Walker

Walker joined Difficult Run as an editor in August 2013. He graduated from the University of North Texas with an MBA in Strategic Management and a BBA in Organizational Behavior and Human Resource Management. He's currently a grad student in Government at Johns Hopkins University. He has been published in SquareTwo, BYU Studies Quarterly, Dialogue, Graziadio Business Review, and Economic Affairs. He also contributed to Julie Smith's (ed.) 'As Iron Sharpens Iron: Listening to the Various Voices of Scripture'. His other online writing can be found at Worlds Without End and Times & Seasons. He lives in Denton, Texas, with his wife.

“Build That Wall!”: It’s 70% Finished

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Sounds ridiculous, right? Especially when you start talking about including a “big, beautiful door.” But according to Peter Andreas of Brown University, “the wall will not only be for real, but it may be one of his biggest political successes.” After pointing out the fuzzy meaning of “wall” (Trump even said “certain areas” may be a fence), Andreas reminds us that “Trump’s predecessors carefully avoided calling any new border barriers a “wall.” Before Trump, the term was politically taboo, viewed as sending the wrong message to Mexico and to the world.” Trump’s breaking of this taboo made his rhetoric jarring to detractors and fresh to supporters, but it doesn’t change the fact that “[s]ince the early 1990s, politicians of all stripes have scrambled to show their commitment to border security. During that time, annual federal funding for border and immigration control mushroomed from $1.5 billion to $19.5 billion. According to one estimate, Washington spends $5 billion more on border and immigration control than for all other federal law enforcement combined.” The explosion in border control “has been lethal for many migrants trying to cross, with thousands of deaths to date, while enriching the smugglers on whom migrants must rely.” On top of this, “it has been politically rewarding for both Democrats and Republicans alike. Trump is simply taking it to the next level.” Despite Trump’s scoffs at our current border security, almost 700 miles of his proposed 1,000 mile wall “are already in place, and portions of it very much look like a formidable metal wall. It is hard to imagine Trump tearing all that fencing up and starting from scratch. What’s more realistic is That Trump will simply add more miles of fencing; reinforce existing fencing in key, visible places; and deploy even more border guards, stadium lighting, and the latest high-tech detection and surveillance equipment.”

“In the end,” Andreas concludes, “Trump’s wall is likely to be the latest addition to the border barrier-building frenzy first launched by President Bill Clinton, greatly expanded by George W. Bush[ref]And voted for by Hillary Clinton, Barack Obama, and Joe Biden.[/ref] and continued by Obama.[ref]President Obama “has presided over one of the largest peacetime outflows of people in America’s history.” And don’t forget that he jailed Central American women and children who crossed illegally and ended amnesty for Cubans.[/ref] But Trump will take full ownership of it as the only president willing to actually call it a wall.”

Entrepreneurial Immigrants

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An October article in Harvard Business Review asks, “Do immigrants take American jobs, or help our economy grow? Do immigrants drain our welfare funds, or can they help refill public coffers as our baby boomers retire?” Furthermore, “state and local governments have clamored to launch initiatives to attract more immigrant entrepreneurs, hoping they will found businesses and create more jobs. Globally, many countries are doing the same — for example, Chile pays overseas entrepreneurs to come visit for six months through its Start-Up Chile program, as a way to build global bridges and foster an entrepreneurial culture at home…Good statistics on immigrant entrepreneurship are exceptionally difficult to assemble, and therefore it’s challenging to create productive policies. Likewise, most standard government sources that are publicly accessible can only tell us about immigrant self-employment, which leaves a big question mark around job creation and economic growth.” The authors–one from Harvard Business School and the other a Senior Research Scientist at Wellesley Centers for Women–explain,

Our recent research aims to address this. We have built a platform that uses restricted-access Census Bureau datasets to explore differences in the types of businesses formed by immigrants and their medium-term survival and growth patterns. The core building block is the Longitudinal Employer-Household Dynamics (LEHD) database, but it incorporates other sources like the Longitudinal Business Database.

This platform gives us a comprehensive view of immigrant entrepreneurship over a long duration (1995 – 2008). The database currently covers 31 U.S. states, with more being added as their unemployment insurance (UI) filings data become available. It spans firms of all shapes and sizes, so long as they have one paid employee or more. For the first time, we can analyze a spectrum of companies — from “Main Street” businesses to VC-backed Silicon Valley firms. We can see what happens to these firms after they have been founded, and whether, for example, immigrant-founded firms perform differently from the start-ups of natives.

