Tyler Cowen's Blog, page 235

What is wrong with the Russian economy?

The Economist had a very good feature-long piece on that question this week, here is one good excerpt:

In today’s Russia, oil and gas account for 75% of all exports, compared with 67% in 1980. Although Russia no longer buys grain from America, as it did in the 1980s, 45% of what Russians buy today is imported. Walk around a department store in central Moscow, and it is hard to find anything that is produced locally. The state remains the single largest employer, while its corporations—controlling natural resources, infrastructure, banking and media—dominate the economy.

As Clifford Gaddy and Barry Ickes, two American economists, have argued, the highly inefficient industrial structure of the old Soviet economy, based on misallocation of both resources and people, remains intact. The oil rent reinforced and perpetuated it: it has bought political stability and the loyalty of the population, but has slowed down modernisation. Inevitably, the result is stagnation.

…The state is one of the chief obstacles to Russia’s modernisation. During the 2000s the number of bureaucrats almost doubled. A quarter of the workforce is employed in the public sector. The total number of people who depend on the state is between 35% and 40%, says Boris Grozovsky, a Russian economic observer. This, he says, points to the share of the electorate that benefits from the status quo. At election time municipal workers are bused in to show support for Mr Putin. Meanwhile, the main purpose of Russia’s civil service is to shuffle papers around and extract administrative revenue from firms and private citizens. The bureaucrats have little interest in fostering competition that might cost them their jobs.

The piece is interesting (and depressing) throughout.

How does democracy affect inequality?

Acemoglu and Robinson have a good post on this and some related issues, excerpt:

…there is a much more limited effect of democracy on inequality. Democracy just doesn’t seem to affect inequality much. Though this might reflect the poorer quality of inequality data, there is likely more to this lack of correlation between democracy and inequality. In fact, we do find heterogeneous effects of democracy on inequality consistent with the theories mentioned above, which would not have been possible if the poor quality of inequality data made it hard to find any empirical relationship.

Overall, our results suggest that democracy does represent a real shift in political power away from elites and has first-order consequences for redistribution and government policy. But the impact of democracy on inequality may be more limited than one might have expected.

The pointer is from Samir Varma.  Here is an earlier post on democracy and inequality, broadly consistent with the claims of Acemoglu and Robinson.

Assorted links

1. Arnold Kling has a question for Thomas Piketty.

2. Suzanne Scotchmer has passed away.  In addition to her research achievements, during her time at Harvard she was one of the most popular professors with the graduate students and also one of the most helpful.

3. “Al-Qaida is obsessed with documenting the most minute expenses.”

4. “(There is in fact no bowl.)” — how would we cover the Super Bowl if it were an event in another country?  Recommended.

5. California students sue teachers over the existence of tenure.

One salvo in the fight against driverless cars

The group that stalked Anthony Levandowski, an engineer at Google X, the company’s clandestine research laboratory, calls itself the Counterforce, after a Thomas Pynchon novel. About a dozen members, all dressed in black, gathered outside the Berkeley house where Mr. Levandowski lives with his partner and two young children.

They unfurled a banner and handed out fliers detailing the engineer’s work on Google’s driverless car technology, Street View and Google Maps. The flier read: “Anthony Levandowski is building an unconscionable world of surveillance, control and automation. He is also your neighbor.”

This is still just a small and fragmented movement, as the article makes clear.  I predict it will vanish, but I wouldn’t have predicted its existence in the first place.

Robert Sams writes me about Ethereum

…wanted to draw your attention to http://ethereum.org/. Their testnet has just been released tonight. This is NOT another alt-coin, but something much more interesting.

It’s a blockchain with hash-based proof-of-work, similar to Bitcoin, and it has a currency at its core called “ether”. But what makes this interesting is that it includes a Turing-complete scripting language that implements a new entity, a programmable *contract* which, like addresses, can generate and receive transactions.

