—all the worse, I fear, because of its professionalism. The above graph looks legit—it has many of the visual signifiers of seriousness, looking similar to a newsy graph you might see in the Economist, rather than like a joke graph of the sort identified with USA Today and parodied so well by the Onion.

P.S. I have no problem with the use of a crisp graph to make a political point; see for example here or here.

Posted by Andrew Gelman at 07:02 AM | Permalink | Comments (1)

Matthew Yglesias rightly writes that:

politicians who claim that if it were up to them they would provide bailout-free governance are just lying.

Most of us would agree that a commitment by politicians never to bail out debtors is not credible. But is this a bad thing? A 2002 article by Patrick Bolton and Howard Rosenthal (my dissertation advisor) in the Journal of Political Economy argues that the opposite is true: under a wide range of conditions it is both ex ante and ex post efficient to allow a political process to determine if and when bailouts occur. The article is mostly motivated by the Panic of 1819 but has some interesting implications for the more recent bailouts.

Continue reading "The Efficiency of Political Bailouts" »

Posted by Erik Voeten at 01:56 PM | Permalink | Comments (0)

Among the many interesting papers presented at the PEIO conference last week was a paper by Lawrence Broz and Daniel Maliniak on the effect of malapportionment on gasoline taxes and support for climate change policies. Malappportionment results in the overrepresentation of rural voters in political systems. The U.S. system (especially the Senate) is unusually bad in this regard but many electoral systems around the world have this effect. Compared to urban voters, rural voters in industrialized countries drive more and thus have a greater preference for low gasoline taxes. Broz and Maliniak show that gasoline prices are indeed lower when rural voters are overrepresented. Moreover, they show that rural overrepresentation lessens support for the Kyoto Treaty. Here is the full paper.

Posted by Erik Voeten at 06:39 AM | Permalink | Comments (0)

This paper shows that people’s optimism towards financial markets and the overall economy is dynamically influenced by their political affiliation and the existing political climate. Republicans (Democrats) are more optimistic and they perceive the markets to be less risky and more undervalued when the Republican (Democratic) party is in power. These optimism shifts are more pronounced among individuals with lower financial sophistication. Further, when the opposite party is in power, investors lower their forecasts of market returns, keep own portfolio return forecasts unchanged and, therefore, appear more overconfident. These shifts in optimism, overconfidence, and perceptions of risk and reward influence people’s investment decisions. Specifically, investors with a pessimistic view of the domestic economy exhibit strong propensity to invest in foreign stocks and in the domestic setting, they gravitate toward less risky, familiar local stocks and trade more actively. Investors improve their raw portfolio performance when their own party is in power, but the improvement in risk-adjusted performance is economically small.

The paper is by Yosef Bonaparte, Alok Kumar, and Jeremy K. Page (here). Hat tip to this NY Times article. Some of these findings depend on categorizing investors based as Republican or Democrat based on the political leaning of the counties in which they lived. That is obviously imprecise, although not necessarily fatal. The results struck me as substantively small in magnitude — e.g., when the Democrats controlled the White House, Republic portfolios had a 9% greater foreign stake compared to Democratic portfolios. Similarly, in-party portfolios manifested 1.3% higher levels of risk and — based in part on higher trading in out-party portfolios — 2.7% better performance. But substantive significance is sometimes specific to the topic, and I profess no knowledge of this one.

Posted by John Sides at 09:10 AM | Permalink | Comments (1)

One does not normally expect to find a political scientist in the midst of a debate within the pages of the prestigious British medical journal The Lancet. Yet that is exactly where Scott Gehlbach of UW-Madison and co-author John Earle of the Upjohn Institute find themselves at the moment. Here’s the background (from materials posted at the Upjohn Institute):

Was mass privatization a “crucial determinant” of the increased mortality in postcommunist societies during the 1990s? This claim appears in a recent article [by David Stuckler, Lawrence King, and Martin McKee] in the British medical journal Lancet. The article shows a positive correlation between the extent of enterprise privatization and the adult male mortality rate using country-level data for 15 economies of the former Soviet Union.

The results of this study were widely reported in the mass media (see for example here, here, and here), including articles with titles such as Privatization Killed a Million People in Eastern Europe.

If true, the claims made by the article are profoundly important, both for assigning blame for suffering in the past but also as a guide to potential policy-making in the future. With that in mind, Gehlbach and Earle set out to examine the robustness of the findings in the original article. Their conclusion:

[Our] analysis shows that the estimated correlation of privatization and mortality in country-level data is not robust to recomputing the mass-privatization measure, to assuming a short lag for economic policies to affect mortality, and to controlling for country-specific mortality trends. Further, in an analysis of the determinants of mortality in Russian regions, the analysis finds no evidence that privatization increased mortality during the early 1990s. Finally, reanalysis of the relationship between privatization and unemployment in postcommunist countries shows that there is little support for the Lancet article’s proposed mechanism by which privatization might have increased mortality.

The full letter to the editor by Gehlbach and Earlecan be found here. You can get the response of the authors to the Gehlbach and Earle criticque on the Lancet website (you have to register for access first, but it is free). You can also find the full paper by Gehlbach and Earle here; more information, including a press release is available here.

A few quick comments in response. It seems clear that the claims in the original Lancet article are not robust to the re-specifications proposed by Gehlbach and Earle. Thus the debate shifts to the question of whether these are “legitimate” robustness tests, and here there seem to be two big questions in play (and I would welcome comments from readers of the Monkey Cage on both of these points) leaving aside some coding disagreements between the two sets of authors. First, Stuckler, King, and McKee argue that in “in a situation where mortality rates were undergoing fluctuations that were unprecedented in a peacetime era” it is inappropriate to add control variables that attempt to pick up other aspects of mortality time trends across the different countries. Gehlbach and Earle argue that the original specification assumes these trends are constant across all countries, and then present data to show that this was not in fact the case. Second, Stuckler, King, and McKee argue that the best specification for testing a relationship between privatization and unemployment is to use measures from the same period of time, justifying this on the grounds that “given evidence that workers’ stress rose in anticipation of privatisation, adverse causal effects could have occurred in the period before privatisation”. Thus, they argue, the findings do not need to be robust to re-estimation with one and two year lags in the effect of mass privatization.

[In the interest of full disclosure, Gehlbach is a friend of mine and I had the opportunity to see his research presented while in progress at an academic conference this summer.]

*****

Update: I originally posted this without the link to the full Gehlbach and Earle paper. This has now been corrected in the text above, and is also available here.

Posted by Joshua Tucker at 05:32 AM | Permalink | Comments (3)

We all know, following the research of Rosenstone, Hibbs, Erikson, and others, that that economic conditions can predict vote swings at state and national levels.

But, what about the reverse? Could we deduce historical economic conditions from election returns? Instead of forecasting elections from the economy, we could hindcast the economy from elections.

Would this make sense as a way of studying local and regional economic conditions in the U.S. in the 1800s, for example? I could imagine that election data are a lot easier to come by than economic data.

P.S. Don’t forget that there have been big changes over time in our impressions of the ability of presidents to intervene successfully in the economy.

Posted by Andrew Gelman at 11:52 AM | Permalink | Comments (0)

A major storyline of the 2008 election was that it was the Great Depression all over again: George W. Bush was the hapless Herbert Hoover and Barack Obama was the FDR figure, coming in on a wave of popular resentment to clean things up. The stock market crash made the parallels pretty direct. One could continue the analogy, with Bill Clinton playing the Calvin Coolidge role, mindlessly stoking the paper economy and complicit in the rise of the stock market as a national sport. Public fascination with various richies seemed very 1920s-ish, and we had lots of candidates for the “Andrew Mellon” of the 2000s. Obama’s decisive victory echoed Roosevelt’s in 1932.

But history doesn’t really repeat itself—or if it does, it’s not always quite the repetition that was expected. With his latest plan of a spending freeze (on the 17% of the federal budget that is not committed to the military, veterans, homeland security and international affairs, Social Security, and Medicare), Obama is being labeled by many liberals as the second coming of Herbert Hoover—another well-meaning technocrat who can’t put together a political coalition to do anything to stop the slide. Conservatives, too, may have switched from thinking of Obama as a scary realigning Roosevelt to viewing him as a Hoover from their own perspective—as a well-meaning fellow who took a stock market crash and made it worse through a series of ill-timed government interventions.

