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.

The DR Book Collection: Catch-Up #7

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This is part of the DR Book Collection.

I’m once again behind on my book reviews, so here’s a list of the books I’ve read recently, their descriptions, and accompanying videos.

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Bas van der Vossen, Jason Brennan, In Defense of Openness: Why Global Freedom is the Humane Solution to Global Poverty (Oxford University Press, 2018): “The topic of global justice has long been a central concern within political philosophy and political theory, and there is no doubt that it will remain significant given the persistence of poverty on a massive scale and soaring global inequality. Yet, virtually every analysis in the vast literature of the subject seems ignorant of what developmental economists, both left and right, have to say about the issue. In Defense of Openness illuminates the problem by stressing that that there is overwhelming evidence that economic rights and freedom are necessary for development, and that global redistribution tends to hurt more than it helps. Bas van der Vossen and Jason Brennan instead ask what a theory of global justice would look like if it were informed by the facts that mainstream development and institutional economics have brought to light. They conceptualize global justice as global freedom and insist we can help the poor-and help ourselves at the same time-by implementing open borders, free trade, the strong protection of individual freedom, and economic rights and property for all around the world. In short, they work from empirical, consequentialist grounds to advocate for the market society as a model for global justice. A spirited challenge to mainstream political theory from two leading political philosophers, In Defense of Openness offers a new approach to global justice: We don’t need to “save” the poor. The poor will save themselves, if we would only get out of their way and let them” (Amazon).

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Greg Lukianoff, Jonathan Haidt, The Coddling of the American Mind: How Good Intentions and Bad Ideas Are Setting Up a Generation for Failure (Penguin, 2018): “Something is going wrong on many college campuses in the last few years. Rates of anxiety, depression, and suicide are rising. Speakers are shouted down. Students and professors say they are walking on eggshells and afraid to speak honestly. How did this happen? First Amendment expert Greg Lukianoff and social psychologist Jonathan Haidt show how the new problems on campus have their origins in three terrible ideas that have become increasingly woven into American childhood and education: what doesn’t kill you makes you weaker; always trust your feelings; and life is a battle between good people and evil people. These three Great Untruths are incompatible with basic psychological principles, as well as ancient wisdom from many cultures. They interfere with healthy development. Anyone who embraces these untruths—and the resulting culture of safetyism—is less likely to become an autonomous adult able to navigate the bumpy road of life. Lukianoff and Haidt investigate the many social trends that have intersected to produce these untruths. They situate the conflicts on campus in the context of America’s rapidly rising political polarization, including a rise in hate crimes and off-campus provocation. They explore changes in childhood including the rise of fearful parenting, the decline of unsupervised play, and the new world of social media that has engulfed teenagers in the last decade. This is a book for anyone who is confused by what is happening on college campuses today, or has children, or is concerned about the growing inability of Americans to live, work, and cooperate across party lines” (Amazon).

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Andrew Selee, Vanishing Frontiers: The Forces Driving Mexico and the United States Together (PublicAffairs, 2018): “There may be no story today with a wider gap between fact and fiction than the relationship between the United States and Mexico. Wall or no wall, deeply intertwined social, economic, business, cultural, and personal relationships mean the US-Mexico border is more like a seam than a barrier, weaving together two economies and cultures. Mexico faces huge crime and corruption problems, but its remarkable transformation over the past two decades has made it a more educated, prosperous, and innovative nation than most Americans realize. Through portraits of business leaders, migrants, chefs, movie directors, police officers, and media and sports executives, Andrew Selee looks at this emerging Mexico, showing how it increasingly influences our daily lives in the United States in surprising ways–the jobs we do, the goods we consume, and even the new technology and entertainment we enjoy. From the Mexican entrepreneur in Missouri who saved the US nail industry, to the city leaders who were visionary enough to build a bridge over the border fence so the people of San Diego and Tijuana could share a single international airport, to the connections between innovators in Mexico’s emerging tech hub in Guadalajara and those in Silicon Valley, Mexicans and Americans together have been creating productive connections that now blur the boundaries that once separated us from each other” (Amazon).

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Blaire G. Van Dyke, Brian D. Birch, Boyd J. Petersen (eds.), The Expanded Canon: Perspectives on Mormonism and Sacred Texts (Greg Kofford Books, 2018): “Among the most distinctive and defining features of Mormonism is the affirmation of continuing revelation through modern day prophets and apostles. An important component of this concept is the acknowledgement of an open canon—that the body of authoritative scriptural texts can expand as new revelations are made available and presented to the membership for ratification. This volume brings together both Mormon and non-Mormon scholars to examine the place, purpose, and meaning of the LDS Standard Works (Christian Bible, Book of Mormon, Doctrine and Covenants, and Pearl of Great Price) in the Mormon tradition, as well as the extra-canonical sources that play a near-scriptural role in the lives of believers. Approaching LDS scripture from a variety of disciplines, methodologies, and perspectives, these scholars offer new insights into both the historical and contemporary understandings of Mormon continuing revelation” (Amazon).

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Beth Felker Jones, Faithful: A Theology of Sex (Zondervan, 2015): “Many believers accept traditional Christian sexual morality but have very little idea why it matters for the Christian life. In Faithful, author Beth Felker Jones sketches a theology of sexuality that demonstrates sex is not about legalistic morals with no basis in reality but rather about the God who is faithful to us. In Hosea 2:19-20 God says to Israel, “I will take you for my wife forever; I will take you for my wife in righteousness and in justice, in steadfast love, and in mercy. I will take you for my wife in faithfulness; and you shall know the Lord.” This short book explores the goodness of sexuality as created and redeemed, and it suggests ways to navigate the difficulties of living in a world in which sexuality, like everything else, suffers the effects of the fall. As part of Zondervan’s Ordinary Theology series, Faithful takes a deeper look at a subject Christians talk about often but not always thoughtfully. This short, insightful reflection explores the deeper significance of the body and sexuality” (Amazon).

