Monday, December 31, 2018

Joan Robinson on Poets, Mathematicians, Economists, and Adam Smith

Joan Robinson, in her book Economic Philosophy (1962, pp. 26-28), offers a meditation on how Adam Smith perceived poets and mathematicians-- and then on how economists fall in-between. Her argument is that mathematicians have an agreed-upon method for evaluating errors. Poets do not. And economists fall in between--which introduces a personal element into all economic controversies. In the passage that follows, I'm especially fond of two of her comments: 

"[E]conomics limps along with one foot in untested hypotheses and the other in untestable slogans."

"Keynes was singularly free and generous because he valued no one's opinion above his own. If someone disagreed with him, it was they who were being silly; he had no cause to get peevish about it."

Here's the fuller passage. Robinson writes: 
Anyone who says to you: 'Believe me, I have no prejudices,' is either succeeding in deceiving himself or trying to deceive you. ... [I]n the social sciences, first, the subject-matter has much greater political and ideological content, so that other loyalties are also involved; and secondly, because the appeal to 'public experience' can never be decisive, as it is for the laboratory scientists who can repeat each other's experiments under controlled conditions, the social scientists are always left with a loophole to escape through - 'the consequences that have followed from the causes that I analysed are, I agree, the opposite of what I predicted, but they would have been still greater if those causes had not operated'.

This need to rely on judgement has another consequence. It has sometimes been remarked that economists are more queazy and ill-natured than other scientists. The reason is that, when a writer's personal judgement is involved in an argument, disagreement is insulting.
Robinson then turns to quoting Adam Smith on poets and mathematicians:
Adam Smith [in the Moral Sentiments] remarks upon the different temperaments of poets and mathematicians:

"The beauty of poetry is a matter of such nicety, that a young beginner can scarce ever be certain that he has attained it. Nothing delights him so much, therefore, as the favourable judgements of his friends and of the public; and nothing mortifies him so severely as the contrary. The one establishes, the other shakes, the good opinion which he is anxious to entertain concerning his own performances.

"Mathematicians, on the contrary, who may have the most perfect assurance, both of the truth and of the importance of their discoveries, are frequently very indifferent about the reception which they may meet with from the "public. . . .

"[They] from their independency upon the public opinion, have little temptation to form themselves into factions and cabals, either for the support of their own reputation, or for the depression of that of their rivals. They are almost always men of the most amiable simplicity of manners, who live in good harmony with one another, are the friends of one another's reputation, enter into no intrigue in order to secure the public applause, but are pleased when their works are approved of, without being either much vexed or very angry when they are neglected.

"It is not always the same case with poets, or with those who value themselves upon what is called fine writing. They are very apt to divide themselves into a sort of literary factions; each cabal being often avowedly and almost always secretly, the mortal enemy of the reputation of every other, and employing' all the mean arts of intrigue and solicitation to preoccupy the public opinion in favour of the works of its own members, and against those of its enemies and rivals."
 Robinson then sums up:
Perhaps Adam Smith had rather too exalted a view of mathematicians, and perhaps economists are not quite as bad as poets; but his main point applies. The lack of an agreed and accepted method for eliminating errors introduces a personal element into economic controversies which is another hazard on top of all the rest. There is a notable exception to prove the rule. Keynes was singularly free and generous because he valued no one's opinion above his own. If someone disagreed with him, it was they who were being silly; he had no cause to get peevish about it.

The personal problem is a by-product of the main difficulty, that, lacking the experimental method, economists are not strictly enough compelled to reduce metaphysical concepts to falsifiable terms and cannot compel each other to agree as to what has been falsified. So economics limps along with one foot in untested hypotheses and the other in untestable slogans."

Saturday, December 29, 2018

Academics, Knowledge, Articles, Journals, Practitioners

Maybe this image is only relevant those who manage academic journals, like me, and who are thinking about the tasks and hopes for the next year. But it made me (in no particular order) wince and smile. From EBP Memes:

Friday, December 28, 2018

"The Man who Despairs When Others Hope... is Admired as a Sage"

It's easy to think of reasons why humans might be hard-wired to pay more attention to bad news and downside risks than to good news and encouraging signs. Bad news may require quick reactions in the name of self-preservation; good news may be more likely to arrive in gradual small doses, and doesn't require any reaction at all. But whatever the underlying reason, the doomsayers and the naysayers often attract an audience, even if the worst of their predictions don't happen on time or with the predicted force. Meanwhile, extreme optimists seem naive. And those who predict middle-of-the-road scenarios, whether leaning toward optimism or pessimism, just seem boring.  

As in the case of many human biases, it's worth pushing back against this one, just for the sake of intellectual equipoise. But back in 1828, in a "Speech on Perfectability," John Stuart Mill argued a stronger case. In his view, this common focus on bad outcomes, negativity, and despair isn't just a judgement bias--it's also a sign of foolishness, lack of imagination, dullness, and even guilt. Mill pushes this line harder than I would. But the broader point is worth consideration. 

Of course, "expecting to find mankind wiser and better than they are" is naive and foolish. But overcorrecting to believe in nothing but "knavery and folly" commit an error of judgement, too. And those who overcorrect most severely should not be presumed wiser because of their greater negativity and cynicism--just misguided in a different way and for different reasons. In some cases, maybe even many cases, a moderate degree of hope and positivity are more perceptive, more honest, and wiser than striking an attitude of poseur pessimism.  

Here's part of what Mill had to say:
"I know that among all that clam of persons who consider themselves to be par excellence the wise and the practical, it is esteemed a proof of consummate judgement to despair of doing good. I know that it is thought essential to a man who has any knowledge of the world to have an extremely bad opinion of it, and that whenever there are two ways of explaining any fact, wise and practical people always take that way which attributes most folly or most immorality to the mass of mankind. ...
"[I]is it really a mark of wisdom to deride all grand schemes of human amelioration as visionary ? I can assure hon. gentlemen that, so far from being a proof of any wisdom, it is what any fool can do as well as themselves, and I believe it is the fools principally who have attached to that mode of proceeding the reputation of wisdom. For an I have observed that if there is a man in public or private life who is so impenetrably dull that reason and argument never make the slightest impression on him, the dull people immediately set him down as a man of excellent judgement and strong sense; as if because men of talent and genius are sometimes deficient in judgement it followed that it was only necessary to be without one spark of talent or genius in order to be a man of consummate judgement. In the same manner because people are sometimes deceived by rash hopes I think I have observed that not the man who hopes when others despair, but the man who despairs when others hope is admired by a large clan of persons as a sage, and wisdom is supposed to consist not in seeing further than other people, but in not seeing so far. ....
"I am persuaded that a vast majority of those who laugh at the hopes of those who think that man can be raised to any higher rank as a moral and intellectual being, do so from a principle very different from wisdom or knowledge of the world. I believe that the great majority of those who speak of perfectibility as a dream, do so because they feel that it is one which would afford them no pleasure if it were realized. I believe that they hold the progressiveness of the human mind to be chimerical because they are conscious that they themselves are doing nothing to forward it, and are anxious to believe that great work impossible in which, if it were possible, they know it would be their duty to assist. I believe that there is something else which powerfully helps many persons to the same conclusion -- consciousness that they do not wish to get rid of their own imperfections, and a consequent unwillingness to believe it practicable that others should throw off theirs. I believe that if persons ignorant of the world sometimes miscalculate from expecting to find mankind wiser and better than they are, those persons who most affect to know the world are incessantly miscalculating the opposite way, and confidently reckoning upon a greater degree of knavery and folly among mankind than really exists.
Homage: I ran across a portion of the quotation from John Stuart Mill in Matt Ridley's article "Why Is it So Cool to be Gloomy?" which appeared in the Wall Street Journal on November 16, 2018. An ungated version is available here.


Thursday, December 27, 2018

Is Loneliness Rising?