I can see the future debates already: was Obama a Hoover who dithered while the economy burned, too little and too late (the Krugman version) or a Hoover who hindered the ability of the economy to recover on his own by pushing every button he could find on the national console (the Chicago-school version)?

In either storyline, it’s 1930, not 1932: rather than being three years into a depression, we’re still just getting started and we’re still in the Hoover-era position of seeing things fall apart but not quite being ready to take the next step.

Anyway, I’m not claiming to offer any serious political or economic analysis here, just pointing out that the 1932 election was a full three years after the 1929 stock market crash, so Obama’s stepping into the story at a different point than when Roosevelt stepped in to his.

Or maybe we’re still on track for Obama to “do a Reagan,’ ride out the recession in the off-year election and sit tight as the economy returns in years 3 and 4.

Posted by Andrew Gelman at 11:44 AM | Permalink | Comments (1)

Yes, according to a new NBER study by Bryan Bollinger, Phillip Leslie, and Alan Sorensen (h/t Eric Lawrence). Here is their paper, which has pretty straightforward implications for policy and Fat Politics:

We study the impact of mandatory calorie posting on consumers’ purchase decisions, using detailed data from Starbucks. We find that average calories per transaction falls by 6%. The effect is almost entirely related to changes in consumers’ food choices—there is almost no change in purchases of beverage calories. There is no impact on Starbucks profit on average, and for the subset of stores located close to their competitor Dunkin Donuts, the effect of calorie posting is actually to increase Starbucks revenue. Survey evidence and analysis of commuters suggest the mechanism for the effect is a combination of learning and salience.

Posted by Erik Voeten at 11:37 AM | Permalink | Comments (2)

Alex Tabarrok has posts on the amusing story of Westerners overestimating the Soviet economy. For example, here’s a graph from the legendary Paul Samuelson textbook (from 1961):

Tabarrok points out that it’s even worse than it looks: “in subsequent editions Samuelson presented the same analysis again and again except the overtaking time was always pushed further into the future so by 1980 the dates were 2002 to 2012. In subsequent editions, Samuelson provided no acknowledgment of his past failure to predict and little commentary beyond remarks about ‘bad weather’ in the Soviet Union.”

The bit about the bad weather is funny. If you’ve had bad weather in the past, maybe the possibility of future bad weather should be incorporated into the forecast, no?

As Tabarrok and his commenters point out, this mistake can’t simply be attributed to socialist sympathies of the center-left Samuelson: For one thing, various other leftist economists did not think that the Soviets were catching up to us; and, for another, political commentators on the right at the time were all telling us that the communists were about to overwhelm us militarily.

I don’t really have anything to add here, I just agree with Alex that it’s a funny graph.

Posted by Andrew Gelman at 11:24 AM | Permalink | Comments (0)

As Luca Masters points out in the comments below, it has been a pretty good decade for Africa in economic terms. Below is a chart that sketches average GDP per capita growth. This is a lazy graph created with Wolfram alpha. Much cooler animations could be created with the incomparable gapminder that would show how unusual this uptick in African GDP really is (although I must admit that I find their bubble animations not always so useful for interpreting trends).

ps. Note also that this is the average (mean) not the median GDP per capita in Africa and that I am a little unsure about the precise sources (the graph looks a little too good to be true). There is no doubt about the message of a positive trend, though.

Posted by Erik Voeten at 07:53 PM | Permalink | Comments (0)

Last year we had a (by Monkey Cage standards) vigorous debate about Michael Ross’ American Political Science Review article “Oil, Islam, and Women.” Ross argued that poor progress towards gender equality in the Middle East was caused not so much by the region’s Islamic traditions as by its preponderance of oil. The argument goes as follows. Oil tends to crowd out other exports, especially manufacturing. Manufacturing demands large numbers of low wage workers and has been the primary source for increased female non-farm labor participation in countries across the globe. Moreover, manual jobs in the extraction of natural resources are male-dominated. Increased female labor participation has in turn been the stepping stone for greater political representation and equal rights. Ross demonstrates that within the Middle East oil-poor countries (like Morocco and Tunisia) have relatively better records on gender equality than oil-rich countries. Outside the Middle East oil-poor countries also tend to do better in this regard.

It has not taken long for proponents of the cultural approach to respond. SSRN has two working papers that both apply multi-level modelling to World Values surveys to show that islam, not oil, correlates with variation in opinions about gender equality across countries. Attitudes towards gender equality, in turn, shape whether women achieve equal rights and leadership positions, such as elected office. (one paper is by Amy Alexander and Christian Welzel the other one comes from Harvard’s Pippa Norris ) .

I find it difficult to arbitrate between these findings without extensively looking at the data given all the usual difficulties with cross-country research. For example, opinion based studies are limited to the sample of countries in which a World Values Survey was held whereas labor force participation is avaliable for a wider range of countries. Nonetheless, this is a very interesting area of research that I am sure we will here more of.

ADDED 12/14: AK points out that Ross is confronted with several critics (including Norris) in the most recent issue of Politics and Gender.

Disclosure: Michael Ross and I are working on a project together.

Posted by Erik Voeten at 02:31 PM | Permalink | Comments (3)

Chris Blattman promises us a randomized evaluation of Marx v. Smith.

That is Marx’s rather pessimistic view of wage labor. It is from 1891, in Wage Labor and Capital his precursor to Das Kapital. Marxists ever since fear wage labor means earnings are lost, enslavement to capital emerges, and with it a loss in humanity. There are plenty of unsavory factories to worry about in the world. But the Marxist view is difficult to reconcile with the thousands of Africans that line up for the chance at a factory job (when they’re available). A good number of people - maybe most - already farm or have small businesses…Another view is that farming and small business are hard work, risky, unrewarding, and unpleasant. Factories give a steady wage and less risk, at possibly monotonous tasks. But at what cost? Ill health? Or the noble reproductive power lost?

Chris proposes to test to see what the effects of randomized assignment of factory jobs are on applicants’ lives. That sounds like a very interesting project. But the framing is all wrong. This is one of those areas where Marx and Smith are in complete agreement. Marx may say that factory work deadens workers’ creative powers (Smith, as it happens, expresses very similar worries in The Wealth of Nations ). But Marx is insistent that factory work is much, much better than life as a peasant and that capitalism beats the hell out of feudalism. From Marx and Engels’ Communist Manifesto:

The bourgeoisie has subjected the country to the rule of the towns. It has created enormous cities, has greatly increased the urban population as compared with the rural, and has thus rescued a considerable part of the population from the idiocy of rural life.

The “idiocy of rural life” is a nice, punchy description of the conditions that Chris’s newly minted factory workers are likely trying to escape from. There are plenty of leftwing (and rightwing) writers out there who idealize the conditions of peasant farmers, but Marx isn’t one of them. “Tolstoy v. Smith” may work better as a project title, although it is admittedly not as enticing-sounding.

Posted by Henry at 09:24 AM | Permalink | Comments (2)

Curt Yeske sends along this animated U.S. map that shows four years of unemployment rates by county. I’d offer my comments on the graphics, but at this point you all pretty much know what I’m going to say (as in that joke where people refer to jokes by their numbers) so I’ll just cut that part short and let you look at the map.

Posted by Andrew Gelman at 02:01 PM | Permalink | Comments (0)

Willem Buiter on the lessons of Dubai in the Financial Times.

From Dubai to Iceland, Ireland, Greece, Hungary, Italy, Portugal, Spain, Japan, France, the UK and the USA, the sovereign debt burdens have been at current levels during peacetime only on the way down from even higher public debt burdens incurred during wars … The political economy of fiscal burden sharing, inside nations and between nations, will be a major field of enquiry for economists and political scientists during the years to come. I am pessimistic in that regard about countries characterised by deep polarisation and political gridlock. This includes nations as different as Greece and the USA. It is clear that nations whose public debt is mainly denominated in domestic currency and whose central bank is either not very independent or can be make dependent by the government of the day are likely to choose inflation and exchange rate depreciation over default as a way out of fiscal-financial unsustainability. That category would include the USA and, to a lesser extent, the UK. Because the ECB faces 16 national governments and national ministries of finance, the power and independence of the ECB are much greater vis-a-vis any Euro Area member state than the power and independence of any central bank facing a single national government and Treasury. That is regardless of the formal independence criteria laid down in laws, treaties or constitutions.