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Bessel van der Kolk, The Body Keeps the Score: Brain, Mind, and Body in the Healing of Trauma (Penguin, 2014): “Trauma is a fact of life. Veterans and their families deal with the painful aftermath of combat; one in five Americans has been molested; one in four grew up with alcoholics; one in three couples have engaged in physical violence. Dr. Bessel van der Kolk, one of the world’s foremost experts on trauma, has spent over three decades working with survivors. In The Body Keeps the Score, he uses recent scientific advances to show how trauma literally reshapes both body and brain, compromising sufferers’ capacities for pleasure, engagement, self-control, and trust. He explores innovative treatments—from neurofeedback and meditation to sports, drama, and yoga—that offer new paths to recovery by activating the brain’s natural neuroplasticity. Based on Dr. van der Kolk’s own research and that of other leading specialists, The Body Keeps the Score exposes the tremendous power of our relationships both to hurt and to heal—and offers new hope for reclaiming lives” (Amazon).

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Kevin Simler, Robin Hanson, The Elephant in the Brain: Hidden Motives in Everyday Life (Oxford University Press, 2018): “Human beings are primates, and primates are political animals. Our brains, therefore, are designed not just to hunt and gather, but also to help us get ahead socially, often via deception and self-deception. But while we may be self-interested schemers, we benefit by pretending otherwise. The less we know about our own ugly motives, the better – and thus we don’t like to talk or even think about the extent of our selfishness. This is “the elephant in the brain.” Such an introspective taboo makes it hard for us to think clearly about our nature and the explanations for our behavior. The aim of this book, then, is to confront our hidden motives directly – to track down the darker, unexamined corners of our psyches and blast them with floodlights. Then, once everything is clearly visible, we can work to better understand ourselves: Why do we laugh? Why are artists sexy? Why do we brag about travel? Why do we prefer to speak rather than listen? Our unconscious motives drive more than just our private behavior; they also infect our venerated social institutions such as Art, School, Charity, Medicine, Politics, and Religion. In fact, these institutions are in many ways designed to accommodate our hidden motives, to serve covert agendas alongside their “official” ones. The existence of big hidden motives can upend the usual political debates, leading one to question the legitimacy of these social institutions, and of standard policies designed to favor or discourage them. You won’t see yourself – or the world – the same after confronting the elephant in the brain” (Amazon).

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Michael D. Tanner, The Inclusive Economy: How to Bring Wealth to America’s Poor (Cato Institute, 2018): “The Inclusive Economy: How to Bring Wealth to America’s Poor energetically challenges the conventional wisdom of both the right and the left that underlies much of the contemporary debate over poverty and welfare policy. Author and national public policy expert Michael Tanner takes to task conservative critiques of a “culture of poverty” for their failure to account for the structural circumstances in which the poor live. In addition, he criticizes liberal calls for fighting poverty primarily through greater redistribution of wealth and new government programs. Rather than engaging in yet another debate over which government programs should be increased or decreased by billions of dollars, Tanner calls for an end to policies that have continued to push people into poverty. Combining social justice with limited government, his plan includes reforming the criminal justice system and curtailing the War on Drugs, bringing down the cost of housing, reforming education to give more control and choice to parents, and making it easier to bank, save, borrow, and invest. The comprehensive evidence provided in The Inclusive Economy is overwhelming: economic growth lifts more people out of poverty than any achievable amount of redistribution does. As Tanner notes, “we need a new debate, one that moves beyond our current approach to fighting poverty to focus on what works rather than on noble sentiments or good intentions.” The Inclusive Economy is a major step forward in that debate” (Amazon).

Incoherent Know-Nothings

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Cards Against Humanity’s Pulse of the Nation poll from 2017 to 2018 has some pretty interesting, disturbing, and rather unsurprising findings about the American public:

Conflicting Views

39.1% of Democrats think that it’s wrong to negatively stereotype people based on their place of birth, but also think Southerners are more racist.

65.2% of Republicans think that people are too easily offended, yet find Black Lives Matter offensive.

64.6% of Democrats think that a woman has the right to do what she wants with her body, except when it comes to selling her kidney. Nearly half also believe a woman has the right to do whatever she wants with her body, except sell it for sex.

57.9% of Republicans think that people should be free to express their political opinions in the workplace, but athletes shouldn’t be allowed to make political protests at games.

Over half of Democrats think that men and women “are equal in their talents and abilities,” except when it comes to multitasking and empathy.

About 1/3 of Republicans think we should be more suspicious of foreigners, yet believe Putin when he says he didn’t interfere in the 2016 election. (You’re twice as likely to do this if you support Trump.)

Over half of Republicans believe nobody deserves a handout and that the government should do more to help small, working-class towns in America’s heartland.

About 1/3 of Democrats say that they trust the scientific consensus, just not when it comes to GMOs.

Political Ignorance

39% of Americans either think low GDP is better than high GDP or have no clue altogether.

The majority of Americans can’t name the three branches of government.

Only 12.7% of Americans can name a living, breathing economist. 55.9% can’t name a living economist, but think their opinions about economic policy are well-informed.

The richest 1% of Americans own 39% of the country’s wealth. Everyone overestimates the amount. If you’re a Democrat, you think it is 75 percent. If you’re a Republican, you think it’s 50 percent. Perhaps surprisingly, the more educated you are, the more likely you are to overestimate the amount.

Nearly half of Americans do not believe the U.S. has interfered with foreign democratic elections. You’re less likely to believe it if you’re Republican.

Other Stuff

Those who think “sex without love” is okay are far more likely to be pro-choice.

If you rely on “common sense” instead of empirical evidence, you’re likely older, less educated, and lack a Twitter account. You also are more likely support military action against Russia for their 2016 election interference. 

29% of Trump supporters would still stick with him in 2020 even if he murdered journalist for spreading lies.

Do Bumps in the Minimum Wage Increase the Number of Job Seekers?

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Some argue that increasing the minimum wage will increase the number of job seekers and, consequently, employment. From a new NBER paper:

Do minimum wage increases affect search effort by job seekers?

