Virtue signalling may be a signal of less virtue

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Timothy Taylor writes,

In a mild form, moral licensing is an issue for all of us. Anyone who exercises hard and then feels that they “deserve” a high-calorie treat knows the feeling. At an extreme form, it is manifest when some of those who claim to be leaders in family values or social justice or religious/spiritual leadership are found to be acting in ways that counter to the values they claim to profess. Such cases may just be hypocrisy, but I suspect there is often an element of moral licensing as well: that is, being identified with doing good can free someone up to do bad, as well.

Read the whole post, which covers research on the topic.

My case for the UBI

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This essay elaborates on the issue of implicit tax rates that Greg Mankiw highlighted.

I am starting to get annoyed with the left-wing bias at Medium. It is one thing for the readers of the site to lean left. Fine. But my articles seem to get much, much less play than a lot of essays that offer nothing but left-wing drivel. And hardly anyone seems to come out of the left-wing echo chamber to read what I write. I get the sense that I am mostly being presented to the (few) people who already are sympathetic. It’s somewhat demotivating.

Greg Mankiw’s case for the UBI

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He writes,

To put it another way, the effective marginal tax rate when a person moves from the bottom to the middle quintile is . . . 76 percent.

The blog post explains how he arrives at this. He is comparing incomes before taxes and transfers with incomes after taxes and transfers. The high implicit tax rate comes from the loss of eligibility for food stamps, Medicaid, and other benefits.

If you replaced all current low-income subsidies with a Universal Basic Income, you could come up with a more rational tax rate for people. Even if the current system doesn’t discourage work effort (although I suspect that it does), just the way that it retards upward mobility strikes me as wrong.

Public money and schools

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A commenter wrote,

Both vouchers and charters are private schools funded with public money, but exempt from all the laws that public schools are mandated to follow.

And they will only be exempt so long as public schools are there to catch the rejects.

1. I think that the case for spending “public money” (i.e., money extracted from taxpayers) on schools is quite weak. Until I see a well-controlled experiment, I will be skeptical of the benefit of schools. And whatever the benefit turns out to be for the child and the parents, the social benefit of schools (that is, the benefit over and beyond the private benefit that parents would be willing to pay for out of their own resources) is only a fraction of that.

2. In theory, there is a case for using schools to mold citizens by imparting social norms. In practice, I don’t agree with a lot of the ideology that goes into the molding nowadays. So for me, the “molding citizens” argument is not as compelling as it could be.

3. I do not think that we need to make taxpayer-funded schooling universal. Take “universal pre-K,” for example. If we had universal pre-K, most of the money would be spent on children whose parents would already send their children to pre-K. As far as I know, the research on pre-K tends to find benefits only for children from the most disadvantaged backgrounds. If we are going to spend taxpayer money on pre-K, I would say that we should spend it only on children from the most disadvantaged backgrounds.

4. I would follow the same reasoning with vouchers for primary school. I would only provide money where research shows benefits.

5. It might turn out that no child really benefits from primary school. I firmly believe that human nature has evolved to make us teachers and learners. But are we sure that classrooms are the most cost-effective approach? Again, as far as I know, we don’t have evidence based on randomized, controlled trials.

6. In particular, we should ask whether “the rejects” really benefit from school. If not, then why put them through it? If so, then it should be possible to provide them with sufficient voucher money to induce an entrepreneur to provide the schooling that benefits them.

What I’m reading

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I was sent a review copy of A Crisis of Beliefs, by Nicola Gennaioli and Andrei Shleifer (henceforth GS). They say that the financial crisis of 2008 illustrates a theory of expectations formation in which market participants both place too much weight on recent news and in some circumstances ignore tail risk.

We know from Tetlock, whose name does not appear in the index, that a good forecaster puts a lot of weight on baseline information–characteristics that are more universal and permanent. Inefficient forecasters instead tend to focus on information that is more recent and local. GS argue that financial market participants are inefficient forecasters.

So far, what I like about the book:

1. The writing is clear.

2. Years ago, I contrasted two classes of theories of the 2008 financial crisis. One I called “moral failure” and the other I called “cognitive failure.” The theory that GS builds falls within that latter class, which is the one on which I would place more weight.

3. GS take seriously data that comes from surveys of the expectations of market participants. They are not afraid to find fault with the rational expectations hypothesis.

What I don’t like:

GS use standard economic modeling methodology, as opposed to Bookstaber’s agent-based modeling. See my review of The End of Theory. In particular, I think that institutional details are important, and Bookstaber’s rich depiction of different classes of market participants is better than a standard mathematical model. Also, I don’t like the idea of collapsing divergent expectations into a single representative agent. Getting away from the representative-agent model is a point in favor of Frydman and Goldberg. Note that Bookstaber, Frydman, and Goldberg do not appear in the index, either.