Pretty interesting - but as far as I am aware, there is very little political science work indeed on the politics of debt to date. The area is wide open for grad students looking for dissertation topics …

Posted by Henry at 09:44 AM | Permalink | Comments (2)

Lane Kenworthy, Yu-Sung Su, and I write:

Income inequality in the United States has risen during the past several decades. Has this produced an increase in partisan voting differences between rich and poor? We examine trends from the 1940s through the 2000s in the country as a whole and in the states. We find no clear relation between income inequality and class-based voting.

This article will appear in a special issue of Social Science Quarterly on the topic of “Inequality and Poverty: American and International Perspectives.” We have some pretty graphs, some of which appeared in the Red State, Blue State book and some of which didn’t.

P.S. “We find no clear relation . . .”: That works great in an academic article but I don’t think we’ll be grabbing the headlines anytime soon.

Posted by Andrew Gelman at 06:46 PM | Permalink | Comments (3)

Here. I have no opinion one way or another on the economic analysis. I just thought it was a funny use of the term “dystopia,” which I usually associate more with Mad Max than with inflation or tax increases. Actually, I thought some economists thought that a bit of inflation was a good thing?

Posted by Andrew Gelman at 09:32 PM | Permalink | Comments (4)

I came across this interesting line in a CNN report yesterday discussing explanations for the July bull market. Here was the basic argument:

With over two-thirds of the S&P 500 having already reported results, profits are currently on track to have fallen 29% versus a year ago, according to earnings tracker Thomson Reuters. Clearly, profits are still suffering amid the recession, but the results were expected to be worse. As of July 1, analysts were expecting year-over-year results to fall more than 35%. Although led by financials, results have been beating expectations pretty much across the board, said John Butters, senior research analyst at Thomson Reuters. . . . “The theme is still that we are seeing an unusually high number of companies beat expectations,” said Butters.

Fair enough. But it was the next line that caught my attention:

Around 74% of companies have beat forecasts, versus the long-term average of 61% (empahsis added) and the all-time record of 73%, reached in the first quarter of 2004.

Now I might be missing something here, but if the forecasters were good at their jobs, shouldn’t the long term average of companies beating forecasts be the same as the long term average of companies doing worse than the forecasts? If we assume that it is impossible to actually get the forecast correct on the nose (e.g., all profits either beat or fall short of the forecasts), then that means 61% of the time companies exceed forecasts and 39% of the time they undershoot them, which is better than a 3:2 ratio. And that’s the most conservative estimate. If companies actually hit the estimates exactly some of the time and beat them 61% of the time, then the ratio could be even higher.

What could account for this systematic bias? Incompetence seems the most benign explanation. What is potentially a little more troubling is if the “industry” knows that what when companies overshoot profit estimates stocks go up and the “industry” benefits, and thus there is some for of systematic pressure on analysts to consistently bias profit estimates downwards to create this effect. I’m sure there is plenty of research out there on this in the financial markets literature, so I’d be interested to hear from someone who knows more about this than I do. But as someone who is used to looking at statistics, this one really jumped out at me.

Posted by Joshua Tucker at 10:57 AM | Permalink | Comments (5)

Greg Mankiw quotes a Tax Foundation report saying:

IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act. Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined. [italics added]

It’s an interesting question what to make of this sort of statistic: the income distribution is more skewed than it used to be, so there are some super-rich people paying a lot of taxes. But what I wanted to focus on here was the shift from “income taxes” to “the tax burden.” This could be misleading.

Posted by Andrew Gelman at 09:43 PM | Permalink | Comments (13)

Well, okay, maybe you — being a “Monkey Cage” reader and therefore an intelligent and well informed person — knew better, but not most people. Here’s what they think:

Earmarks are the motor driving large budget deficits.

Using omnibus legislation instead of regular orders is the real culprit.

“Airdropped” earmarks (those added at the conference stage) are a major problem.

Those are among the three most common bits of conventional wisdom concerning earmarks (though the first one has probably gotten less conventional since Barack Obama so frequently disputed it during his campaign debates with John McCain.) According to Michael H. Crespin, Charles J. Finocchiaro, and Emily O. Wanless, all three of these widely held beliefs are wrong. In the just-released issue of the Berkeley Electronic Press’ Forum, they argue that:

1. Pork barrel spending is a drop in the budgetary bucket. Using data assembled by Citizens Against Government Waste, they show that total federal spending in 2008 due to earmarks was $17.2 billion, compared with discretionary spending (set annually by Congress) of approximately $1.1 trillion, entitlement spending (required by law) of more than $1.5 trillion, and spending on interest of more than $240 billion. Since 2000, pork spending has remained fairly even, while spending in other categories (e.g., defense, medicare/social security) has risen appreciably. Thus, “while increasing levels of pork may be symptomatic of a larger government spending problem, they are not the underlying cause.”

2. Although it just makes sense to blame omnibus appropriations bills for pork (because legislators can hide favored projects and secure approval from others who are doing the same thing, and they don’t have to worry much about getting overridden at higher levels), when all appropriations bills, bill-by-bill and over time, 1997-2008, are examined it turns out that the amount of earmarked money depends very little on whether the bill was part of an omnibus package or not.

3. Although last-second, secretive air-drops are supposed to be a big problem (because they happen behind the scenes without public scrutiny or legislative hearings and add so much to the total bill), the data don’t provide much support for this idea. On average, just 16% of total pork spending has been added at the conference stage. “However reckless the practice, our results suggest it is misguided to blame conference committees for the amount of pork barrel spending – the individual committees in the respective chambers are responsible for the bulk of the earmarks.”

Many earmarks are easy targets of criticism, e.g., the notorious “Bridge to Nowhere” or a $3 million appropriation for a study of bear DNA, as is the entire practice of earmarking, irrespective of the quality (or lack thereof) of the projects that are funding. In reality, though, earmarks are no more than a minor sideshow operating on the fringes of the enormous carnival of the appropriations process. There is considerable irony, then, in watching many of the same members of Congress who posture most vehemently against the rampant waste of earmarks scramble to assert their support for big-bucks defense projects that the Department of Defense itself opposes – projects that in many cases would pour federal dollars into (quelle surprise!) the states they themselves represent. Sounds kinda like pork barrel, doesn’t it?

Posted by Lee Sigelman at 12:32 PM | Permalink | Comments (5)

Steve Teles:

The fundamental point to keep in mind is that this health care debate is not the battle of Armageddon, the health care war to end all wars. It is a large fight in a multi-decade long war. So the question isn’t how to get as much as you can now, because you’ll never get another shot. Health care policy—like all politics—is a game with multiple iterations. … you need to evaluate policy change by two criteria—is the change you’re getting now going to be politically sustainable (that is, will you be able to hold whatever territory you’re gaining) and politically generative (will the changes you’re making now make your side comparatively stronger when the game is played again in the future). … the real bottom line in health care is the structure of the exchanges, rather than the amount of subsidy or the presence or absence of a public plan. …

Consider for comparison purposes the politics of airline deregulation in the 1970s (I’m drawing here on Eric Patashnik’s excellent Reforms at Risk). The strongest opponents of deregulation were the weakest airlines … the first thing that happened when you deregulated prices and routes was that the weakest airlines were pushed to the wall, into bankruptcy. Critically, that meant that they were no longer around to fight to undo deregulation—the policy itself shifted the constellation of interests in a way that was supportive of the new status quo. … The stronger (in the sense of being national and mandatory for the largest number of employers) the exchange is, the more pressure you put on the more marginal, bottom-feeding insurers who depend upon creaming the best risks, or charging huge sums to those who can’t get insurance through large group plans. A strong exchange that gives the upper hand to the largest insurers (whose cost structure is also superior to the smaller firms) will almost certainly kill off a large part of the health insurance industry.

This is well worth comparing with the arguments of Jacob Hacker (see here and here). What is interesting from a political science point of view is that these two claims draw on different mechanisms from the historical institutionalist literature. Hacker is drawing on his own and others’ arguments about the mechanisms underlying institutional change, and suggesting that a public plan that is layered on existing institutions is likely to undermine their appeal over time. Teles, in contrast, is developing on older set of arguments about the relationships between institutions and the interest groups that spring up around them (see Skocpol’s Protecting Soldiers and Mothers and for a general discussion, Paul Pierson’s article “When Effect Becomes Cause”). What is interesting about Teles’ argument (and, I presume, Patashnik’s) is that it reverses the usual claim of this literature, that institutions create interest groups that want to protect them, and instead argues that institutions can eliminate actors who would otherwise oppose them. It will be interesting to see which of these mechanisms prevails (if, indeed, either of them does). The health care debate is shaping up, among other things, as a good test of different approaches to institutional change.

