Adjusted U.S. Income Inequality

Image result for income inequality

A 2016 working paper explores the well-tread topic on income inequality, but with proper adjustments. These include:

  • Remove non-deductible losses before 1987
  • Include tax-exempt interest
  • Remove filers  younger than 20 years old and remaining dependent filers
  • Remove non-resident filers
  • Correct number and income of non-filers
  • Correct for income sources
  • Include C corporation retained earnings
  • Include C corporation taxes
  • Include employer payroll taxes
  • Include employer provided health insurance
  • Measure income group sizes using the number of adults
  • Include Social Security benefits
  • Include unemployment insurance benefits
  • Include other cash transfers
  • Include Medicare
  • Include other non-cash transfers

When all is said and done, the researchers conclude,

Using unadjusted tax-based measures, Piketty and Saez (2003 and updates) estimate that between 1960 and 2013 top one percent pre-tax income shares increased by 10.0 percentage points. Using a consistent market income measure results in an increase of only 2.8 percentage points. Using a broad income measure with government transfers results in an increase of only 0.8 percentage points. Compared to unadjusted top one percent income shares, broad income shares were about 4 percentage points larger in the 1960s due to the inclusion of corporate retained earnings and taxes. They were about 5 percentage points lower in recent decades due to controlling for lower marriage rates outside the top of the distribution and including employer provided health insurance and government transfers. These differences illustrate how unadjusted tax-based income measures can present a distorted picture of inequality, as income sources outside the individual tax system can strongly impact inequality trends (pg. 14).

What I’m Watching Catch-Up: Anime Edition

This is part of What I’m Watching (sort of).

I’ve fallen behind on my additions to What I’m Watching. Way behind. So, instead of doing longer posts like I’ve done in the past, I’m going to list all the series I’ve watched over the last several months with a brief synopsis and a few quick thoughts. I’ll include the ones I’m still watching at the end without comment.

Completed:

Image result for melancholy of haruhi suzumiyaThe Melancholy of Haruhi Suzumiya (2006, 2009): “Kyon is a cynical and incredulous student of North High School in Nishinomiya. He is dragged along by his classmate, the eponymous protagonist Haruhi Suzumiya, an eccentric girl who is seeking supernatural phenomena and figures such as aliens, time travelers, and espers. With Kyon’s reluctant help, Haruhi establishes a club called the “SOS Brigade” (SOS団 Esu-Ō-Esu Dan), short for “Spreading excitement all Over the world with Haruhi Suzumiya Brigade”…to investigate mysterious events. Haruhi later recruits three additional members: the laconic bibliophile Yuki Nagato, the shy and timid Mikuru Asahina, and the extremely friendly transfer student Itsuki Koizumi. These members soon reveal themselves (to Kyon) to be the types of extraordinary characters that Haruhi is seeking. They have been sent by their organizations to observe Haruhi — who is unaware that she possesses destructive reality warping powers — and to prevent these powers from being unleashed. This leaves Kyon the task of maintaining the illusion of a normal life for Haruhi” (Wikipedia).

I absolutely adored season one. The concept is totally bizarre, the comedy is top-notch, and the characters are fantastic (even if Haruhi’s sexualization of Asahina is a bit uncomfortable). Unfortunately, season 2 is bogged down by its infamous 8-episode story arc, which could’ve been well-done in a two-or-three-parter instead of the repetitive eight. While there are a couple highlights, overall the second season is a major letdown after such a memorable first one. Watch the first, skip the second.


Image result for one punch manOne-Punch Man
(2015):
“On an unnamed Earth-like super-continent planet, strange monsters and supervillains have been mysteriously appearing and causing disasters. To combat them, the world’s superheroes have risen to fight them. Saitama is one such superhero, hailing from the metropolis of Z-City and easily defeating monsters and villains with a single punch. However, he has become bored with his power and only gets truly excited when fighting strong opponents that can challenge him. Over the course of the series, Saitama encounters various superheroes, supervillains, and monsters. He gains a disciple in the form of the cyborg Genos and eventually joins the Hero Association in order to gain official recognition” (Wikipedia).

The premise combined with Saitama’s often deadpan delivery (as well as his occasional freak-outs) adds up to some incredibly funny moments. The action is also pretty spectacular, even if the story line is fairly thin: battles which are episodic in nature with no major developments plot wise (think Mighty Morphin’ Power Rangers with a new rampaging monster to defeat each episode). Throw in a mix of characters–from the epic to the absurd–and you get nothing but pure fun.

Image result for attack on titanAttack on Titan (2013, 2017): “Over 100 years ago, a natural predator of humanity appeared: the Titans, giant humanoid but mindless monsters whose sole purpose of existence seemed to be to devour humans. There was an insurmountable gap in power between them and mankind, and as a result, humanity was rapidly exterminated to the brink of extinction. The survivors responded by constructing three concentric walls: Wall Maria, Wall Rose and Wall Sina, which graced them with a century of peace. However, one day a Colossal Titan far larger than any other seen before breached the outer wall, allowing the smaller Titans to invade the human territory and forcing the survivors to retreat to the inner walls. Eren Jaeger, a boy whose mother was eaten during the invasion, vowed to wipe every last Titan off the face of the Earth, and joined the military determined to exact his revenge” (Attack on Titan WIKI).

