Sluggish economic adjustment

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Timothy Taylor writes,

In the decades after World War II and up into the 1980s, the US economy experienced regional convergence: that is, the economies and incomes in poorer regions (like the US South) tended to grow more quickly than the economies of richer regions (like the US North). But in the 1980s, this pattern of regional convergence slowed down.

He cites interesting papers on the topic by Peter Ganong and Daniel W. Shoag as well as by Elisa Giannone.

Also relevant is the paper by Ryan A. Decker and others, cited by Tyler Cowen.

Uninformative Regression

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Pierre Lemieux writes,

simple regression analysis confirms the absence of statistical correlation between country size and economic freedom.

Simple regression analysis is not a good choice with skewed data, such as the population size of different countries. What the regression algorithm does in this case is just compare the freedom index values of China and India with the average of all other countries. That is not very informative.

If you want to see a more careful analysis, which does show that smaller countries tend to be better run, see the essay that I wrote on The recipe for good government.

Russ Roberts and Bill James

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Self-recommending.

At the end, Bill James expresses sentiments that are essentially identical with mine.

Self-righteousness is the great problem that afflicts our political culture. And, the problem is that large numbers of people on both ends of the political spectrum are so convinced that they are correct and that failings to see their correctness are moral failings, that we have lost much of our ability to communicate from one end of the spectrum to the other. And, there’s no justification for it on either end. None of us understand the world. The world is vastly more complicated than the human mind. No one understands whether these policies are going to have the intended effects, or whether the unintended effects are going to be greater than the intended effects. No one knows the answers to those questions. And the people who are convinced that they know the answers to those questions are just wrong. And it’s become a huge concern, because people are so angry, based on their self-righteousness, that we are: anger repeatedly expressed–anger building on anger, building on anger eventually leads to violence. And we need to get people to back away from the conviction that they are right and see that they may be wrong not about something but about everything.

The case against education

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Made by Ben Wilterdink.

unsurprisingly, one of the best ways to develop the soft skills necessary for labor market success comes in the form of entry level employment. A 2015 report from USAID concludes, “Theoretical literature suggests that adolescence and young adulthood are optimal times to develop and reinforce these skills.” Additionally, a growing body of evidence suggests that actually working, or at least being in a workplace environment, is a key indicator of successful soft skill development.

Read the whole thing. One implication is that young people probably would learn more if they spent less time in school and more time working at jobs.

Surprising Sentences

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From Alex Tabarrok,

More police on the street is one cause, among many, of lower crime. It’s important in the debate over better policing that we not lose sight of the value of policing. Given the benefits of reduced crime and the cost of police, it’s clear that U.S. cities are under policed (e.g. here and here). We need better policing–including changes in laws–so that we can all be comfortable with more policing.

You can lose your libertarian membership card for saying things like that. I’d be curious to see whether his commenters tried to stomp on him.

This is a topic where conservatives may have it right, and progressives and libertarians may have it wrong.

My essay on the CBO for the Yale Law and Policy Review

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I write,

The demand for pseudoscience leads to unwise policy choices. Although the CBO is nonpartisan, the presentation of its model results serves to focus attention on scenarios that are favorable to intervention and to deficit spending. But the policy discussion does not include scenarios in which intervention fails to accomplish intended results or where economic shocks make a large government debt problematic. This Essay recommends ways for Congress to redirect the CBO, resulting in analysis and reporting that would provide better support for public policy.

This is one of my favorite essays, because I believe it is both original and correct.

There is a sort of Murphy’s Law at work in the way that policy makers use the CBO. They pay attention to its “scoring” when it is least appropriate to do so, and they ignore the CBO when it is most appropriate to pay attention, namely its analysis showing that the long-term budget outlook is not sustainable.

It should be very clear that I blame the press and policy makers for how they mis-use the CBO. I do not blame the CBO itself.

Megan McArdle on the CBO

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She writes,

Now imagine a world with open CBO models. Every bill would still have a score, yes — that’s mandated by law — but then every score would have a dozen think-tanks slinging mud at the assumptions, and proclaiming that their iteration of the CBO model was producing the true results.

She says this as if it would be a bad thing. My own view is that there should not be a definitive CBO score. The CBO does not own Truth. The most important truth about policy is that there is no Truth. Economic theories are contestable. Treating one model as Truth biases policy makers toward intervention, because they are over-confident in the results.

I make this point in a forthcoming essay. Not sure when the essay will appear.

The case against policy analysts

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Robin Hanson writes,

On the other side, however, are most experts in concrete policy analysis. They spend their time studying ways that schools could help people to learn more material, hospitals could help people get healthier, charities could better assist people in need, and so on. They thus implicitly accept the usual claims people make about what they are trying to achieve via schools, hospitals, charities, etc. And so the practice of policy experts disagrees a lot with our claims that people actually care more about other ends, and that this is why most people show so little interest in reforms proposed by policy experts. (The world shows great interest in new kinds of physical devices and software, but far less interest in most proposed social reforms.)

Tyler Cowen adds,

Policy analysis, while it often incorporates behavioral considerations, when studying say health care, education, and political economy, very much neglects the fact that often both the producers and consumers in these areas have hypocritical motives. For that reason, what appears to be a social benefit is often merely a private benefit in disguise, and sometimes it is not even a private benefit.

Some comments of my own.

1. This is where George Mason has a very distinctive point of view. Bryan Caplan’s The Case Against Education will be out soon. There is Hansonian medicine. And of course The Elephant in the Brain.

2. My minor contribution is to say that whatever the policy analyst inputs to the policy process, the output is usually policies that subsidize demand and restrict supply. See my book Specialization and Trade.

3. And of course there is the whole Hayekian theme that about what policy analysts do not know about complex problems.

It is too bad that there is so much resistance to these ideas, all of which seem persuasive to me.

Jeffrey Friedman on expertise in public policy

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The abstract says,

How can political actors identify which putative expert is truly expert, given that any putative expert may be wrong about a given policy question; given that experts may therefore disagree with one another; and given that other members of the polity, being non-expert, can neither reliably adjudicate inter-expert disagreement nor detect when a consensus of experts is misguided? This would not be an important question if the problems dealt with by politics were usually simple ones, in the sense that the answer to them is self-evident. But to the extent that political problems are complex, expertise is required to answer them—although if such expertise exists, we are unlikely to know who has it.