Posted by Henry at 09:34 PM | Permalink | Comments (1)

Stratfor Global Intelligence has a thought provoking article up on their website that puts the US recession in comparative perspective. The article makes a number of interesting claims:

• Despite widespread belief to the contrary, the current recession is only the worst in the US since 1982, not since the 1930s

• Despite the fact that the recession started in the US, it is actually having a far milder effect here than in many other large economies (see table above, from the original article; India and China are noticeable omissions)

• Perhaps most interestingly, the article argues that this is the case because “the American system is far more stable, durable and flexible than most of the other global economies, in large part thanks to the country’s geography ” (emphasis added). Valuable geographic attributes include usable land, its maritime transit system, and very little local competition.

• In contrast, “If in economic terms the United States has everything going for it geographically, then Russia is just the opposite”.

While I was surprised not to see a bit more emphasis on the Russian economy’s reliance on the oil and gas industries — thus the extreme effect that a drop in natural resource prices can have on Russian GDP — the article is an interesting “outside the box” take on the recession and, perhaps more importantly, opportunities for recovering from the recession.

[Hat Tip to The Power Vertical, a fantastic blog that I strongly recommend for Russia watchers.]

Posted by Joshua Tucker at 05:25 PM | Permalink | Comments (5)

For those who aren’t well versed in automotive history (and even for those who are), here is a brief but useful interactive overview of how the giant automaker got where it is today (wherever that is), courtesy of the New York Times website.

Posted by Lee Sigelman at 10:28 AM | Permalink | Comments (0)

A 1930s Chicago Tribune cartoon

[Hat tip to Marc Stern]

Posted by Lee Sigelman at 07:54 AM | Permalink | Comments (1)

Alex Hoffman pointed me to this widely-circulated map comparing the fifty states in something called the Human Development Index:

As Alex points out, the coding of the map is kind of goofy: the states with the three lowest values are Louisiana at .801, West Virginia at .800, and Mississippi at .799, but their color scheme makes Mississippi stand out as the only yellow state in a sea of green.

But I’m concerned about more than that. Is Alaska really so developed as all that? And whassup with D.C., which, according to the table, is #4, behind only Connecticut, Massachusetts, and New Jersey? I know about gentrification and all that, but can D.C. really be #4 on any Human Development Index worth its name?

Time to look behind the numbers.

Continue reading "Debunking the so-called Human Development Index of U.S. states" »

Posted by Andrew Gelman at 12:02 AM | Permalink | Comments (2)

Have a listen

Posted by Lee Sigelman at 07:52 AM | Permalink | Comments (0)

Instead, Dani Rodrik informs us gleefully, it was a guy with a degree from another department altogether.

To start with, AIG trod carefully in the new, scientific universe. Sosin’s idea was to buy financial risk from people who did not want it, then sell the risk to others in a series of “hedges” so that AIG kept the fees but not the risk. If a big organisation wanted to lock in an interest rate, for example, AIG would promise to pay the difference in costs if rates rose, then pass the risk to other parties in separate contracts. Sosin supplied the nerds and the models, AIG supplied the reassurance of its AAA rating, and for a long time the alchemy worked. AIG Financial Products (AIGFP), a unit with 0.3% of AIG’s 116,000 employees, made over $1 billion in profits between 1987 and 1992, a vast sum at the time. But Sosin left. And so did his successor, a mathematician named Tom Savage. When Savage departed in 2001, Greenberg put in charge a man he saw as “smart, tough and aggressive”: the unit’s chief operating officer, Joseph Cassano. The new leader had no background in Frankenfinance; his degree, from Brooklyn College, was in political science.

Posted by Henry at 06:15 PM | Permalink | Comments (2)

International economics is a mystery to me, but the following approach to resolving the global economic slump strikes me as very promising:

It is August. In a small town on the South Coast of France, holiday season is in full swing, but it is the rainy season not much business is taking place. Everyone is heavily in debt. Luckily, a rich Russian tourist arrives in the foyer of the small local hotel. He asks for a room, puts a 100 Euro note on the reception counter, takes a key, and goes upstairs to inspect the room.

The hotel owner takes the banknote and rushes to his meat supplier, to whom he owes E100.

The butcher takes the money and races to his wholesale supplier to pay his debt.

The wholesaler rushes to the farmer to pay E100 for pigs he purchased some time ago.

The farmer triumphantly gives the E100 note to a local prostitute who gave him her services on credit.

The prostitute goes quickly to the hotel, as she owed the hotel for her hourly room use to entertain clients.

At that moment, the rich Russian comes back down to reception, informs the hotel owner that the proposed room is unsatisfactory, takes his E100 back, and departs.

There was no profit or income. But now no one has any debt and the residents of the small town look optimistically towards their future.

[Hat tip to Bob Goldfarb]

Posted by Lee Sigelman at 05:33 PM | Permalink | Comments (9)

One under-appreciated fact of comparative political economy is that the US tax system, for its many faults, is significantly more progressive than the tax systems of ‘continental’ and ‘social democratic’ welfare regimes in Europe. Monica Prasad and Yingying Den find general support for this (PDF) from the Luxembourg Income Study.

Our study supports the general picture that the USA has more progressive taxes than the continental or social democratic countries. The comparative tax picture maps onto the ‘worlds of welfare’ typology, but it is the social democratic states that have the most regressive taxes and the liberal USA that has the most progressive taxes.

More generally, the authors find a broad inverse relationship between tax progressivity and welfare state efforts - the more progressive a country’s taxation system, the less likely that it has an active welfare state, and vice-versa. The causal argument goes that countries with regressive tax systems have found it easier to maintain welfare states against the pressures of globalization, because their tax base rests on a relatively immobile asset - labour. What is interesting though, is that the UK (which one might have thought to be somewhere between the US system and the continental European position, and closer to the former than the latter, is an outlier with more regressive taxes than either standard continental (e.g. France, Germany) or social democratic (e.g. Sweden, Norway) welfare states. The authors suggest that this is a result of Thatcher’s policy of shifting the tax burden away from income to VAT, and speculate that it might fund welfare state expansion in future years. Their argument is that consumption taxes, like taxes on labour, are likely to be relatively unaffected by globalization. Equally interesting (and poorly understood) is that most types of taxes (e.g. income taxes, property taxes etc) are not inherently progressive or regressive (the exception being consumption taxes, which they find to be universally regressive across their sample); also their criticisms of the comparative aspects of Picketty and Saez’s arguments about regressivity.

Posted by Henry at 03:40 PM | Permalink | Comments (3)

Bill Peterson at Chance News reports that Dick Morris writes:

In the last five months, according to the Federal Reserve Board, the money supply in the United States has increased by 271 percent. It has almost tripled.

As Morris notes, the economy has hardly tripled during that time, so where did the money come from? I was thinking maybe the Fed improved its data collection procedures and started counting the quarters behind the cushions in couches and under car seats, But, no, it’s nothing so fun as that. Peterson did a little web searching and writes:

Here is a link to the March 5 Federal Reserve Statistical Release that was current at the time of Morris’s posting. At the bottom of the first table there, we read that for the 3 Months from October 2008 to January 2009 the M1 money stock grew at a seasonally adjusted annualized rate of 27.1 percent.

What it means, that the money supply has been going up (or whether we should focus on M1 at all), that’s another story, to which I’ll defer to macroeconomic experts. To put this more plainly, Morris discredits his cause by making ridiculous, mockable statements. I can only imagine that it also reduces his ability to get hired as a political consultant, but maybe it makes him in more demand as a speaker and an author.

Near the end of this column, Morris writes:

None of this [problem with the growth of the money supply] should come as any news to Obama. He likely knows all this. But he is determined to pass his agenda of bigger government, nationalized healthcare and vastly greater spending even at the price of inflation and subsequent recession. He puts ideology first and the economy a distant second.

