Tyler Cowen's Blog, page 138
August 5, 2014
Stratfor on the Chinese anti-corruption campaign
That campaign is one of the more notable events going on in a busy and event-rich world, so it feels remiss not to cover it at all. Here is John Minnich:
The anti-corruption campaign is one of those steps. It serves many overlapping functions: to clear out potential opponents, ideological or otherwise; to consolidate executive power and reduce bureaucratic red tape so as to ease the implementation of reform; to remind the Chinese people that the Communist Party has their best interests at heart; and to make it easier to make tough decisions.
Underlying and encompassing these, we see the specter of something else. The consensus-based model of politics that Deng built in order to regularize decision-making and bolster political stability during times of high growth and that effectively guided China throughout the post-Deng era is breaking down. It can no longer hold in the face of China’s transformation and the crises this will bring. Simply put, now that its post-1978 contract with Chinese society — a social contract grounded in the exchange of growth for stability — is up, the Party risks losing the public support and political legitimacy that this contract undergirded. A new and more adaptive but potentially much less stable model is being erected, or resurrected, from within the old. This model is grounded more firmly in the personality and prestige of the president and more capable, or so Chinese leaders seem to hope, of harnessing and managing the Chinese nation through what could well be a period of turmoil.
This does not necessarily mean a return to Imperial China, nor does it mean a return to the days and methods of the Great Helmsman, Mao. It doesn’t even mean the new model will succeed, even remotely. What it means will be decided only by the specific interplay of structure and contingency in the unfolding of history. But it is this transformation that serves as the fundamental, if latent, purpose for Xi’s anti-corruption campaign.
The full piece is here, and for the pointer I thank Jim Olds. “Be careful what kind of anti-corruption campaign you wish for…”
China punishment of the day (Biblical)
Drivers caught using high beams inappropriately will now be offered on-the-spot training about the dangers of such practices, according to a posting on the Shenzhen Traffic Police’s verified account with Weibo.
Specifically, headlight-happy drivers will be forced to stare straight ahead into the glaring headlights of a police van for a period of several minutes.
“You still dare to use your headlights carelessly?” the Traffic Police posting asks. “If so, then starting from now we’ll make you stare at our high beams for five minutes.”
There is also a 300 yuan ($49) fine. The policy is popular in some quarters:
Still, most people reacted positively to the Shenzhen Traffic Police’s approach.
“An eye for an eye, and a tooth for a tooth! This punishment should be popularized. When can it be used to deal with red-light running or hit-and-run?” wrote another.
More people in The Middle Kingdom need to read Gary Becker. The full story is here.
Assorted links
1. Maps of cultural centers, a new research tool, fun too.
3. “Scientists reconstruct speech through soundproof glass by watching a bag of potato chips.”
4. Marathon finishing times have reference-dependent outcomes. And bumble bee cognitive individuality.
5. Good review of the excellent David Eimer book on Chinese minorities. And the strike that is Hong Kong. And who will end up owning New Zealand farms?
6. Early Mediterranean containerization.
7. Chefs, critics, solve for the equilibrium with four-letter words.
8. Serenading the cattle with my trombone (music video).
Ebola and the FDA
The Telegraph reports:
The two American doctors who have caught Ebola have been treated with a new “secret serum” which could potentially save their lives.
…A source close to the Atlanta hospital, where Dr Brantly is being treated, told CNN: “Within an hour of receiving the medication, Brantly’s condition was nearly reversed. His breathing improved; the rash over his trunk faded away.”
One of his doctors reportedly described the events as “miraculous.”
…Dr Writebol was also administrated with the drug, which was transported to Liberia in a special sub-zero container. She showed a less remarkable recovery, but is hoped to travel to the US on Tuesday to continue her treatment.
According to CNN, the drug was developed by the biotech firm Mapp Biopharmaceutical, based in California. The patients were told that this treatment had never been tried before in a human being but had shown promise in small experiments with monkeys.
…health workers said drugs that could fight Ebola are not particularly complicated but pharmaceutical firms see no economic reason to invest in making them because the virus’ few victims are poor Africans.
Of course, pharmaceutical firms are not going to invest millions in getting a drug through FDA trials for a disease that has only killed a few thousand people since being discovered in 1976. Nevertheless, some people find this simple logic difficult to accept.
Prof John Ashton, Britain’s leading public health doctor, termed the “moral bankruptcy” of profit-driven drugs developers.
The logic of profit-driven drug developers is no different than the logic of profit driving automobile manufactures. It isn’t profitable to make cars for people who can’t afford them but the auto firms are rarely called morally bankrupt for not giving cars away to the poor. Moreover, it’s not at all obvious why the burden of producing unprofitable drugs should fall on the drug manufacturers. To the extent that there is an ethical case for developing drugs for the poor it’s a burden that falls on all of us.
As Eric Crampton notes there are at least two possible solutions. Either ensure at taxpayer expense a return on investment by subsidizing, offering prizes (as I suggested in Launching) or publicly investing in orphan drugs or
…ease up the FDA trials for drugs in this kind of category. Does it really make sense to mandate placebo trials for drugs hitting diseases with 60% fatality rates? We are condemning people to a very high risk of death for the sake of ensuring that there aren’t drug side effects and that the drugs are more effective than placebos (pretty easy to tell quickly where the fatality rate is otherwise 60%!).
