Tyler Cowen's Blog, page 119

The demonstration effect

Or is it herd behavior?:

Since the video of former NFL player Ray Rice knocking his then-fiancée out in an elevator leaked, the National Domestic Violence Hotline has seen an 84% increase in call volume.

There is more here, from Kottke.

Is hypergamy fading?

Here is a new paper from Christine R. Schwartz and Hongyun Han, and here is the key part of the abstract:

…marriages in which wives have the educational advantage were once more likely to dissolve, but this association has disappeared in more recent marriage cohorts. Another key finding is that the relative stability of marriages between educational equals has increased. These results are consistent with a shift away from rigid gender specialization toward more flexible, egalitarian partnerships, and they provide an important counterpoint to claims that progress toward gender equality in heterosexual relationships has stalled.

There are ungated versions here, and for the pointer I thank the excellent Kevin Lewis.

A politician can influence voters just by stating an opinion, even an opposing opinion

There is a new research paper by David E. Broockman and Daniel M. Butler (pdf), the abstract is this:

Politicians have been depicted as, alternatively, strongly constrained by public opinion, able to shape public opinion if they persuasively appeal to citizens’ values, or relatively unconstrained by public opinion and able to shape it merely by announcing their positions. We conduct unique field experiments in cooperation with legislators to explore how constituents react when legislators take positions they oppose. For the experiments, state legislators sent their constituents official communications with randomly assigned content. In some letters, the representatives took positions on salient issues these constituents opposed, sometimes supported by extensive arguments but sometimes minimally justified. Results from an ostensibly unrelated telephone survey show that citizens often adopted their representatives’ issue positions even when representatives offered little justification. Moreover, citizens did not evaluate their representatives more negatively when representatives took positions citizens opposed. These findings suggest politicians can enjoy broad latitude to shape public opinion.

I suppose Alex Salmond is one current leader who understands this, Putin is another.

For the pointer I thank the excellent Samir Varma, who also cites coverage from Wonkblog.

*The Shifts and the Shocks*

That is by Martin Wolf and the subtitle is What We’ve Learned — And Still Have to Learn — From the Financial Crisis.  You can buy it here.

File under Arrived in my pile.

Further evidence for The Great Reset

Matt Yglesias writes:

…the Kaiser Family Foundation is out today with new reporting on employer benefit costs that reveals the slowdown is visible in this slice of the market. Premium costs rose by just 3 percent, a number much lower than they routinely rose by in the recent past. So how about those wage rises? Well — let’s just say there’s no evidence that they’re happening.

In other words, there is still downward pressure on real wages, even when we don’t always see real wage cuts.

This also means that the monetary policy argument “there can’t be a build up inflationary pressures because we don’t see real wages rising” is highly unreliable or at the very least a non sequitur (NB: I am not in fact extremely worried about inflationary pressures these days).

China estimate of the day

From The Wall Street Journal:

Over the past decade, China rushed to buy up global commodities as its economy boomed—both to feed its factories and to ensure it wasn’t reliant on Western powers for raw materials. China’s overseas investments in resources soared to $53.3 billion last year, from $8.2 billion in 2005…

China came late to the global resources boom and often overpaid for assets Western companies had passed over or wanted to sell. China typically paid one-fifth more for oil-and-gas assets than the industry average, estimates Scott Darling, Asian regional head of oil-and-gas research at J.P. Morgan Chase & Co.

…Last year, the head of China’s mining association estimated that 80% of all overseas mining deals had failed, though he didn’t elaborate, according to state media.

The full story, by Wayne Arnold, is very interesting and quite thorough, use news.google.com if you have to.

Assorted links

1. 53 percent of Chinese respondents expect China to go to war with Japan.

2. “Tell me something I don’t know” is looking for participants.

3. John Gray on Francis Fukuyama and democracy.

4. What does a “harvard.edu” email account cost on the Chinese black market?  How about UC Merced?

5. Student attendance is down at college football.  Cereals are declining too.

6. There is no great pizza box stagnation.

Crafty Nudges and Prize Linked Savings Accounts

Thirteen percent of US citizens play the lottery every week. The average household spends around $540 annually on lotteries and poor households spend considerably more than the average. The high demand for lotteries, especially among the poor, has led many to suggest that we use them to promote some other good. Los Angeles, for example, has recently discussed giving voters lottery tickets–a great idea if we want to encourage more voting by uninformed people with a penchant for get-rich-quick schemes. What could go wrong?