And what did they find?:

  • Immigrants constitute 15% of the general U.S. workforce, but they account for around a quarter of U.S. entrepreneurs (which we define as the top three initial earners in a new business). This is comparable to what we see in innovation and patent filings, where immigrants also account for about a quarter of U.S. inventors.

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  • On the whole, immigrant entrepreneurship is somewhat stronger for VC-backed firms, with 31% of VC-backed founders being immigrants, compared to 25% of all entrepreneurs in 2005.
  • Immigrant founders launch firms that are smaller than native-founded firms. The average initial employment for firms founded by immigrants exclusively is 4.4 workers, compared to 7.0 workers for firms launched exclusively by natives. When both types of founders are present (i.e., “mixed founder team”), the average is 16.9 workers.
  • We quantify subsequent firm performance by analyzing employment growth and closure rates. The firms founded by immigrants close at a faster rate than firms founded by natives, but those that survive do grow at a faster rate in terms of employment, payroll, and establishments for the next six years. Previous research has found that this phenomenon — called “up or out” — is how young firms create more jobs. Compared to older firms, which show modest growth regardless of their size, young firms and new entrants have more dynamic patterns that foster greater job creation. Immigrant-founded firms display more of this behavior.
  • Now that we can study the age of arrival, we found that immigrants coming to the U.S. as children are more likely to start larger firms than immigrants arriving as adults. Moreover, firms created by immigrants who have grown up in the U.S. are generally associated with better outcomes, in terms of lower closure rates and higher representation among larger firms. Much remains to be done here, but we hope this serves a spring board to the study of other migrant traits.

The authors conclude, “Global talent flows will continue to be a fundamental force shaping the U.S. economic and business landscape. This is especially true for entrepreneurship given the economic dynamism that startups unleash and the disproportionate role of immigrants in this process.”

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Something to Be Thankful For: Declining Poverty

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“Did you know that, in the past 30 years, the percentage of people in the world who live in extreme poverty has decreased by more than half?”

According to three World Bank economists, the answers from the general public are rather disappointing:

In 2014, 84% of Americans who were asked this question were unaware of such declines in global extreme poverty. In fact, 67% of adult respondents thought global poverty had been on the rise over the past three decades. Unsurprisingly, 68% did not believe it would be possible to end extreme global poverty within the next 25 years (Todd 2014).

A recent study analysing the public awareness around the world of the Sustainable Development Goals confirmed that this widespread ignorance is not a US anomaly (Lampert and Papadongonas 2016). A significant majority of respondents from several countries, both developing and developed, are unaware of this achievement (see Figure 1). Interestingly, Chinese citizens appear much better informed about global poverty trends than those of the US or Germany.

Share of people who believe that extreme global poverty has decreased in the last 20 years

But the public should take heart:

The new Poverty and Shared Prosperity Report 2016 launched this October by the World Bank explains why (World Bank 2016b). The figure below shows that the number of extremely poor people worldwide – measured by the very low $1.90 a day standard – has fallen by 1.1 billion people over the last two and a half decades, a period in which the global population grew by almost 2 billion (see Figure 2). This is true for all regions in the world without exception, from relatively richer Eastern Europe and Latin America to poorer Sub-Saharan Africa and South Asia. True, each region has reduced their poverty numbers at different paces. But the numbers leave little room for doubt – extreme poverty has been effectively and dramatically reduced.

The World Bank is aiming to end extreme poverty by 2030. While there are obstacles to achieve this goal, the above should give us a reason for optimism.

Perhaps more important, it gives us a reason to be thankful.

What’s the Economic Impact of Undocumented Workers?

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Tired of all these supposedly freeloading illegal aliens? Think the economy would be better off without them?

Think again.

Image result for undocumented workersA brand new working paper shows the contribution undocumented workers make to the national economy. As reported by Pacific Standard,

In the research, economists Ryan Edwards and Francesc Ortega break down the economic contributions of unauthorized workers across different industries, while also exploring how mass deportations would affect those industries and looking at the effects of legalization. Undocumented immigrants constitute 4.9 percent of the American workforce. Some industries rely more heavily on these workers. In agriculture, for example, illegal immigrants represent 18 percent of the workforce. In construction, they constitute 13 percent; 10 percent in leisure and hospitality.

If all those workers were to disappear, gross domestic product (GDP) would go down by about 3 percent (that’s $5 trillion) over a 10-year period. “Once capital has adjusted, value-added in Agriculture, Construction and Leisure and hospitality would fall by 8–9%,” Edwards and Ortega write. “However, the largest losses in dollars would take place in Manufacturing, Wholesale and retail trade, Finance and Leisure and hospitality.”

