Tyler Cowen's Blog, page 472

Crime in Europe and the U.S.

Has there been a “reversal of fortune”?  Paolo Buonanno, Francesco Drago, Roberto Galbiati, and Giulio Zanella step into these treacherous waters with a new paper (pdf):

Contrary to common perceptions, today both property and violent crimes (with the exception of homicides) are more widespread in Europe than in the US, while the opposite was true thirty years ago. We label this fact as the “reversal of misfortunes”. We investigate what accounts for the reversal by studying the causal impact of demographic changes, incarceration, abortion, unemployment and immigration on crime. For this we use time series data (1970-2008) from seven European countries and the U.S. We find that the demographic structure of the population and the incarceration rate are important determinants of crime. Our results suggest that a tougher incarceration policy may be an effective way to contrast crime in Europe. Our analysis does not provide information on how incarceration policy should be made tougher nor does it provide an answer to the question whether a such a policy would also be efficient from a cost-benefit point of view. We leave this to future research.

I would stress that there are numerous controversial claims in this paper.  (I also personally believe that the heavy U.S. reliance on incarceration is morally problematic.)  Nonetheless we are committed to bringing you thought-provoking material and so there you go.

For the pointer I thank Noah Smith, who should not be construed as necessarily endorsing any of these results.

More data on survival during maritime disasters

From Mikael Elinder and Oscar Erixson (pdf, final PNAS gated version here):

It’s a widespread notion that women and children are saved first in maritime disasters. The systematic evidence of this comes primarily from the sinking of RMS Titanic. By analyzing individual level data from MS Estonia – one of the largest maritime disaster in the Northern hemisphere since World War II – a different picture emerges. Estonia sunk in the Baltic Sea with 137 survivors and 852 casualties. Despite equal gender rates on Estonia, 111 men, but only 26 women survived. This striking observation, as well as econometric analyses of survival probabilities, shows that the behavior among passengers and crew was clearly inconsistent with the norm that women should be saved before men. We show that the survival patterns from several maritime disasters, including Titanic, can be explained by the behavior of the captain. Women have a survival advantage only when the captain orders that women should be given priority and threatens disobedience with violence. Otherwise women will have lower survival chances.

Assorted links

1. There is no great stagnation markets in everything (cardboard bicycles).

2. Admitting to academic bias.

3. Cyborg America.

4. Where is the one percent cut-off for India?

5. The culture that is Singapore, the accompanying pro-natalist music video is here.  The chipmunk remix is here.

Sin: The Price is Not Right

Here is an excellent New York Times story on payments to firms that destroy HFC-23, a by product from the creation of air conditioning coolant. The gas is 11,700 times worse for climate change than C02 so the UN set a price for destroying the gas 11,700 times higher than for eliminating C02. N.B. In a real market prices are based on supply and demand not just demand! Hi jinx ensue:

…since 2005 the 19 plants receiving the waste gas payments have profited handsomely from an unlikely business: churning out more harmful coolant gas so they can be paid to destroy its waste byproduct. The high output keeps the prices of the coolant gas irresistibly low, discouraging air-conditioning companies from switching to less-damaging alternative gases.

…The production of coolants was so driven by the lure of carbon credits for waste gas that in the first few years more than half of the plants operated only until they had produced the maximum amount of gas eligible for the carbon credit subsidy, then shut down until the next year, United Nations reports said. The plants also used inefficient manufacturing processes to generate as much waste gas as possible…

The invisible hand is subtle and difficult to duplicate with manufactured markets. The UN is trying to stop the payment program but, as usual, the rents attracted rent seekers who are now using their profits to lobby to keep the system in place.

In other offset news, Ted Frank’s chicken offset will let you eat at Chick-fil-A and still keep your liberal conscience clean.

H/t: Carl Danner.

The Young Lady’s Illustrated Primer

Nearly here:

SITTING down with the Inquire system is, at first, a lot like trying to cosy up to an intimidatingly dense biology textbook. Sure, its presentation on the iPad is slick, but that can’t hide the fact that you are in for a tough old read.

That is until you highlight the first bit of particularly impenetrable text. Suddenly a list of questions pops up in the right-hand margin. Touch one and you are whisked away to a Wikipedia-like page full of information specific to the concept you are stuck on. Terms like “chloroplast” and “plasma membrane” are succinctly defined, and the page explains how each concept fits into the wider field of biology.

Want to know more? Type in your own question and artificially intelligent software will construct a new page to answer your query.

The aim of Inquire is to provide students with the world’s first intelligent textbook, says its creator David Gunning of Seattle-based Vulcan. At first glance, the system just looks like an electronic version of Campbell Biology, the tome that forms the bedrock of biology classes for first-year university and advanced high school students in the US. But behind the scenes is a machine-readable concept map of the 5000 or so ideas covered in the book, along with information on how they are all related.

Now that’s what I call fiscal policy

If Changsha gets its way, the 100 day battle will just be a start. The city made headlines late last month when it unveiled plans for Rmb829bn ($130bn) in spending on projects ranging from airport expansion to road building, waste treatment and sprucing up the city.

The investment target was jaw-dropping, nearly 150 per cent the size of the city’s GDP last year.

Here is more, Simon Rabinovitch in the FT, “Changsha plan at the heart of China stimulus.”  Obviously not all of China will see a comparably large program.

Really uncertain business cycles

There is more to macroeconomics than blogosphere debates often reflect.  From Nicholas Bloom, Max Floetotto, Nir Jaimovich, Itay Saporta-Eksten, and Stephen J. Terry (ungated versions here):

We propose uncertainty shocks as a new shock that drives business cycles. First, we demonstrate that microeconomic uncertainty is robustly countercyclical, rising sharply during recessions, particularly during the Great Recession of 2007-2009. Second, we quantify the impact of time-varying uncertainty on the economy in a dynamic stochastic general equilibrium model with heterogeneous firms. We find that reasonably calibrated uncertainty shocks can explain drops and rebounds in GDP of around 3%. Moreover, we show that increased uncertainty alters the relative impact of government policies, making them initially less effective and then subsequently more effective.

There is no need to think of this as a competitor to Keynesian or market monetarist theory, rather it is a complement.  It suggests that the economy needs “repair of trust” in addition to stronger aggregate demand.  It suggests that policy weakness and uncertainty may follow from more general uncertainties, rather than being the primary problem.

This result also addresses some of Evan Soltas’s questions here.  As of 2006-2007, it was not commonly understood how volatile the economic environment was, and how broken U.S. finance was.  The ongoing problems in the eurozone, even if their effects on U.S. exports are small, are a nagging reminder that “Toto, we don’t live in Kansas any more.”

Real Real Wages

The workers at Brazil’s central bank are on strike today, demanding a 23 percent pay increase to compensate for inflation that’s occurred since June 2008.

As reported by Matt Yglesias based on this article.

China estimate of the day

Every 10% cut in US emissions is completely negated by 6 months of China’s emissions growth.

Admittedly, that seems to be calculated at previous growth rates for the Chinese economy, rather than at current or pending rates.

That is from the interesting and provocative Energy for Future Presidents: The Science Behind the Headlines, by Richard A. Muller.

Assorted links

1. Facts about Brazil.

2. Can Haiti rebuild with recycled garbage?

3. Reviving Thomas Browne.

4. Markets in everything.

5. Rortybomb on whether policy uncertainty is what matters, and here is a look at some Romney plan-cited economists.