When my brother-in-law first told me of this show, I thought it sounded a tad ridiculous…until I watched the gruesome first episode. Titan features some of the most epic battle scenes I’ve ever seen; scenes that are made all the more exhilarating thanks to its incredible soundtrack. Furthermore, the narrative is shrouded in mystery, with constant twists, turns, and mind-blowing reveals. Pacing at times is an issue and Eren is a somewhat annoying lead, but it’s difficult to find fault with a show that takes everything that was great about early The Walking Dead and turns it to 11. Can’t wait for Season 3 next year.

Image result for one week friendsOne Week Friends (2014): “Fujimiya Kaori has a strange condition; every Monday she loses all her memories of her friends. She hides herself away, never making any friends to forget, until her classmate Hase Yuki starts eating lunch with her on the roof. Together, the two work to address Fujumiya’s challenges as she learns to open up to people and expand her circle of companions” (Nihon Review).

Think 50 First Dates with Adam Sandler, but actually good. The message that friendship is both necessary *and* difficult (even without a disability) is a powerful one. The resolve Yuki shows at the beginning—pledging to be Kaori’s friend in the face of a challenging disability—is heartfelt and moving, making the ending all the more satisfying. Cute, if sentimental.


Image result for your lie in aprilYour Lie in April
(2014-2015):
“Piano prodigy Kousei Arima dominated the competition and all child musicians knew his name. But after his mother, who was also his instructor, passed away, he had a mental breakdown while performing at a recital that resulted in him no longer being able to hear the sound of his piano even though his hearing was perfectly fine. Even two years later, Kousei hasn’t touched the piano and views the world in monotone, and without any flair or color. He was content at living out his life with his good friends Tsubaki and Watari until, one day, a girl changed everything. Kaori Miyazono is a pretty, free spirited violinist whose playing style reflects her personality. Kaori helps Kousei return to the music world and show that it should be free and mold breaking unlike the structured and rigid style Kousei was used to” (Your Lie in April WIKI).

This one always has high marks among anime reviews, but I was personally a little disappointed. I loved witnessing Arima struggle with and defeat his personal demons, but Kaori’s lack of character development undermines the nature of their relationship. Plus, the sudden tonal shifts–jumping from deadly serious to comical instantaneously–don’t work as well as they do in, say, Fullmetal Alchemist: Brotherhood and are therefore distracting. Finally, I would liked to see more about the technicalities of music similar to the way new techniques are explored in sports animes (e.g., Haikyuu!!). Nonetheless, the music performances are great, the animation is beautiful, and it still tugs enough at the heartstrings to be worthwhile.

Image result for the devil is a part timerThe Devil Is a Part-Timer! (2013): “In another dimension, the Demon Lord Satan and his forces of evil were defeated by the Hero Emilia Justina and her armies. Satan and his Demon General Alsiel were forced to flee through a portal which dropped them off in modern day Japan. With their magic slowly depleting in an unfamiliar world, they are forced to act as normal human beings in order to survive. The Hero Emilia Justina follows them through the portal and is also met with the same circumstances. Although she still harbours negative feelings towards Satan for his past acts of evil, they become unlikely allies in order to survive” (The Devil is a Part-Timer WIKI).

Another fun and quirky series along the lines of Haruhi Suzumiya (though not as brilliant). The protagonist’s ambition of worldwide domination via working up the corporate ladder of a fast-food chain is both hilarious and relatable. Plot development is only fair, but works well enough for the situational comedy. The second half didn’t feel as fresh as the first (which was pure gold), but nonetheless highly enjoyable.

Image result for fullmetal alchemist brotherhoodFullmetal Alchemist: Brotherhood (2009-2010): “Alchemy is the art of transforming matter. However, in order to create something, the alchemist has to present something of equal value; this is the golden rule of alchemy. After losing their mother to a disease, Edward and Alphonse Elric try to resurrect her, an illegal taboo in the world of alchemy. Through the unsuccessful process Edward loses his arm and his leg and has to transmute Alphonse’s soul (which lost its body,) to a suit of armor. Afterward the two set off on a journey to find the legendary philosopher’s stone and use its magic to reunite with their bodies. In the process Edward joins the army and a much bigger plot unfolds” (Nihon Review).

This series always occupies the top spots in anime lists and for good reason. The characters are fleshed out, the action is impeccable, and the story is complex and gripping. Then there is the almost philosophical way FMAB explores the ins and outs of morality, human nature, family, and friendship. What’s more is the finale is completely satisfying. It took me a few episodes to really get really engaged, but the 60+ episode journey was well worth the effort.

Image result for scum's wishScum’s Wish (2016-2017): “High school student Hanabi Yasuraoka has been in love with her older childhood friend who is now her homeroom teacher Narumi Kanai. But from the look in Narumi’s eyes when he sees the new music teacher Akane Minagawa, Hanabi realizes that he is in love with Akane and not her. Hanabi meets Mugi Awaya, another student who is in love with Akane, who was his tutor when he was in middle school. Hanabi and Mugi make a pact and begin a fake relationship to satisfy each other’s loneliness from their respective unrequited loves, both sexually and emotionally. They agree to not fall in love with each other and end the relationship if their love is returned from the people they are in love with” (Wikipedia).

An odd series that portrays teenage awkwardness, loneliness, longing, and sexual frustration rather well. The show was a bit uncomfortable to watch at times (anything regarding teenage sex would be), but I was captivated by how realistic the emotions onscreen seemed. Unfortunately, the story eventually devolves into absurdity, cheapening an otherwise interesting premise.

Related imageMy Teen Romantic Comedy SNAFU (2013, 2015): “The story follows two loners: the pragmatic Hachiman Hikigaya and beautiful Yukino Yukinoshita, who, despite their varying personalities and ideals, offer help and advice to others as part of their school’s Service Club, assisted by the cheerful and friendly Yui Yuigahama. It largely depicts various social situations faced by teens in a high school setting and the psychology driving their interactions” (Wikipedia).

A series about highly-intelligent high school loners isn’t all that exciting of a premise and it admittedly took me a little bit to get into show, but by the end of Season 2, I was more than happy that’d I given it a shot. Loneliness is something everyone has experienced. The search for belonging is a universal one and watching these characters–despite the exaggerations of their various traits–on that quest is a moving one.

Image result for haikyuuHaikyuu!! (2014-2016): “Hinata Shoyo dreams of playing volleyball, just like his idol the Little Giant. In Junior High, his thrown-together team is thoroughly crushed by another school led by setter, Kageyama Tobio, the “King of the Court”. Hinata swears revenge against the King, only to discover upon joining the Karasuno High School volleyball club that Kageyama is not his adversary, but his new teammate. Together with the other players, they have to battle hard to regain their schools reputation as one of the best in the prefecture” (Nihon Review).

This was my first sports anime and I unequivocally loved it. It embodies everything I love about anime: inner monologues that capture the essence of various emotions and mental states (e.g., insecurity, despair, concentration, joy), the apotheosis of the mundane (e.g., the grind of continual practice, new techniques), and the complete immersion in the story as a viewer. Furthermore, Haikyuu!! never paints the opposing teams as villainous, but as fellow players with the same hopes and dreams as the Karasuno team. I’m very much looking forward to Season 4.

Still Watching:

Image result for classroom of the eliteThe Classroom of the Elite (2017): “In the not too distant future, the Japanese government has established the Tokyo Metropolitan Advanced Nurturing School, dedicated to instruct and foster the generation of people that will support the country in the future. The students there have the freedom to wear any hairstyle and bring any personal effects they desire. Our protagonist is Kiyotaka Ayanokōji, a quiet, unassuming boy who is not good at making friends and would rather keep his distance. He is a student of D-class, which is where the school dumps its inferior students in order to ridicule them. After meeting Suzune Horikita and Kikyō Kushida, two other students in his class, Kiyotaka’s situation begins to change” (Wikipedia).

Image result for my hero academiaMy Hero Academia (2016-2017): “A new phenomenon has appeared among mankind. 80 percent of the population possess superpowers known as “Quirks”, and this gave birth to the rise of heroes and villains. Being a hero has always been high school student Midoriya Izuku’s dream, and All Might, the greatest hero of all, is his all-time inspiration. Unfortunately, Midoriya learns that he possesses no Quirks and is fated never to become a hero at all. One day, he gets rescued by none other than All Might himself after being attacked by a villain. Little did he know that on that fateful day, he learned All Might’s deepest secret, one that would change his life forever and what it means to follow All Might’s footsteps” (Nihon Review).

Image result for psycho passPsycho-Pass (2012-2013): “In the near future, Japan has taken a strong stance for isolationism and has created its own self-sufficient bubble controlled by a series of supercomputers.  By implanting a chip into the brains of its citizens, this society has cracked the code to people’s inclinations, aptitudes and psychological well being.   As a result, crime has been almost eradicated, and employment is practically pre-determined based on the person’s metrics. The show follows the lives of a series of police officers who investigate the few crimes the system failed to predict, and bring in the perpetrators for rehabilitation.  However, should the algorithms decide that the criminals cannot be salvaged, they are exterminated on the spot” (Nihon Review).

Related imageSword Art Online (2012): “In the year 2022, a game called Sword Art Online is released. It is a virtual reality massive multiplayer online role-playing game that is played with a helmet called the Nerve Gear. One day the players discover that they are unable to log out. The creator of the game, Akihiko Kayaba, informs them that they cannot escape until they beat the game, and if they die in the game, they will die in real life. The swordsman Kirito’s quest to escape this life and death game now begins” (Nihon Review).

Image result for monster animeMonster (2004-2005): “Doctor Tenma Kenzou is one of the best brain surgeons in the world. But one day he decides to perform surgery on a 10 year old over the City’s Mayor. After saving the boy, the Director of the Hospital and the Doctors that worked in the Mayor show up dead in the hospital, and the boy who Dr. Tenma saved is missing, along with his twin sister. 9 years later a patient of Dr. Tenma is murdered and the cops place him as the main suspect, but Dr. Tenma knows who did it; the boy he saved 9 years ago, he revived a Monster then and he must kill the Monster now, before more murders occur” (Nihon Review).