From their whitepaper (http://ethereum.org/ethereum.html): “A contract is essentially an automated agent that lives on the Ethereum network, has an Ethereum address and balance, and can send and receive transactions. A contract is “activated” every time someone sends a transaction to it, at which point it runs its code, perhaps modifying its internal state or even sending some transactions, and then shuts down.” So the network doesn’t just compute meaningless hashes, it is a distributed computer automating any type of financial exchange expressible in its scripting language.

In theory, all manner of things can be implemented on the network: sophisticated escrow arrangements, securities, CFD’s, order books, games of chance. And being Turing-complete, there will be many things possible that are not currently anticipated or even conceived.

The creators use an internet analogy. As a protocol, Bitcoin is like SMTP, good for doing one thing well (transferring Bitcoin from A to B). Ethereum is like TCP/IP, a generic, low-level platform on top of which other high-level protocols can be built. The internet of finance, as it were.

Haven’t had a chance to look into the code yet. It will be awhile before we know whether the thing is robust. I predict lots of teething problems. I’m just guessing here, but the biggest question mark is whether the security of the network can withstand malicious or buggy code (Bitcoin’s simple scripting language is deliberately not Turing-complete for this reason). Creators of contracts must fund them with tx fees which, as far as I can tell, are proportional to the complexity of the program. So they’re taking an economic approach to solving that problem.

You can read about Ethereum on Twitter here.  Here is Wired on Ethereum.  By the way, it seems Goldman Sachs may be involved.  By the way, here is Sams on cryptonomics.

Thoughts about children

“All Joy and No Fun” inspired me to think differently about my own experience as a parent. Over and over again, I find myself bored by what I’m doing with my children: How many times can we read “Angelina Ballerina,” or watch a “Bob the Builder” video? And yet I remind myself that such intimate shared moments, snuggling close, provide the ultimate meaning of life. I have never quite sorted out the conundrum of how I could be distracted into thinking about something as tiresome as email when I was with my beloved kids. If I lost all my emails, I’d manage, and if I lost my children, I’d never recover; yet still I sometimes find it hard to stay in the moment with them. Senior demonstrates that there is no contradiction in this seeming paradox; she understands that tolerating our children is the cornerstone of loving them.

That is from Andrew Solomon.

Does immigration expand or contract the welfare state?

Bryan Caplan reports:

If you look at the fifty United States, however, immigration has no detectable effect on TANF/AFCD, K-12 education, or Medicaid spending.  This is true for both per capita and total spending…

He is drawing on a new Cato study (pdf) by Zachary Gochenour and Alex Nowrasteh.

How much snow it takes to cancel school

The pointer is from Ángel Cabrera, link here.

What happens when we correct for publication bias?

There is a recent paper by Leif D. Nelson, Uri Simonsohn, and Joseph P. Simmons on this topic, the abstract is this:

Journals tend to publish only statistically significant evidence, creating a scientific record that markedly overstates the size of effects. We provide a new tool that arrives at unbiased effect size estimates while fully ignoring the unpublished record. It capitalizes on the fact that the distribution of significant p-values, p-curve, is a function of the true underlying effect. Researchers armed with only the sample sizes and p-values of the published findings can fully correct for publication bias. We demonstrate the use of p-curve by reassessing the evidence for the impact of “choice overload” from the Psychology literature, and the impact of minimum wage on unemployment from the Economics literature.

When it comes to both the choice overload effect and the minimum wage, correcting for publication bias implies a lack of significance in the overall tenor of the results.  In passing I am not sure the minimum wage is the best example here, since a “no result” paper on that question seems to me entirely publishable these days and indeed for some while.

For the pointer I thank Kevin Lewis.  And Kevin Drum adds comment.

Assorted links

1. The Cato session on glamour, with Virginia Postrel, myself, and Sam Tanenhaus.

2. Does exposure to fast food diminish your happiness? (speculative) and electronic tongue can identify brands of beer.

3. Robot directing traffic in Congo.

4. The shaming culture that is China.

5. What worries Americans.

6. Social liberalism as class warfare, another home run post by Ross Douthat.

7. The book that lets you feel the protagonist’s pain.