I don’t think so. Obama’s #1 economic priority has got to be for the economy to improve in the year 2012, at which time a presidential election is coming up. You could very well argue that he might not care about the long term (i.e., after 2016), but the conventional wisdom (which I believe, and I expect Obama and his advisors believe too) is that he needs the economy to improve so as to get reelected. I suppose Morris might be arguing that Obama’s policies will be stimulative up to 2012 and then lead to a recession around 2014, but that’s a bit too extrapolative for my taste.

It might be that Obama’s ideology is blinding him to the potential adverse consequences of his policies—just as it might be that Morris’s ideology or professional interests are blinding him—but, if anybody has an interest in the economy improving, it’s Obama, Summers, and the rest. Again, by labeling Obama as an ideological extremist, Morris is forfeiting his chance to make a more substantive point about economic policy.

If you don’t think Obama’s policy is going to work, is your best argument really to make the implausible claim that Obama knows his policy won’t work but is just so ideological that he’ll do it anyway? I think it would make more sense to argue that Obama is well-meaning but mistaken. Although presumably not so mistaken as to think that a 27.1% annualized growth is the same as 271% over five months.

P.S. Could I get my very own column in The Hill? I promise not to get any numbers off by a factor of 24 . Also, I promise not to write columns saying Sarah Palin saved GOP from landslide defeat.

Posted by Andrew Gelman at 11:08 AM | Permalink | Comments (7)

If you look at the figures for the world, rather than just the US, the answer is yes - or at least the patterns we see resemble the start of the Great Depression. Barry Eichengreen and Kevin O’Rourke have the graphs. The one below compares falls in world industrial output starting in June 1929 and April 2008. They have other graphs showing that global decreases in stock prices and trade are even starker than the Great Depression. However (and this is where the political economy comes in), they also show that the policy response to the crisis has been sharper - discount rates have been cut more rapidly, the money supply has expanded more, and governments seem much more willing to engage in deficit spending.

Posted by Henry at 12:06 PM | Permalink | Comments (1)

Indeed.

Posted by Andrew Gelman at 09:34 PM | Permalink | Comments (1)

Lee Drutman sends along this graph and some questions to ponder:

He writes:

I recently read Robert Kaiser’s new book So Damn Much Money, which is, in part, the story of Gerry Cassidy and the growth of earmarks lobbying. One of the many intriguing threads of the book, I thought, was the extent to which the earmark lobbying business is about constantly and aggressively signing up new clients.

And there has, in fact, been a remarkable increase in the number of clients listing “federal budget and appropriations” on their lobbying disclosure forms over a ten-year period. The number has gone from 1,470 clients in 1998 to 4,748 in 2008 – a 223 percent increase, according to the Center for Responsive Politics.

However, this is much faster than the growth in the federal discretionary budget. Controlling for inflation, the federal discretionary budget has risen 56 percent, from $729 billion to $1.14 trillion over the same ten-year period (in 2008 dollars). Meanwhile, the money available for earmarks grew about 70 percent between 1998 and 2006 — from $17.4 billion to $31 billion (again in 2008 dollars), only to return to its initial 1998 levels (according to Citizens Against Government Waste).

Of course, this is still a lot of money (so damn much, even). If the average appropriations client spends $100,000 a year on appropriations lobbying (a reasonable and perhaps even generous assumption, I think), that’s still only $475 million chasing $17 billion in earmarks, and $1.14 trillion in discretionary spending. Which is a pretty good ratio.

But here is the question: Is this a reflection of more and more clients out there in the world getting wise to the giant pot of money the federal government has to offer by way of discretionary spending and earmarks? Or is this most a matter of lobbyists doing a good sales job in getting more clients interested in a somewhat limited pool of money?

Or is this the marriage of both: savvy and enterprising lobbyists showing savvy and enterprising companies and institutions the way to the promised land of government largesse?

Posted by John Sides at 11:26 AM | Permalink | Comments (0)

I’m too embarrassed to ask this one on my own blog . . . it’s basically a macroeconomics question, and I haven’t taken an economics class since 11th grade . . .

Anyway, there’s all this stuff in the newspaper about hundreds of billions of dollars for homeowners. When this sort of thing comes out, do they every give something to renters? As a non-homeowner, this doesn’t seem so fair! Especially since I imagine that the average renter is poorer than the average owner. Perhaps Ubs has some insights here.

P.S. See the comments here for similar thoughts (for example, “it’s all such a terrible shame. Hey, can someone give me $300,000. Thanks”).

P.P.S. Yes, I realize that there are many many much more important issues to worry about than the distributive question of whether renters or owners are benefiting from this bill. Nonetheless, it surprises me that this concern didn’t seem to be raised at all.

Posted by Andrew Gelman at 01:05 PM | Permalink | Comments (12)

Ezra Klein gently criticizes Susan Helper’s arguments for reform of the Detroit car manufacturing industry.

” What’s missing in both proposals,” she says, “is an honest, humble appraisal of why more consumers haven’t wanted to buy their cars at a similar price point to their competitors—and a demonstration of how they intend to fix this situation. Or, to put it another way, why do Detroit Three’s cars sell for $2,000 less than comparable Japanese models? This is the key issue—not labor costs, which including the legacy costs account for less than 10 percent of the cost of a car.” I’m don’t have half Ms. Helper’s expertise, but I might gently suggest that Detroit doesn’t know how to fix this situation. Indeed, it’s probably the case that Detroit can’t fix this situation. This was true five years ago, when consumers understood that Detroit’s quality lagged Toyota’s metronome-like reliability, and it’s truer now, when Detroit’s stability threatens their very survival. Put another way, I don’t care how detailed the restructuring plan proves: I’m buying the car from the company that a) is reputed to make better cars and b) is likeliest to exist next year.

Ezra may be right that Detroit car manufacturing is stuck in an irremediable trap. But I think that there is a little more to Helper’s argument than he is suggesting here. Much of Helper’s work over the last fifteen years or so has been about trust and cooperation between auto manufacturers and their suppliers (which is why I”m familiar with it - I have a forthcoming book on trust and cooperation among engineering firms, albeit building from a different theoretical base). She (together with John MacDuffie, Mari Sako and others) has argued that Big Three manufacturers in Detroit haven’t been able to emulate Toyota’s efficiencies because they prefer to exploit their suppliers than to collaborate with them in improving quality. And even on those rare occasions where they have tried to take a less hard-nosed attitude, they haven’t been able to maintain it because of external pressures. In short, they have a serious commitment problem.

This is why Helper and MacDuffie were cautiously optimistic about government intervention in restructuring Detroit. They hoped that the government could do what car manufacturers and suppliers themselves could not, by knocking businesses’ heads together, and (if I read their hints correctly), serving as a kind of implicit guarantor to underpin supplier relations, force the Big Three not only to think in the long term but to live up to long term commitments, and hence introduce real collaboration. It may be (as Ezra seems to imply) that Detroit car manufacturing is in an irreversible spiral; since I’ve no specific expertise on car manufacturing, I’m not in a position to say. But if the situation isn’t quite that hopeless, then Helper’s suggestion as to the underlying problem (and probable cure) is at the least plausible.

Posted by Henry at 11:10 AM | Permalink | Comments (0)

As a sidebar to the big discussion of what should be done about the financial crisis, there’s a debate about what brought it on, more specifically how to allocate the blame between, on one side, a barely-regulated private system spinning out of control and, on the other, governmental and quasi-governmental agencies that encouraged loans to people who had bad prospects for credit. (I take it as a given that we can’t simply blame greedy investors, incompetent loan officers, overworked bureaucrats, etc., since these will always be with us.)

Without taking a stand on this issue myself—as I never tire of saying, this is outside my area of competence—I would like to comment on what I perceive are misunderstandings on both sides about the role of government.

As an example, Jeff Madrick writes, “It was principally the investor appetite for the mortgage-based securities and the easy profits made by the banks and mortgage brokers that led to the mortgage-writing frenzy in the 2000s, not encouragement by the federal government to lend to low-income home buyers.” Again, I won’t try to evaluate this claim, but I’d suggest that the government was possibly influenced by the easy profits etc. If the government is encouraging too many people to borrow, this isn’t necessarily a case of naive do-gooders and their unintended consequences. It could well be the product of some serious lobbying.

Continue reading "Whether you blame the government or you credit the government, it's not so simple" »

Posted by Andrew Gelman at 09:08 PM | Permalink | Comments (1)

As a sort of follow-up to Drutman, this paper by a clatter of Chicago economists is worth looking at.

We examine the determinants of congressional voting behavior on two of the most signi…cant pieces of federal legislation in U.S. economic history: the American Housing Rescue and Foreclosure Prevention Act of 2008 and the Emergency Economic Stabilization Act of 2008. We fi…nd evidence that constituent interests and special interests in‡uence voting patterns during the crisis. Representatives from districts experiencing an increase in mortgage default rates are signifi…cantly more likely to vote in favor of the AHRFPA. They are precise in responding only to mortgage related constituent defaults, and are signi…ficantly more sensitive to defaults of their own-party constituents. Increased campaign contributions from the fi…nancial services industry is associated with a higher likelihood of voting in favor of the EESA, a bill which transfers wealth from tax payers to the fi…nancial services industry. We also examine the trade-off between politician ideology and constituent and special interests, and …nd that conservative politicians are less responsive to constituent and special interest pressure. This latter fi…nding suggests that politicians, through ideology, can commit against intervention even during severe crises.

They suggest (unsurprisingly) that the levels of mortgage defaults in a particular district counts importantly in explaining how that district’s Member of Congress votes, and a little less intuitively that non-mortgage defaults seem to have no explanatory power. Furthermore, they use zipcode data to explore whether Congress members are more sensitive to mortgage defaults among ‘their’ supporters than to constituents in general (they suggest that the answer is ‘yes’) and also note that the size of campaign donations from the financial services industry have a clear effect on voting. While I’ll leave the detailed analysis and critique to more statistically inclined monkeycagers, I will note that I am a bit dubious about their suggestion that these votes constitute a natural experiment that allows one neatly to separate the effects of ideology and constituent interest in voting because, supposedly, “the shock to mortgage defaults that precedes the bill is completely orthogonal to ideology.” Additionally, as is typical for papers with this kind of provenance, they cite rather more extensively to quasi-connected literatures in economics and public choice than to the relevant literature on voting.

Posted by Henry at 02:04 PM | Permalink | Comments (1)

Lane Kenworthy writes (link from here and here):

The notion that political parties are a key determinant of income inequality has been around for a long time. I suspect many non-academics take its truth for granted. Among American scholars, the notion is perhaps most closely associated with Douglas Hibbs . . . [In his recent book, Unequal Democracy], Larry Bartels suggests that a key part of the story is different policies pursued by Democratic and Republican presidents. . . . Bartels’ argument, while by no means novel, is very much a fresh one. It is based on extensive empirical analysis of the post-World War II period. Is he correct? I think Bartels probably has it right for part of this period, but I’m not convinced that his hypothesis holds up for the other part. . . .

This relates to some ideas I had after seeing Bartels speak on his work at Columbia a couple of years ago; see here and here. In particular, in that last link, I wrote the following:

After seeing Larry Bartels present his findings on how the economy has done better, for the poor and middle class, under Democratic presidents than Republican presidents, I was puzzled. Not that it couldn’t be true, but it seemed a little mysterious, given the general sense that presidents don’t have much control over the econony—business cycles just seem to happen sometime.

But the general perceptions about Presidents and the economy have changed over time.

Continue reading "Income inequality and different ideas over time about the ability of presidents to intervene successfully in the economy" »

Posted by Andrew Gelman at 10:48 AM | Permalink | Comments (1)

This article discusses the common-pool problems that arise when multiple territorially overlapping governments share the authority to provide services and levy taxes in a common geographic area. Contrary to the traditional Tiebout model in which increasing the number of competing governments improves efficiency, I argue that increasing the number of overlapping governments results in “overfishing” from the shared tax base. I test the model empirically using data from U.S. counties and find a strong positive relationship between the number of overlapping jurisdictions and the size of the local public sector. Substantively, the “overlap effect” amounts to roughly 10% of local revenue.

That is from a recently published paper by Christopher Berry (here; here, ungated). Here is Wikipedia on the Tiebout model.

Berry notes that the Tiebout model presumes that the tax base is elastic; in short, inefficiency will either lead people to leave the local jurisdiction or reduce the value of the tax base. But the negative consequences of inefficient policy are spread among all the governments sharing the tax base, making inefficiency less costly for any particular government. Hence this conclusion:

In sum, the same sorts of common-pool problems that provide the incentives for individual jurisdictions to overspend also dilute the effects of the competitive counterpressures that are thought to punish deviations from efficiency. The incentives for efficiency become weaker as more governments share the same tax base.

Another of Berry’s observations might be subtitled “Why Economics Needs Political Science”:

The complex vertical layering of fiscally and politically interacting governments defies Tiebout’s institution-free model of local nonpolitics.

Posted by John Sides at 04:30 PM | Permalink | Comments (0)

For several years now, it seems like every time I’ve turned around a new Google Something has popped up — Google This, Google That, and Google The Other Thing. Google has been all over the place, and generating enormous revenues in the process — the very model of a high-flying dot.com that, unlike so many others, showed no signs of crashing to earth.

Well, Google hasn’t crashed, but its revenue growth has slowed sharply and its stock has fallen by more than half in the last two years. As a consequence (perish the thought!), “corporate austerity is reaching one of the most extravagant spenders of the boom years.” Google is “ratcheting back spending and cutting new projects,” and the days of all those generous perks that Google employees enjoyed may be drawing to a close. Who knows? Perhaps the next arrival on the scene will have to be Google Bailout.

Here’s the story, as told by Jessica Vascellaro and Scott Morrison in the Wall Street Journal.

Posted by Lee Sigelman at 08:21 PM | Permalink | Comments (0)

Political scientists’ opinions on electoral realignments seem to run the somewhat limited gamut between ‘we have no idea whether they exist,’ and ‘if they exist they are much weaker than the expectorate says they are.’ But is there better evidence of policy realignments - that is, of long term changes in the contours of politics that make some kinds of policies and laws easier to pass, and other kinds more difficult? This makes more plausible sense, given that the breaking of major policy watersheds in particular areas (think the New Deal or civil rights) often seem to make it easier to pass similar or reinforcing policies in the successive period, even if control of the Presidency or Congress changes hands. And there is some historical evidence to back this up, as Paul Pierson noted at APSA this year.¹

If you look at regulation, there’s a huge expansion in government regulatory activity, especially with respect to consumer protection and the environment during the same period. Again, it doesn’t slow down when Nixon comes into the White House. If you look at Mayhew’s list of landmark pieces of legislation and look at the regulatory ones, there are twice as many major regulatory laws passed between 1964 and 1977 as there are if you combine the thirteen year period before that and the twenty five year period after that. More than twice as much regulatory legislation in about a third of the time. This is when it was all happening. The Nixon presidency is right in the middle of it. When does it stop? It doesn’t stop in 1981. Roughly, it stops in 1978. The defeat of key domestic initiatives like industrial relations reform and health care reform; the passage of a completely different kind of tax bill, much more oriented towards business and the affluent than the tax bills that had come previously, but a tax bill that would look very familiar to more recent discussions in American politics. You see also the beginnings of a deregulatory push that would eventually remake government and the connection between government and the economy. And all this comes after the huge Democratic electoral victory of 1974, and the recapture of the White House in 1976.

So the more interesting question over the next number of years is whether or not we are seeing a policy realignment taking place. My strong prediction, thanks to the current economic meltdown, is ‘yes.’ We are likely to see a substantial shift in policy over the next several years, so that forms of state intervention that were previously unthinkable start to look routine. Not only is the Obama administration going to be, by any reasonable definition, a strongly left-leaning administration, but its successor in 2012, whether Democratic or Republican, is likely to be left-leaning too.

Here, the chattering class’s obsession with whether the personnel of the administration are liberals or centrist technocrats seems completely beside the point (I know people have to gossip about something but they shouldn’t pretend that the something has world-historic significance when it doesn’t). As Chris Hayes points out, someone looking at the incoming Bush presidency in 2000, and extrapolating the presidency’s policy predilections from Bush’s reliance on old hands from the Ford administration, would have likely been very badly mistaken. But you can go further - the fact that strongly right-leaning Bush administration officials are not only advocating but administrating substantial state intervention in the economy tells us that the policy changes we are seeing are probably not dependent on personnel or individual ideological inclinations, but on a changed environment in which certain kinds of policies have become pressing necessities. When this is added to (a) the usual preference of government officials to maximize the scope of their competences, (b) the difficulty of roll-back, (c ) the apparent desire of the administration to link spending programs that they would have wanted anyway to crisis response and (d) how close the Democrats are to being able to outvote blocking minorities in the Senate, I imagine that we are in for a substantial shift in the parameters governing which policies are politically feasible and which are not.

¹ I don’t imagine that anyone has looked to see whether this apparent pattern is statistically convincing - it seems to me that the problem is akin to the one of genre fiction tackled here by Cosma Shalizi with simple simulations so it certainly isn’t intractable - but in the absence of work to the contrary, I’m going to stick with the assumption that the pattern is indeed significant. This is a blogpost, not a peer reviewed article.

Posted by Henry at 11:04 AM | Permalink | Comments (0)

Forget about the Great Depression. Writing in the current issue of the Chronicle of Higher Education, Scott Reynolds Nelson, a history professor at the College of William & Mary, argues that the depression of 1929 is the wrong model for the current economic crisis. A more appropriate model is the panic of 1873. Here’s why.

Continue reading "The Real Great Depression" »

Posted by Lee Sigelman at 09:29 AM | Permalink | Comments (1)

Perhaps the greatest public relations coup of this decade was the successful persuasion of millions of Americans that repealing the estate tax was a populist cause.

That is Floyd Norris in the New York Times (here). His view reflects one of the bigger misconceptions about public opinion of the estate tax: that support for its repeal derived from the wily strategies of conservatives who hoodwinked the public with clever Luntzian phrases like “death tax.”

In fact, opposition to the “death tax” is not much greater than opposition to the estate tax. In 2002, the National Election Studies conducted a question wording experiment that randomly assigned respondents to be asked about the estate tax and death tax. 72% favored repealing the estate tax; 75% favored repealing the death tax.

Moreover, as Larry Bartels argues in Unequal Democracy — in a chapter that has received far less attention than the chapter with this finding — public support for inheritance is hardly new. He cites a 1935 em>Fortune survey that asked “How much money do you think any one person should be allowed to inherit?” Fully 52% of respondents said there should be “no limit.” 3% said over $1 million, 16% said $100K to $1 million, and 15% said $100,000 or less. Given that these dollar amounts are in 1935 dollars, and that the survey was conducted during the Great Depression, it’s safe to say that a large fraction of the public was and is comfortable with large inheritances.

In Bartels’ view, public opinion about the estate tax is not a story of conservatives beguiling a liberal or egalitarian public.

…the real “political mystery” is why not why the estate tax was phased out in 2001, but why it lasted as long as it did. The answer to that question has little to do with conservatives elites’ grasp of public opinion, but much to do with the political leverage of liberal Democratic elites whose own ideological values make them eager to retain “a steeply progressive tax.”

Posted by John Sides at 09:29 AM | Permalink | Comments (3)

Thanks to Lee for pointing me to this very interesting survey article (liable to linkrot after five days) in the Chronicle on the political economy of inequality in the US.

Is income inequality due to economics, politics, or some interplay between the two? Some pundits are tempted to look inside the Beltway for a cause, but the case is hard to make,” wrote the Harvard economist N. Gregory Mankiw in an April column in The New York Times. … our new society results from a massive shift in income returns to education. … But economics can’t give us the whole picture. There is, after all, a fundamental political puzzle here. How does it happen that a democratic citizenry will tolerate increasing income inequality without pushing for a systematic response — something more than the recent flood of phone calls and e-mail on Capitol Hill over the Wall Street bailout?

To illuminate that puzzle, we should turn to the Princeton political scientist Larry M. Bartels’s book, Unequal Democracy: The Political Economy of the New Gilded Age. … Bartels’s book challenges not just economists like Mankiw who caution against looking inside the Beltway for explanations of income inequality. It also questions the way many political scientists view the politics of macroeconomic performance. Many political scientists have reasoned that because the Fed is independent, macroeconomic performance cannot be politically engineered to decisively help one party or the other. … voters are also myopic. In judging economic performance, they take into account only quickly accessible information from the very recent past. n contrast, Republicans, who have their own characteristic macroeconomic preoccupations, throw people out of work in Year 2 in order to reduce inflation. That causes a general economic slowdown but also increases incomes disproportionately for the wealthiest. Republicans also happen to preside over strong GDP growth in Year 4. In contrast, Republicans, who have their own characteristic macroeconomic preoccupations, throw people out of work in Year 2 in order to reduce inflation. That causes a general economic slowdown but also increases incomes disproportionately for the wealthiest. Republicans also happen to preside over strong GDP growth in Year 4.

Nolan McCarty, Keith T. Poole, and Howard Rosenthal, in Polarized America: The Dance of Ideology and Unequal Riches, focus on why rational voters do not halt rising income inequality and correct it with redistributive public policy.McCarty and colleagues emphasize the role of immigration in weakening citizen support for unemployment insurance and increased minimum wage. Political inaction is reinforced, they persuasively suggest, by the ideological polarization of the political parties and frequent recurrences of divided government.

In fairness to Mankiw, there are still substantial gaps in the politics-led account of increasing inequality. Bartels and McCarty, Poole and Rosenthal have substantially advanced our understanding of the relationship between voter attitudes and inequality. But what we still lack is a precise account of the mechanisms through which government policies have increased inequality. One possible explanation, advanced by James Mosher in a 2007 article (sub required) for Politics and Society is union power. US government policy has demonstrably made it harder for unions to organize workers, and Mosher uses data over time to argue that this in turn may help explain rising wage inequality. This seems to me to be an useful first step - but only a first step. While, as Paul Krugman (who used to believe in the skills-based inequality story and has now changed his mind) argues, the mechanism of changing-returns-to-skills doesn’t provide a good overall explanation of what seems to have happened over the last couple of decades, we still need better-developed alternative explanations of what actually has been going on.

Posted by Henry at 11:18 AM | Permalink | Comments (4)

Four years ago, Paul Pierson, a comparativist who has drifted into the study of US politics, complained vigorously about the state of Americanist political science.

The compartmentalization that characterizes the American subfield has also led to a kind of methodological one-upmanship. Technical proficiency becomes the metric for evaluating quality. Statistical analysis of large data sets and the development of formal models of strategic interaction of small groups of actors are dominant. Despite the wealth of scholarly resources, research has become increasingly concentrated on that restricted subset of questions that lend themselves to the most “sophisticated” research techniques. There is no questioning the technical proficiency of much work in American politics. Yet far too much of that research reminds one of nothing more than muscled-up body-builders, whose arms are so bulky that they are almost useless for everyday tasks. …

Again, comparativists are much more likely to organize their inquiries around distinctive substantive issues rather than particular sites of political activity. For example, one of the liveliest areas of inquiry in comparative politics over the past two decades has been the study of political economy. A large group of well respected scholars has debated how the evolving structures of national economies and the coalitions of interests surrounding those economies influence, and are influenced by, political systems. By contrast, there is really nothing like a field of political economy in the American subfield. There are scattered studies that could be placed under such a rubric. Yet despite massive and growing economic and political inequalities, the interplay between the highly distinctive American economy and its peculiar political system has not generated a sustained or systematic research
program.

I know that Paul is now more enthusiastic about the Americanist field than he was four years ago. We’re beginning to see intellectual firepower being concentrated on the specific question of the political sources of economic inequality by Larry Bartels, McCarty, Poole and Rosenthal and others. Yet I think that the major criticism he makes still stands, and that the current economic crisis makes this eminently clear. If I were to want to to point, say, an intelligent journalist, to a useful synthetic literature on the way that the American economy is governed, and how these governance arrangements lead to certain patterns of regulation, private actor behavior etc, I wouldn’t know where to start. There are books and articles that I can think of which deal with smaller aspects of this question, but as Paul notes, there isn’t any very broad debate that could bring these different sub-perspectives together usefully. I wouldn’t have any problem in identifying literatures that do this for the countries of Western Europe, for the EU (which is a fantastically complicated and multilayered regulatory system), or for Asian economies (including big complex economies such as China). I’m not an Americanist - am I missing out on a literature that does this? Or is there really not much of a there there, as I suspect to be the case?