Image result for kuroko basketballKuroko’s Basketball (2012-2015): “The Teikō Middle School basketball team had been labelled unrivaled after winning for three consecutive years every championship game they were in. This impressive track record was attributed to the star players, whose exceptional skill and raw talent earned them the moniker ”Generation of Miracles”. Following graduation, each member of the Miracles went on their separate way to join different high school basketball teams. Kuroko Tetsuya, once part of this undefeated team as a sixth member who earned the acknowledgement and respect of the others, decides to enlist in Seirin High School’s basketball club. There he meets Kagami Taiga, a basketball player with promising ability, and they both make a pledge to defeat the Generation of Miracles and become the top players in Japan” (Nihon Review).

 

Immigrant Integration: European Edition

I’ve written before about how strict labor laws in Europe may be hindering immigrant integration. While I still think these may be barriers to integration, Europe is doing better than is often reported. As Tyler Cowen explains in Bloomberg,

Debates over immigration are fraught with misconceptions. One of the most common is that the integration of Muslims into societies in Western Europe has gone very badly, in large part because terror attacks loom so large in the news. Those attacks are a very real problem, yet they do not reflect the typical reality. A new study from the Bertelsmann Stiftung in Germany shows that Muslim integration in Europe is in fact proceeding at a reasonable pace.

The survey included more than 1,000 Muslims in Germany and about 500 in Austria, France, Switzerland and the U.K. (both immigrants and children of immigrants were included, though not recent refugees). Although this is hardly the first study of its kind, the results offer considerable hope for societies facing integration challenges: The stereotype of an uneducated, unemployed, easily radicalized Muslim migrant does not fit the facts.

The first sign of integration is language skill. About three-quarters of the Muslims born in Germany report German as their first language; 46 percent of foreign-born Muslims do. Overall, language skills improve with each generation, and migrants seem to be resourceful in finding ways to learn an adopted country’s tongue. Muslims immigrants to France and the U.K. often arrive knowing the languages of their new countries.

Only about one in 10 French Muslims report leaving school before age 17; the American high school graduation rate for all attendees is lower, at 83 percent. In Germany, employment for Muslim immigrants is on a par with employment for non-Muslims, though Muslim wages are lower. The rate of unemployment for French Muslims is a disappointing 14 percent, but that looks less troubling when you consider that migrants are relatively young and French youth unemployment as a whole is about 25 percent. Labor market reforms and better economies can help integrate foreign migrants, and Europe is currently showing decent economic growth, again reasons for hope.

Nor do Muslims huddle in Muslim-only communities, apart from the broader population. Some 87 percent of Swiss Muslims report having frequent or very frequent social contact with non-Muslims. In both Germany and France that number is 78 percent, again a sign of assimilation. It is lower in the U.K. (68 percent) and Austria (62 percent), but even those figures show plenty of social intermingling. And migrants across countries report feeling a close connection to the countries they live in, from a high of 98 percent (Switzerland) to a low of 88 percent (Austria).  

Cowen continues,

The study also suggests that integration works better when the migrants are relatively numerous, perhaps because they can create mutual support services. But making that point is unlikely to win many European elections…The good news is that Western European integration of Muslims is further along than many people believe. The bad news is that the process of integration entails significant social change and change sometimes brings turmoil. The human race is improving at this broader challenge only slowly.

Father Loss at the Cellular Level

Image result for father sonPrinceton molecular biologist Daniel Notterman and colleagues published a new article in Pediatric titled “Father Loss and Child Telomere Length.” According to the IFS blog,

Research tells us that father loss is linked to a broad range of negative outcomes for children, including lower rates of high school and college graduation, a higher risk of delinquency, early sexual activity, teen pregnancy, and poor mental, physical, and emotional health. Yet despite the emerging science of fatherhood, in many ways, we are only beginning to understand the significance of the biological father connection to child well-being. New research indicates that the repercussions of losing a biological father—whether to death, divorce, or incarceration—go even deeper, affecting children at the cellular level.

Notterman explains these new findings in an interview with IFS:

Telomere length (TL) has been shown in many studies to be associated with chronic stress of diverse origins in both children and adults. We reasoned that separation or loss of a father would be a significantly stressful event in the life of a young child. If that were the case, we hypothesized that father loss would be associated with telomere attrition, and that turned out to be the case. We know that chronic stress is also associated with long-term adverse effects on health, including cardiovascular and behavioral health. Whether accelerated telomere attrition is just a biomarker of these subsequent health effects, or actually plays a causal role in producing these effects is not known at present, but it is the subject of intense laboratory and clinical study. In either case, by examining telomere length, we get an early window (by age 9 years in our study) into adverse health effects that may not be realized for many years.

