Wednesday, January 26, 2011

No Need for Horse Trading in the Texas Legislature

Applied public choice in the Texas Legislature, as seen in the video below (HD Division of Labour).

And some people thought that "pianist congressmen and congresswomen" existed only in places like Brazil. To be fair to Brazil, there the misdeed at least led to a big public scandal, a public statement of misconduct by the Congress, and a change of the voting system (which now reads fingerprints).

One important economic lesson here is that, as it's well known among economists, ethical integrity of politicians is not among the strongest factors explaining developmental differences across countries, independently of the popularity of the notion.

Enjoy the representatives' ballet!

Sunday, January 23, 2011

The Selfish Nation State

In a comment to a Caplan's post on growth, redistribution and immigration, reader MichaelM makes the following insightful comment:
I've made a point of asking in the past why, if income redistribution is an unqualified good, we don't pay for state provided health insurance for poor Africans or Indians. Nobody ever has given me a good answer that doesn't ultimately reduce to nationalism.
I think part of the reason that nobody will ever admit to being an adherent of this ideology is because the natural label for it is none other than national socialism.
This may indeed be true when it comes to most nationalists and socialists that I know.

I believe however that I can make a quasi-libertarian case for some amount of conditional redistribution in open societies not based on nativist criteria. To that, redistribution is qualified by commitment to the values of open societies. Societal participation, contribution and access to benefits is conditional on the support of those values. Immigration is open, but only to the extent that there's commitment to these values -- which has to be shown in part by "moving in".

The idea is that open societies shouldn't be in the business of supporting individuals that are committed to the values of closed societies. They should allow however individuals that are committed to the values of open societies to immigrate. Obviously, open societies could and probably should support one another.

Now, this argument poses a few practical problems of its own. How do you measure an individual's level of commitment to the values of an open society? Isn't this intrusive? Should individuals that aren't committed be exiled from open societies? Would such possibly draconian rules be compatible with the values of open societies themselves? BTW, what are the values of open societies?

Up to a certain extent, modern open societies try yet to guide their policies, even if in a somewhat awkward fashion, by this principle. They would probably do better however if they would acknowledge it more explicitly.

Saturday, January 22, 2011

The Saturated Fat French Paradox

French culture, politics and economics are fascinating due to all the puzzles and paradoxes it poses to researchers in the rest of the world. This article by Fat Head for example talks about the saturated fat paradox:
Compared to Americans, the French consume four times as much butter, three times as much pork and 60% more cheese. Their overall consumption of saturated animal fat is double ours. Since the experts have told us over and over that saturated fat will clog your arteries, the heart-attack rate in France must be higher than the Eiffel Tower, right? Wrong.
The heart-disease rate in France is about one-third the rate in the United States and United Kingdom, in spite of the fact that the rate of smoking in France is also 10% higher. Since everyone knows saturated fat causes heart disease, the experts refer to this as the French Paradox — and for years, they’ve been falling all over themselves to explain it away.
Since public health and medical researchers have shown again and again to be clueless about the phenomenon, the article (and its hilarious politically incorrect comments) proposes a few "explanations." Follow the link and enjoy!

Monday, January 17, 2011

Is Canada a Free Country? Really?

Political correctness is an intellectual disease. Slowly but continuously, it's been used to suppress freedom and as a tool against classical liberal values, particularly in the US, Canada and the UK. In republics it's been used to ostracize universal republican values too. It's now deeply institutionalized in North America, and has become the standard ideological mantra of its academia.

As an ideology it's a relatively recent phenomenon, so we may only now be observing the broader consequences of the institutionalization efforts of the last 20 years. Examples abound; the ethnically motivated but factually ludicrous Batman French sidekick called Nightrunner is an interesting one.

PC in rich countries renders measures of freedom according to restrictive economic standards irrelevant. The Heritage Foundation's Index of Economic Freedom for example ranks Canada in 2011 as the 6th most free country in the world, above the US and much above France. Yet, the song "Money for Nothing" by Dire Straits has been banned from the airwaves in Canada. Here's what has happened according to the Washington Times:

The Dire Straits song "Money for Nothing" was ruled by the Canadian Broadcast Standards Council to be "extremely offensive" and thus inappropriate for airing on radio or television because it uses an anti-gay slur...

Though the decision does not bind Canadian record stores, Canada has broad human-rights policies and tribunals that may give the broadcasting decision probative value.

Formally, the CBSC isn't a government body, but does it really matter? In practice, it has the same powers of censorship of government, and operates under the auspices of government.

So who wins the day, Dire Straits or Canada? Between great music and political idiocy, it's an easy pick: I choose great music. So, here's to the CBSC: enjoy Dire Straits!

Saturday, January 15, 2011

More Investment (Not Government Spending) Is What Makes the Economy Tick

It should be obvious, but since governments don't pay heed, it's always a good idea to repeat it. According to John Taylor (my edits):
Some economists argue that efforts to reduce government spending as a share of GDP have adverse effects on unemployment. This is not what the data show. There is no indication that lower government purchases increase unemployment; in fact we see the opposite. In sharp contrast, the data on spending shares show that the most effective way to reduce unemployment is to raise investment as a share of GDP.
Not convinced? A picture (or two) is worth a thousand words (US data, 1990 to 2010):

Thursday, January 13, 2011

Are Demographic Changes Contributing to the Economic Crisis?

According this speech by the Deputy Governor of the Bank of Japan, Kiyohiko Nishimura, delivered at the 2011 AEA Meeting, there could be a relationship (HT De Gustibus Non Est Disputandum and NadaEsGratis). This graph for example shows how peaks of the demographic variable called inverse dependency ratio appears to be associated with peaks of real estate price runs:

The inverse dependency ratio increased with the boomers and now falls in the US as the population ages. Dr. Nishimura is suggesting that the demographic transition, even if not necessarily having caused the crisis, saps economic vitality and makes recovery in aging economies much harder and less probable than in previous similar episodes. This would explain for example the long stagnation of the Japanese economy.

If this is the case, the negative effects of the demographic transition may prove to be much more worrisome than previously acknowledged by economists, not restricting themselves to retirement and other benefits to elders.

It's interesting to notice that these problems aren't confined to rich countries. Brazilian economist Jorge Arbache, a colleague of mine, has written articles in which he alerts for the fact that the same demographic phenomenon is happening in China and won't take long to happen in Brazil, even though these countries are yet very far from having reached the status of developed countries.