Quoted

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Arnold Kling, 64, an American economist and Israeli folk dancer since his student days at the Massachusetts Institute of Technology (MIT), has another theory. Kling, of Silver Spring, Maryland, contends that the nature of engagement in general has changed in 50 years, becoming both narrower and deeper. Increasingly complex new dances discourage beginners from trying Israeli folk dancing. Veteran dancers come for the “oldies,” those choreographed before 1990. That leaves a large generation gap of people who can’t relate to either end of the Israeli dance spectrum — thus the decline.

UPDATE: here is the link

The paragraph is a bit terse–a condensed version of Narrower, Deeper, Older.

I’ve attended some of the sessions pictured in the article, but I have managed to avoid being in the pictures. The second picture shows a session I attend regularly, but I think it was taken when I was out for a couple of months with a foot injury. The picture was taken early in the evening, when there are a lot of new beginners and perpetual beginners. There are three women dancing facing the camera, one with silver hair and two with arms high over their heads. I am confident that they know what they are doing. The rest of the dancers are. . .trying their best.

Mike Munger on non-ownership

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You can watch the podcast at Cato (I watched it live yesterday, so the link may be different). The book is Tomorrow 3.0: Transaction costs and the sharing economy. It can be summarized by a remark from one of my commenters.

The commenter writes,

Ownership is a form of market failure:

– Your car being parked 23hrs a day just to ensure that it’s there when you need it.
– Transaction costs of selling/buying your house tying you down and decreasing efficiency of your human capital.

This reminds me of my line to my high school students that “Do It Yourself is market failure.” I had an economist friend who built a deck for his house to “save money.” I pointed out that if he could get paid his economist’s wage rate while working more hours and then paid someone to build the deck, then that would have saved a lot more money. His inability to get paid for marginally more hours worked as an economist was the market failure.

Transaction costs and agency costs related to land are fundamentally important. In theory, the best way for me to own land is to include a well-diversified mutual fund that invests in real estate as part of my portfolio. In practice, transaction costs make me want to stay in a particular dwelling much longer than might otherwise be optimal, and agency costs make it more likely that a property will be well cared for by an owner than by a renter. Overcome those sources of market failure and you make it feasible to own a diversified real estate portfolio instead of being stuck with one home.

The non-ownership society?

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Tyler Cowen writes,

The great American teenage dream used to be to own your own car. That is dwindling in favor of urban living, greater reliance on mass transit, cycling, walking and, of course, ride-sharing services such as Uber and Lyft.

He gives many other examples where we have given up ownership. He does not even mention the issue of social media and who owns your data.

In all of these cases, we may be giving up control in order to have convenience. The cumulative effect may be to give away our independence.

I see this from a Specialization and Trade perspective. The more we specialize and trade, the more interdependent we become. We don’t grow our own food, make our own clothes, build our own homes, and so on. The more we consume the goods and services provided by others, the more we have to trust the institutions through which we obtain those goods and services.

I think that Tyler has a legitimate worry that liberty may be more fragile in this more specialized economy. Because we are more interdependent, there are more ways for us to be let down. That in turn could make us seek more protection from government. Libertarians must make a convincing case that market competition offers better consumer protection than government agencies.

Why I favor vouchers

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Naomi Schaefer Riley writes,

When it comes to the role that teachers’ unions play in the problems of public education, Mr. Duncan doesn’t pull his punches. Upon taking charge of the public schools in Chicago in 2001, he discovered (with the help of the Chicago-based economist Steven Levitt ) that at least 5% of the city’s teachers were helping their students cheat on standardized tests. He was appalled but felt stymied: “If I’d asked Mayor [Richard] Daley to fire 5 percent of all Chicago teachers, then there would have been hell to pay.” The episode is emblematic beyond its particular circumstances: In what other profession is it acceptable to retain people who you know are falsifying results?

She is reviewing the memoir of President Obama’s first education secretary, Arne Duncan.

You will not find me arguing that charter schools do a better job than government schools when it comes to creating better long-term outcomes for students. The Null Hypothesis would say that neither does a better job.

My concern is with the distribution of power.

I live in an area where the collective “bargaining” table has the teachers’ union on both sides. The union controls the election of the officials with whom it “bargains.” The consequences are an enormous cost to taxpayers relative to the number of actual classroom teachers. The big winners are retired school personnel, non-classroom staff, and teachers who would otherwise be recognize as not fit for the classroom and fired, rather than given administrative jobs.

As a matter of principle, I believe that parents should have the power of choice when it comes to their children’s education. For any product, I want sovereignty for consumers, not for the supplier. Consumers will make mistakes, but I prefer the mistakes of consumers to the mistakes of government.

If we stopped sending taxpayer money directly to schools, then I don’t think we need to give vouchers to every parent. I would prefer to see voucher money concentrated on the neediest families, where need relates to income and the specific problems of some children.