…Father loss was conceptualized as being of one of three types: separation of the biologic father from the child’s mother, often due to the dissolution of their relationship; incarceration of the child’s father; and death of the father before the child was 9 years of age. In addition to the associations noted in the question, we also found evidence of genetic moderation. Due to the presence of specific gene variants (called, “alleles”) in a gene called “SERT,” which is known to affect how the brain processes serotonin, a key neurotransmitter, some children seem to be more sensitive to environmental stimuli such as loss of a parent. In our study, children bearing a sensitizing allele, or variant, or SERT are much more susceptible to telomere shortening. Thus, the magnitude of telomere shortening is affected not only by the loss of a father but also by the genetic endowment received from the parents.

The death of a father is “a more potent stress because it completely ends the relationship between father and child. With separation and incarceration, it is still possible for there to be contact between father and child. Fathers who are separated from the family often maintain contact with a biological child, and incarceration may be limited in time.” And while the effects of father loss were greater for boys than girls (possibly due to fahters providing “specific role-modeling to sons”), the “study was not specifically designed to answer this question.”

Income associated with the father is a major player in one form of father loss, but less in others:

We found that father loss due to the dissolution of the relationship with the child’s mother affects telomere length mainly by reducing family income. We conjecture that this is due to the stress engendered by material hardship (worsening poverty). Father loss due to incarceration or death seems to be a much more potent stress, such that the additional contribution of income loss is relatively small.

In summary,

We think that our findings reinforce the growing understanding of a father’s importance in the life of his children. We do not think that our data support a conclusion that one type of relationship between a child’s parents is more favorable than another; rather, we conclude that a central role for the father is optimal for his child’s well-being. Furthermore, we think that this knowledge should inform public policy in providing support to families and children where the father, for one reason or another, is absent from his children.

 

Opioid Use and the Labor Force

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According to a new Brookings paper by Princeton economist Alan Krueger, “The increase in opioid prescriptions from 1999 to 2015 could account for about 20 percent of the observed decline in men’s labor force participation (LFP) during that same period.” Other findings include:

  • Regional variation in opioid prescription rates across the U.S. is due in large part to differences in medical practices, rather than varying health conditions. Pain medication is more widely used in counties where health care professionals prescribe greater quantities of opioid medication, with a 10 percent increase in opioid prescriptions per capita is associated with a 2 percent increase in the share of individuals who report taking a pain medication on any given day. When accounting for individuals’ disability status, self-reported health, and demographic characteristics, the effect is cut roughly in half, but remains statistically significant.
  • Over the last 15 years, LFP fell more in counties where more opioids were prescribed. Krueger reaches this conclusion by linking 2015 county-level opioid prescription rates to individual level labor force data in 1999-2001 and 2014-16. For more on the relationship between prescription rates and labor force participation rate on the county-level, visit these maps.

Krueger also found that “nearly half of prime age men who are not in the labor force take pain medication on a daily basis, and that two-thirds of those men—or about 2 million—take prescription pain medication on a daily basis.” Furthermore, “two-thirds of men not in the labor force and taking pain medication used Medicaid, Medicare, or Veterans Affairs health insurance to purchase prescription pain medication, with the largest group relying on Medicaid.” In short, “Krueger’s analysis reinforces past research in finding that the overall decline in LFP since 2007 is primarily due to an aging population and ongoing trends that preceded the recession, for example increased school enrollment of young workers.”

Check it out.

Who Is More Socially Connected?

“Social capital,” according to the Greater Good Science Center,

refers to family and friends who support you through difficult times, as well as neighbors and coworkers who diversify your network and expose you to new ideas. While social capital originally referred to face-to-face interaction, it now also accounts for virtual interactions online such as email or on social media platforms like Facebook, Instagram, Twitter, and LinkedIn.

Social capital also includes the rewards these social connections yield, such as the feelings of bonding and belonging felt in close friendship, and the expanded worldview you might get from looser, broader connections. And these benefits trickle down to many parts of life; social capital is associated with happiness, better job prospects, cardiovascular health, and positive health-seeking behavior. Among seniors, social capital has been linked to physical mobility and tends to reduce cognitive decline.

Last year, GGSC put out a social capital quiz, asking “readers questions about how connected they feel to a larger community, whether they have someone to turn to in times of need, and how open and curious they are about new people, places, and things—both in-person and online. In reviewing the data, we calculated an overall social capital score, in-person social capital score, and online social capital score for each responder, and we looked at the trends among everyone who took the quiz.” Here’s what they found:

  • Young and old have less social capital than those in between.
  • Ethnicity did not affect social capital scores.
  • More education was linked to higher social capital.
  • People in big cities had higher social capital.
  • People on the West Coast had higher social capital.
  • Liberals might have more social capital than conservatives.

Check out the article for further details.

 

The Origins of Formal Segregation Laws

Image result for segregation

A new NBER paper looks at the decline in collective action promoting segregation and the rise of formal laws enforcing it. From the ungated version:

The goal of the analysis is to identify which of the two channels (i.e., increases in black housing demand and/or reductions in white vigilante activity) actually drove demand for passage of municipal segregation ordinances. Although our data and estimating strategies are limited, the patterns we observe are consistent with the predictions of the model, though the evidence for the vigilante channel is stronger than for the housing demand channel. In particular, whether we use city-level or ward-level data, we find only mixed evidence that demand for segregation ordinances is strongest in areas with the fastest growing black populations.