During this holiday season, as families and friends seize and make opportunities to gather, one wonders about those who do not feel that they have such a community. It's easy to find claims that loneliness is rising (for example, here's a recent Wall Street Journal article on that theme). But last summer the Social Capital Project run by the Joint Economic Committee of the US Congress published "All the Lonely Americans?" (August 22, 2018) and found little evidence of such an increase.  The report cites a broad array of claims and evidence, which you can check out for yourself. But here's a quick overview of some main  points (with citations omitted for readability):
"There are a few different but related questions that tend to get lumped into one general story about whether loneliness is on the rise in America, in part because of a lack of good data, and occasionally because of a failure to distinguish the two often distinct lines of psychological and sociological research. One question is whether Americans are increasingly alone (that is, have fewer social contacts, or have less social interaction). This question, which sociologists tend to study, is about objectively observable social networks or relationship characteristics. It is distinguishable from the second question, regarding the subjective experience of loneliness. This latter question—whether Americans are increasingly experiencing loneliness (`perceived social isolation')—has typically been the research purview of psychologists.
"Correlations are lower than we might expect between the most common measures of loneliness and objective measures of social network characteristics, so these two questions are substantially though not wholly distinct from each other. ... However, it is not at all clear that loneliness has increased over the last several decades.
In his 2011 book, Still Connected: Family and Friends in America Since 1970, sociologist Claude Fischer puts a fine point on this question: `For all the interest in loneliness, there appears to be little national survey data that would permit us to draw trends.'
"We looked for the strongest support for the claim that loneliness has risen, and the best we could find comes from polls by FGI. Between 1994 and 2004, the FGI polls indicate that the share of adults saying loneliness was a problem for them rose from roughly 25 percent to 30 percent. It is unclear, however, whether this five-point difference reflects a real shift or arises from chance differences in the people sampled in each year or in survey administration.
"The remaining evidence suggests flat trends. ... The claim that loneliness has doubled—or even increased—since the 1980s (let alone the late 1960s) is simply unwarranted. ... It is entirely possible that loneliness has increased over time, but the available evidence does not appear to support that claim. It is just as possible that loneliness has stayed the same or even declined."
In terms of measures of "aloneness," the study quotes from Fischer's 2011 book, where he wrote:
"Over the long run—say, the last couple of centuries—Americans' ties to kin have diminished, in number at least, if for no other reason than that families have shrunk in size. In addition, nonkin relationships have probably displaced weaker kinship and local ties—people may now turn to friends instead of cousins, to coworkers instead of neighbors. The friendships that emerge from work, clubs, hobbies, and casual meetings, and that are then sustained by modern affluence and communications, have probably grown in number and kind. In the window of the last forty years, not much has changed, and that continuity probably testifies to the ardor of Americans' ties to their families and friends."
This report doesn't discuss how the nature of loneliness and aloneness has been affected by an internet-based world. My teenagers often chat and even spend an evening playing games using connections that let them see each others faces. It's not the same as being there in-person. But connectedness means something different in a world of social media, Skype, and FaceTime than it did some decades ago when a long-distance phone call cost could cost enough to make you think twice before dialing.

Of course, don't let the overall average stop you from particular actions. Even if loneliness hasn't been trending higher, it's still worth reaching out to family, friends, and acquaintances.

Wednesday, December 26, 2018

"To be Happy at Home is the Ultimate Result of All Ambition"

Around the hustle and bustle of the end-of-year holidays, I sometimes reflect on  how many of us put considerable time and energy into thinking about where to live and furnishing our home--but then rush off and travel to other place to vacation, celebrate, and meet with friends.

Back in 1750, Samuel Johnson wrote in the November 10 issue of his magazine, The Rambler, "To be happy at home is the ultimate result of all ambition, the end to which every enterprise and labour tends ..." It's a thought-provoking sentiment around the holidays. Many people would not describe their ambitions in this way, but instead would focus on their idea of ambition in a role outside the home and on the idea of becoming a "star" in some way, in business, politics, entertainment, social activism, or some other way. It is of course conceptually impossible for everyone to be recognized as a star by everyone else, and so a desire for public recognition of star-status will leave most people unhappy. Being happy at home can be a difficult goal in its own way, but it does have two virtues. One is that being happy at home is based on one's own feelings and one's own ungilded personality,  rather than about how one is perceived and treated by those outside one's family and close friends.  The other is that being happy at home is a more broadly achievable goal for many people, unlike the evanescent dreams of fame and celebrity.

Going back further in time, the philosopher Blaise Pascal discussed a related question in 1669. He argued that we cannot be happy in our homes because when we are alone, we fall into thinking about our "weak and mortal condition," which is depressing. Rather than face ourselves and our lives squarely and honestly, we instead rush off looking for diversion. Pascal writes of how people "aim at rest through agitation, and always to imagine that they will gain the satisfaction which as yet they have not, if by surmounting certain difficulties which now confront them, they may thereby open the door to rest. Thus rolls all our life away. We seek repose by resistance to obstacles, and so soon as these are surmounted, repose becomes intolerable."

I aspire to remember and to live out the value of happiness at home. But I recognize in myself the contradiction of aiming at rest through agitation. I know that my opinion of myself, along with the those who have known me longer and more intimately, should matter most. But I recognize in myself a desire to receive attention and plaudits from those who barely know me at all.

Here's a longer version of the comments from Johnson and Pascal. First, from Samuel Johnson, from the November 10, 1750 issue of The Rambler:  
For very few are involved in great events, or have their thread of life entwisted with the chain of causes on which armies or nations are suspended; and even those who seem wholly busied in publick affairs, and elevated above low cares, or trivial pleasures, pass the chief part of their time in familiar and domestick scenes; from these they came into publick life, to these they are every hour recalled by passions not to be suppressed; in these they have the reward of their toils, and to these at last they retire.
The great end of prudence is to give chearfulness to those hours, which splendour cannot gild, and acclamation cannot exhilarate; those soft intervals of unbended amusement, in which a man shrinks to his natural dimensions, and throws aside the ornaments or disguises, which he feels in privacy to be useless incumbrances, and to lose all effect when they become familiar. To be happy at home is the ultimate result of all ambition, the end to which every enterprise and labour tends, and of which every desire prompts the prosecution.
It is, indeed, at home that every man must be known by those who would make a just estimate either of his virtue or felicity; for smiles and embroidery are alike occasional, and the mind is often dressed for show in painted honour, and fictitious benevolence. ... The most authentick witnesses of any man's character are those who know him in his own family, and see him without any restraint, or rule of conduct, but such as he voluntarily prescribes to himself. 
And from "The thoughts of Blaise Pascal," written in 1669:

"When I have set myself now and then to consider the various distractions of men, the toils and dangers to which they expose themselves in the court or the camp, whence arise so many quarrels and passions, such daring and often such evil exploits, etc., I have discovered that all the misfortunes of men arise from one thing only, that they are unable to stay quietly in their own chamber. A man who has enough to live on, if he knew how to dwell with pleasure in his own home, would not leave it for sea-faring or to besiege a city. An office in the army would not be bought so dearly but that it seems insupportable not to stir from the town, and people only seek conversation and amusing games because they cannot remain with pleasure in their own homes.
But upon stricter examination, when, having found the cause of all our ills, I have sought to discover the reason of it, I have found one which is paramount, the natural evil of our weak and mortal condition, so miserable that nothing can console us when we think of it attentively.
Whatever condition we represent to ourselves, if we bring to our minds all the advantages it is possible to possess, Royalty is the finest position in the world. Yet, when we imagine a king surrounded with all the conditions which he can desire, if he be without diversion, and be allowed to consider and examine what he is, this feeble happiness will never sustain him; he will necessarily fall into a foreboding of maladies which threaten him, of revolutions which may arise, and lastly, of death and inevitable diseases; so that if he be without what is called diversion he is unhappy, and more unhappy than the humblest of his subjects who plays and diverts himself.
Hence it comes that play and the society of women, war, and offices of state, are so sought after. Not that there is in these any real happiness, or that any imagine true bliss to consist in the money won at play, or in the hare which is hunted; we would not have these as gifts. We do not seek an easy and peaceful lot which leaves us free to think of our unhappy condition, nor the dangers of war, nor the troubles of statecraft, but seek rather the distraction which amuses us, and diverts our mind from these thoughts. ...
They fancy that were they to gain such and such an office they would then rest with pleasure, and are unaware of the insatiable nature of their desire. They believe they are honestly seeking repose, but they are only seeking agitation.
They have a secret instinct prompting them to look for diversion and occupation from without, which arises from the sense of their continual pain. They have another secret instinct, a relic of the greatness of our primitive nature, teaching them that happiness indeed consists in rest, and not in turmoil. And of these two contrary instincts a confused project is formed within them, concealing itself from their sight in the depths of their soul, leading them to aim at rest through agitation, and always to imagine that they will gain the satisfaction which as yet they have not, if by surmounting certain difficulties which now confront them, they may thereby open the door to rest.
Thus rolls all our life away. We seek repose by resistance to obstacles, and so soon as these are surmounted, repose becomes intolerable. For we think either on the miseries we feel or on those we fear. And even when we seem sheltered on all sides, weariness, of its own accord, will spring from the depths of the heart wherein are its natural roots, and fill the soul with its poison.