And as for the opposite counterfactual, the one in which the country’s undocumented workforce was suddenly legalized? The authors find that legalization would increase private-sector GDP by about 0.5 percent, with larger gains (anywhere from 1.1 percent to 1.9 percent) in leisure and hospitality, construction, and agriculture.

Edwards and Ortega’s conclusions are consistent with past research, which overwhelmingly concludes that immigration is good for the economy at large, and that legalizing undocumented workers is beneficial to both the economy and native workers.

Maybe amnesty isn’t a bad thing.

New Metallica Album: “Hardwired…to Self-Destruct”

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Metallica’s first studio album in eight years was released today. When I first heard that they were returning to the studio, I was a little skeptical. I love Metallica, but 2003’s St. Anger took a toll on me. And even though 2008’s Death Magnetic was leaps and bounds better, I kind of felt like the band was on its way out. But so far, I’ve been thoroughly impressed with their new album Hardwired…to Self-Destruct. I expected good things after hearing the singles “Hardwired“, “Moth Into Flame“, and “Atlas, Rise!“.

I wasn’t disappointed.

I found myself literally yelling in excitement over the full-on thrash of “Spit Out the Bone.” The heavy plod of “Dream No More” reminded me of a mix of “Sad But True” with ReLoad‘s “Devil’s Dance” and “Where the Wild Things Are” (not to mention a return to Lovecraft-inspired lyrics a la “The Thing That Should Not Be” and the instrumental title “The Call of Ktulu“). The bluesier riffs of “ManUNkind” and “Am I Savage?” would be welcome additions to either Load or ReLoad. “Halo On Fire” could easily rank as one of the best on Death Magnetic, while songs like “Confusion” and “Here Comes Revenge” would feel right at home among the other tracks of that album.

In short, Metallica is back. And for my money, this is their best album since 1997’s ReLoad.

Innovation: Another Benefit of Trade

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With many still worrying about the policy outcomes of Trump’s protectionist rhetoric, here’s yet another study demonstrating the importance of trade liberalization. From the abstract:

This paper estimates the effect of trade policy during the Great Liberalization of the 1990s on innovation in over 60 countries using international firm-level patent data. The empirical strategy exploits ex-ante differences in firms’ exposure to countries and industries, allowing us to construct firm-specific measures of tariffs. This provides a source of variation that enables us to establish the causal impact of trade policy on innovation. Our results suggest that trade liberalization has economically significant effects on innovation and, ultimately, on technical change and growth. According to our estimates, about 7 percent of the increase in knowledge creation during the 1990s can be explained by trade policy reforms. Furthermore, we find that the increase in patenting reflects innovation, rather than simply more protection of existing knowledge. Both improved market access and more import competition contribute to the positive innovation response to trade liberalization.

The “Great Enrichment” that has taken place over the last two centuries is due to what economist Deirdre McCloskey refers to as “market-tested innovation and supply“ (or market-tested improvement). If we are interested in the continual enrichment and betterment of the world, we should be fully supportive of international trade.

The entire paper can be read here.

Are Refugees an Economic Burden?

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Many complain that refugees are a financial burden, draining the host country’s economic resources. But new research casts doubt on this assertion. From the abstract:

The number of refugees displaced by civil conflict or natural disasters is on the rise. Economic impacts of refugees on host countries are controversial and little understood, because data have not been available and the question of refugee impacts does not lend itself to conventional impact evaluation methods. We use a unique Monte Carlo simulation approach with microdata from refugee and host-country surveys to obtain the first estimates of refugee camps’ impacts on surrounding host-country economies and to compare impacts of cash versus in-kind refugee aid. An additional refugee increases total real income within a 10-km radius around two cash camps by significantly more than the aid the refugee receives. Impacts around a camp receiving in-kind (food) aid are smaller.

This coincides with the findings of other studies. All of this makes me even more proud of my church’s “I Was A Stranger” initiative.

Democracy and Political Ignorance: A Cato Lecture by Ilya Somin

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This is part of the DR Book Collection.

Image result for democracy and political ignoranceThe outcome of the election still has many rocking. I had taken up reading GMU law professor Ilya Somin’s Democracy and Political Ignorance: Why Smaller Government Is Smarter the week prior to the election, but finished a few days afterwards. What a timely read. Somin puts forth a wealth of evidence that political ignorance is pervasive among American voters. For example:

  • Prior to the 2014 elections, only 38% of Americans knew that Republicans controlled the House of Representatives, while the same amount knew that Democrats had the majority in the Senate (pg. 17).
  • In late August 2013, 44% of Americans did not know that the Affordable Care Act was still the law (pg. 18).
  • In September 2014, only 20% of Americans knew that the federal government spends more on Social Security than on foreign aid, transportation, and interest on the government debt (pg. 18).
  • In August 2012, 43% of Americans had never heard of Paul Ryan and only 32% knew he was a member of the House of Representatives (pg. 18).
  • A 2014 poll found that only 36% of Americans could name the three branches of the federal government (pg. 20).
  • A 2002 study indicated that 35% of Americans thought Marx’s “From each according to his ability to each according to his need” was in the Constitution with another 34% saying they weren’t sure (pg. 20).

Somin, however, does not believe the above results are due to voter stupidity. Instead, he believes that voters are rationally ignorant: the instrumental value of a single vote is vanishingly small, making the incentive to be well-informed about political matters incredibly weak. But even those who are politically informed act more like sports fans than objective truth-seekers. They cheer for their team and evaluate evidence in a highly-biased fashion. Many think this political ignorance and bias could be overcome with greater education, but Somin points out that even as educational attainment and IQ scores have risen over the last five or six decades, political knowledge levels have barely budged.

How does Somin propose tackling this issue? He advocates increasing the opportunity for people to “vote with their feet.” In the private sector, people spend more time acquiring information about the products and services they intend to consume. Those products or services they dislike, they do not purchase. Similarly, people spend more time acquiring information about the states and cities before relocating. This includes cost of living, laws, etc. Voters leave states and local governments when they find better opportunities elsewhere. To allow for more “foot voting” vs. ballot box voting, Somin recommends more decentralization of government. He explains,

Unlike ballot box voting, “foot voting” creates much better incentives to both acquire information and use it rationally. The reason is simple: for most foot voters, the choice to leave or stay is individually decisive. The would-be migrant does not have to take a vote in which her ballot has only a miniscule chance of making a difference. Rather, she knows that whatever decision she makes she can then implement, subject perhaps to the agreement of a few family members. This simple point has important implications for institutional design in democratic political systems. It strengthens the case for decentralizing political power. The greater the degree of decentralization, the more political decisions can be made by foot voting, rather than ballot box voting alone. The informational advantages of foot voting also buttress the case for limiting the scope of government authority relative to the private sector. In markets and civil society, individuals can often vote with their feet even more effectively than in a system of decentralized federalism. Foot voting in the private sector usually doesn’t carry moving costs as high as those of interjurisdictional migration. In addition, limiting the scope of government could alleviate information problems by reducing the knowledge burden imposed on voters. The smaller and less complex government is, the more likely that even rationally ignorant voters might be able to understand its functions. Smaller government does not make us smarter in the sense of increasing our intelligence. But it can help us make smarter decisions by improving our incentives to make effective use of the intelligence we already have (pgs. 14-15).

Check out a lecture by Somin at the Cato Institute below.

Cultural Diversity Boosts Economic Growth

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This just keeps getting better and better. I wrote last month on research regarding cultural/ethnic diversity, immigration, and economic growth and institutions. A new study adds support to these findings by showing that cultural fractionalization and polarization positively effect real GDP per capita. The authors explain,

By using data on a large sample of world economies for 1960-2010, we construct two indexes of diversity:

  • Fractionalisation: the likelihood that two individuals randomly selected from the population were born in different countries
  • Polarisation: how far the distribution of the groups in one country is from a bipolar distribution where there are only two groups of equal size.

Causality can run both ways – countries that have a higher growth rate might attract more immigrants from a variety of origins, thereby increasing the degree of diversity. Therefore heterogeneity might be the effect rather than the cause of economic growth. Also immigration policies could be important drivers of immigration and, if unaccounted for, they could lead to incorrect inferences.

To address this we exploit the dyadic nature of our dataset to predict countries’ bilateral migration flows using a set of pre-determined or ‘exogenous’ dyadic variables such as geographic distance. We then use the predicted immigration flows to construct predicted indexes of diversity. This approach allows us to isolate the portion of the correlation between diversity and economic growth that is due to the causal effect of diversity.

We also exploit the time dimension of our dataset to control for unobserved heterogeneity by estimating a dynamic panel data model. This approach would remove any time-invariant country-specific unobserved factors that might possibly drive the relationship between diversity and economic growth.

We find that both indices of cultural heterogeneity – fractionalisation and polarisation – have a positive impact on the growth rate of GDP over long time periods. For, example, between 1960 and 2010, the growth rate of per capita GDP increased by about 0.15 percentage points when the growth rate of fractionalisation variable increased by one percentage point.

The impact is especially good for developing countries:

The literature on immigration emphasises that immigrants represent human resources, particularly appropriate for innovation and technological progress (Bodvarsson and Van den Berg 2013). So, as with the effect of education, the level of heterogeneity in their composition should enhance human capital formation and favour the adoption of new technologies (Nelson and Phelps 1966). Rich countries are closer to the technological frontier, thus the strength of the catch-up effect becomes smaller the more developed the host country is. This implies that developing economies would benefit the most from diversity.

To test this hypothesis, we split countries into two subgroups according to their initial level of development, and find that developing economies are more likely to experience an increase in GDP growth rate following changes in the degree of diversity. The most conservative estimates suggest that a one percentage point increase in the growth rate of fractionalisation (polarisation) boosts per capita output by about 0.1 percentage points in developing countries.

Our evidence suggests that immigration-fuelled diversity is good for economic growth. We recommend more openness to immigration so as to reap the large unrealised benefits from an increased range of skills and ideas in the destination country. Cultural diversity is a phenomenon that is continually changing, and difficult to define. Individuals have many observable characteristics – race, language, religion, nationality, wealth, education – but only some categories have economic salience. Because we don’t yet know which markers of identity are economically important, this subject will be a fertile area of study for the foreseeable future.

Perhaps we could all try being a bit more welcoming.

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“You’re Racist!”: How (Not) to Change Someone’s Mind

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Both before and after the election results, Trump’s supporters were lambasted as racist, misogynist bigots.[ref]According to some data, the label isn’t necessarily wrong. In fact, one study found that white Americans whose ethnic identity was important to them were more supportive of Trump if they felt believed that racial diversity was increasing. Interesting enough, this fits somewhat with the results from Brexit in which those areas that experienced a foreign-born population increase (versus mere foreign-born headcount) overwhelmingly voted Leave.[/ref] But do these insults work? Will shaming change anyone’s mind? If not, how do you convince people to drop their prejudices? As Vox reports: “a frank, brief conversation.”

[A 2016] study, authored by David Broockman at Stanford University and Joshua Kalla at the University of California Berkeley, looked at how simple conversations can help combat anti-transgender attitudes. In the research, people canvassed the homes of more than 500 voters in South Florida. The canvassers, who could be trans or not, asked the voters to simply put themselves in the shoes of trans people — to understand their problems — through a 10-minute, nonconfrontational conversation. The hope was that the brief discussion could lead people to reevaluate their biases.

It worked. The trial found not only that voters’ anti-trans attitudes declined but that they remained lower three months later, showing an enduring result. And those voters’ support for laws that protect trans people from discrimination increased, even when they were presented with counterarguments for such laws.

…In talking with researchers and looking at the studies on this, I found that it is possible to reduce people’s racial anxiety and prejudices. And the canvassing idea was regarded as very promising. But, researchers cautioned, the process of reducing people’s racism will take time and, crucially, empathy.

This is the direct opposite of the kind of culture the internet has fostered — typically focused on calling out racists and shaming them in public. This doesn’t work. And as much as it might seem like a lost cause to understand the perspectives of people who may qualify as racist, understanding where they come from is a needed step to being able to speak to them in a way that will help reduce the racial biases they hold.[ref]This approach seems to be reinforced by previous research on things like diversity training and the politicization of climate change.[/ref]

Image result for you're racist gifIt turns out that favorite buzzwords and phrases like “racist,” “white privilege,” and “implicit bias” are often seen by these voters “as coded slurs. These terms don’t signal to them that they’re doing something wrong, but that their supposedly racist attitudes (which they would deny having at all) are a justification for lawmakers and other elites to ignore their problems…What’s more, accusations of racism can cause white Americans to become incredibly defensive — to the point that they might reinforce white supremacy. Robin DiAngelo, who studies race at Westfield State University, described this phenomenon as “white fragility” in a groundbreaking 2011 paper[…]The innate resistance and defensiveness to conversations about bigotry don’t mean that you should never talk about racism, sexism, homophobia, or other kinds of hate. But those conversations may have to be held more tactfully — positioning people into a more receptive position to hear what these problems are all about.”

The entire piece is worth reading.