By contrast, we find relatively strong and robust evidence for the second channel involving white vigilante activity. Across a variety of model specifications and different measures of white vigilante activity, it is clear that in the cities where whites were able to police color lines and punish deviations through private channels, there was relatively little demand for segregation ordinances. For example, the data show that in cities located in counties with high lynching rates (a direct indicator of the ability of whites to organize privately to punish blacks for violating established racial norms) the probability of passing a segregation ordinance is significantly lower than in places with low lynching rates. Similarly, cities that possessed a robust volunteer fire department (an alternative measure of the ability to provide public goods through private channels) are significant less likely to pass a segregation ordinance. We supplement our city-level analysis with ward level data from St. Louis. With the ward-level data from St. Louis, we can identity which wards were the strongest supporters of the city’s segregation ordinance. The patterns observed in St. Louis suggest that support for the city’s segregation ordinance was strongest in the wards where it was difficult for white communities to coordinate private vigilante activity (pg. 4-5).

The authors conclude,

The existing literature on the origins of municipal segregation ordinances argues that segregation ordinances were passed largely because of rapidly growing black populations in urban areas and variation in the intensity anti-black preferences across cities. Our results suggest the existing literature needs to be revised. While there is evidence that growing black populations might have played a role in the propagation of segregation ordinances, the results here suggest that a decline in the ability of whites to provide a local public good (i.e. segregation) through private vigilante activity was especially important. In particular, the negative coefficient on lynching and the positive coefficients on white population growth are consistent with the hypothesis that segregation ordinances were passed in those cities where it was becoming increasingly difficult for whites to organize and punish blacks for violating established color lines in residential housing markets.

More generally, the model developed and tested here has broad implications for our understanding of residential segregation the processes that give rise to it. Of particular interest is the exploration of how market processes such as tipping interact with institutional change. While prior research has tended to treat market-related processes such as tipping independently from institutions, both formal and informal, the framework here integrates them. In the process, it can help us understand political institutions and market processes work together to drive segregation and make it persistent (pg. 34-35).

Houston, Hurricanes, and History

Economic and policy historian Phillip Magness has an enlightening post on Houston’s Harvey situation:

Older generations remember earlier storms and hurricanes that produced similar effects going back decades, although you have to return to December 6-9, 1935 to find an example that compares to Harvey’s stats.

Houston was a much smaller city in 1935, both in population and in geographical spread. But by some metrics the 1935 flood was even more severe. Buffalo Bayou – the main waterway through downtown – peaked at over 54 feet. Harvey, in all its devastation, hit “only” 40 feet by comparison. The 1935 storm dropped less rain, the maximum recorded being about 20 inches to the north of town where Houston’s main airport now sits. But it was also complicated by the problem of severe storms upstream that flowed into town and caused almost all of the other creeks and bayous that flooded last weekend to exceed their banks. Reports at the time noted that as much as 2/3rds of what was then rural and unpopulated farmland in surrounding Harris County saw flooding. Those areas are now suburbs today.

The effects of the 1935 flood on populated areas are also eerily similar to what we saw on television over the weekend. I recommend watching this film of the aftermath for comparison. All of downtown was underwater, as the film shows. People were stranded on rooftops as rivers of water emerged around them. There are even clips of rescuers navigating the streets of neighborhoods in small boats and canoes as water reached second and third stories on nearby buildings.

In the aftermath of the 1935 flood, the federal government commissioned an extensive study of Houston’s rainfall patterns. They produced the following map of the Houston storm’s effects, showing unsettling similarities to what we just witnessed (note that this map does not include the areas to the north of town, where rainfall in 1935 was significantly higher. These are the suburbs that flooded along Cypress and Spring Creeks last weekend and the farmland that similarly flooded in 1935)

And therein lies the importance of history to understanding what we just witnessed in catastrophic form this weekend. Houston floods fairly regularly. In fact, downtown Houston has suffered a major flood on average about once a decade as far back as records extend in the 1830s.

He continues:

tropical storms and hurricanes throughout the 20th century revealed Houston’s continued vulnerability to storms.

The reasons have to do almost entirely with topography and geography. Houston sits on the gulf of Mexico in an active hurricane zone that attracts large storms. But more significantly, Houston’s topography is extraordinarily flat. The elevation drop across the entire city and region is extremely modest. Most local waterways are slow-moving creeks and bayous that wind their way through town and eventually trickle into the shallow, marshy Trinity bay. Drainage is slow on a normal day. During a deluge, these systems fill rapidly with water that effectively has nowhere to go.

We’ve seen a flurry of commentators in the past few days attributing Houston’s flooding to a litany of pet political causes. Aside from the normal carping about “climate change” (which always makes for a convenient point of blame for bad warm weather events, even as environmentalists simultaneously decry the old conservative canard about blizzards contradicting Al Gore), several pundits and journalists have opportunistically seized upon Houston’s famously lax zoning and land use regulations to blame Harvey’s destruction on “sprawl” and call for “SmartGrowth” policies that restrict and heavily regulate future construction in the city.

