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 Cooperative Advantage” of International Trade

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Charles Kenney of the Center for Global Development has an excellent article in the Summer 2014 issue of the Breakthrough Journal (published by the Breakthrough Institute) on how international trade and innovation actually benefit everyone involved. He begins with a little history on the 19th-century Guano Islands Act, by which Americans were authorized to seize unoccupied islands filled with dry bat or bird poop. This was

at a time when guano was the world’s best fertilizer and source of saltpeter, a vital ingredient of gunpowder. Around 100 islands were claimed by the United States under the law, including Midway. And it wasn’t just the United States that scrambled for control of guano deposits: Peru, Spain, Bolivia, and Chile fought wars over them. That might have seemed reasonable at the time: everyone was desperate for the same source of nitrogen fertilizer. But in 1909, Fritz Haber developed a method of producing ammonia from nitrogen in the air, enabling chemists to manufacture fertilizer on an industrial scale. This new technology, the Haber process, provided the world with a less smelly and more widely replicable way to meet our nitrogen needs, slashing the strategic value of poop-covered real estate. Nonetheless, the Guano Islands Act remains on the books, representing a way of thinking about international relations that is as anachronistic as it is enduring: the idea that countries must compete for a set amount of resources, land, or wealth.

This fear-based approach to international relations fuels much of the isolationism and protectionism we see today. But Kenney argues that “the increasing success of emerging markets, in part the result of their adopting ideas and institutions pioneered by industrial economies, is binding the world’s countries together into ever closer relationships of mutual benefit.”

After reviewing the evidence, he concludes,

All of this suggests that we need to develop a new view of the international economy as a positive-sum game (to borrow from Financial Times columnist Martin Wolf), one that acknowledges that advances in wealth, technology, or wellbeing in one part of the world are likely to enhance rather than hurt prospects for progress elsewhere. Seeing the planet today through the decayed eyes of Malthus and Machiavelli — and framing engagement with developing countries as zero-sum — simply does not make sense in a non-rival, globally integrated world.

In our positive-sum world, cosmopolitanism and compassion increasingly align with self-interest. This is a far nicer situation than one in which the two conflict, and it is surely a leading reason to hope that the world will keep on becoming a better place to live. It’s time to shift our thinking about Asia, Africa, and Latin America, emphasizing cooperation and mutual gain rather than competition and fear. Thinking of the developing world’s growth in the 21st century as primarily a threat makes about as much sense as trying to run a modern empire on bird poop.

Check it out.

IMF Working Paper: Government Spending and Economic Growth

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A new study from the International Monetary Fund looks at multiple episodes of government spending “booms” across 21 different countries. It does not address whether or not “in theory public investment drives could accelerate growth, but rather whether in practice, with real governments deciding how to spend the funds and implementing investments, they have in fact accelerated growth” (pg. 62) The answer?: “probably very little”.

This conclusion pertains to the drives – the big increases in public capital spending – not necessarily to routine levels of public investment. And furthermore the evidence here  is not about whether public capital can promote growth by averting the emergence of bottlenecks.  Major public investment campaigns continue to be advocated in several countries as a major trigger  for economic growth, and on this issue, whether they have in fact triggered growth, the evidence for a  positive effect of public capital on GDP or GDP growth is weak (pg. 62).

It further states that “it is difficult to find a clear-cut example that fits the oft-repeated narrative of a public investment boom followed by acceleration in GDP growth. If anything the cases of clear-cut booms illustrate the opposite – major drives in the past have been followed by slumps rather than booms” (pg. 4).

Matthew Klein has a really good overview in the Financial Times. Check it out.[ref]This goes along quite well with previous research on government spending and economic growth.[/ref]

 

Family Instability and Wages

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Marriage historian Stephanie Coontz has an interesting piece in The New York Times on rising family instability. Commenting on male and female wages, she states,

Today, job prospects for young men are far less favorable. Real wages for men under age 35 have fallen almost continuously since the late 1970s, and those with only a high school diploma have experienced the sharpest losses. Between 1979 and 2007, young male high school graduates saw a 29 percent decline in real annual earnings — an even steeper decline than the 18 percent drop for men with no high school diploma…Women’s wages, by contrast, have risen significantly since the 1970s, except for those on the very bottom…Meanwhile, women’s expectation of fairness and reciprocity in marriage has been rising even as men’s ability to compensate for deficits in their behavior by being “good providers” has been falling. Low-income women consistently tell researchers that the main reason they hesitate to marry — even if they are in love, even if they have moved in with a man to share expenses, and even if they have a child — is that they see a bad marriage or divorce as a greater threat to their well-being than being single.