Tuesday, December 25, 2018

Charles Dickens on Seeing the Poor

Charles Dickens wrote what has become one of the iconic stories of Christmas day and Christmas spirit in A Christmas Carol. But of course, the experiences of Ebenezer Scrooge are a story, not a piece of reporting. Here's a piece by Dickens written for the weekly journal Household Words that he edited from 1850 to 1859. It's from the issue of January 26, 1856, with his first-person reporting on "A Nightly Scene in London." Poverty in high-income countries is no longer as ghastly as in Victorian England, but for those who take the time to see it in our own time and place, surely it is ghastly enough. Thus, I repeat this post each year on Christmas day.

Economists might also wince just a bit at how Dickens describes the reaction of some economists to poverty, those who Dickens calls "the unreasonable disciples of a reasonable school." Dickens writes: "I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-sufficient for every case, can easily prove that such things ought to be, and that no man has any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity ..."  Here's a fuller passage from Dickens:

A NIGHTLY SCENE IN LONDON

On the fifth of last November, I, the Conductor of this journal, accompanied by a friend well-known to the public, accidentally strayed into Whitechapel. It was a miserable evening; very dark, very muddy, and raining hard.

There are many woful sights in that part of London, and it has been well-known to me in most of its aspects for many years. We had forgotten the mud and rain in slowly walking along and looking about us, when we found ourselves, at eight o'clock, before the Workhouse.

Crouched against the wall of the Workhouse, in the dark street, on the muddy pavement-stones, with the rain raining upon them, were five bundles of rags. They were motionless, and had no resemblance to the human form. Five great beehives, covered with rags— five dead bodies taken out of graves, tied neck and heels, and covered with rags— would have looked like those five bundles upon which the rain rained down in the public street.

"What is this! " said my companion. "What is this!"

"Some miserable people shut out of the Casual Ward, I think," said I.

We had stopped before the five ragged mounds, and were quite rooted to the spot by their horrible appearance. Five awful Sphinxes by the wayside, crying to every passer-by, " Stop and guess! What is to be the end of a state of society that leaves us here!"

As we stood looking at them, a decent working-man, having the appearance of a stone-mason, touched me on the shoulder.

"This is an awful sight, sir," said he, "in a Christian country!"

"GOD knows it is, my friend," said I.

"I have often seen it much worse than this, as I have been going home from my work. I have counted fifteen, twenty, five-and-twenty, many a time. It's a shocking thing to see."

"A shocking thing, indeed," said I and my companion together. The man lingered near
us a little while, wished us good-night, and went on.

We should have felt it brutal in us who had a better chance of being heard than the working-man, to leave the thing as it was, so we knocked at the Workhouse Gate. I undertook to be spokesman. The moment the gate was opened by an old pauper, I went in, followed close by my companion. I lost no
time in passing the old porter, for I saw in his watery eye a disposition to shut us out.

"Be so good as to give that card to the master of the Workhouse, and say I shall be glad to speak to him for a moment."

We were in a kind of covered gateway, and the old porter went across it with the card. Before he had got to a door on our left, a man in a cloak and hat bounced out of it very sharply, as if he were in the nightly habit of being bullied and of returning the compliment.

"Now, gentlemen," said he in a loud voice, "what do you want here?"

"First," said I, " will you do me the favor to look at that card in your hand. Perhaps you may know my name."

"Yes," says he, looking at it. " I know this name."

"Good. I only want to ask you a plain question in a civil manner, and there is not the least occasion for either of us to be angry. It would be very foolish in me to blame you, and I don't blame you. I may
find fault with the system you administer, but pray understand that I know you are here to do a duty pointed out to you, and that I have no doubt you do it. Now, I hope you won't object to tell me what I want to know."

"No," said he, quite mollified, and very reasonable, " not at all. What is it?"

"Do you know that there are five wretched creatures outside?"

"I haven't seen them, but I dare say there are."

"Do you doubt that there are?"

"No, not at all. There might be many more."

''Are they men? Or women?"

"Women, I suppose. Very likely one or two of them were there last night, and the night before last."

"There all night, do you mean?"

"Very likely."

My companion and I looked at one another, and the master of the Workhouse added quickly, "Why, Lord bless my soul, what am I to do? What can I do ? The place is full. The place is always full—every night. I must give the preference to women with children, mustn't I? You wouldn't have me not do that?"

"Surely not," said I. "It is a very humane principle, and quite right; and I am glad to hear of it. Don't forget that I don't blame you."

"Well!" said he. And subdued himself again. ...

"Just so. I wanted to know no more. You have answered my question civilly and readily, and I am much obliged to you. I have nothing to say against you, but quite the contrary. Good night!"

"Good night, gentlemen!" And out we came again.

We went to the ragged bundle nearest to the Workhouse-door, and I touched it. No movement replying, I gently shook it. The rags began to be slowly stirred within, and by little and little a head was unshrouded. The head of a young woman of three or four and twenty, as I should judge; gaunt with want, and foul with dirt; but not naturally ugly.

"Tell us," said I, stooping down. "Why are you lying here?"

"Because I can't get into the Workhouse."

She spoke in a faint dull way, and had no curiosity or interest left. She looked dreamily at the black sky and the falling rain, but never looked at me or my companion.

"Were you here last night?"

"Yes, All last night. And the night afore too."

"Do you know any of these others?"

"I know her next but one. She was here last night, and she told me she come out of Essex. I don't know no more of her."

"You were here all last night, but you have not been here all day?"

"No. Not all day."

"Where have you been all day?"

"About the streets."

''What have you had to eat?"

"Nothing."

"Come!" said I. "Think a little. You are tired and have been asleep, and don't quite consider what you are saying to us. You have had something to eat to-day. Come! Think of it!"

"No I haven't. Nothing but such bits as I could pick up about the market. Why, look at me!"

She bared her neck, and I covered it up again.

"If you had a shilling to get some supper and a lodging, should you know where to get it?"

"Yes. I could do that."

"For GOD'S sake get it then!"

I put the money into her hand, and she feebly rose up and went away. She never thanked me, never looked at me— melted away into the miserable night, in the strangest manner I ever saw. I have seen many strange things, but not one that has left a deeper impression on my memory than the dull impassive way in which that worn-out heap of misery took that piece of money, and was lost.

One by one I spoke to all the five. In every one, interest and curiosity were as extinct as in the first. They were all dull and languid. No one made any sort of profession or complaint; no one cared to look at me; no one thanked me. When I came to the third, I suppose she saw that my companion
and I glanced, with a new horror upon us, at the two last, who had dropped against each other in their sleep, and were lying like broken images. She said, she believed they were young sisters. These were the only words that were originated among the five.

And now let me close this terrible account with a redeeming and beautiful trait of the poorest of the poor. When we came out of the Workhouse, we had gone across the road to a public house, finding ourselves without silver, to get change for a sovereign. I held the money in my hand while I was speaking to the five apparitions. Our being so engaged, attracted the attention of many people of the very poor sort usual to that place; as we leaned over the mounds of rags, they eagerly leaned over us to see and hear; what I had in my hand, and what I said, and what I did, must have been plain to nearly all the concourse. When the last of the five had got up and faded away, the spectators opened to let us pass; and not one of them, by word, or look, or gesture, begged of us.

Many of the observant faces were quick enough to know that it would have been a relief to us to have got rid of the rest of the money with any hope of doing good with it. But, there was a feeling among them all, that their necessities were not to be placed by the side of such a spectacle; and they opened a
way for us in profound silence, and let us go.

My companion wrote to me, next day, that the five ragged bundles had been upon his bed all night. I debated how to add our testimony to that of many other persons who from time to time are impelled to write to the newspapers, by having come upon some shameful and shocking sight of this description. I resolved to write in these pages an exact account of what we had seen, but to
wait until after Christmas, in order that there might be no heat or haste. I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-
sufficient for every case, can easily prove that such things ought to be, and that no man has
any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity; and I address people with a respect for the spirit of the New Testament, who do mind such things, and who think them infamous in our streets.

Monday, December 24, 2018

Charles Dickens on Management vs. Labor

There's a sort of parlor game that the economically-minded sometimes play around the Christmas holiday, related to A Christmas Carol, by Charles Dickens. Was Dickens writing his story as an attack on economics, capitalism, and selfishness? After all, his depiction of Ebenezer Scrooge, along with his use of phrases like "decrease the surplus population" and "a good man of business" would suggest as much, and a classic example of such an interpretation is here. Or was Dickens just telling a good story with distinct characters? After all, Scrooge is portrayed as an outlier in the business community. The warm portrayal of Mr. Fezziwig certainly opens the possibility that one can be a successful man of business as well as a good employer and a decent human being. And if Scrooge hadn't saved money, would he have been able to save Tiny Tim?

It's all a good "talker," as they say about the topics that get kicked around on radio shows every day. As part of my own holiday break, I republish this essay each year near Christmas day.

I went looking for some other perspectives on how Charles Dickens perceived capitalism that were not embedded in a fictional setting. In particular, I checked the weekly journal Household Words, which Dickens edited from 1850 to 1859. Articles in Household Words do not have authors provided. However, Anne Lohrli went through the business and financial records of the publication, which identified the authors and showed who had been paid for each article. The internal records of the journal show that Dickens was the author of this piece from the issue of February 11, 1854, called "On Strike." (Lohrli's book is called Household Words: A Weekly Journal 1850-59, conducted by Charles Dickens, University of Toronto Press, 1973. Household Words is freely available on-line at at site hosted by the University of Buckingham, with support from the Leverhulme Trust and other donors.)

The article does not seem especially well-known today, but it is the source of a couple of the most common quotations from Charles Dickens about "political economy," as the study of economics was usually called at the time. Early in the piece, Dickens wrote: ""Political Economy was a great and useful science in its own way and its own place; but ... I did not transplant my definition of it from the Common Prayer Book, and make it a great king above all gods." Later in the article, Dickens wrote: "[P]olitical economy is a mere skeleton unless it has a little human covering and filling out, a little human bloom upon it, and a little human warmth in it."

But more broadly, the article is of interest because Dickens, telling the story in the first person, takes the position that in thinking about a strike taking place in the town of Preston, one need not take the side either of management or labor. Instead, Dickens writes, one may "be a friend to both," and feel that the strike is "to be deplored on all accounts." Of course, the problem with a middle-of-the-road position is that you can end up being hit by ideological traffic going in both directions. But the ability of Dickens to sympathize with people in a wide range of positions is surely part what gives his novels and his world-view such lasting power. The article goes into a fair amount of detail, and can be read on-line, so I will content myself here with a substantial excerpt.

Here's a portion of the 1854 essay by Dickens:

"ON STRIKE"

Travelling down to Preston a week from this date, I chanced to sit opposite to a very acute, very determined, very emphatic personage, with a stout railway rug so drawn over his chest that he looked as if he were sitting up in bed with his great coat, hat, and gloves on, severely contemplating your humble servant from behind a large blue and grey checked counterpane. In calling him emphatic, I do
not mean that he was warm; he was coldly and bitingly emphatic as a frosty wind is.

"You are going through to Preston, sir?" says he, as soon as we were clear of the
CharPrimrose Hill tunnel.

The receipt of this question was like the receipt of a jerk of the nose; he was so short and sharp.

"Yes."

"This Preston strike is a nice piece of business!" said the gentleman. "A pretty piece of business!"

"It is very much to be deplored," said I, "on all accounts."

"They want to be ground. That's what they want to bring 'em to their senses," said the gentleman; whom I had already began to call in my own mind Mr. Snapper, and whom I may as well call by that name here as by any other. *

I deferentially enquired, who wanted to be ground?

"The hands," said Mr. Snapper. " The hands on strike, and the hands who help 'em."

I remarked that if that was all they wanted, they must be a very unreasonable people, for surely they had had a little grinding, one way and another, already. Mr. Snapper eyed me with sternness, and after opening and shutting his leathern-gloved hands several times outside his counterpane, asked me
abruptly, " Was I a delegate?"

I set Mr. Snapper right on that point, and told him I was no delegate.

"I am glad to hear it," said Mr. Snapper. "But a friend to the Strike, I believe?"

"Not at all," said I.

"A friend to the Lock-out?" pursued Mr. Snapper.

"Not in the least," said I,

Mr. Snapper's rising opinion of me fell again, and he gave me to understand that a man must either be a friend to the Masters or a friend to the Hands.

"He may be a friend to both," said I.

Mr. Snapper didn't see that; there was no medium in the Political Economy of the subject. I retorted on Mr. Snapper, that Political Economy was a great and useful science in its own way and its own place; but that I did not transplant my definition of it from the Common Prayer Book, and make it a great king above all gods. Mr. Snapper tucked himself up as if to keep me off, folded his arms on the top of his counterpane, leaned back and looked out of the window.

"Pray what would you have, sir," enquire Mr. Snapper, suddenly withdrawing his eyes from the prospect to me, "in the relations between Capital and Labour, but Political Economy?"

I always avoid the stereotyped terms in these discussions as much as I can, for I have observed, in my little way, that they often supply the place of sense and moderation. I therefore took my gentleman up with the words employers and employed, in preference to Capital and Labour.

"I believe," said I, "that into the relations between employers and employed, as into all the relations of this life, there must enter something of feeling and sentiment; something of mutual explanation, forbearance, and consideration; something which is not to be found in Mr. M'CulIoch's dictionary, and is not exactly stateable in figures; otherwise those relations are wrong and rotten at the core and will never bear sound fruit."

Mr. Snapper laughed at me. As I thought I had just as good reason to laugh at Mr. Snapper, I did so, and we were both contented. ...

Mr. Snapper had no doubt, after this, that I thought the hands had a right to combine?

"Surely," said I. " A perfect right to combine in any lawful manner. The fact of their being able to combine and accustomed to combine may, I can easily conceive, be a protection to them. The blame even of this business is not all on one side. I think the associated Lock-out was a grave error. And
when you Preston masters—"

"I am not a Preston master," interrupted Mr. Snapper.

"When the respectable combined body of Preston masters," said I, " in the beginning of this unhappy difference, laid down the principle that no man should be employed henceforth who belonged to any combination—such as their own—they attempted to carry with a high hand a partial and unfair impossibility, and were obliged to abandon it. This was an unwise proceeding, and the first defeat."

Mr. Snapper had known, all along, that I was no friend to the masters.

"Pardon me," said I; " I am unfeignedly a friend to the masters, and have many friends among them."

"Yet you think these hands in the right?" quoth Mr. Snapper.

"By no means," said I; " I fear they are at present engaged in an unreasonable struggle, wherein they began ill and cannot end well."

Mr. Snapper, evidently regarding me as neither fish, flesh, nor fowl, begged to know after a pause if he might enquire whether I was going to Preston on business?

Indeed I was going there, in my unbusinesslike manner, I confessed, to look at the strike.

"To look at the strike!" echoed Mr. Snapper fixing his hat on firmly with both hands. "To look at it! Might I ask you now, with what object you are going to look at it?"

"Certainly," said I. " I read, even in liberal pages, the hardest Political Economy—of an extraordinary description too sometimes, and certainly not to be found in the books—as the only touchstone of this strike. I see, this very day in a to-morrow's liberal paper, some astonishing novelties in the politico-economical way, showing how profits and wages have no connexion whatever; coupled with such references to these hands as might be made by a very irascible General to rebels and brigands in arms. Now, if it be the case that some of the highest virtues of the working people still shine through them brighter than ever in their conduct of this mistake of theirs, perhaps the fact may reasonably suggest to me—and to others besides me—that there is some little things wanting in the relations between them and their employers, which neither political economy nor Drum-head proclamation writing will altogether supply, and which we cannot too soon or too temperately unite in trying to
find out."

Mr. Snapper, after again opening and shutting his gloved hands several times, drew the counterpane higher over his chest, and went to bed in disgust. He got up at Rugby, took himself and counterpane into another carriage, and left me to pursue my journey alone. ...

In any aspect in which it can be viewed, this strike and lock-out is a deplorable calamity. In its waste of time, in its waste of a great people's energy, in its waste of wages, in its waste of wealth that seeks to be employed, in its encroachment on the means of many thousands who are labouring from day
to day, in the gulf of separation it hourly deepens between those whose interests must be understood to be identical or must be destroyed, it is a great national affliction. But, at this pass, anger is of no use, starving out is of no use—for what will that do, five years hence, but overshadow all the mills in
England with the growth of a bitter remembrance? —political economy is a mere skeleton unless it has a little human covering and filling out, a little human bloom upon it, and a little human warmth in it. Gentlemen are found, in great manufacturing towns, ready enough to extol imbecile mediation with dangerous madmen abroad; can none of them be brought to think of authorised mediation
and explanation at home? I do not suppose that such a knotted difficulty as this, is to be at all untangled by a morning-party in the Adelphi; but I would entreat both sides now so miserably opposed, to consider whether there are no men in England above suspicion, to whom they might refer the matters in dispute, with a perfect confidence above all things in the desire of those men to act justly, and in their sincere attachment to their countrymen of every rank and to their country.