According to this argument, Harvey’s floods are a byproduct of unrestricted suburban development in the north and west of the city at the expense of prairies that would supposedly absorb rainwater at sufficient rates to prevent natural disasters and that supposedly served this purpose “naturally” in the past.

There are multiple problems with this line of argument that suggest it is rooted in naked political opportunism rather than actual concern for Houston’s flooding problems.

And here they are:

  1. “flooding has been a regular feature of Houston’s landscape since the beginning of recorded history in the region. And catastrophic flooding – including multiple storms in the 19th century and the well-documented flood of December 1935 – predates any of the “sprawl” that has provoked these armchair urban designers’ ire.”
  2. “the flooding we saw in Harvey is largely a result of creeks and bayous backlogging and spilling over their banks as more water rushes in from upstream. While parking lot and roadway runoff from “sprawl” certainly makes its way into these streams, it is hardly the source of the problem. The slow-moving and windy Brazos river reached record levels as a result of Harvey and spilled over its banks, despite being nowhere near the city’s “sprawl.” The mostly-rural prairie along Interstate 10 to the extreme west of the city recorded some of the worst flooding in terms of water volume due to the Brazos overflow, although fortunately property damage here will be much lower due to being rural.”
  3. “the very notion that Houston is a giant concrete-laden water retention pond is itself a pernicious myth peddled by unscrupulous urban planning activists and media outlets. In total acres, Houston has more parkland and green space than any other large city in America and ranks third overall to San Diego and Dallas in park acreage per capita.”
  4. “a 2011 study by the Houston-Galveston Area Council…actually measured the ratio of impervious-to-pervious land cover within the city limits (basically the amount of water-blocking concrete vs. water-absorbing green land). The study used an index scale to measure water-absorption land uses. A low score (defined as less than 2.0 on the scale) indicates a high presence of green relative to concrete. A high score (defined as greater than 5.0) indicates high concrete and low levels of greenery and other water-absorbing cover. The result are in the map below, showing the city limits. Gray corresponds to high levels of pervious surfaces (or greenery). Black corresponds to high impervious surface use (basically either concrete or lakes that collect runoff). As the map shows, over 90% of the land in the city limits is gray, indicating more greenery and higher water absorption. Although they did not measure unincorporated Harris County, it also tends to be substantially less dense than the city itself.”

In short,

Houston’s flood problems are a distinctive feature of its topography and geography, and they long predate any “sprawl.” While steps have been taken over the years to mitigate them and reduce the severity of flooding, a rare but catastrophic event will unavoidably overwhelm even the most sophisticated flood control systems. Harvey was one such event – certainly the highest floodwater event to hit Houston in over 80 years, and possibly the worst deluge in its recorded history. But it is entirely consistent with almost 2 centuries of recorded historical patterns. In the grander scheme of causes for Harvey’s flooding, “sprawl” does not even meaningfully register.

DR Editor in GBR: The Economic and Moral Case for Good Management

Image result for graziadio business review

I’m excited to announce that my article “The Great Escape from Global Poverty: The Economic and Moral Case for Good Management” was published in the latest issue of Pepperdine University’s Graziadio Business Review. From the introduction:

Poverty has been a moral issue at the center of philosophical, theological, and social thought for millennia. However, over the last two centuries, much of the world has experienced what Nobel economist Angus Deaton calls “the great escape” from economic deprivation. As a 2013 issue of The Economist explained, one of the main targets of the United Nations Millennium Development Goals (MDG) was to halve extreme poverty between 1990 and 2015. That goal was accomplished years ahead of schedule and the credit largely lies with one thing: “The MDGs may have helped marginally, by creating a yardstick for measuring progress, and by focusing minds on the evil of poverty. Most of the credit, however, must go to capitalism and free trade, for they enable economies to grow—and it was growth, principally, that has eased destitution.”

If this economic narrative is to be believed, then managing well is even more important in the fight against poverty. Research over the last decade finds that management—the day-in, day-out processes of everyday business—matters. As this article will show, economic growth has lifted billions of people worldwide out of extreme poverty via pro-growth policies (especially trade, property rights, and moderate government size). Good management, in turn, plays a significant part in this growth by increasing total factor productivity (TFP) and could therefore be considered a pro-growth policy. In short, those in management positions have the potential to improve the well-being of the global poor by learning to manage well.

Check it out.

More Economic Illiteracy from Journalists

I’ve lamented about this before. Funny enough, it was largely about the same source: The Guardian. A recent piece suggests that “neoliberalism” is responsible for, in the words of Forbes‘ Tim Worstall, the destruction of “everything that is good and holy about society.” This is based on a new IMF study that reviews the following:

Our assessment of the agenda is confined to the effects of two policies: removing restrictions on the movement of capital across a country’s borders (so-called capital account liberalization); and fiscal consolidation, sometimes called “austerity,” which is shorthand for policies to reduce fiscal deficits and debt levels. An assessment of these specific policies (rather than the broad neoliberal agenda) reaches three disquieting conclusions:

•The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.­

•The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.­

•Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.­

In other words, it worries about financial openness and austerity. However, The Guardian describes it as such:

Three senior economists at the IMF, an organisation not known for its incaution, published a paper questioning the benefits of neoliberalism. In so doing, they helped put to rest the idea that the word is nothing more than a political slur, or a term without any analytic power. The paper gently called out a “neoliberal agenda” for pushing deregulation on economies around the world, for forcing open national markets to trade and capital, and for demanding that governments shrink themselves via austerity or privatisation. The authors cited statistical evidence for the spread of neoliberal policies since 1980, and their correlation with anaemic growth, boom-and-bust cycles and inequality.

Unfortunately for the author, that’s not quite accurate. The IMF researchers actually say,

There is much to cheer in the neoliberal agenda. The expansion of global trade has rescued millions from abject poverty. Foreign direct investment has often been a way to transfer technology and know-how to developing economies. Privatization of state-owned enterprises has in many instances led to more efficient provision of services and lowered the fiscal burden on governments.­

Perhaps The Guardian author needs to be reminded that the IMF came out against protectionism last year in the midst of anti-trade rhetoric from politicians. Similarly, it released a report around the same time extolling the benefits of trade. Furthermore, the new IMF study qualifies its concerns:

The link between financial openness and economic growth is complex. Some capital inflows, such as foreign direct investment—which may include a transfer of technology or human capital—do seem to boost long-term growth. But the impact of other flows—such as portfolio investment and banking and especially hot, or speculative, debt inflows—seem neither to boost growth nor allow the country to better share risks with its trading partners (Dell’Ariccia and others, 2008; Ostry, Prati, and Spilimbergo, 2009). This suggests that the growth and risk-sharing benefits of capital flows depend on which type of flow is being considered; it may also depend on the nature of supporting institutions and policies.­

…In sum, the benefits of some policies that are an important part of the neoliberal agenda appear to have been somewhat overplayed. In the case of financial openness, some capital flows, such as foreign direct investment, do appear to confer the benefits claimed for them. But for others, particularly short-term capital flows, the benefits to growth are difficult to reap, whereas the risks, in terms of greater volatility and increased risk of crisis, loom large.­

This doesn’t strike me as a denunciation of “neoliberalism.” I’m going to follow Worstall’s lead on this one and refer to Max Roser’s work.

Roser explains,

The distribution of incomes is shown at 3 points in time:

  • In 1800 only few countries achieved economic growth. The chart shows that the majority of the world lived in poverty with an income similar to the poorest countries in today. Our entry on global extreme poverty shows that at the beginning of the 19th century the huge majority – more than 80% – of the world lived in material conditions that we would refer to as extreme poverty today.

  • In the year 1975, 175 years later, the world has changed – it became very unequal. The world income distribution has become bimodal. It has the two-humped shape of a camel. One hump below the international poverty line and a second hump at considerably higher incomes – the world was divided into a poor developing world and a more than 10-times richer developed world.

  • Over the following 4 decades the world income distribution has again changed dramatically. The poorer countries, especially in South-East Asia, have caught up. The two-humped “camel shape” has changed into a one-humped “dromedar shape”. World income inequality has declined. And not only is the world more equal again, the distribution has also shifted to the right – the incomes of the world’s poorest citizens have increased and poverty has fallen faster than ever before in human history.

That’s right: global inequality is decreasing. The World Bank reports,

Globally, there has been a long-term secular rise in interpersonal inequality. Figure 4.3 shows the global Gini index since 1820, when relevant data first became available. The industrial revolution led to a worldwide divergence in incomes across countries, as today’s advanced economies began pulling away from others. However, the figure also shows that, in the late 1980s and early 1990s, the global Gini index began to fall. This coincided with a period of rapid globalization and substantial growth in populous poor countries, such as China and India.

…Global inequality has diminished for the first time since the industrial revolution. The global Gini index rose steadily by around 15 Gini points between the 1820s and the early 1990s, but has declined since then (see figure 4.3). While the various methodologies and inequality measures show disagreement over the precise timing and magnitude of the decline, the decline since the middle of the last decade is confirmed across multiple sources and appears robust. The estimates
presented in figure 4.5 show a narrowing in global inequality between 1988 and 2013. The Gini index of the global distribution (represented by the blue line) fell from 69.7 in 1988 to 62.5 in 2013, most markedly since 2008 (when the global Gini index was 66.8). Additional exercises confirm that these results are reasonably robust, despite the errors to which the data are typically subject (pg. 76, 81).

Harvard’s Andrei Shleifer has shown that between 1980 and 2005, world per capita income grew about 2% per year. During these 2.5 decades, serious hindrances on economic freedom declined, including the world median inflation rate, the population-weighted world average of top marginal income tax rates, and the world average tariff rates. “In the Age of Milton Friedman,” summarizes Shleifer, “the world economy expanded greatly, the quality of life improved sharply for billions of people, and dire poverty was substantially scaled back. All this while the world embraced free market reforms” (pg. 126).

Go away Guardian.