She concludes,

If women lowered their expectations to match men’s lower economic prospects, perhaps marriage would be more common in low-income communities. But it would most likely be even less stable, and certainly less fair. Turning back the inequality revolution may be difficult. But that would certainly help more families — at almost all income levels — than turning back the gender revolution.

This piece goes nicely with a recent review in The Wall Street Journal by sociologist and National Marriage Project director W. Bradford Wilcox, in which he points out,

Although the authors put too much stress on economic explanations-their approach cannot explain, for instance, why the economic dislocation of the Depression did not result in high levels of family breakdown in the 1930s-the story told by “Marriage Markets” is worth heeding, whatever one’s political affiliations. Conservatives need to take note of the growing family divide in part because fragile families require more public aid, from Medicaid to food stamps: As marriage goes, so goes the tradition of limited government. Progressives, for their part, might well worry that the family divide begets not only economic disparity but also gender inequality. After all, communities where fathers are largely absent from their children’s day-to-day lives do not come close to approximating the egalitarian ideal championed by today’s left-of-center thinkers and activists.

…What, then, is to be done? Ms. Carbone and Ms. Cahn offer a number of good suggestions, such as job-relocation grants for laid-off workers (to help them move away from high-unemployment regions to those with jobs) and portable health plans that allow workers to seek out the best job opportunities instead of clinging to bad, low-paying jobs for the sake of their benefits.

But the authors also think that the way forward requires strategies designed to “enhanc[e] women’s power”-such as “improved access to contraception.” …Perhaps. But a stronger case could be made that the bigger challenge facing working-class and poor families is not a lack of female empowerment but rather that contemporary masculinity has been decoupled from work, fatherhood and marriage-and for reasons that are not entirely economic.

Good stuff. Check them out.

 

The Politics of Character

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Image result for snow blower calvin and hobbes

The Brooking Institution’s Richard Reeves has an incredible article in the most recent volume of National Affairs entitled “The New Politics of Character,” which basically summarizes much of the research associated with Brooking’s Character and Opportunity Project (which I’ve mentioned before). As Reeves explains,

Character, as we will see, is not synonymous with morality. Character combines qualities like drive and prudence that could — but might not — serve moral ends. It’s much more prosaic, but it may be more important.

The development of character is perhaps the central task of any civilized society and every individual within it. Its absence is felt not only when communities collapse into a brief, riotous war of all against all, but in many long-standing areas that are vital for human flourishing and constitute many of the abiding concerns of policymakers and the everyday issues of American politics. This is perhaps most true of the current debates about inequality and social mobility. Gaps in character development closely correlate to gaps in income, family functioning, education, and employment. The character gap fuels the opportunity gap, and vice versa.

If we want a better, freer, fairer society, we will have to complement the 20th-century focus on strong institutions with a new (if also ancient) concern for strong individuals. The quality of our policies is a vital concern. But so is the quality of our people.

After exploring a vast amount of research, he concludes,

Any new emphasis on character will need bipartisan support. This will require liberals to get past their squeamishness about words like “character” and conservatives to get over their hostility to public policy. Liberals who are genuinely concerned about rising inequality cannot turn a blind eye to the deep character inequalities that track with class lines. They are understandably afraid of seeming to blame the poor for their plight. But as we work to provide opportunities, we need to ensure people are able to seize them.

Conservatives who are genuinely concerned about opportunity need to look beyond tropes about moral character to the more practicable cause of performance character. As James Q. Wilson urged in The Public Interest’s 20th-anniversary issue: “For most social problems that deeply trouble us, the need is to explore, carefully and experimentally, ways of strengthening the formation of character among the very young.” Step one is to harness education and put character development firmly on the school agenda; step two is to invest in parenting, especially in the very early years. More broadly, the design of policies aimed at alleviating poverty or promoting opportunity ought to be sensitive to their impact on character development.

What is needed is a bipartisan policy push to help cultivate character in the name of opportunity. Given deepening concerns on both sides over barriers to upward mobility, there is an opportunity for a new coalition on character. Let us hope it is seized.

Well worth the read.

Immigration and the Poor

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Pretty much
Pretty much. The claims provoking this sign tend to be untrue.