…We investigate the effect of minimum wage increases on job search effort utilizing data from the Current Population Survey (CPS) and the American Time Use Survey (ATUS). We exploit the staggered nature of CPS and ATUS interviews and use an event-study approach, leveraging within-state variation in the adoption of minimum wage changes. We account for shocks affecting a particular state in a given year as well as month effects to control for seasonality, and individual demographic characteristics. Intuitively, we compare the outcomes in each month near the treatment date to the outcomes for otherwise-identical individuals in the same state and year whose survey period was not near a treatment date.

We find no evidence that the minimum wage has persistent effects on search effort; the likelihood of searching does not increase in the aftermath of minimum wage increases. However, there is a large yet transitory increase in the intensive margin of search effort, concentrated in the month of the minimum wage increase, that fades almost immediately. There is no short-run increase in the employment rate nor changes in observable characteristics of searchers, suggesting that our results are not driven by changes in the composition of job seekers. These findings are robust to the inclusion of demographic controls, the duration of unemployment benefits, and month-by-year fixed effects that account for any idiosyncratic national-level variation in a given month. We also conduct a permutation test for our search duration results in which we randomly assign minimum wage increases across time periods and show that these results do not appear to be due to chance.

Our results call into question the assumption underpinning search-and-matching models as applied to analysis of the minimum wage – namely, that more workers will enter the labor market and each worker will search harder, increasing the returns to firm vacancy postings. Importantly, we find minimum wage increases do not induce individuals to begin searching. While we find that minimum wage increases yield significant increases in worker search effort on the intensive margin, they are transitory (pg. 2-3).

 

What Kind of Immigration Fuels Nationalism?

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From a recent NBER Digest:

In Skill of Immigrants and Vote of the Natives: Immigration and Nationalism in European Elections 2007-16 (NBER Working Paper No. 25077), Simone Moriconi, Giovanni Peri, and Riccardo Turati explore the relationship between immigration and European elections. They develop an index of “nationalistic” attitudes of political parties to measure the shift in preferences among voters when confronted with influxes of skilled and unskilled immigrants. They find that larger inflows of highly educated immigrants dampen nationalistic sentiments, while larger inflows of less-educated immigrants heighten them. Their results imply that a more balanced inflow of high-skilled and low-skilled immigrants could attenuate voters’ nationalistic attitudes.

...The new study tracks voter attitudes and behavior for all political parties and elections in 12 European countries for a decade. It relies on demographic and political data from the European Social Survey and a number of other sources. In addition, the researchers collected and classified the political manifestos of 126 parties for 28 elections, focusing in particular on how frequently these materials mentioned nationalistic subjects, the European Union, and other indicators of where parties stood on the political spectrum.

The researchers found “that highly educated native voters are less nationalistic in their attitudes towards immigrants than less-educated natives. The data also show strong nationalistic sentiments in regional pockets in the United Kingdom, Ireland, France, Germany, Demark, Sweden, Norway and, especially, Italy.”

The results suggest that a 1 percent increase in the share of a country’s population who are immigrants in highly educated, highly skilled groups was associated with a 0.1 standard deviation voting change away from nationalism. An increase of comparable size in the number of less-educated and lower-skilled immigrants led to a 0.12 standard deviation voting change towards nationalism. The same patterns emerged when the researchers analyzed voter sentiment expressed in surveys. In this case, a 1 percent increase in high-skilled immigrants led to a 0.07 standard deviation decrease away from nationalism, while a 1 percent increase in lower-skilled immigrants lead to a 0.07 standard deviation increase in nationalism. The results were broadly similar regardless of whether the analysis focused on all immigrants or only on immigrants from non-EU nations.

Immigration is not only about ethnicity, but class as well.

What’s Behind Cuba’s Health Outcomes?

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The above comes from Michael Moore’s Sicko. Cuba’s healthcare system is a common talking point among those of Moore’s persuasion. However, a recent study should give us pause regarding some of the overly positive claims about Cuba’s system. First, what people like Moore get right:

How is Cuba healthy while poor? Most attribute the fact to Cuba’s zero monetary cost health care system. There is some truth to that attribution. With 11.1% of GDP dedicated to health care and 0.8% of the population working as physicians, a substantial amount of resources is directed towards reducing infant mortality and increasing longevity. An economy with centralized economic planning by government like that of Cuba can force more resources into an industry than its population might desire in order to achieve improved outcomes in that industry at the expense of other goods and services the population might more highly desire (pg. 755).

However,

Centralized planning has disadvantages. Physicians are given health outcome targets to meet or face penalties. This provides incentives to manipulate data. Take Cuba’s much praised infant mortality rate for example. In most countries, the ratio of the numbers of neonatal deaths and late fetal deaths stay within a certain range of each other as they have many common causes and determinants. One study found that that while the ratio of late fetal deaths to early neonatal deaths in countries with available data stood between 1.04 and 3.03 (Gonzalez, 2015)—a ratio which is representative of Latin American countries as well (Gonzalez and Gilleskie, 2017). Cuba, with a ratio of 6, was a clear outlier. This skewed ratio is evidence that physicians likely reclassified early neonatal deaths as late fetal deaths, thus deflating the infant mortality statistics and propping up life expectancy. Cuban doctors were re-categorizing neonatal deaths as late fetal deaths in order for doctors to meet government targets for infant mortality.

Using the ratios found for other countries, corrections were proposed to the statistics published by the Cuban government: instead of 5.79 per 1000 births, the rate stands between 7.45 and 11.16 per 1000 births. Recalculating life expectancy at birth to account for these corrections (using WHO life tables and assuming that they are accurate depictions of reality), the life expectancy at birth of men by between 0.22 and 0.55 years (Gonzalez, 2015) (pg. 755).

But that’s not the only thing driving low infant mortality rates:

Coercing or pressuring patients into having abortions artificially improve infant mortality by preventing marginally riskier births from occurring help doctors meet their centrally fixed targets. At 72.8 abortions per 100 births, Cuba has one of the highest abortion rates in the world. If only 5% of the abortions are actually pressured abortions meant to keep health statistics up, life expectancy at birth must be lowered by a sizeable amount. If we combine the misreporting of late fetal deaths and pressured abortions, life expectancy would drop by between 1.46 and 1.79 years for men. In Figure 1 below, we show that that with this adjustment alone, instead of being first in the ranking of life expectancy at birth for men in Latin America and the Caribbean, Cuba falls either to the third or fourth place depending on the range (pg. 755-756).

The researchers explain, “Other repressive policies, unrelated to health care, contribute to Cuba’s health outcomes” (pg. 756) These include:

  • Restrictions in car ownership leading to low automobile fatalities.
  • Rationing combined with physically demanding transportation (e.g., cycling) contributing to reductions in obesity and deaths caused by diabetes, coronary heart diseases and strokes.

The researchers conclude,

Cuban mortality and longevity statistics appear impressive. They are a result of some combination of the government’s choice to allocate more resources into the health care industry (at the expense of other industries that could produce needed goods) and from coercive measures through both health delivery and economic planning that improve health statistics at the expense of other spheres of life.

Although the USA and other countries re-examine how to design health care delivery they should not uncritically accept the myth that the Cuban health care system has been the sole, or even the most important, cause of Cuba’s abnormally high longevity statistics. The role of Cuban economic and political oppression in coercing ‘good’ health outcomes merits further study (pg. 756).

The Effects of Corporate Taxes on Innovation

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I’ve looked at some of the negative effects of corporate taxes in previous posts. These largely had to do with wages and employment. But a new study based on Chinese data finds that they can have negative effects on innovation:

Theoretically, taxes can have either positive or negative impacts on firm innovation. On the one hand, lower taxes can increase the after-tax profit of firms, so that they have better capacity to invest in new technologies or products. Moreover, lower taxes may reduce the resources that firms spend on tax evasion, such as the costs of bribing tax officers, which can be instead used on innovation activities. On the other hand, lower taxes may also have a negative impact on innovation because they decrease government revenue, and in turn may reduce government spending on public goods such as research, education, and infrastructure. As a result, whether providing tax incentives can improve firm innovation is ambiguous. 

In a new study, we investigate the impact of taxes on firm innovation using a natural experiment in China (Cai et al. 2018). In November 2001, China implemented a tax collection reform on all manufacturing firms established on or after January 2002, which switched the collection of corporate income taxes from the local tax bureau to the state tax bureau. After the reform, similar firms established before or after 2002 could pay very different effective tax rates because of the differences in the management and incentives of those two types of tax bureaus…[T]he reform changed the enforcement of tax collection, resulting in a reduction of effective corporate income tax rates by almost 10% among newly established firms.

…To test the impact of taxes on innovation, we combine a comprehensive dataset of all medium and large enterprises in China between 1998 and 2007 with patent data from the State Intellectual Property Office (SIPO), including all patents applied in China by the year 2014. We use the data to measure three dimensions of innovation activities – input (R&D expenditure and skilled labour ratio), output (number of patent application), and quality (type and characteristics of patent application). 

Our analysis yields several interesting results. First, we show a strong and robust causal relationship between tax rate and firm innovation. Decreasing the effective tax rate by one standard deviation (0.01) increases the average number of patent application by a significant 5.7% (see Figure 2 for the graphical evidence). The reform also stimulated R&D expenditures and increased the skilled-labour ratio by 14%. Second, a lower tax rate also improves the quality of patents. The impact of tax reform on patent applications mainly comes from its effect on invention and utility patents – decreasing the effective tax rate by one standard deviation improves the probability of having an invention patent application by 4.4% and increases the number of utility patent applications by 4.7%. This suggests that the improvement in innovation outcomes is not merely driven by the low-quality design patents. We also use the detailed information on patent applications as proxies for the patent quality, including number of claims, number of independent claims, and the amount of effort that was spent on the patent application (length of the application document, number of figures, and length of abstract). In our patent data, only invention and utility patents have the above information, and results suggest that a reduction in the tax rate significantly improved patent quality, and the effect is significant for both invention and utility patents. 

Another study drawing on datasets from the 20th century had similar results:

We use new data from the 20th century to show a negative effect of high taxes on innovation. We use three newly constructed datasets consisting of: (1) the universe of corporate and non-corporate inventors who patented since 1920, as well as the citations to their patents; (2) the patents, research employment, and location of laboratory facilities of firms active in R&D; and (3) an historical state-level database of corporate income taxes linked to personal income tax rates from Bakija (2017).

…At the macro level, we find that the effects of taxes are strongly negative and quantitatively important. For example, a one percentage point increase in either the median or top marginal tax rate is associated with an approximately 4% decline in patents, citations, and inventors, and a close to 5% decline in the number of superstar inventors in the state. A one percentage point higher top corporate tax rate leads to around 6-6.3% fewer patents, 5.5-6% fewer citations, 4.6-5% fewer inventors, and 8.5-9.3% fewer superstar inventors.

Furthermore, we find that the share of patentsassigned to corporations appears to be extremely sensitive to the corporate tax rate. A one percentage point increase in the top corporate tax rate is associated with close to 1.2 percentage points fewer patents assigned to companies.      

Individual case studies of tax regime changes underscore how important the effect of taxation could be. As one example, Figure 4 shows the depressing impact on innovation of Michigan’s 1967 and 1968 tax reform bills. In 1967, Michigan introduced its personal income tax, at a rate of 2.6%. In 1968, it then introduced its corporate income tax, at a rate of 5.6%. In the subsequent years, the state experienced a substantial decline in innovative output relative to its peer states.

…At the micro level, we similarly find that taxation negatively affects innovation. To estimate the effect, we assign inventors to their tax brackets based on their productivity, which we observe in the patent data. A one percentage point higher tax rate at the individual level decreases the likelihood of having a patent in the next three years by 0.63 percentage points, even controlling for inventor quality and all other state-level policy changes. The likelihood of having high-qualitypatents with more than ten citations decreases by 0.6 percentage points for every percentage point increase in the personal tax rate. We also show that corporate inventors — inventors who appear on at least one patent assigned to a company — are much more responsive to personal and corporate income taxes than non-corporate inventors, consistent with the profit-sharing narrative posited above, as well as with different motives for innovation. 

Inventors prefer to locate in places where other inventors are active in their particular technology area. This suggests there are particular characteristics which may matter to inventors, and which can ultimately dampen their responses to taxation. Silicon Valley, for example, still attracts an abundance of tech inventors due to its rich network of capital and labour resources for innovation, despite California being a high tax state.          

At the firm level, we find consistently negative effects of taxation on patents and citations. We also find that the top corporate tax rate has a significantly negative effect on the decision of a firm to locate its R&D laboratory in a given state.

Innovation is critical to improvements in human well-being. Something for policymakers to consider.

The Benefits of Walmart

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Walmart catches a lot of grief. For example, as reported by CNN, Bernie Sanders recently “introduced a bill, titled the Stop Walmart Act, that would prevent large companies from buying back stock unless they pay all employees at least $15 an hour, allow workers to earn up to seven days of paid sick leave and limit CEO compensation to no more than 150 times the median pay of all staffers.” Yet, many don’t consider the massive benefits produced by Walmart: 

A 2005 Global Insight study commissioned by Wal-Mart and overseen by an independent panel suggested that a new Wal-Mart would create, on net, 137 jobs in the short term and 97 jobs in the long term (Global Insight 2005: 2). Studying Pennsylvania counties, Hicks (2005, discussed by Vedder and Cox 2006: 110) found that the company led to a net increase of fifty new jobs with a 40% reduction in job turnover. Hicks (2007: 93-94) uses data from Indiana to estimate that Wal-Mart increases rural retail employment from 3.4% to 4.8% after correcting for endogeneity. After correcting for endogeneity of urban Wal-Mart entry, Hicks argues that Wal-Mart leads to a 1.2% increase in employment but points out that this estimate is statistically insignificant.

…Wal-Mart’s most obvious effect on the retail sector comes through its policy of Every Day Low Prices. Basker (2005b) and Basker and Noel (2009) estimate that WalMart has a substantial price advantage over competitors with the effect being that prices among incumbent competitors fall after Wal-Mart entry. Hausman and Leibtag (2007: 1147) argue that the compensating variation from Big Box retailers’ effect on prices leads to welfare increases of some 25% of total food expenditure for people who enjoy the direct and indirect effects of Big Box stores. Further, they argue (Hausman and Leibtag 2009) that the Consumer Price Index is over-estimated because it fails to account properly for price effects of supercenters, mass merchandisers, and club stores. Evaluating estimates of the price effects of Big Box retailers and adjusting for foreign sales, Vedder and Cox (2006: 18-19) argue that “the annual American-derived welfare gains are probably still in excess of $65 billion, or about $225 for every American, or $900 for a typical family of four.”

…Jason Furman (2005) called Wal-Mart a “progressive success story” because of its impact on prices. He notes that if the 2005 Global Insight estimate of annual average household savings of $2,329 is accurate, the annual Wal-Mart related consumer savings of $263 billion dwarfs Wal-Mart-generated reductions in retail wages of $4.7 billion estimated by Dube et al. (2005). Hicks (2007: 82) notes that reductions in nominal retail wages are likely offset by larger price reductions, which translates into higher real wages. Courtemanche and Carden’s (2011a) estimate of $177 per household in savings attributable to the effects of Wal-Mart Supercenters in 2002 multiplied by the 105,401,101 households in the 2000 census yields household savings of $18.7 billion, which is still substantially higher than Dube et al.’s estimate of lost wages. 

Hausman and Leibtag (2007: 25) argue that the compensating variation—i.e., welfare increase—attributable to supercenters, mass merchandisers, and club stores is some 25% of food expenditures. Since poorer households spend more of their income on food, the effect (as a percentage of income) is higher toward the bottom of the income distribution (Furman 2005: 2-3). Hausman and Leibtag (2007: 1172, 1174) further argue that compensating variation from access to non-traditional retailers is higher at lower income levels, which would make the effect even more progressive (pgs. 8-9).

A brand new study demonstrates even more benefits provided by Walmart:

We estimate the effects that Walmart Supercenters have on food security using data from the 2001–2012 waves of the December Current Population Study Food Security Supplement (CPS-FSS). Narrow geographic identifiers available in the restricted version of these data enable us to compute the distance from each household’s census tract to the nearest Walmart Supercenter. Our outcomes are counts of the number of affirmative responses on the household and child-specific portions of the food insecurity questionnaire, along with binary variables for household food insecurity, household very low food security, child food insecurity, and child very low food security. We estimate instrumental variables (IV) models that leverage the predictable geographic expansion patterns of Walmart Supercenters outward from corporate headquarters. Specifically, we instrument for Walmart Supercenters with the interaction of distance from Bentonville, Arkansas (Walmart’s headquarters), with time. For both households in general and children specifically, the results show that a closer proximity to the nearest Walmart Supercenter leads to sizeable and statistically significant improvements in all food security measures except the indicator for very low food security. Subsample analyses reveal that the effects are especially large for low-income households and children, though they are also sizeable for middle-income children.

As journalist John Tierney asked, “How could any progressive with a conscience oppose an organization that confers such benefits?”

What Innovative Cultures Are Really Like

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Innovation is a must for both organizations and economies. At least, if one cares about the continued well-being of both. When it comes to creating an innovative organizational culture, several factors stand out. Gary P. Pisano at Harvard Business School lists some of the more popular ones:

  • Tolerance for failure: “Given that innovation involves the exploration of uncertain and unknown terrain, it is not surprising that a tolerance for failure is an important characteristic of innovative cultures. Some of the most highly touted innovators have had their share of failures.”
  • Willingness to experiment: “Organizations that embrace experimentation are comfortable with uncertainty and ambiguity. They do not pretend to know all the answers up front or to be able to analyze their way to insight. They experiment to learn rather than to produce an immediately marketable product or service.”
  • Psychological safety: “Psychological safety is an organizational climate in which individuals feel they can speak truthfully and openly about problems without fear of reprisal. Decades of research on this concept by Harvard Business School professor Amy Edmondson indicate that psychologically safe environments not only help organizations avoid catastrophic errors but also support learning and innovation. For instance, when Edmondson, health care expert Richard Bohmer, and I conducted research on the adoption of a novel minimally invasive surgical technology by cardiac surgical teams, we found that teams with nurses who felt safe speaking up about problems mastered the new technology faster. If people are afraid to criticize, openly challenge superiors’ views, debate the ideas of others, and raise counterperspectives, innovation can be crushed.”
  • Collaboration: “Well-functioning innovation systems need information, input, and significant integration of effort from a diverse array of contributors. People who work in a collaborative culture view seeking help from colleagues as natural, regardless of whether providing such help is within their colleagues’ formal job descriptions. They have a sense of collective responsibility.”
  • Flat hierarchy: “In culturally flat organizations, people are given wide latitude to take actions, make decisions, and voice their opinions. Deference is granted on the basis of competence, not title. Culturally flat organizations can typically respond more quickly to rapidly changing circumstances because decision making is decentralized and closer to the sources of relevant information. They tend to generate a richer diversity of ideas than hierarchical ones, because they tap the knowledge, expertise, and perspectives of a broader community of contributors.”

Much of this is appealing to the liberal mind. It touches on a number of Western democratic values: tolerance, openness to new experience, equality. One might even see echoes of social justice activism: “come as you are,” safe spaces, communalism, anti-establishment. However, Pisano couples these elements with others that may seem rather old school:

  • Intolerance for Incompetence: “[Innovative organizations] set exceptionally high performance standards for their people. They recruit the best talent they can. Exploring risky ideas that ultimately fail is fine, but mediocre technical skills, sloppy thinking, bad work habits, and poor management are not. People who don’t meet expectations are either let go or moved into roles that better fit their abilities…The truth is that a tolerance for failure requires having extremely competent people. Attempts to create novel technological or business models are fraught with uncertainty. You often don’t know what you don’t know, and you have to learn as you go. “Failures” under these circumstances provide valuable lessons about paths forward. But failure can also result from poorly thought-out designs, flawed analyses, lack of transparency, and bad management.”
  • Highly Disciplined: “A willingness to experiment…does not mean working like some third-rate abstract painter who randomly throws paint at a canvas. Without discipline, almost anything can be justified as an experiment. Discipline-oriented cultures select experiments carefully on the basis of their potential learning value, and they design them rigorously to yield as much information as possible relative to the costs. They establish clear criteria at the outset for deciding whether to move forward with, modify, or kill an idea. And they face the facts generated by experiments. This may mean admitting that an initial hypothesis was wrong and that a project that once seemed promising must be killed or significantly redirected. Being more disciplined about killing losing projects makes it less risky to try new things.”
  • Brutal Candidness: “We all love the freedom to speak our minds without fear—we all want to be heard—but psychological safety is a two-way street. If it is safe for me to criticize your ideas, it must also be safe for you to criticize mine—whether you’re higher or lower in the organization than I am. Unvarnished candor is critical to innovation because it is the means by which ideas evolve and improve. Having observed or participated in numerous R&D project team meetings, project review sessions, and board of directors meetings, I can attest that comfort with candor varies dramatically. In some organizations, people are very comfortable confronting one another about their ideas, methods, and results. Criticism is sharp. People are expected to be able to defend their proposals with data or logic…When it comes to innovation, the candid organization will outperform the nice one every time. The latter confuses politeness and niceness with respect. There is nothing inconsistent about being frank and respectful. In fact, I would argue that providing and accepting frank criticism is one of the hallmarks of respect. Accepting a devastating critique of your idea is possible only if you respect the opinion of the person providing that feedback.”
  • Individual Accountability: “[T]oo often, collaboration gets confused with consensus. And consensus is poison for rapid decision making and navigating the complex problems associated with transformational innovation. Ultimately, someone has to make a decision and be accountable for it. An accountability culture is one where individuals are expected to make decisions and own the consequences…Accountability and collaboration can be complementary, and accountability can drive collaboration. Consider an organization where you personally will be held accountable for specific decisions. There is no hiding. You own the decisions you make, for better or worse. The last thing you would do is shut yourself off from feedback or from enlisting the cooperation and collaboration of people inside and outside the organization who can help you.”
  • Strong Leadership: “Lack of hierarchy…does not mean lack of leadership. Paradoxically, flat organizations require stronger leadership than hierarchical ones. Flat organizations often devolve into chaos when leadership fails to set clear strategic priorities and directions. Amazon and Google are very flat organizations in which decision making and accountability are pushed down and employees at all levels enjoy a high degree of autonomy to pursue innovative ideas. Yet both companies have incredibly strong and visionary leaders who communicate goals and articulate key principles about how their respective organizations should operate.”

I remember making a point to my therapist–who uses a lot of Brene Brown’s work–that authenticity can be easily warped. “You are enough” is absolutely true if we are talking about the inherent dignity of people. However, when it used as license for “take me as I am” and “I don’t have to change,” it becomes a moral cancer. The same can be said of concepts like empathy or mindfulness. Similarly, focusing on only a few select traits of an innovative culture can be undermine the very innovation they are meant to promote.

Transformation is a balancing act. And a hard one at that.

What Drives Political Violence?