Masters right, or men right; masters wrong, or men wrong; both right, or both wrong; there is certain ruin to both in the continuance or frequent revival of this breach. And from the ever-widening circle of their decay, what drop in the social ocean shall be free!

Sunday, December 23, 2018

Real vs. Artificial Christmas Trees: Comparing Environmental Effects

The holiday season is full of resource consumption for gifts, food, decorations, entertainment, and travel. In that context, the environmental tradeoffs between either a real or an artificial Christmas tree are not actually of much importance. But for the more curious and/or obsessive readers of my wandering thoughts at this blog, the American Christmas Tree Association (the trade association for artificial Christmas trees) has hired WAP Sustainability Consulting to do a "Life Cycle Assessment:Comparative LCA of the Environmental Impacts of Real Christmas and Artificial Christmas trees" (March 2018). Here's a summary:
"For the real Christmas tree, cultivation (planting, fertilizing, watering, etc.) is the largest contributor of environmental impacts, with one exception. The end-of-life phase of the real Christmas tree results in the largest contribution of greenhouse gas emissions in the real Christmas tree’s life cycle. This difference is, in part, due to modeling decisions concerning the handling of carbon sequestration in the cultivation phase and carbon release in the end-of-life stage.

"For the artificial tree, the raw materials used in manufacturing, specifically polyvinylchloride followed by steel sheets, comprises the largest source of impacts in the artificial tree. Among the various life cycle phases, raw materials and transportation are seen to have largest impacts. Raw materials are primarily responsible for greenhouse gas emissions, eutrophication of water sources and use of non-renewable energy. Transportation mainly causes acidification of water, air and soil and smog in the atmosphere.

"Given the quantification of environmental impacts across both of the trees’ life cycles, a comparative assertion shows the breakeven point between the two trees is 4.7 years. That is to say an artificial tree purchased and used for at least 4.7 years demonstrates a lower contribution to environmental impact than 4.7 real Christmas trees purchased over 4.7 years." 
This calculation that an artificial tree used for more than five years has less environmental effect than a series of one-year natural trees is consistent with previous research. My discussion of studies done a few years ago, including the previous time that the American Christmas Tree Association commissioned a life-cycle analysis on this question, is here.

Of course, any study like this is subject to questions and concerns. Are you buying a new tree stand each year, or reusing the same one? Does the life-cycle calculation for a natural tree take into account carbon that remains stored in the root system under the tree after the tree is cut?   Bert Clegg offers a nice discussion at "The Conversation" website under the title "Don’t stress about what kind of Christmas tree to buy, but reuse artificial trees and compost natural ones" (December 11, 2018). But the WAP report and Clegg both note, if you are someone who is worried about environmental effects of your choice of tree, your own behavior has a substantial effect.

For example, if  you make a special trip and drive a long way to shop for either a real or an artificial tree, that is a meaningful addition to the environmental costs in either case. If you pick up either kind of tree as part of a trip you would have made anyway--say, a commute home from work or a shopping trip that would have happened regardless, then the environmental costs is lower. (The WAP study estimates that consumers make an additional trip to pick up either kind of tree.)

When it comes to disposal, Clegg argues that if a natural tree is chipped or composted, the carbon content remains largely in the soil, but if it is burned or send to landfill, the effect on greenhouse gases is much worse. For an artificial tree, the longer you use the tree--and thus postpone disposal--the better for the environment. In addition, many cities offer facilities for recycling artificial trees, rather than just adding them to landfill, at the end of their lives.

I confess that I come from a real tree family and have always had real trees. But I do live in a part of the country where real trees are easy to grow. For the country as a whole, the National Christmas Tree Association (the trade association for real Christmas trees) finds that about 45% of the trees purchased in 2017 were artificial ones. In the holiday spirit of putting aside small differences, I take no position here on the great debates over real vs. artificial trees. Many holiday celebrations in many places have aspects of environmental wastefulness--it's part of what makes them holidays, after all. The challenge is to celebrate heartily, whole-heartedly, and also in moderation. In the broader context of how Christmas is often celebrated, Christmas trees are only a modest indulgence.

Friday, December 21, 2018

Subsidized Employment: Two Randomized US Studies

In certain locations and among certain groups, participation in the labor force is low. Can government-subsidized transitional jobs offer a method of getting more people connected to the labor force, in a way that persists after the government support is withdrawn or the transitional job comes to an end?

A couple of years ago, the Georgetown Center on Poverty and Inequality published a study on "Lessons Learned from 40 Years of Subsidized Employment Programs," which I discussed here. The report looked at a range of programs over time, with different design features, and a mixture of successes and failures. It also pointed to two federal studies of subsidized employment that were underway: The Subsidized and Transitional Employment Demonstration (STED) being run by the US Department of Health and Human Services in seven cities and the Enhanced Transitional Jobs Demonstration (ETJD) study is being run in seven cities by the US Department of Labor.

Both studies now have some results available. Both are randomized studies, which are thought of as the gold standard for this kind of research: that is, among a group of possible participants, some are randomly selected for a subsidized job and the others form a control group for purposes of comparison. Results from the studies are at best only modestly encouraging.

For some evidence on the STED program, Sonya Williams, Richard Hendra of MDRC have written "The Effects of Subsidized and Transitional Employment Programs on Noneconomic Well-Being" (Office of Planning, Research and Evaluation Report 2018-17 February 2018).
"The Subsidized and Transitional Employment Demonstration (STED) is designed to investigate the effects of subsidized and transitional employment programs on both financial and nonfinancial well-being. Participants were assigned at random to a program group that had access to program services, including subsidized or transitional jobs, or to a control group that did not. Several of the STED programs produced large employment and earnings effects in the first year after random assignment because program group members participated in subsidized or transitional jobs at high rates. However, one year after random assignment the employment rates of the program group and the control group were about the same ...

"While thus far these programs have tended to have limited long-term effects, they do clearly have effects in the short term. Since well-implemented transitional and subsidized employment programs generally have high participation rates, they generally give at least temporary increases in employment and earnings to people who otherwise cannot find jobs in the private labor market. These results in this report indicate that these programs also temporarily improve subjective well-being. While these temporary effects fall short of the primary goals for implementing transitional or subsidized employment programs (that is, long-term improvements in self-sufficiency) they may improve outcomes in more subtle ways."
For some results from the EJTD study were a bit more encouraging, although the programs that were evaluated had somewhat different designs and emphases. Bret Barden, Randall Juras, Cindy Redcross, Mary Farrell, and Dan Bloom of MDRC have written "The Enhanced Transitional Jobs Demonstration New Perspectives on Creating Jobs Final Impacts of the Next Generation of Subsidized Employment Programs" (May 2018). They write: 
"Most measures presented in the report focus on the final year of the follow-up period, when nearly all program group members had left transitional jobs. The results therefore reflect longer-term effects of the programs after the subsidized positions ended.

The ETJD programs increased participants’ earnings and employment rates in the final year of the study period. The program group earned about $700 more than the control group in that year. Sixty-four percent of the program group worked in that year, compared with 60 percent of the control group. Impacts on longer-term employment outcomes are better than those found in previous evaluations.

The three ETJD programs targeting people returning from prison reduced incarceration in prison among those at higher risk of reoffending. ... [A]mong higher-risk participants across the three locations, there was a statistically significant reduction in incarceration in prison (of 12 percentage points) in the 30 months following study enrollment. The impacts on recidivism largely reflect the program in Indianapolis, which targeted a very disadvantaged and high-risk population.

The ETJD programs targeting noncustodial parents did not increase the amount of child support paid in the last year of the follow-up period. However, they did increase the proportion of parents who paid at least some support during this period by 6 percentage points ...
It may be that short-term government subsidized employment works better at certain times and places, or for certain populations. For example, David Neumark has proposed in which the government targets specific local areas where employment is very low ("Rebuilding Communities Job Subsidies," September 28, 2018, written for the Hamilton Project at the Brookings Institution. Government would then pay for jobs for 18 months, with the idea that the program would be run by "local nonprofits in partnership with local employers and community groups," and the jobs "must both have the potential to quickly build skills that lead to good jobs in the private sector and contribute to revitalizing and improving the disadvantaged areas where the jobs are subsidized." After 18 months, the government would then pay half the wages for a private sector job, up to the first $30,000 of annual earnings.