A somewhat better idea is to use lotteries to promote saving. Prize linked savings (PLS) accounts offer savers pro-rata lottery tickets based on how much they save. The average return on a PLS account can be the same as on regular account but the interest rate is lowered to make up for the small probability of a big gain. It’s illegal for banks in the United States to offer lotteries but a few credit unions have experimented with PLS accounts and they are used in some 20 other countries around the world.

Does the option of saving in a PLS account increase total savings or does it merely reallocate savings? In a new paper, Atalay, Bakhtiar, Cheung and Slomin run an experiment in which participants allocate a budget to consumption, saving, lottery tickets, and a PLS account. They conclude:

…the introduction of a PLS account indeed increases total savings quite dramatically (on average by 12 percentage points), and that the demand for the PLS account comes from reductions in lottery expenditures and current consumption. We further show that these results are stronger among study participants with the lowest reported savings on the survey.

Thus, PLS accounts appear to be a kind of crafty nudge, a way to trick the get-rich-quick brain module to save more.

If we allow PLS accounts, the poor may save more and in a competitive bank market the return on PLS accounts will trump the lousy returns offered by state lotteries. Win, win. If we deregulate all kinds of lotteries, however, I have little doubt that entrepreneurs will come up with schemes that will easily trump PLS accounts–but without the social benefit of encouraging saving among the poor. As a libertarian, I can live with that but as a political economist I wonder how well we can draw the line between banning gambling and allowing gambling so long as it’s tied to a nice nudge.

Does natural resource wealth imply technological stagnation?

Peter Thiel tells us:

Look at the Forbes list of the 92 people who are worth ten billion dollars or more in 2012. Where do they make money? 11 of them made it in technology, and all 11 were in computers. You’ve heard of all of them: It’s Bill Gates, it’s Larry Ellison, Jeff Bezos, Mark Zuckerberg, on and on. There are 25 people who made it in mining natural resources. You probably haven’t heard their names. And these are basically cases of technological failure, because commodities are inelastic goods, and farmers make a fortune when there’s a famine. People will pay way more for food if there’s not enough. 25 people in the last 40 years made their fortunes because of the lack of innovation; 11 people made them because of innovation.

I also liked this bit:

One of the smartest investors in the world is considered to be Warren Buffett. His single biggest investment is in the railroad industry, which I think is a bet against technological progress, both in transportation and energy. Most of what gets transported on railroads is coal, and Buffett is essentially betting that after the 21st century, we’ll look more like the 19th rather than the 20th century. We’ll go back to rail, and back to coal; we’re going to run out of oil, and clean-tech is going to fail.

This very useful post collates and presents all of Peter’s evidence for his view that modern technology has been stagnating.  It is both “interesting throughout” and “self-recommending.”  It is from this blog by Dan Wang.

I very much liked Peter’s new book, Zero to One: Notes on Start-Ups, or How to Build the Future.

What I’ve been reading

1. Kai Bird, The Good Spy: The Life and Death of Robert Ames.  Kai Bird is very highly rated, but in my view he remains underrated.  I very much like each and every one of his books, and this sympathetic treatment brings to life the Middle East conflicts through the 1980s, and also the life of a CIA officer, as well as a bygone era in U.S. foreign policy.

2. Henry Kissinger, World Order.  I liked parts of his China book, but there’s nothing really to this one.  Leave it alone.

3. Pascal Bonafoux, Rodin & Eros.  Beware of visiting too many Rodin museums, you might end up thinking he just repeated the same themes over and over again.  This book, including the color plates, will jolt you into seeing his work fresh once again.

4. Samuel Fromartz, In Search of the Perfect Loaf: A Home Baker’s Odyssey.  A fun cross-sectional look at the bread universe, combined with some recipes and reminiscences.

5. Henry R. Nau, Conservative Internationalism: Armed Diplomacy under Jefferson, Polk, Truman, and Reagan.  We could use more of this, and I am referring to each of those words “conservative” and “internationalism,” as well as the combination of the two.  This book was published about a year ago, and I don’t think the author could have realized how relevant it was going to become.  An important book for 2014, it sets out a manifesto for a classical liberal but non-isolationist approach to foreign policy.

6. Jeff Riggenbach, Persuaded by Reason: Joan Kennedy Taylor and the Rebirth of American Individualism.  I knew her a bit and was always fond of her.  This book is a good look at 1970s libertarianism, and the rebirth of libertarian feminism in the United States.  Both Alex and I make cameos in the text, he as an editor, gatekeeper, and theorist of self-ownership and abortion, I as a purchaser of the CD collection from the estate of Roy Childs (Joan was executor of the estate and also Roy’s dear friend).

I’ve spent time with both the new Ian McEwan novel and the new David Mitchell.  Both have some virtues but neither appears to be a must-read.