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Image result for political violence

This is disturbing, if not really all that surprising. From the Greater Good Science Center:

Earlier this year, political scientists Lilliana Mason and Nathan Kalmoe presented a paper at the American Political Science Association’s annual meeting, titled “Lethal Mass Partisanship.” With data from two different national surveys, they found that 24 percent of Republicans and 17 percent of Democrats believe that it is occasionally acceptable to send threatening messages to public officials. Fifteen percent of Republicans and 20 percent of Democrats agree that the country would be better if large numbers of opposing partisans in the public today “just died,” which the authors call a “shockingly brutal sentiment.” Nine percent of both Democrats and Republicans agree that violence would be acceptable if their opponents won the 2020 presidential election.

So drives political violence? First and foremost, aggression:

By far the biggest predictor of lethal partisanship across the board was having aggressiveness as a personality trait. This isn’t surprising, of course—aggression and violence go hand in hand. But a deeper look at aggression reveals how it fits together with other traits and shapes human behavior. Aggression all by itself is not good or bad; any of us can become aggressive when we face a direct threat. But aggression can go too far when inner and outer restraints are absent.

In neurological studies, more aggressive people tend to show less activation of the default mode brain network, which is associated with empathy and emotion regulation, which in turn helps suppress aggressive impulses. As psychologist Scott Barry Kaufman notes in Scientific American, aggressive people are more likely to retaliate when treated unfairly by others, which is not necessarily a bad thing (“although they tend to care much less about whether others are treated unfairly”).

However, aggression also shapes political outcomes. “Politicians who are more antagonistic get more media attention and are more often elected than more agreeable politicians,” he writes. “In the general population, antagonistic people are more likely to distrust politics in general, to believe in conspiracy theories, and to support secessionist movements.” In a series of experiments published in 2014, Kalmoe found “that exposure to mildly violent political metaphors such as ‘fighting for our future’ increased general support for political violence among people with aggressive personalities.”

Next, party identity:

After aggressiveness, Mason and Kalmoe found that “partisan identity strength”—how much being Democrat or Republican is part of who they are—is the most important factor in endorsing violence.

There are many studies—mostly from political science and sociology—showing that more Americans are using their political party affiliation as a source of meaning and social identity, with these identities linked to differences in “leisure activities, consumption, aesthetic taste, and personal morality,” as Daniel DellaPosta and colleagues write in their 2015 paper, “Why Do Liberals Drinks Lattes?”

Worse, the Republican Party has become whiter in recent decades, while the Democratic Party has become more racially diverse—which could be intensifying party antagonism. A recent study of survey data by political scientist Diana Mutz found that nothing predicted support for Donald Trump more than a feeling of threatened status among white Christians—an insight ratified by several studies from Robb Willer at Stanford Universityand the Public Religion Research Institute.

…“All of the research to date was pointing in this direction,” adds Mason in an interview. “But we have a long tradition of treating partisanship like a largely benevolent force. It makes sense that as an identity grows stronger, and conflict intensifies, people will begin to approve of violence.”

Third, emotions like anger, contempt, and disgust:

While Mason and Kalmoe’s study gives us some sense of how common the tendency to accept political violence is—and some of the personality traits and belief structures that may be associated with it—a 2015 study points us in the direction of the emotions involved. In “The Role of Intergroup Emotions in Political Violence,” San Francisco State University researchers David Matsumoto and Hyisung C. Hwang and the University at Buffalo’s Mark G. Frank tried to figure out which emotions can drive violence by a group against an outgroup.

They examined the emotional tone of major political speeches that occurred prior to political events throughout history, looking at the emotions expressed in words, the judgments underlying the emotions, and the nonverbal expression of the emotions that could be seen in video form.

They also examined speeches made by “ideologically driven” leaders who despised opponent outgroups that resulted in violence, such as Hitler’s; and they studied those that did not, like Gandhi’s Salt March and pro-Tibet protests at the Beijing Olympics in 2008.

They found that speeches which preceded violent events tended to express more anger, contempt, and disgust (ANCODI)—but not fear, happiness, sadness, or surprise. These negative emotions tended to target specific “outgroups”—Jews, in the case of Hitler’s speeches.

Fourth, moralizing language:

Earlier this year, a team of five researchers searched the popular social media platform Twitter for tweets about the Baltimore protests. They wanted to investigate “moralizing” tweets—that is, tweets that viewed the protests as a moral issue rather than as a political disagreement. A moralizing tweet might, for example, refer to people as “disgusting” or “evil” or “traitorous.”

In fact, they did find a positive association between the number of moral tweets and the occurrence of violent protests (gauged with arrest data). “The days in which there were violent protests, we saw that there was a lot more moral language being used,” says study co-author and University of Southern California Ph.D. student Joe Hoover. “Which was consistent with the idea that morality and violence in these contexts might be linked.”

The team also ran an experiment using another prominent protest marred by violence: the far-right rally in Charlottesville, Virginia, in 2017. Respondents were asked to what extent they thought protesting against the far-right demonstrators was a moral issue; they were then asked how acceptable it was to use violence against these far-right activists. What they found is that people were more likely to embrace violence the more they saw it as a moral issue.

In an additional experiment, the participants were given the same prompts, but they were told either that the majority of Americans agreed with their view of the protest, or that few Americans agreed with their view. They found that “moralization predicted violence only when participants perceived that they shared their moralized attitudes with others.”

In other words, when it comes to violence, there’s validation and safety in numbers. The researchers dubbed this phenomenon “moral convergence,” when many people come together around a strong idea of what’s right and what’s wrong. The “risk of violent protest, in other words, may not be simply a function of moralization, but also the perception that others agree with one’s moral position, which can strongly be influenced by social media dynamics,” they write. 


Finally, group leadership:

There are many, many studies—starting with Stanley Milgram’s classic electric-shock experiments—which show that people are much more likely to inflict pain on others when an authority figure tells them to. When leaders engage in violent rhetoric, so do their followers; when they urge calm, people do calm down. Research has documented that words do have an impact on both beliefs and behaviors.

For example, a 2017 Polish study found “frequent and repetitive exposure to hate speech leads to desensitization to this form of verbal violence and subsequently to lower evaluations of the victims and greater distancing, thus increasing outgroup prejudice.” As part of the study, researchers surveyed participants on how frequently they encountered hate speech against refugees; they found that those who were more exposed to hateful words were more prejudiced against the group and more accepting of restrictive immigration policy.