August 4, 2014
Sentences to ponder
“…while we don’t expect deflation, we do think inflation will remain in negative territory in the coming months.”
That one is about Spain, from Victor Echevarría at BNP Paribas.
Political booms, financial crises
There is a new paper by Helios Herrera, Guillermo Ordoñez, and Christoph Trebesch and it has a striking result:
We show that political booms, measured by the rise in governments’ popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging economies are more concerned about their reputation and tend to ride the short-term popularity benefits of weak credit booms rather than implementing politically costly corrective policies that would help prevent potential crises. We provide evidence of the relevance of this reputation mechanism.
The NBER version is here, there are ungated versions here.
Matt Yglesias on Tyler Cowen
Which is to say that while Cowen’s point about the global picture is both interesting and correct, his political stance is backwards. It’s not fans of Capital in the 21st Century who are pushing nationalism as an alternative to plutocracy, but its detractors. And though the recent politics in the US Congress have been driven by the somewhat odd sequence of events around the arrival of unaccompanied minors from Central America, the underlying pattern runs much deeper than that.
I don’t have an “he says exactly that” quotation to pull from Matt’s piece, but I believe he is saying I (or someone?) should be a Progressive instead of a “conservative economist” as he calls me. The article is interesting throughout.
My framing of course is different. It is not about who are the best people, but rather which are the best set of positions. Just to summarize, I generally favor much more immigration but not open borders, I am a liberal on most but not all social issues, and I am market-oriented on economic issues. On most current foreign policy issues I am genuinely agnostic as to what exactly we should do but skeptical that we are doing the right thing at the moment. I don’t like voting for either party or for third parties.
The economics of cyclone disasters
It’s not quite the Solow model. Here is a new paper from Solomon M. Hsiang and Amir S. Jin, “The Causal Effect of Environmental Catastrophe on Long-Run Economic Growth: Evidence From 6,700 Cyclones,” the abstract is this:
Does the environment have a causal effect on economic development? Using meteorological data, we reconstruct every country’s exposure to the universe of tropical cyclones during 1950-2008. We exploit random within-country year-to-year variation in cyclone strikes to identify the causal effect of environmental disasters on long-run growth. We compare each country’s growth rate to itself in the years immediately before and after exposure, accounting for the distribution of cyclones in preceding years. The data reject hypotheses that disasters stimulate growth or that short-run losses disappear following migrations or transfers of wealth. Instead, we find robust evidence that national incomes decline, relative to their pre-disaster trend, and do not recover within twenty years. Both rich and poor countries exhibit this response, with losses magnified in countries with less historical cyclone experience. Income losses arise from a small but persistent suppression of annual growth rates spread across the fifteen years following disaster, generating large and significant cumulative effects: a 90th percentile event reduces per capita incomes by 7.4% two decades later, effectively undoing 3.7 years of average development. The gradual nature of these losses render them inconspicuous to a casual observer, however simulations indicate that they have dramatic influence over the long-run development of countries that are endowed with regular or continuous exposure to disaster. Linking these results to projections of future cyclone activity, we estimate that under conservative discounting assumptions the present discounted cost of “business as usual” climate change is roughly $9.7 trillion larger than previously thought.
That link has an NBER gate, I do not yet see an ungated version.
Is growing income inequality diminishing middlebrow culture?
A.O. Scott considers that question in The New York Times. I am not sure I can sum up his view in a sentence, so I don’t know if this is criticizing him or partially agreeing with him. In any case, I don’t see growing income inequality as the main driving force behind the decline of middlebrow American culture. An individual’s level of education often predicts cultural consumption better than does his or her income, and education has not in general declined in this country.
Furthermore many forms of culture have grown much cheaper. Once you are paying for cable, the marginal dollar cost of watching a show or a movie at home is zero. Songs and music are much cheaper than twenty years ago, and eBooks make many (not all) books cheaper. In other words, if stagnant income groups wanted middlebrow culture, they still could afford it.
Global markets are growing and those markets are often relatively middlebrow in their orientation, which should maintain the return to producing middlebrow culture. And the United States continues to grow in population, even though the middle is shrinking in percentage terms. The supply of creative activity is quite elastic, so it is hard to argue the wealthy have placed all relevant artists in their employ and thus choked or starved the middle.
It is much more expensive to organize a middlebrow art exhibit than fifteen years ago, and we see fewer good ones, but that is mainly because of 9/11 and insurance rates and related institutional issues, not income inequality.
My view is a lot of people never wanted middlebrow culture in the first place, at least not in every sphere of their cultural consumption. The internet gave them more choice, they took it, and much of middlebrow culture lost its support base. Consider one area where the internet still doesn’t play that much of a role and that is theatrical productions. You can watch plenty of theatre on YouTube, but it’s not such a close substitute to seeing the show live. And if you look at Broadway theatre, it seems more relentlessly and aggressively middlebrow than ever before. Ugh, that is why I stopped going. NFL football seems middlebrow to me and the audience base still is there, again because the internet has not come up with a close competitor. If the sport has a problem it is the violence and injury, not that we’ve evolved into a mix of polo ponies and roller derby.
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