Immigration is in the news again with the influx of Central American children across U.S. borders. Some of the responses to these child immigrants have shown the ugly side of American nationalism. This skepticism toward immigration can be traced back to several of the Founding Fathers, including Benjamin Franklin, Thomas Jefferson, Alexander Hamilton, George Washington, and John Jay.[ref]Historian Thomas E. Woods, Jr. discusses their various concerns in his 33 Questions About American History You’re Not Supposed to Ask (New York: Three Rivers Press, 2007). However, some anti-immigration Americans assume immigrants are predominantly criminals, which the evidence doesn’t bear out. Furthermore, we often ignore how our own policies (such as the War on Drugs) helps create undesirable environments from which these immigrants want to escape.[/ref] However, even the skeptics among the Founders expressed the benefits of immigration. But I’m not particularly interested in cherry-picking Founders statements. What I am interested in is alleviating global poverty. Here are a few links that cover a variety of studies demonstrating increased immigration does just that:

  • Economist David Henderson, writing in a 2012 issue of The Freeman, notes, “Boston University economist Patricia Cortes, in a study published in the Journal of Political Economy, found that cities with larger influxes of low-skilled immigrants had lower prices for labor-intensive services such as dry cleaning, childcare, housework, and gardening. In a later study, Cortes and coauthor Jose Tessa found that these low-price services allowed Americans, especially women, to spend more hours working in high-skilled, high-paying jobs.The gains from eliminating barriers to immigration are huge. In a recent article in the Journal of Economic Perspectives, economist Michael Clemens finds that getting rid of all immigration restrictions worldwide would approximately double world GDP.” He continues, “…Harvard University economist Lant Pritchett’s observ[es] that the average gain from a lifetime of microcredit in Bangladesh, such as that provided by Nobel Peace Prize winner Mohammed Yunus’s Grameen Bank, is about the same as the gain from eight weeks working in the United States. Asks Pritchett, “If I get 3,000 Bangladeshi workers into the US, do I get the Nobel Peace Prize?” …Pritchett found that if rich countries allowed just a 3 percent increase in their labor forces through immigration, the world’s have-nots would benefit by $300 billion a year, and the residents of the rich countries would benefit by $51 billion a year.”
  • The Economist reports on a brand new study that “offer[s] ammunition for fans of more open borders. In 19 out of 20 countries, the authors calculated that shutting the doors entirely to foreign workers would make the native-born worse off. (Never mind what it would do to the immigrants themselves, who benefit far more than anyone else from being allowed to cross borders to find work.) The study also suggests that most countries could handle more immigration than they currently allow. In America, a one-percentage point increase in the proportion of immigrants in the population made the native-born 0.05% better off. The opposite was true in some countries with generous or ill-designed welfare states, however. A one-point rise in immigration made the native-born slightly worse off in Austria, Belgium, Germany, Luxembourg, the Netherlands, Sweden and Switzerland. In Belgium, immigrants who lose jobs can receive almost two-thirds of their most recent wage in state benefits, which must make the hunt for a new job less urgent. None of these effects was large, but the study undermines the claim that immigrants steal jobs from natives or drag down their wages.”[ref]This actually offers evidence for Milton Friedman’s initial point about immigration and the welfare state.[/ref]
  • Lydia DePillis at The Washington Post reports on two new papers that demonstrate immigrants fill labor gaps, complement existing capital, tech, and labor, and that this complementarity increases production and consequently wages.

Be sure to read and research the actual studies.

A History of Air Conditioning

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Popular Mechanics has a fun timeline of air conditioning.  Given that it is the middle of summer and I live in Texas, I can’t imagine living without A/C. It is sometimes easy to forget that the first home-based air conditioning unit was installed for the first time 100 years ago “in the Minneapolis mansion of Charles Gates” and was “approximately 7 feet high, 6 feet wide, 20 feet long and possibly never used because no one ever lived in the house.” In 1970, only 36% of U.S. households had air conditioning. This percentage rose to 68% by 1993 and 87% by 2009 (this includes 81.6% of poor households). It also takes less energy in homes today, dropping to under 50% of U.S. home energy use. And to think no one before 1914 had one. 

So, enjoy your A/C along with an extra dose of gratitude.

More on the Minimum Wage

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minimum wageWe’ve written a lot about minimum wage hikes here at Difficult Run. Here’s another to add to the list: economist David Neumark (who has published extensively on minimum wage) has an op-ed in The Wall Street Journal arguing that minimum hikes may indeed go to low-wage workers, this very different from saying they go to low-income families. “One might think that low-wage workers and low-income families are the same,” Neumark writes. “But data from the U.S. Census Bureau show that there is only a weak relationship between being a low-wage worker and being poor, for three reasons” (reasons that are “descriptive evidence” and “not disputed by economists”):

  1. “[M]any low-wage workers are in higher-income families—workers who are not the primary breadwinners and often contribute a small share of their family’s income.”
  2. “[S]ome workers in poor families earn higher wages but don’t work enough hours.”
  3. “[A]bout half of poor families have no workers, in which case a higher minimum wage does no good.”

The amount of low-wage workers from poor families dropped from 85% in 1939 to 17% by the early 2000s due to changes in social safety nets and family structure. Evidence indicates that only 18% of the benefits of a national minimum wage of $10.10 would go to poor families, while 29% would “go to families with incomes three times the poverty level or higher.” The benefits for poor families decline to 12% at 15 dollars, while benefits for the well-off would increase to 36 percent. Neumark further explains that “most studies…fail to find any solid evidence that higher minimum wages reduce poverty.”

He concludes, “The desire to help poor and low-income families is understandable. But increasing the minimum wage is a misguided way to do it.”

CDC Reports: Children’s Health and Family Structure

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A couple new government reports have focused on the well-being of children in the United States. The first one focused on adverse family experiences[ref]Nathaniel had an excellent post about a year ago on adverse childhood experiences. Well worth the read. Note especially the impact adverse experiences have on future health and well-being.[/ref] and discovered that those “children living with neither of their parents are 2.7 times as likely as those living with both biological parents, and more than twice as likely as children living with one biological parent, to have had at least one adverse experience such as those shown in the figure below.”

What’s worse is that children “living with one parent are fifteen times as likely to have had four or more adverse experiences as those living with two biological parents, and for children in nonparental care that number rises to thirty.” It is important to point out that “researchers did not control for household income or other demographic factors, and that the reported adverse experiences, apart from financial deprivation, include those that occurred at any time in the child’s life. That means, for instance, that the many adverse experiences of children in foster care may have preceded (and led to) their being placed in foster care, or that the violence or drug use of one biological parent could have led to the child living exclusively with the other biological parent…Nevertheless, the figures are a striking illustration of how children in the care of both biological parents are most likely to escape adverse experiences.”

The second report provides a snapshot of children’s health in the United States and its relation to family structure. Overall, those in nuclear families (i.e. children “living with two parents who are married to one another and are each biological or adoptive parents to all children in the family”) fared better than those in other family structures. Children in nuclear families were least likely to be in “good,” “fair,” or “poor” health as opposed to “very good” or “excellent” health.

Percentages of Children in Good, Fair, or Poor Health by Family Structure
Percentages of Children in Good, Fair, or Poor Health by Family Structure

Data on chronic conditions and behavioral issues produced similar findings. “Although some confounding factors were controlled for…the researchers emphasize that since they simply measured family structure and child outcomes at a single point in time, their findings still cannot be used to make conclusions about causality. Prior research, they note, suggests that the arrow may go both ways…And obviously, family structure is one among many factors that matter for children’s health. In the CDC data, lower socioeconomic status (conditions of poverty or near-poverty, or parental educational attainment of no more than a high school diploma) was associated with worse health outcomes for children in every type of family, and sometimes it essentially drowned out the association between family structure and health. On the other hand, family structure and stability are associated with children’s health in many parts of the developing world, where access to health care is limited and where single-parent families are actually less likely than nuclear families to be socioeconomically disadvantaged. Teasing out all the determinants of children’s health will take more research than is currently available, but at this stage, family background seems in many cases to be one significant factor.”

Check out the full reports.

Essays on McCloskey

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Over at the Online Library of Liberty there is an excellent group of essays covering economist Deirdre McCloskey’s work on the “Bourgeois Era”:  The Bourgeois Virtues: Ethics for an Age of Commerce (2006), Bourgeois Dignity: Why Economics Can’t Explain the Modern World (2010), and the forthcoming Bourgeois Equality: How Betterment Became Ethical, 1600-1848, and Then Suspect (2015).

The full amount of essays are still in the process of being posted, but so far you can read ones by economists Don Boudreaux, Joel Mokyr, and John Nye. Boudreaux captures many of my own feelings about McCloskey’s work, while Mokyr and Nye provide some excellent feedback and criticism.

Definitely worth checking out.

William Easterly: Poverty Is a Moral Problem

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Christianity Today has an excellent interview with economist William Easterly on his new book The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor. In it, Easterly explains that poverty is a moral problem that cannot be easily fixed by technocratic solutions. The answer comes from treating the poor with the same dignity as everyone else. He explains,

I realized our attitude towards the poor is so often condescending and paternalistic. We think of them as helpless individuals. We don’t respect their dignity as individuals.

The next step was not to just avoid paternalism or condescension but actually to go back to first principles and think about the rights of the poor and what role those rights play in development. Economists’ research actually does give the institutions associated with individual rights a lot of the credit for the development in the West and the rest of the world. This combined with my own moral awakening that these rights are a desirable good in and of themselves. Whenever we violate them, we set back development.

Check it out.