Taken together, these studies suggest that our political leadership—everyone from pundits on cable news to the President of the United States—would do well to avoid promoting the political tribalism that leads people to strongly identify with one group and demonize the other.

In short, watch your aggression, avoid identity politics, keep your emotions in check, lay off the moral grandstanding, and quit putting so much stock into political leaders and pundits.

Economic Growth and Corruption

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In my latest paper in Economic Affairs, I wrote,

Drawing on the EFW Index, Brennan (2016a)…points to a strong positive correlation between a country’s degree of economic freedom and its lack of public sector corruption. Granted, a lack of corruption could very well give rise to market reforms and increased economic freedom instead of the other way around. However, recent research on China’s anti-corruption reforms (Ding et al. 2017; Li et al. 2017) suggests that markets may actually pave the way for anti-corruption reforms (pg. 425).

Furthermore,

Market liberalisation can also have indirect effects on war and violence. For example, Neudorfer and Theuerkauf (2014) explore the effects of public sector corruption on ethnic violence by analysing 81 to 121 countries between 1984 and 2007. They find that corruption has a robust positive effect…on the risk of ethnic civil war. When the evidence provided in the previous sections by Brennan (2016a) and Lin et al. (2017) is considered, we find that market liberalisation deters corruption and, consequently, ethnic violence (pg. 429).

Research suggests that economic growth may reduce corruption:

The traditional explanation for this relationship has been the theory articulated by Wolfenson above – corruption increases the cost and risk of business activity, thereby deterring investment and depressing growth that could have lifted citizens out of poverty (Mauro 1995, Wei 1999).

However, there is an alternative possibility that has received less attention among development practitioners and academics. The strong relationship between income and growth may result from exactly the opposite causal relationship – countries may be growing out of corruption (Tresiman 2002). Over time, economic growth reduces both the incentives for government officials to extract bribes and firms’ willingness to pay them. Some scholars of developed countries have discussed this possibility in terms of a ‘life cycle’ theory with corruption peaking at early stages of development and declining as countries industrialise (Huntington 1968, Theobald 1990, Ramirez 2013). However, there has been little work either testing for this empirical link from growth to corruption, or laying out the specific mechanisms that could generate the link.

The authors continue:

The key theoretical insight of our argument is that the share of bribes that officials will choose to extract as rents depends on a firm’s ability to move and set up business in a different location. Ask for too much, and firms that have the ability to do so, will simply pull up anchor and head to safer harbours. Because officials know this, they are likely to set a bribe amount that is just below the cost of moving.

Building on that insight, we show that as firms grow the cost of moving should decline relative to firm size. The fixed cost of moving becomes less expensive relative to revenue, and more and more firms have the opportunity to escape the bribe requests of officials in their locality. Corrupt officials faced with a sudden growth surge must lower their bribe rates, or face losing their key providers of employment and tax payers to competitors.

…The theory we propose has important policy implications. To the extent this theoretical mechanism is important, rather than focusing on politically difficult institutional changes to combat corruption, resources might be better spent on policies that facilitate capital mobility across subnational jurisdictions. Providing clear titles to business premises, for instance, enables entrepreneurs to sell and recoup the full market value of land. Such businesses are more mobile than renters or owners with insecure titles, who risk significant losses if they try to escape corruption by fleeing across the border.

Drawing on “an annual survey funded by USAID and administered by the Vietnamese Chamber of Commerce and Industry,” the researchers find “that the average bribe rate decreases as GDP per capita increases” and “that large firms actually pay lower bribe rates, which is what our theory predicts. Firms with higher revenues are more put out by a high bribe rate, since it increases the amount of bribes they must pay dramatically. To retain them then, officials must push their bribe rate lower.” 

Then, using “a census of firms conducted by Vietnam’s General Statistical Office (GSO) [to] calculate aggregate employment at the province-industry-year level,” the authors

show that exogenous industry-wide performance is indeed a strong predictor of a firm’s performance. A doubling of total employment in the industry is associated with a 1.6 percentage point reduction in the bribe rate, or about 42% of the mean level. Moreover, the effect is more pronounced for highly mobile firms. The magnitude of the effect of growth on bribe reductions is 17% larger for firms in possession of a Land Use Rights Certificate, which facilitates the sale of their business premises. Similarly, the effect is 20% greater for firms that already have branch operations in other provinces, and therefore possess knowledge and experience that could facilitate movement.

These effects survive a battery of robustness tests and alternative specifications, providing compelling evidence that growth can directly reduce corruption.

In short, economic growth can decrease corruption by undermining the power of officials to extract bribes. But this is likely part of a virtuous feedback loop. For example, a 2017 paper 

exploit[s] spatial variation in randomized anti-corruption audits related to government procurement contracts in Brazil to assess how corruption affects resource allocation, firm performance, and the local economy. After an anti-corruption crackdown, regions experience more entrepreneurship, improved access to finance, and higher levels of economic activity. Using firms involved in corrupt business with the municipality, we find that two channels explain these facts: allocation of resources to less efficient firms, and distortions in government dependent firms. The second channel dominates, as after the audits government dependent firms grow and reallocate resources within the organization (pg. 31). 

As I state in the beginning of my paper,

Of course, it is far easier to demonstrate correlation than causation, and while some studies do find markets playing a causal role in moral development, most simply establish a positive relationship. However, findings that ‘merely’ demonstrate positive correlations should be interpreted in light of the feedback loops: even if moral behaviours are foundational and give rise to market systems (instead of vice versa), market systems in turn reinforce these virtues by imbuing them with value. As Paul Zak (2011, p. 230) explains, ‘Markets are moral in two senses. Moral behavior is necessary for exchange in moderately regulated markets, for example, to reduce cheating without exorbitant transaction costs. In addition, market exchange itself can lead to greater expression of morals in nonmarket settings’ (pg. 423).