I'm certainly in favor of continued experiments with subsidized jobs. Especially when an economy is n recession, they may offer an alternative to other forms of government support that keep people connected to the labor force. But at least so far, there isn't great evidence on how to design such programs that offers a healthy assurance that their benefits will exceed their costs.

Of course, the idea of transitional government job subsidies is just one mechanism for trying to build additional connections to the labor market. The Hamilton Project report discusses some of these other options, which include:



Thursday, December 20, 2018

Interview with Lisa Cook: Invention Gaps, Anonymous Patents, and More

Douglas Clement has one of his characteristically excellent interviews, this one with Lisa Cook, published in The Region from the Federal Reserve Bank of Minneapolis ("Lisa Cook interview: On invention gaps, hate-related violence, discrimination, and more," December 11, 2018).  From Clement's prelude to the interview:
"In the late 1980s, Lisa Cook arrived in Dakar, Senegal, to study philosophy—African concepts of time, to be specific. Her interests soon took a very different direction. “One of the first things I do is to buy a Bic pen,” she recalls. “Each one was 10 dollars! Ten dollars! This completely stunned me. I knew how poor most people were. I knew students had to have these pens to write in their blue books. It just started this whole train of thought.” The train led to a Ph.D. in economics, at UC Berkeley, and a dissertation on property rights and banking. She went on to Harvard for postdoctoral research, to the U.S. Treasury as a Council of Foreign Relations fellow, to the Hoover Institution for several years, and then to Michigan State University, where she is an associate professor of economics and international relations." 
The interview covers a range of intriguing work, and should be read in full. But for a flavor, here are a few points that caught my eye.

Pink and Black Patenting Gaps
Region: You document huge race and gender gaps in science and engineering education, and in invention and innovation. Patent output, for example, is six patents per million for African Americans in the population and 40 per million for women versus 235 per million for all others. The gap is enormous. On the other hand, your data showed that there are increasing shares of women and minorities in engineering programs. Intriguingly, you also found that co-ed patent teams are more productive than single-sex female or male patent teams. ... Have the pink and black gaps persisted, or are they closing?
Cook: The gap is pretty persistent, and that shows up in the data on the labor pool. We collected more data on the diversity of people working in one part of the innovation economy—at tech firms—from the tech firms themselves in 2014. And that showed a serious gap in the people participating in invention. ... The [gender and racial] gap is pretty persistent. … I don’t think that [it] is closing in the way patent data would have suggested at the time the analysis was done in 2010. What I have found is that the women and African Americans who were productive were likely superstars. When I say “productive,” I mean at commercializing their inventions. But I think they were unicorns, and I don’t think that the gap is closing in the way patent data would have suggested at the time the analysis was done in 2010. 
Garrett Morgan and the Anonymity of Patents
Region: "[I]n a 2012 paper, you relate the example of Garrett Morgan, an African American who, in the early 20th century, invented the gas mask and modern stoplight as well as various beauty products. Could you tell us about Morgan and the methods he used to sell his inventions in the face of racial discrimination and relative lack of social capital?
Cook: To learn about him, I went to a collection of his papers at Case Western University. This was one of those white-glove exercises, archival work. I didn’t know what I would find. And I found all of this advertising material. It was fantastic!
But I noticed right away that not a single advertisement for some of his best-known inventions had him in it. I was astonished, for two reasons. First, most advertising at the time used photos or images of the inventor. Edison was a prime example. There was a picture of Edison in all of his advertisements, side-by-side with all of his inventions, like the phonograph. Ford sold his cars the same way. In many of his advertisements, he literally stood behind his product. And, secondly, in advertisements for Morgan’s beauty products for African Americans, he and everyone else in his family were featured. I was struck by that. .... 
First, it was important that in the patent data, race is not recorded. So a generic name like Garrett Morgan wouldn’t suggest that he was African American, and he used that to his advantage.
Secondly, he featured prominent white businessmen on his business letterhead. Alexander Dreyfus, for instance, was listed as company treasurer.
And, third, he featured whites and other races in his marketing materials. To sell his gas mask, for example, he hired a Native American to travel with him. It was literally a road show. He would pretend to be the Native American’s assistant. That put customers at ease because it appeared he wasn’t the main one behind the invention, but rather the Native American was. At the time, Native Americans were given respect in American society as being inventive and resourceful. So this would translate into a good gas mask or a good moccasin or a good boat and so on. ...
So he completely took advantage of the anonymity that patents afforded him. And there was no internet to look up his race, no Instagram to fact check this. Those tactics were very effective. And the test was that when a number of firehouses in the South found out that he was the inventor, they stopped ordering his gas masks. ... 
Black Names in the Early 1900s and Longer Life Expectancy
Region: In two recent papers, you first documented that 17 distinctively black names were common in the United States in the early 1900s and then showed that men with those names enjoyed a significant boost in longevity—an additional year of life! ... Could you elaborate on this research? What was behind the creation of distinctive names and the longevity effect? ... 
Cook: For our next paper on this topic, we’re investigating mechanisms you refer to. ... Many were Old Testament names: Abraham and Moses, for instance. And my sense of it, supported by both anecdotal evidence and historical records, is this: Most schools at that time, especially black schools, were in churches, and there was a special place in the community for those who knew the Bible well or were associated with biblical figures. They were some of the best-educated people in the community, and education was important to them.
If you walk into a classroom, and your name is Moses, that tells the teacher that your parents are concerned about your Christian education. The teacher will have a story from the Bible to use when you need to be disciplined. If you’re called Moses, and you’re acting up in class, and you’re not proving yourself a leader, there’s an instant story and an instant set of expectations that go along with that.
The students might have carried themselves with that in mind. They had a role model name—Abraham, Moses, and so on. The teachers, for their part, would have a signal about how seriously the parents take the student’s education, and they might raise the level of that student’s engagement and the teacher’s engagement with that student. That’s just one theory that we’re investigating, of course. There may have been several things going on, so we’re looking at a variety of potential mechanisms.

Wednesday, December 19, 2018

Can the Earned Income Tax Credit (Mostly) Pay for Itself?

The most obvious reason for the Earned Income Tax Credit is to raise the level of household income for poor and near-poor workers. A secondary reason is to encourage such workers to enter the workforce and remain connected to jobs. But there's another potential benefit as well. Jacob Bastian Katherine Michelmore consider "The Long-Term Impact of the Earned Income Tax Credit on Children’ s Education and Employment Outcomes" (Journal of Labor Economics, October 2018, pp. 1127-1160, ungated version here). It suggests that the the EITC can be viewed not just a transfer of income, but also as an investment in human capital with a corresponding payoff.

A lot of economists and policy wonks, myself included, are enamoured of the EITC as a way of helping low-wage workers. Unlike raising the minimum wage, it doesn't risk the potential unwanted side effects of telling employers to pay more. At a more subtle level, it's designed so that those who work more don't immediately have the benefit clawed back from them. Here's a useful figure from the Tax Policy Center to illustrate the structure. The different lines show families with different numbers of children. Thus, the top line shows that a worker in a family with three children would receive a payment equal to 45% of earnings up to a total income of $14,290, for a total credit of $6,431. That total credit stays fixed as income rises to $18,660, and then phases more slowly, with a loss of 21.06% of the credit for each dollar earned until the credit is eliminated at total earnings of $49,104.


It's easy to spot some potential difficulties with the EITC. The small line at the bottom shows that it provides very little benefit for those without children. The tax credit is "refundable," which means that it doesn't just reduce the tax liability of low-wage workers to zero, but provides direct payments to them payments. The slow phase-out of the subsidy means that the payments don't only go to the poor, but also to those above the official poverty line. The total cost of the EITC is more than $60 billion (which is about twice the cost of the Temporary Assistance to Need Families "welfare" program). The It adds complexity to the tax returns of low-wage workers, and there can be problems of fraud (for example, if the number of children actually living with someone is overstated).

That said, a compelling body of research developed over the last few decades suggests that the EITC has a range of benefits (for summaries, see here and here). Its payments are concentrated among lower-earners, and it lifts about 6 million households above the poverty line. It encourages entering the labor force. It improves maternal and infant health.