Posted by Henry at 10:17 AM | Permalink | Comments (8)

Over at the other place where I blog I write about a meeting that I and a few other bloggers had with Bill Clinton. Most of this isn’t of direct political science interest (except in the broad sense that politics is interesting to political science). But there was one bit of the conversation where a political scientist has something of interest to say. Throughout the conversation, Clinton was at pains to defend his role in signing the bill replacing Glass-Steagal. He suggested that this hadn’t had the negative consequences that some say it had, and may have had positive consequences, but allowed that there might be convincing arguments to the contrary out there that he would like to hear about. Perhaps one such argument comes from political scientist/economist Barry Eichengreen. Eichengreen argues that:

At the domestic level, the key decisions in the United States were to deregulate commissions for stock trading in the 1970s and then to eliminate the Glass-Steagall restrictions on mixing commercial and investment banking in the 1990s. In the days of fixed commissions, investment banks could make a comfortable living booking stock trades for their customers. Deregulation meant greater competition, entry by low-cost brokers like Charles Schwab, and thinner margins. The elimination of Glass-Steagall then allowed commercial banks to encroach on the investment banks’ other traditional preserves. (It was not only commercial banks of course, but also insurance companies like AIG that did the encroaching.)

In response, investment banks to survive were forced to branch into new lines of business like originating and distributing complex derivative securities. They were forced to use more leverage, funding themselves through the money market, to sustain their profitability. Thereby arose the first set of causes of the crisis: the originate-and-distribute model of securitisation and the extensive use of leverage.

It is important to note that these were unintended consequences of basically sensible policy decisions. … eliminating Glass-Steagall was a fundamentally sensible choice. Conglomeratisation allows financial institutions to better diversify their business. Combining with commercial banking allows investment banks to fund their operations using a relatively stable base of deposits rather than relying on fickle money markets. This model has proven its viability in Germany and other European countries over a period of centuries. These advantages are evident in the United States even now, with Bank of America’s purchase of Merrill Lynch, which is one small step helping to staunch the bleeding.

Again, however, the problem was that other policies were not adapted to the new environment. Conglomeratisation takes time. In the short run, Merrill, like the other investment banks, was allowed to lever up its bets. It remained outside the purview of the regulators. As a self-standing entity, it was then vulnerable to inevitable swings in housing and securities markets. A crisis sufficient to threaten the entire financial system was required to precipitate the inevitable conglomeratisation.

I’ll pass this piece on to the Clinton people whom I met: in the obviously very unlikely eventuality that (a) he has a response, and (b) that I can publish it, I’ll put it up here.

Posted by Henry at 12:19 PM | Permalink | Comments (6)

Tom Ferguson writes:

Smith Barney is owned by Citigroup, which is headed by . . .

Posted by Andrew Gelman at 07:42 PM | Permalink | Comments (1)

Evidence from elections, votes, and surveys.

Posted by Andrew Gelman at 07:36 AM | Permalink | Comments (0)

Rising income and earnings inequality in the United States does not appear to have been offset by increased mobility.

That is Lane Kenworthy. More here, with nice graphs.

Posted by John Sides at 02:43 PM | Permalink | Comments (1)

Women have made less progress toward gender equality in the Middle East than in any other region. Many observers claim this is due to the region’s Islamic traditions. I suggest that oil, not Islam, is at fault; and that oil production also explains why women lag behind in many other countries. Oil production reduces the number of women in the labor force, which in turn reduces their political influence. As a result, oil-producing states are left with atypically strong patriarchal norms, laws, and political institutions.

That is Michael Ross in the latest American Political Science Review. The paper is here. In the statistical analyses, oil rents per capita are associated with lower female labor force participation and fewer female seats in parliament — controlling for factors such as GDP per capita, region (Middle East, etc.), the proportion of the country that is Muslim, and other demographic and institutional characteristics of states. Moreover, if one focuses only on the Middle East, these same findings hold.

See also Ross’ work on how oil contributes to civil war and other conflicts — here in the Journal of Peace Research and here in Foreign Affairs.

Posted by John Sides at 09:00 AM | Permalink | Comments (16)

Straight from the mouth of Senate Majority Leader Harry Reid:

[Hat tip to Marc Stern]

Posted by Lee Sigelman at 07:38 AM | Permalink | Comments (4)

[Hat tip to Bob Goldfarb]

Posted by Lee Sigelman at 12:11 PM | Permalink | Comments (3)

This piece by Felix Salmon on the problems that Gawker Media is encountering with pay-per-pageview is pretty interesting.

Golson’s take-home pay is so much larger than his base salary that his base salary ($2,500 a month) has become basically irrelevant. Instead, he’s been relying entirely on his PVR of $9.75 per thousand pageviews - a rate which has seen him taking home more than $4,000 a month so far this year. For Golson, then, his realistic base salary is in the $4,000 range - much higher than the $2,500 which Robischon is referring to. … The problem here could have been partially fixed if Robischon had decided to give Golson a more realistic base salary to begin with. But Robischon’s boss, Nick Denton, wants fixed salaries to be as low as possible: he hates it when a writer doesn’t justify his salary with pageviews, and the best way of ensuring that situation never arises is to make the fixed salaries as low as possible.

This PVR is being lowered, leading to a strong reaction from Golson and others. Salmon explains their anger in terms of psychological mechanisms such as loss aversion, which are indeed applicable. But I think that there are two other things going on, both of which have to do with the economics of piecework. And after all, paying people on the basis of the number of pageviews their articles receive is a glorified version of piecework.

Continue reading "Piecework, Political Economy and the Internet" »

Posted by Henry at 05:46 PM | Permalink | Comments (1)

A: Send a stimulus bill to the Senate for quick approval.

Playing out on the Senate floor and in the party cloakrooms is a stunning example of why one should never count on the Senate when time is of the essence. The Senate— true to form— has tied itself in knots as the two parties squabble over voting procedures for considering an economic stimulus package.

Although 80 senators voted on Monday to invoke cloture on the motion to proceed to consider the House-passed version of the stimulus bill, GOP senators are insisting on using all 30 hours alloted under the Senate’s Rule 22 for “post-cloture” debate. With me so far? Meanwhile, as the post-cloture clock ticks, Democrats are working to secure 60 votes in anticipation of a Republican filibuster of the substitute stimulus package approved by the Senate Finance Committee. Still with me? At the same time, Republicans are working so sustain 41 Republican votes against this next cloture vote, preferring to offer their own amendment to the package (which might also require 60 votes) or to pass the House stimulus bill endorsed by House party leaders and the president.

The Finance Committee substitute on which Democrats must secure cloture extends tax breaks to wealthier Americans, low-income senior citizens and disabled veterans, extends unemployment benefits, and offers low-income heating assistance, in addition to numerous other add-ons to the House-passed bill. Not surprisingly, given the extension of rebates to a broader set of constituencies, the Democratic package has given pause to more centrist GOP senators who are up for re-election in competitive states and who hail from cold states (Collins and Smith of Maine, Coleman from Minnesota, Smith from Oregon, and possibly Stevens and Murkowski of Alaska). (I can see the regression now, modeling the cloture vote controlling for each state’s average daily temperature in February.) Add in Grassley and that totals (at best) 58 votes for cloture (assuming Hillary and Barack fly in for the pivotal vote currently scheduled for Wednesday night). Meanwhile, the new GOP whip, John Kyl, is working to keep 41 senators in line against the Finance substitute while the Senate minority leader holds out for the right to offer a trimmer GOP amendment to counter the Democratic package and to give cross-pressured GOP moderates something to vote for.

Should the Democrats fail to reach 60 votes for the Finance substitute, will they allow Republicans to offer their own amendment to the House package? It depends on who blinks first. The majority leader on Tuesday “filled the amendment tree,” a Senate procedure that prevents other senators from offering any amendments to the pending bill and amendment on the floor. Unless the Democrats relent, no other amendments would be in order for the stimulus bill. You’re still with me, right?

On the bright side, at least while the Senate is tangled in knots over voting rules for the stimulus bill, the chamber can make progress on the other contentious issue before it, the overhaul of surveillance rules for the government. Perhaps, but only if the GOP consents to moving forward on the so-called FISA bill— which yesterday they refused.

Legislating? Hostage-taking? You be the judge. Let’s just say that Treasury Secretary Henry Paulson might have been a tad optimistic— even naive— when he noted that the $150 billion economic stimulus package worked out by President George W. Bush and House leaders was a “rare bipartisan moment” likely to be repeated in the Senate. A rare moment indeed. And not likely to be repeated in the Senate.

Posted by Sarah Binder at 08:45 AM | Permalink | Comments (0)