Motu researchers on the political benefits of destruction, Bill's datatopia, why meddling governments make you happy, the productivity gap, the Fed and fiscal policy, scaling the depths of bad puns and more

Today's Top 10 (and an extra one for fun) is a guest post from Edmund Lou, Kate Preston, Loic Henry, Nathan Chappell and Wilbur Townsend at economic and public policy research house Motu

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1. Riots

Lately, people have been thinking a lot about how to make political change happen. One option (that some consider under-explored) is the destruction of private property. This paper evaluates that option within a study of the 1992 Los Angeles riot. This riot followed the acquittal of four white police officers who had been filmed beating Rodney King, an African-American man. The riot resulted in roughly a billion dollars in property damage. The authors study the effects of the riot on referenda, which disproportionately benefit African American people, finding that the riot both mobilised black voters and increased support from white voters.

2. Bill English’s datatopia

Prime Minister Bill English is leading the push for evidence-based policy and social investment. This article has caused debate to rage within Motu. Self-described data nerd, Keith Ng, has two main worries. The first is that we’ll make the perfect enemy of the good; meaning government will follow a narrow focus on evidence-based policy that may degenerate into naïve ambivalence. However, in debates where we lack good data, there can still be better-justified positions based on institutional knowledge or qualitative research. Second, few people deeply understand statistical modelling. What happens when a policymaker defends her position by telling people to go read her model? Perhaps we need the public and policymakers to be better educated in statistics, and a broad recognition that statistical modelling is difficult and fraught with issues.

3. Citizens are happier in countries where the government intervenes more frequently in the economy

This study shows that citizens of industrialised democratic countries can be expected to have higher life satisfaction if their government intervenes more in the market. In particular, the measures of intervention considered include the size of the government; social welfare expenditure; generosity of the welfare system (e.g. ease of access to welfare benefits); and the degree of labour market regulation. The focus on gauging wellbeing outcomes, as opposed to material outcomes, has been gaining momentum for several years. However the self-reported measures of wellbeing often used are probably unable to capture all dimensions of wellbeing. A recent working paper highlights some of the challenges of building a more comprehensive measure of wellbeing.

4. The Best vs. the Rest: The Global Productivity Slowdown Hides an Increasing Performance Gap across Firms

Although aggregate productivity in OECD countries hasn’t increased significantly, some multinational firms and their foreign affiliates have recorded massive productivity gains. You could claim the productivity gains of few firms can benefit the whole economy through spillovers effects. However, this article highlights a potential persistent productivity gap. It becomes even more obvious when considering information and communication services where digitalisation has brought quick productivity gains for now established companies such as Google and Amazon. This could be a political issue in terms of market competition: is it possible for new firms to be credible competitors to these giants?

5. The Need for Different Classes of Macroeconomic Models

In recent years, there has been a never-ending polemic on the usefulness of dynamic stochastic general equilibrium (DSGE) models in macroeconomics. The key challenge to these math-heavy, computer-based models is their poor predictive performance, which is mainly due to a failed attempt to fit realistic data with intensive theoretical structure. This blog on the topic went viral in economic circles. Olivier Blanchard (previously head of the IMF), suggests a ‘simple’ resolution for the issue: have two separate types of model, DSGEs and policy models. The DSGEs should, while keeping their esoteric nature, help provide a platform which facilitates macroeconomic discussions despite not actually fitting the data. The policy models, however, should closely follow the real data and therefore have a satisfactory forecasting ability. Interestingly, the Reserve Bank of New Zealand had this idea before Olivier pointed it out (see here).

6. The economic impact of colonialism

Today we see massive economic inequalities that didn’t exist 500 years ago. Acemoglu and Robinson have authored this article that asks how colonialism contributed to these differences. The consequences were exploitation and poor institutions for areas with dense populations and environments hostile to Europeans, such as Africa and Latin America. For areas with fewer people and resources to exploit, the consequences were fairer and more inclusive institutions; the colonisers had to encourage Europeans to migrate and stay. One may question the authors’ more specific claims, such as geography’s irrelevance for development. This is based on statistical work which been challenged. But their broad historical narrative is compelling.

7. The atomic origins of climate science

Jill Lepore gives an overview of climate science’s fascinating links with atomic science, and the nuclear winter controversy. Climate science developed in part from studying the effects of atomic weapons - from measuring the ideal weather conditions for explosions, to the effects of nuclear explosions on the atmosphere. The nuclear winter hypothesis, spearheaded by Carl Sagan, is the idea that firestorms instil soot in the atmosphere which leads to severe global cooling. The modelling of a nuclear winter was controversial and full of uncertainties which weren’t always communicated. Lepore explores how nuclear winter sceptics later switched their attention and institutions to attack global warming.

8. Gender

Statistically, women are less likely to study subjects perceived as requiring innate brilliance -- philosophy, maths, and physics. This paper traces the gendered construction of brilliance in young children. While both 5 year-old girls and 5 year-old boys tend to associate brilliance with their own gender, girls stop doing so as they age. At the same time, boys become more likely to play a game said to be for “children who are really, really smart” while girls become less likely to do so. School seems to trap children within gendered expectations which they could otherwise have escaped.

9. The Fed and fiscal policy

Former chairman of the US Federal Reserve, Ben Bernanke explains why the Fed looks at Trump-backed fiscal expansion with a cold eye. The US economy is doing well, with a large employment increase in January. The unemployment rate is stabilising at about 4.8%, while the CPI climbed to 2.1% in December 2016. A large-scale fiscal stimulus today has a large probability to push inflation up higher. Overall, Trump administration’s fiscal plan may only speed up the Fed’s rise of interest rate.

10. Why is men’s life expectancy so high in Israel?

In 2013, men from Israel could expect to live for 81 years, compared to an average of 77.7 years among OECD countries. What is even more interesting, is that actual life expectancy in Israel is around seven years longer than the accepted contributors to life expectancy (factors relating to the level of development, access to health services, and demographic characteristics) can predict for the country. In this study, some additional controls are plugged into the life expectancy model, which together explain almost all of the deviation between Israel’s predicted and actual life-expectancy. Among these added variables, the most important contributor to life expectancy in Israel is compulsory military service. A probable mechanism for this effect is through physical fitness which reduces mortality rates from some diseases.

11. A Red Herring

The Economist triumphs, reporting on a serious issue while making terrible puns. We found 15, but there may be more.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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18 Comments

#3 Doh - of course it is! I've been arguing this for a few years now. Balanced regulation is required. Too wedded to the Free Market opens the door to manipulation. Regulation is supposed to limit or stop manipulation. The big players don't like regulation because it limits their ability to control and manipulate the markets. But they have most of the money, and all the influence!

#6 Really? Take the Maori model, as I understand it - originally all the property belonged to the rangatira to the benefit of the Iwi. Today this has morphed into a collective ownership model by the Iwi, a consequence of colonialisation. If collective ownership hadn't occurred, what would the outcome be a stratified society with a landed privileged class, and serfdom?

#3 Social Democrats tend to offer more regulation and controls especially on balancing budgets and then the whole thing is destroyed by lack of government intervention by privatisers.
Neither Labour or National here can be accused as falling in either of the extremes but we can see how even moderate trending away from the centre can exist.

It Is Friday...Talking of Fishy Stories. (I did like the puns and the tail).

Here is another tale.

A man called home to his wife and said, ' Honey I have been asked to go fishing up in Canada with my boss and several friends. We'll be gone for a week. This is a good opportunity for me to get that promotion I've been wanting, so could you please pack enough clothes for a week! Oh, and set out my rod and fishing box, we're Leaving from the office & I will swing by the house to pick my things up.'
' Oh! And please pack my new blue silk pyjamas. '

The wife thinks this sounds a bit fishy but being the good wife she is, did exactly what her husband asked.

The following Weekend he came home a little tired but otherwise looking good.
The wife welcomed him home and asked if he caught many fish?
He said, 'Yes! Lots of Salmon, some Bluegill, and a few Swordfish. But why didn't you pack my new blue silk pyjamas like I asked you to to?'

You'll love the answer...

The wife replied, 'I did. They're in your fishing box.!'

Probably cost him more than the First Tuna of the Season...in Japan.

Never Lie To A Woman.!

#1 These wonks should really include Syria, Egypt, (actually make it all the Arab Spring countries) into their study to determine whether riots lead to better outcomes for the rioters. People may have sympathy for riots against egregious actions taken against one (relatively) innocent individual, but if some get wind that the riots are designed to undermine their political rights things may degenerate. Quite badly. Escalation breeds escalation as I suspect will happen with the Gorsuch Senate confirmation. Democrats used the nuclear option to confirm their cabinet. Whose betting against Republicans using it for the SCOTUS vacancy?

So conscription is cited as one of the reasons Israeli men live longer , due to being physically fit for the period of call-ups which go right up to 60 years of age in a war .

I wonder if we, as humans , need some stress to enable us to live longer .

Anyone who has any understanding of Israel knows its a stressful place to live , its frankly not a "normal ' society in many senses .

Its unique in that it was founded on a religion, and its a tiny religion, there are estimated to be under 15 Million practicing Jews in the world , when the number of Muslims is estimated in the thousands of millions (1,600,000,000)

Its plagued internally by historical divisions between religions and then the Jews themselves are divided by language , places of origin , sects , and leanings , Zionists and liberals

Its constantly under threat , from bombs, missiles , suicide bombers , knife wielding lunatics , Islamic Fundamentalists , your bags are searched on entry into shopping malls and everyone is regarded with suspicion.

Its politics are divided and shambolic , and its assembly , the Knesset , is rambunctious and fraught with arguments and discord

The gap between rich Jews and poor Jews within Israel is massive , and tax is spent on defence so its almost always running a budget deficit .

It has all the features of a country that one would normally expect to have a low life expectancy

In short its stressful , but they statistically live longer .

It makes you wonder

The Taiwanese radioactive apartments produced a non-expected result.

"The conventional approach for radiation protection is based on the ICRP's linear, no threshold (LNT) model of radiation carcinogenesis, which implies that ionizing radiation is always harmful, no matter how small the dose. But a different approach can be derived from the observed health effects of the serendipitous contamination of 1700 apartments in Taiwan with cobalt-60 (T1/2 = 5.3 y). This experience indicates that chronic exposure of the whole body to low-dose-rate radiation, even accumulated to a high annual dose, may be beneficial to human health."
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2477708/

2. Bill English's Datatopia: Prime Minister Bill English is leading the push for evidence-based policy and social investment.

This...coming from the same government who told us that child poverty is too hard to measure? If you can't measure child poverty, why the heck would you proclaim your aspiration to being a data-driven government?

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And don't forget the initial lack of evidence to determine what effect immigrants were having on house prices, AND then the selective 'evidence' they did produce to support that there was no impact.

Some call it selective evidence, others call it "alternative facts".

Lies, damn lies, and data-driven government.

Evidently so ...... Doctor Feelgood ......

This week, on Tuesday from memory, Stephen Joyce appeared on TV news stating the "supply" of housing had increased ... whoopdi-do .... we all felt tremendously elated ... didn't we

Of course what he didn't say was that the total increase in supply was an increase of 1 house ... yep, that's an increase in supply alrighty

But, as always there was no mention of "demand"

Because demand probably increased by 20000 at the same time supply went up by 1

Measure that if you can, meanwhile

At the same time on Thursday it was announced AKL consents went down 30%

House increase of 1??

Joyce could be parodied as General Melchett in Blackadder Goes Forth" where he shows the increase in land captured from the Hun.

https://www.youtube.com/watch?v=yZT-wVnFn60

6. Today we see massive economic inequalities that didn’t exist 500 years ago.

500 years ago (this week) was the fall of Cairo to the Selim the Grim and the apogee of a great slave powered empire.

I'm not entirely convinced there weren't vast inequalities occurring 500 years ago.

You obviously haven't applied the correct rose tinted lense to your interpretation of inequality.

"Slave-powered empire"

I believe today we have New Zealand's hospitality and seasonal-labour industries, importing ever more from the third world to avoid the supply/demand equation in the local market.

Indeed Rick. Our industries promote imported labour so they can keep workers on minimum wage. Look at the rot promulgated from the transport industry about drivers wages.
Why would a country allow the goal to be a low wage economy. I would have thought a fundamental goal would be to raise the incomes of our citizens.

Perhaps a zero got added by mistake and it should have read 50 years ago-that would make more sense.if it's not a mistake,then it's just silly.

When is a House ....not a home?......"Oh...woe is me"....

or is that...."You"?.....

or "us"...???????..next.

https://www.bloomberg.com/news/articles/2017-02-10/vancouver-s-empty-man...

How to get more houses in the system fast - "Local authorities across the country are considering using compulsory purchase orders to seize vacant houses and turn them into social units after a successful trial by Louth county council.

About 12 per cent of Co Louth’s residential stock is vacant and the council believes it could empty the list of people waiting on local authority housing by using CPOs without having to build a single house. The orders allow a state body to obtain properties that it needs without the consent of the owner."
http://www.thetimes.co.uk/edition/ireland/empty-houses-hold-the-key-to-s...