All of which brings us back to the recent paper by Bastian and Michelmore. The amount of the earned income tax credit has varied over time because of changes in federal law and state law, and it is also designed to vary by size of family. They use these variations as a kind of "natural experiment." They use data from the  Panel Study of Income Dynamics (PSID), which tracks families over time and onto the next generation. They write:
This paper analyzed the long-run effects of childhood EITC exposure on education and employment outcomes among individuals born between 1967 and 1995. Using variation in federal and state EITC benefits over time by family size, results indicate that the EITC significantly improves a number of outcomes for children and that these improvements persist into adulthood. After a policy-induced $1,000 increase in EITC exposure between ages 13 and 18, we find that individuals are subsequently 1.3% more likely to complete high school by age 20 and 4.2% more likely to complete a college degree by age 26. These education gains also translate into increases in employment and earnings in adulthood. Estimates suggest that a $1,000 increase in EITC exposure from age 13 to age 18 leads to a 1.0% increase in the likelihood of being employed between ages 22 and 27 and a $560 (or 2.2%) increase in average annual earnings.
The broad benefits of the Earned Income Tax Credit, which go beyond providing income to low-wage families, create a distinct possibility that the program may come close to paying for itself. Indeed, Jacob E. Bastian and Maggie R. Jones have a recent working paper called "Do EITC Expansions Pay for Themselves? Effects on Tax Revenue and Public Assistance Spending" (December 9, 2018). They write:
We use administrative Internal Revenue Service tax data linked to Current Population Survey data on enrollment in public assistance programs to estimate the EITC's net cost. The evidence from three decades of EITC policy expansions implies that the EITC decreases public assistance received by mothers and increases payroll and sales taxes paid. Our estimates suggest that the EITC has a self-financing rate of 87 percent, so that the EITC's true cost is only 13 percent of the "sticker price."
On one side, it seems useful to dampen the enthusiasm about this result just a bit. It's a working paper, so numbers are subject to change. But more to the point, the main way in which the EITC "pays for itself" is by an offsetting reduction payments for other government support programs like welfare or housing assistance. Thus, the underlying argument is that it is better for government support to low-wage households to be channelled in a way that encourages work--not that total government support for those with low wages has declined.

On the other side, it seems plausible that the Bastian and Jones methodology considerably understates the gains from the EITC. It is based purely on increases in work effort by mothers. It doesn't take into account benefits to maternal and infant health, or the benefits to improved education and earnings for children. Including these kinds of benefits might plausibly yield a result that the $60-plus billion spent on the Earned Income Tax Credit  actually does pay for itself.

Tuesday, December 18, 2018

Tragedy of the Commons: 50 Years Later

Back in December 1968, an ecologist and microbiologist named Garrett Hardin published a short essay called "The Tragedy of the Commons" in Science (December 13, 1968, pp. 1243-1248).  The phrase "tragedy of the commons" passed into everyday use, and the article itself spawned a vast research literature. Fifty years later, what's it all about?

Here is how Hardin conceptualized the tragedy of the commons: 

"The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy.
As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?" This utility has one negative and one positive component.
1) The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1.
2) The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of -1.
Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another.... But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit--in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all."
Hardin applied this concept in a variety of contexts. For example, he points out that free parking in shopping areas is a kind of commons; that  national parks are a kind of commons; that emitting pollution into air and water diminishes the common environment. But the main focus of his essay is on human overpopulation. Hardin wrote:
"Perhaps the simplest summary of this analysis of man's population problems is this: the commons, if justifiable at all, is justifiable only under conditions of low-population density. As the human population has increased, the commons has had to be abandoned in one aspect after another. First we abandoned the commons in food gathering, enclosing farm land and restricting pastures and hunting and fishing areas. These restrictions are still not complete throughout the world. Somewhat later we saw that the commons as a place for waste disposal would also have to be abandoned. Restrictions on the disposal of domestic sewage are widely accepted in the Western world; we are still struggling to close the commons to pollution by automobiles, factories, insecticide sprayers, fertilizing operations, and atomic energy installations. ...
Every new enclosure of the commons involves the infringement of somebody's personal liberty. ... The most important aspect of necessity that we must now recognize, is the necessity of abandoning the commons in breeding. No technical solution can rescue us from the misery of overpopulation. Freedom to breed will bring ruin to all. At the moment, to avoid hard decisions many of us are tempted to propagandize for conscience and responsible parenthood. The temptation must be resisted, because an appeal to independently acting consciences selects for the disappearance of all conscience in the long run, and an increase in anxiety in the short. The only way we can preserve and nurture other and more precious freedoms is by relinquishing the freedom to breed, and that very soon."
Hardin did not go into detail about population policy here, but in general, he writes approvingly of "mutual coercion, mutually agreed upon by the majority of the people affected."

Over time, the application of the tragedy of the commons to human population is less common. Back in the late 1960s and early 1970s, it was fairly common to hear predictions that human overpopulation would within a decade or two lead to mass starvation. For example, Paul Ehrlich's 1968 best-selling book The Population Bomb started with "The battle to feed all of humanity is over” and then moved on to comments like "hundreds of millions of people are going to starve to death” and “nothing can prevent a substantial increase in the world death rate.” But although human population has continued to grow, birth rates have also fallen substantially and life expectancies have grown. There has been a remarkable decline in global poverty in the last few decades. For the world as a whole, more people are obese than malnourished. Even where global poverty remains, we are now more likely in 2018 to perceive it as a problem of too little economic development, rather than a problem of too many people. 

Another shift in  how we think about the tragedy of the commons 50 years later is that Hardin seems to argue that there are really only two choices for a commons: ending the commons and turning it over to private ownership, or government control.  But the menu of choices turns out to be broader. For example, government control applied to issues of environmental pollution can include both command-and-control regulation, but also other possibilities like pollution taxes and tradable pollution permits. 

In addition, a powerful body of research, led by the work of Elinor Ostrom (Nobel '09) showed that a local commons could in many cases be managed by groups, without either government ownership or privatization. Thirty years after Hardin's essay, 
Ostrom along with co-authors Joanna Burger, Christopher B. Field,  Richard B. Norgaard, and David Policansky discussed this view in "Revisiting the Commons: Local Lessons, Global Challenges," published in Science (April 9, 1999). As one of many examples where group management of a commons turned out perhaps unexpectedly well, they wrote:
Although tragedies have undoubtedly occurred, it is also obvious that for thousands of years people have self-organized to manage common-pool resources, and users often do devise long-term, sustainable institutions for governing these resources. ....  Both government ownership and privatization are themselves subject to failure in some instances. For example, Sneath shows great differences in grassland degradation under a traditional, self-organized group-property regime versus central government management. A satellite image of northern China, Mongolia, and southern Siberia shows marked degradation in the Russian part of the image, whereas the Mongolian half of the image shows much less degradation. In this instance, Mongolia has allowed pastoralists to continue their traditional group-property institutions, which involve large-scale movements between seasonal pastures, while both Russia and China have imposed state-owned agricultural collectives that involve permanent settlements. More recently, the Chinese solution has involved privatization by dividing the “pasture land into individual allocations for each herding household”. About three-quarters of the pasture land in the Russian section of this ecological zone has been degraded and more than one-third of the Chinese section has been degraded, while only one-tenth of the Mongolian section has suffered equivalent loss. Here, socialism and privatization are both associated with more degradation than resulted from a traditional group-property regime.
Ostrom and others tried to look at what they called "social-ecological systems" in fine-grained and pragmatic detail, steering away from grand pronouncements about what worked, and instead trying to sort out why group property rights worked in specific settings, but not others.

The 50th anniversary of the "tragedy of the commons" essay has brought some ruminations. Science magazine, the original publisher of Hardin's essay, marked the occasion with a suite of 
short comments in the  December 14 issue. Some of the comments emphasize Ostrom-style arguments: how a wide range of society's over time have developed a set of moral beliefs and cultural practices that can sometimes support cooperation over large-scale irrigation projects and resource management. But such arrangements are not inevitable, and it's not clear how to build them where they do not already exist.

