Economics Archives - Eddy's musings

We study the effects that two of the largest gangs in Latin America, MS-13 and 18th Street, have on economic development in El Salvador. We exploit the fact that the emergence of gangs in El Salvador was in part the consequence of an exogenous shift in US immigration policy that led to the deportation of gang leaders from the United States to El Salvador. Using the exogenous variation in the timing of the deportations and the boundaries of the territories controlled by the gangs, we perform a spatial regression discontinuity design and a difference-in-differences analysis to estimate the causal effect that living under the rule of gangs has on development outcomes. Our results show that individuals living under gang control have significantly worse education, wealth, and less income than individuals living only 50 meters away in areas not controlled by gangs. None of these discontinuities existed before the arrival of gangs from the US. The results are not determined by exposure to violence, lower provision of public goods, or selective migration away from gang locations. We argue that our findings are mostly driven by gangs restricting residents’ mobility and labor choices. We find that individuals living under the rule of gangs have less freedom of movement and end up working in smaller firms. The results are relevant for many developing countries where non-state actors control parts of the country.

That is from a new paper by Nikita Melnikov, Carlos Schmidt-Padilla, and Maria Micaela Sviatschi. Via the excellent Samir Varma.

August 20, 2019August 20, 2019

An email I sent on negative nominal interest rates

https://marginalrevolution.com/marginalrevolution/2019/08/an-email-i-sent-on-negative-nominal-interest-rates.html

Some of the negative nominal premium comes from the fact that you need these govt. securities for collateral, REPOs, clearinghouse margin, etc.

That doesn’t explain the change, but this point is often overlooked and it makes the puzzle somewhat less mysterious.

August 20, 2019August 20, 2019

Are Recessions Inevitable?

http://www.unz.com/rpaul/are-recessions-inevitable/

Stocks fell last week following news that the yield curve on Treasury notes had inverted. This means that a short-term Treasury note was paying higher interest rates than long-term Treasury note. An inverted yield curve is widely seen as a sign of an impending recession.

Some economic commentators reacted to the inverted yield curve by parroting the Keynesian propaganda that recessions are an inevitable feature of a free-market economy, whose negative effects can only be mitigated by the Federal Reserve. Like much of the conventional economic wisdom, the idea that recessions are caused by the free market and cured by the Federal Reserve is the exact opposite of the truth.

June 22, 2019June 22, 2019

Civic honesty around the globe

https://marginalrevolution.com/marginalrevolution/2019/06/civic-honesty-around-the-globe.html

I am a bit late to this party, having been traveling, but I will serve this one up anyway:

Civic honesty is essential to social capital and economic development, but is often in conflict with material self-interest. We examine the trade-off between honesty and self-interest using field experiments in 355 cities spanning 40 countries around the globe. We turned in over 17,000 lost wallets with varying amounts of money at public and private institutions, and measured whether recipients contacted the owner to return the wallets. In virtually all countries citizens were more likely to return wallets that contained more money. Both non-experts and professional economists were unable to predict this result. Additional data suggest our main findings can be explained by a combination of altruistic concerns and an aversion to viewing oneself as a thief, which increase with the material benefits of dishonesty.

May 10, 2019May 10, 2019

China has overestimated Trump’s desperation to do a deal

https://www.ft.com/content/f2e3e93a-72d4-11e9-bf5c-6eeb837566c5

For anyone who has negotiated with either Donald Trump or the Chinese Communist party, the collapse of US-China trade talks thanks to last-minute brinkmanship will come as no surprise.

At noon Beijing time on Friday — midnight Thursday in Washington — the US increased tariffs on $200bn of Chinese imports from 10 per cent to 25 per cent after it accused China of “reneging” on earlier promises at the eleventh hour.

December 28, 2018December 28, 2018

The fight to keep ideas open to all

The “commons of the mind” must be preserved, says James Boyle of Duke Law School, on the 50th anniversary of “The tragedy of the commons”

https://www.economist.com/open-future/2018/12/12/the-fight-to-keep-ideas-open-to-all?fsrc=gp_en?fsrc=scn/tw/te/bl/ed/thefighttokeepideasopentoallopenvoices

“THE ONLY way we can preserve and nurture other and more precious freedoms is by relinquishing the freedom to breed.” This ominous sentence comes not from China’s one-child policy but from one of the 20th century’s most influential—and misunderstood—essays in economics. “The tragedy of the commons”, by Garrett Hardin, marks its 50th anniversary on December 13th.

The article, published in the journal Science, was a neo-Malthusian jeremiad about uncontrolled population growth. But it is remembered for the image that the title conjures up and for the anecdotes that Hardin used. The idea behind it is as simple as it is profound: a resource freely available to all will be used inefficiently. An actual common will inevitably be overgrazed. Who would restrict their cattle if other herders may not follow suit?

August 10, 2018

Key pointers from “The Great Man” Theory Debunked

Source: https://www.zerohedge.com/news/2018-08-09/hitler-trump-great-man-theory-debunked

The “Great Man Theory” [Link] tells us that history can be largely explained by the impact of great leaders.

Herbert Spencer [Link] forcefully disagreed with the “Great Man Theory.” He believed that great leaders were merely products of their social environment.

One of the significant shortcomings of many political philosophers is their ignorance of human nature.

Donald Trump, He’s a brute, a bully, and a demagogue, but he understands the zeitgeist, the spirit of the times and he adjusts his message to appeal to his base.

I have known many bullies; on the playground and in the boardroom. A bully may achieve short-term gain, but for long-term pain. It is very easy to destroy corporate culture, but extremely difficult, if not impossible, to mend a toxic workplace after the bully was dismissed. Now, extrapolate this to the world under Donald Trump.

China is building a large, new embassy at the mouth of the Panama Canal visible to every ship “as they enter a waterway that once symbolized the global influence of the United States.”

China is replacing U.S. influence in Latin America.

The elites are running out the clock in order to loot as much as they can before it hits the fan.

We dirt people will continue to suffer from stagnant wage growth while the so-called increase in national wealth goes to a tiny minority. [link]

It is said that every few generations, money returns to its rightful owners. That is what’s happening now.

or 5,000 years, China was a world superpower with only a short, two-century hiatus that is now ending as China again emerges as an economic superpower. Such a massive shift in wealth cannot be attributed to either leadership or the people below. It is a painful reversion to the mean. All the finger-pointing and wailing and gnashing of teeth … not even bombastic Trump and his tariffs can stem the tide and make Amerika great again as money continues to flow back to its rightful owners.

The USA is a declining, bankrupt, warmongering police state and most of its indoctrinated citizens think they live in a free, peaceful country.

China is a corrupt police state, but most of its citizens know it.

We have met the enemy, and he is us. The future awaits.

July 8, 2018

Survival of the Richest

The wealthy are plotting to leave us behind

Source: https://medium.com/s/futurehuman/survival-of-the-richest-9ef6cddd0cc1

Last year, I got invited to a super-deluxe private resort to deliver a keynote speech to what I assumed would be a hundred or so investment bankers. It was by far the largest fee I had ever been offered for a talk — about half my annual professor’s salary — all to deliver some insight on the subject of “the future of technology.”

I’ve never liked talking about the future. The Q&A sessions always end up more like parlor games, where I’m asked to opine on the latest technology buzzwords as if they were ticker symbols for potential investments: blockchain, 3D printing, CRISPR. The audiences are rarely interested in learning about these technologies or their potential impacts beyond the binary choice of whether or not to invest in them. But money talks, so I took the gig.

Continue reading “Survival of the Richest”

June 28, 2018

Macroeconomics – 11. The Economics of Developing Countries

What are some of the most important characteristics of developing countries?
Describe the Malthusian trap associated with population growth.
Explain the demographic transition view of population growth.
What is the so-called “brain drain?”
What is the Catch-22 of capital formation for many developing countries?
Illustrate the vicious circle of poverty.
Regarding strategies of economic development, describe and assess three major strategic choices faced by developing countries.
List nine ways for developing countries to enhance economic growth.