Tyler Cowen's Blog, page 89

When will China reverse its carbon emissions?

No one knows for sure, you will find a brief survey of some estimates here.  Let’s start with a few simpler points, however.

First, China is notorious for making announcements about air pollution and then not implementing them.  This is only partially a matter of lying, in part the government literally does not have the ability to keep its word.  They have a great deal of coal capacity coming on-line and they can’t just turn that switch off.  They’re also driving more cars, too.

Second, China falsifies estimates of the current level of air pollution, so as to make it look like the problem is improving when it is not.  Worse yet, during the APEC summit the Chinese government blocked the more or less correct estimates coming from U.S. Embassy data, which are usually transmitted through an app.  A nice first step to the “deal” with the United States would have been to allow publication (through the app) of the correct numbers.  But they didn’t.  What does that say about what one might call…”the monitoring end”…of this new deal?

Third, a lot of the relevant Chinese regulatory apparatus is at the local not federal level (in fact it should be more centrally done, even if not fully federalized in every case).  There are plenty of current local laws against air pollution which are simply not enforced, often because of corruption, and often that pollution is emanating from locally well-connected, job-creating state-owned enterprises.  Often the pollution comes from one locality and victimizes another, especially in the north of the country.   Those are not good local regulatory incentives and it will take a long time to correct them.  Right now for instance Beijing imports a lot of its pollution from nearby, poorer regions which simply wish to keep churning the stuff out.  The Chinese also do not have anything close to a consistently well-staffed environmental bureaucracy.

Fourth, if you look at the history of air pollution, countries clean up the most visible and also the most domestically dangerous problems first, and often decades before solving the tougher issues.  For China that highly visible, deadly pollutant would be Total Particulate Matter, which kills people in a rather direct way, and in large numbers, and is also relatively easy to take care of.  (Mexico for instance has been getting that one under control for some time now.)  The Chinese people (and government) are much more worried about TPM than about carbon emissions, which is seen as something foreigners complain about.  Yet TPM is still getting worse in China, and if it is (possibly) flat-lining this year that is only because of the economic slowdown, not because of better policy.

When will China cap carbon emissions?  “Fix TPM and get back to me in twenty years” is still probably an underestimate.  Don’t forget that by best estimates CO2 emissions were up last year in China by more than four percent.  How many wealthier countries have made real progress on carbon emissions?  Even Denmark has simply flattened them out, not pulled them back.

The Chinese really are making a big and genuine effort when it comes to renewables, it is just that such an effort is dwarfed by the problems mentioned above.

The media coverage I have seen of the U.S.-China emissions “deal” has not been exactly forthcoming in presenting these rather basic points.  It’s almost as if no one studies the history of air pollution anymore.

I understand why a lot of reporters want to “clutch at straws” — it’s good for both clicks and the conscience — but a dose of realism is required as well.  The announced deal is little more than a well-timed, well-orchestrated press release.

What’s up with GruberGate?

Is it up to three cynical tapes about Obamacare now?   I’ve lost track.

I’m not so interested in pushing through the mud on this one.  It’s a healthy world where academics can speak their minds at conferences and the like without their words becoming political weapons in a bigger fight.  Or how about blogs?: do we want a world where no former advisor can write honestly about the policies of an administration?  I’ve disagreed with Gruber from the beginning on health care policy and I thought his ObamaCare comic book did the economics profession — and himself — a disservice.  But I’m simply not very interested in his proclamations on tape, which as far as I can tell are mostly correct albeit overly cynical.  (If anything he is overrating the American voter — most people weren’t even paying close enough attention to be tricked.)  Criticisms of Gruber are not criticisms of a policy, and it is policy we should focus upon and indeed there is still a great deal of health care policy we need to figure out.  It’s hardly news that intellectuals who hold political power, even as advisors, very often do not speak the truth.  If anything, I feel sorry for Gruber that he has subsequently felt the need to so overcompensate by actively voicing such ex post cynicism, it is perhaps the sign of a soul not at rest.

In the meantime, I’d like to see more open discourse, not less.  Perhaps we should subsidize people who end up looking foolish, rather than taxing them.

Facts about Lords

The House of Lords, that is:

One hundred and thirteen draw paychecks from financial-services firms. Twenty-six are paid by resource-extraction companies. Twenty work for foreign governments, in capacities that include advising officials on policy and consulting for government-controlled companies.

Some of those jobs materialized after they joined the House of Lords.

There is much more here, from Justin Scheck and Charles Forelle.  For the pointer I thank Matthew A. Petersen.

Assorted links

1. Is badminton the most corrupt sport? (link now fixed)

2. Why do so many hipsters look alike?

3. How to disrupt bribes.

4. Habal-Habal in the Philippines (photo).

5. The secret (internet) life of plants?

6. Can computers write fiction?  (No, not yet)  Kill people?  (Yes)

7. 28 claims about Latin America.

8. Should German traffic lights show men or women figurines?

The Reversal of the Latitude-Income Correlation

It’s well known that GDP per capita increases with distance from the equator and it does so moving both North and South. (I discuss this correlation at MRU in Geography and Development, Disease (video)). Dietz Vollrathat at the Growth and Development Blog points us to a new paper by Holger Strulik and Carl-Johan Dalgaard that shows that development used to be greater nearer the equator. Here’s the big picture.

The top panel shows that as absolute latitude (distance from the equator) increases today so does development, here measured as the urbanization rate. The left panel shows the world. The right panel shows, rather remarkably, that the relationship continues to hold in Europe.  The bottom panel shows that as absolute latitude increased in 1500 development, here measured as population density, decreased both in the world and Europe.

What can account for this relationship and its reversal? The authors have a let’s say highly speculative (but very interesting!) theory. It runs as follows. Animals and people get bigger in colder climates possibly because surface area to volume decreases with size so larger animals can retain heat more easily. All else the same, however, bigger people means fewer people and so in the pre-industrial era higher latitudes had smaller populations leading to less innovation (ala my TED talk on market size and innovation). But fewer children also meant more investment in human capital per child (a Beckerian quality-quantity tradeoff). Higher human capital per child leads to increases in technology which allow and encourage even more human capital accumulation and fewer but yet even higher quality children and thus you hit a takeoff point where the economies of the colder regions accelerate generating the modern relationship.

Phew! Now that’s a theory. I don’t say that I believe it but I applaud the ambition. Bravo!

What alternative theories do MR readers propose?

Is the economics job market worth it?

There is a new NBER paper on this topic by McFall, Murray-Close, Willis, and Chen, gated copy here.  Here are some key takeaways from the paper:

1. One-third of the job candidates in the sample were women.

2. More than one quarter of all job candidates on the market come from top ten institutions, which tend to have the largest Ph.d. programs.

3. 28 percent of new job candidates enter the market with some kind of publication.  The average candidate has served as primary instructor for one or two courses, plus as teaching assistant for more than three courses.

4. The five most frequently listed fields are labor economics, macro, IO, applied micro, and econometrics, each listed by 21-23% of the candidates.

5. 72% of the people on the market express a preference for jobs as assistant professor.

6. More than eighty percent of the job candidates “expected to place in the top half of the distribution for their graduate department.”

7. Although there is overoptimism, in terms of relative rank candidates have a decent idea of where they will end up.

8. Job candidates receive three offers on average (noting that only half of the candidates in the total pool responded, so there may be bias.  Three strikes me as a little high on average).

9. Number of publications predicts higher yield in terms of job offers, whereas gender, undergraduate school, having a Ph.d. from the U.S., and teaching experience have only weak predictive power.

10. As a candidate progresses through the process of interview, flyout, and the like, unobservable characteristics matter more and more for predicting outcomes.  This is consistent with the view that the process itself yields information, though whether that information is ultimately accurate as a predictor of success remains an open question.

11. Approximately 92% of candidates ended up with a job (!).

12. More than two-thirds of the candidates are “very” or “extremely” satisfied with their final results.

13. The average base salary for accepted jobs is $93,000.  The median base salary is $88,600.

14. The paper has many other results of interest.  As Bryan Caplan has previously observed, being an economist is a great life and a great career — do it!

Learning the Wealth of Nations

This paper I had neglected, now it is time to remedy that.  The authors are Francisco J. Buera, Alexander Monge-Narajo, and Giorgio E. Primiceri, and it was published in Econometrica 2011:

We study the evolution of market-oriented policies over time and across countries. We consider a model in which own and neighbors’ past experiences influence policy choices through their effect on policymakers’ beliefs. We estimate the model using a large panel of countries and find that it fits a large fraction of the policy choices observed in the postwar data, including the slow adoption of liberal policies. Our model also predicts that there would be reversals to state intervention if nowadays the world was hit by a shock of the size of the Great Depression.

I don’t find that abstract so informative, this paper has a few main results:

1. Policymakers have priors about how good the market economy is, and they revise those views — and thus revise policy — as they observe their own growth results and those of their neighbors.  Success for market economies tends to breed greater reliance on markets.

2. A simple learning model predicts about 97% of the policy choices observed in the data.  Perhaps more importantly, the model accounts for more than 77% of the observed policy switches over a three-year time window.

3. Evolving beliefs — and not just the fixed demographic characteristics of countries — are critical for understanding policy decisions.

4. It was probably the growth collapse of the late 1970s for interventionist countries which led to a greater reliance on markets.

5. Adjustment toward better-performing policies is often quite slow.  In part this is because policymakers attribute the superior performance of other countries to heterogeneity rather than policy per se.

6. A global Great Depression would lead to a significant switch back to state interventionism.

7. If I understand the model correctly (and I am making a bit of a leap in interpretation here), it implies a Chinese growth slowdown will lead to greater state intervention in China, not greater liberalization.

The pointer to this paper is from Luis Garicano.

Kansas apocalypse markets in everything

The best defense is sometimes…a good defense:

When Tyler Allen agreed to fork over $3 million in cash for a luxury condominium near Concordia, Kan., he wasn’t attracted by the indoor swimming pool, 17-seat movie theater, or hydroponic vegetable garden.

The real selling point of the 1,820-square-foot apartment: It will be buried 174 feet underground in a decommissioned missile silo sturdy enough to withstand a nuclear attack.

…The so-called Survival Condo complex boasts full and half-floor units that cost $1.5 million to $3 million each. The building can accommodate up to 75 people, and buyers include doctors, scientists and entrepreneurs, says developer Larry Hall.

The development is sold out.  I found this bit interesting:

…the complex has enough emergency food on hand to last for up to five years. There’s also a holding cell for unruly occupants.

The full story is here.

Assorted links

1. Public transit use in the United States.

2. Women and pot legalization, redux.

3. What is new with ECB monetary policy?

4. When fish shout.

5. 9 Chinese marriage proposals.

6. Tim Geithner on Europe (caution: contains profanity).

I just clicked on pre-order

Michael Hofmann, Where Have You Been?: Selected Essays.  Hofmann is a poet, translator, and essayist and in my view he is one of the finest (and most underrated) thinkers and writers of our day.  The book is due out December 2.  Here are previous MR mentions of Michael Hofmann.