Matthew O. Jackson mentions one key issue, which is that even when there are overall socail gains from some form of social cooperation, benefits and costs may not be evenly distributed--and some can even experience outright losses.  In the context of climate change and the global commons, he writes:
"Over the past five decades, we have come to a deep understanding of commons problems and how to solve them: They are not zero-sum games, but instead offer substantial gains from cooperation. Game theory and market design have helped us understand how to provide appropriate incentives. For instance, taxes as well as cap-and-trade systems can be designed to make the price of emitting carbon include its ultimate social/climate cost, and subsidies can make the prices of alternative technologies reflect their ultimate social benefit. However, a challenge with global commons problems is that solving the incentive problems often leads the collective gains to be distributed very unevenly; the costs can even outweigh the benefits for some parties. There are many players with enormous differences in wealth and interests around the planet—both within and across countries—facing different consequences from commons problems and abilities to pay for them. Yet, universal cooperation is needed, including coordinated limits and the willingness and the ability to enforce those limits. Thus, the main challenges that we face are political."
Brett M. Frischmann, Michael J. Madison, Katherine J. Strandburg offer a different angle, applying the tragedy of the commons to a build-up of knowledge in society:
Intellectual resources have their own tragedy-of-the-commons allegory. Replace Hardin's pasture with an idea, and consider what happens when the resource, the idea, is openly accessible to all. ... Avoiding cultural, technological, and scientific stagnation thus seems to require collective action to ensure adequate investment in knowledge creation. To facilitate this, many analysts assume two options: government subsidies or intellectual property-enabled markets. Though both are indeed important drivers of knowledge production, so are “knowledge commons,” which we should not take for granted.
Knowledge commons refers to institutionalized community governance of the sharing and, in many cases, creation and curation of intellectual and cultural resources. Examples range from scientific research commons, including data, literature, and research materials, to intellectual property pools, entrepreneurial/user innovation commons, rare-disease clinical research consortia, open-source software projects, and Wikipedia. Understanding how such communities share and develop knowledge is crucial in today's “information society.” ... [W]e have worked to systematize the study of knowledge commons and build a new field of interdisciplinary research in which law, economics, sociology, political science, network science, and other fields converge. Dozens of case studies have begun to reveal an empirical picture of knowledge commons.
Angela R McLean and Christopher Dye point out that the tragedy of the commons applied in the context of overuse of antibiotics and the resulting antimicrobial resistance: 
It has become commonplace to refer to the rise of antimicrobial resistance (AMR) as a tragedy of the commons. Each individual wishes to use the common-pool resource of functioning antimicrobials whenever they might have a beneficial effect (whether in treating human illness or in raising livestock), but overuse accelerates the spread of drug-resistant pathogens, so the drugs become useless to all—and therein lies the tragedy. ...Whereas Hardin emphasized private or state ownership to achieve this, Ostrom argued that those who share in exploiting a common-pool resource can develop their own rules to prevent its overuse. She identified factors that are conducive to the establishment of effective institutions to regulate the exploitation of a resource: Users have common interests; they place a high value on the resource far into the future; users support effective monitoring; accurate information is valued and easily communicated; and it is feasible to establish binding and enforceable regulations. ... 
Many of Ostrom's observations are starting to be fulfilled in the search for solutions to the problems of AMR, even if few people in this area explicitly set out to apply her work. The growing threat of AMR is increasingly understood by medical professionals, policy professionals, and the public alike. The associated discourse reflects the common, long-term interests of these diverse users. The widely accepted need for better surveillance of AMR signals rising support for effective monitoring and accurate, shared information. In a growing search for effective rules, physicians are adhering more strictly to evidence-based guidance for diagnosing infections; for infection control in hospitals; for procuring, prescribing and dispensing antimicrobials; and for ensuring that patients complete treatments. Beyond codes of practice, governments have in some settings introduced methods of enforcement, such as restricting the use of essential drugs to certified treatment centres. And public health specialists have called for AMR to be included among the International Health Regulations, a legally binding agreement to prevent the international spread of disease. Last, the global nature of the challenge is acknowledged in the World Health Organization's leadership in developing new norms for using existing antimicrobials and investing in new ones.
For economists, the tragedy of the commons is a memorable example of a situation where people pursuing their own self-interest will unleash a dynamic that leads to outcomes making everyone worse off than before. But the development of the idea has also brought forward the idea that while market coordination can fail, so can coordinatiou through government and coordination through social customs. In some ways, the tragedy that ultimately underlies the "tragedy of the commons" is the recognition that gains from cooperation are possible, but not being achieved.

Friday, December 14, 2018

Is Carbon Capture and Storage on the Verge?

If carbon capture and storage was cheap and easy, it would be a technological fix for the issue of climate change. It's not that simple, of course. But along with a range of other technologies and policies, carbon capture and storage can be part of the answer. In the Global Status of CCS 2018, the Global CCS Institute provides an overview of this technology (download requires free registration). The tone of the report is boosterish and upbeat about the technology--but it's also full of facts and case studies and background about efforts currently underway.

Here are some main points:

When the Intergovernmental Panel on Climate Change develops scenarios for how the world economy limit carbon in the atmosphere in the next few decades, a major expansion of carbon capture and storage is baked into those forecasts. 
"In October 2018, the Intergovernmental Panel on Climate Change (IPCC) released its highly anticipated Special Report on Global Warming of 1.5 °C (SR15), reinforcing the role carbon capture and storage technology must play in beating climate change. ... Significantly for CCS, it made the point that any remaining emissions would need to be balanced by removing CO2 from the air. CCS was acknowledged in three of all four pathways IPCC authors used to reach 1.5°C and was singled out for its ability to: `play a major role in decarbonising the industry sector in the context of 1.5°C and 2°C pathways, especially in industries with higher process emissions, such as cement, iron and steel industries.'"

There are a number of reasonably large-scale CCS facilities in operation, but they have naturally tended to pick the approaches that are already cost-effective. The question is whether CCS will spread into a much broader array of uses. 
There are now 43 commercial large-scale global CCS facilities, 18 in operation, 5 in construction and 20 in various stages of development. ... The first-of-a-kind commercial CCS facilities addressed in this report have already been in operation for years, mostly in industrial applications. They are “low hanging fruit”  in terms of deployment – natural gas processing, fertiliser, ethanol production where CO2 capture is an inherent process of productions. There is still a swathe of industrial applications crying out for CCS application. There is also a wave of new innovations such as hydrogen with CCS, direct air capture, CCS hubs and clusters that need to be deployed. ...

CCS is the conduit to a new energy economy of hydrogen production, bioenergy with CCS (BECCS), direct air capture (DAC) and carbon to value (C2V), representing a raft of CO2 reuse applications.
Hydrogen: Several CCS clean hydrogen initiatives are at the planning and feasibility stages in Europe – Hydrogen 2 Magnum (H2M) in the Netherlands, H21 North of England, Hynet North West, Ervia Cork CCS, HyDeploy in the UK. In Australia, the Hydrogen Energy Supply Chain is paving the way towards CCS enabled hydrogen production.
BECCS: Bioenergy with carbon capture and storage offers large-scale negative emissions (carbon removal) where CO2 emissions are removed from the atmosphere through the application of CCS to the transformation of trees and crops into energy fuels. The CO2 capture at Arkalon and Bonanza ethanol plants in Kansas, and CO2 storage in enhanced oil recovery, as well as Illinois Industrial CCS are well-known BECCS operations in the US.
DAC: Direct air capture, whereby CO2 is removed directly from the atmosphere through the use of capture technologies that bind or “stick” to CO2, is operating successfully at Zurich-based Climeworks, Canada’s Carbon Engineering (CE), and Global Thermostat in the US.
C2V: CO2 is being innovatively used to manufacture new C2V products, including fertiliser feedstock (SABIC in Saudi Arabia), soda ash (Carbon Clean Solutions in India), foams used in mattresses and upholstered furniture (Cavestro in Germany), bricks and cement (Australia’s Mineral Carbonation International), it is acid gas injection with subsequent CO2 storage.
Nicholas Stern, one of the most prominent economists studying climate change, thinks that the technology is moving forward briskly. The report quotes Stern: 

The last 12 months have been particularly refreshing in the world of CCS. There has been a noticeable surge in inclination and activity with policy-friendly CCS legislation introduced in the United States (45Q), China (an ETS) to new levels of political action undertaken in the UK (the Rt Hon Claire Perry’s CCUS Cost Challenge Task Force), Norway (ACT – Accelerating CCS Technologies), and the Netherlands (CCS Road-map). ...  More and more, people are seeing the practicality and importance in deploying the one technology proven to decarbonise “difficult” sectors such as cement and steel and “locked-in”  fossil fuel-based infrastructure. ... The concept of industrial CCS hubs and clusters is taking rapid shape in North Western Europe ... Industry is closely situated, storage resources are abundant, employment is assured, the business case is obvious.
For those interested in reading more: