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. . . .


"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 claim 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:  
And from "The thoughts of Blaise Pascal," written in 1669:

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

























"Do you doubt that there are?"


''Are they men? Or women?"


"There all night, do you mean?"

"Very likely."








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


"Were you here last night?"


"Do you know any of these others?"



"No. Not all day."

"Where have you been all day?"

"About the streets."

''What have you had to eat?"




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


"Yes. I could do that."

"For GOD'S sake get it then!"




way for us in profound silence, and let us go.


Monday, December 24, 2018

Charles Dickens on Management vs. Labor






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



CharPrimrose Hill tunnel.






I deferentially enquired, who wanted to be ground?


abruptly, " Was I a delegate?"



"Not at all," said I.


"Not in the least," said I,









when you Preston masters—"










find out."




Sunday, December 23, 2018

Real vs. Artificial Christmas Trees: Comparing Environmental Effects



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.





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: 

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: 

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. ...
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: