Matt Spiegel nails it

for the most part in his analysis of the editorial process in finance journals (much of this also applies to economics). His experience as editor of RFS inspired him to write a little polemical piece with some sparkling insights. It seems that nowadays, every referee tells the editor how he or she would have written the paper, in a bid to seem smarter than the author... the final result is sometimes a big improvement, and often enough, no improvement at all. I can think of a paper of mine that went through N revisions in several years, before finally being published; the final version, bloated and cumbersome, isn't half as good as the original. True, another paper was so-so on submission, and then really improved through the editorial process. So it's a mixed bag overall.

What is Matt Spiegel's suggestion? Relax. The good articles, the ones that are truly important, will receive close scrutiny anyway, so don't demand robustness check no. 12345. His conclusion?

We can accomplish a lot more as a profession if we all do less as referees and editors. Referees should just read the article at hand and try to figure out if anybody else would. If the answer is yes, make at most a few suggestions. Limit them to ones that are editorial in nature. Help make the article more readable. Then sign off.

I think this is something to ponder... 

Risk in Amsterdam

Stanford B-School's website  has a pretty good (ie easy to read and clear) write-up of Peter Koudijs' and my work on risk attitudes and personal experience... 

why is there no contingent debt today?

(except by defaulting countries like Greece and Argentina). If you want to find out, you can do worse than read:

Drelichman, Mauricio and Hans-Joachim Voth, "Contingent Sovereign Debt Contracts: The Historical Perspective", CESifo DICE Report 

Punchline: Philip II managed to do it - so why can't modern-day treasury departments and investment banks do what Genoese financiers and courtiers in tights got done to perfection?

Massacre Memories and German Car Sales

Do boycotts ever work? The Euro crisis certainly made a lot of Greeks unhappy. They promptly blamed the Germans, resulting in calls for boycott. Now, the typical result in the literature is that there isn't much of a reaction -- consumers don't on average vote with their pocket books. People want what they want, and they aren't going to change their purchases much for political reasons. Most research on US consumer behavior after the US invasion of Iraq - inexplicably not supported by the French - found no clear reduction in French wine sales in the US, for example.

Together with my PhD student Vasiliki Fouka, I thought I'd try and see if there wasn't a noticeable decline in German sales in Greece. We focus on cars - these are big ticket items, and arguably very "Teutonic". Our key finding is that sales of German cars slowed, but the pattern differed by province -- in areas where German army units and the SS committed massacres during the occupation of Greece, there was a much bigger slump.

Here is the abstract of our working paper:

During the Greek debt crisis after 2010, the German government insisted on  harsh austerity measures. This led to a rapid cooling of relations between the Greek and German governments. We compile a new index of public acrimony between Germany and Greece based on newspaper reports and internet search terms. This information is combined with historical maps on German war crimes during the occupation between 1941 and 1944. During months of open conflict between German and Greek politicians,   German car sales fell markedly more than those of cars from other countries. This was especially true in areas affected by German reprisals during World War II: areas where German troops committed massacres and destroyed entire villages curtailed their purchases of German cars to a  greater extent during conflict months than other parts of Greece. We conclude that cultural aversion was a key determinant of purchasing behavior, and that memories of past conflict can affect economic choices in a time-varying fashion. These findings are compatible with behavioral models emphasizing the importance of salience for individual decision-making.

The working paper is on SSRN and at CEPR. If you happen to be in the Cambridge area - you can hear Vicky on Monday, October 18th, at the Harvard Economic History Tea.

Congratulations

to my PhD student Marc Goni Trafach, who has just won the UPF Teaching Award. Did I mention he is on the market this year?

You can watch

the testimonials accumulate for Mauricio's and my book over at the  facebook page for Lending to the Borrower of Hell (coming in early 2013 to a bookseller near you).

Inet interview

on the Spanish crisis. Keep in mind that this was taped in April of this year...

The first experimental paper in economic history

... hits the working paper stage. I meant to do this for... ? maybe a decade? Anyway, I finally found the right co-authors, time, and money to do it. I always loved the elegance of experimental economics; no problem with internal validity here. What do we learn? A lot, in general, but external validity can be an issue... So why and how to apply this to history? The idea is simple, actually - instead of using market conditions in the lab that are at best loose metaphors for financial markets, we use concrete, detailed features of a historical asset market where things really went wrong: the market for South Sea shares in 1720. We then switch of these features one by one, in a bid to pin down what was really responsible for the "mother of all bubbles". The paper is over at SSRN and the abstract is

Major bubble episodes are rare events. In this paper, we examine what factors might cause some asset price bubbles to become very large. We recreate, in a laboratory setting, some of the specific institutional features investors in the South Sea Company faced in 1720. Several factors have been proposed as potentially contributing to one of the greatest periods of asset overvaluation in history: an intricate debt-for-equity swap, deferred payment for these shares, and the possibility of default on the deferred payments. We consider which aspect might have had the most impact in creating the South Sea bubble. The results of the experiment suggest that the company’s attempt to exchange its shares for government debt was the single biggest contributor to the stock price explosion, because of the manner in which the swap affected fundamental value. Issuing new shares with only partial payments required, in conjunction with the debt-equity swap, also had a significant effect on the size of the bubble. Limited contract enforcement, on the other hand, does not appear to have contributed significantly.

The Wall Street Journal

interviewed Robert Putnam to see what he thought of Nico Voigtländer's, Shanker Satyanath's and my study on association density and the rise of the Nazi Party, where we show that towns and cities with more singing, hiking, and animal breeding clubs also had many more people joining the Hitler movement... apparently Putnam thought that social capital is still a good thing for democracy on average. You can read the small article here. 

If your parents are on welfare

your chances of ending up on welfare yourself are higher. So what? The link is only interesting if it is causal -- and unobservables can very well be expected to drive the correlation across generations. For example, people who struggle with education will probably have children who also don't do well in school; their chances of requiring hand-outs must be higher.

How to solve the problem? Norwegian data to the rescue! Dahl et al. in new NBER working paper use random assignment to judges in Norway - with some of them more likely to uphold/deny access to disability insurance -- to identify the nature of the link. The result - it's causal, it's big, and it's depressing:

Strong intergenerational correlations in various types of welfare use have fueled a long standing debate over whether welfare dependency in one generation causes welfare dependency in the next generation. Some claim a culture has developed in which welfare use reinforces itself through the family, because parents on welfare provide information about the program to their children, reduce the stigma of participation, or invest differentially in child development. Others argue the determinants of poverty or poor health are correlated across generations, so that children's welfare participation is associated with, but not caused by, parental welfare use. However, there is little empirical evidence to sort out these claims. In this paper, we investigate the existence and importance of family welfare cultures in the context of Norway's disability insurance (DI) system. To overcome the challenge of correlated unobservables across generations, we take advantage of random assignment of judges to DI applicants whose cases are initially denied. Some appeal judges are systematically more lenient, which leads to random variation in the probability a parent will be allowed DI. Using this exogenous variation, we find strong evidence that welfare use in one generation causes welfare use in the next generation: when a parent is allowed DI, their adult child's participation over the next five years increases by 6 percentage points. This effect grows over time, rising to 12 percentage points after ten years. Using our estimates, we simulate the total reduction in DI participation from a policy which makes the screening process more stringent; the intergenerational link amplifies the direct effect on parents at the margin of program entry, leading to long-run participation rates and program costs which are substantially lower than would otherwise be expected. The detailed nature of our data allows us to explore the mechanisms behind the causal intergenerational relationship; we find suggestive evidence against stigma and parental investments and in favor of children learning from a parent's experience with the DI program.

Some Spanish lessons

Summer is upon us; Barcelona is swarming with tourists. Doubtlessly, many are here to brush up their Spanish a bit, too. Mauricio Drelichman and I have been writing about some other Spanish lessons - those from Habsburg Spain for modern-day debt markets. The Financial Times carries a brief op-ed piece of ours in tomorrow's edition, explaining the importance of state-contingent debts for avoiding pro-cyclical fiscal policy.... it is remarkable that risk sharing in sovereign debt markets worked much better in the 16th century than it does today!

Laffer curve reflections (Detroit and Spain edition)

Tyler Cowan has some interesting observations on tax rates in (now bankrupt) Detroit - high rates, low revenue. Who would want to live there, given how easily you can move away by a few miles?

Problems for states are different - moving away is costly, though high-skilled people certainly can and do move to greener pastures when times get too awful. There is also another effect that comes from jacking up tax rates, which produces something like the Laffer-curve effect, but for different rates. Spain/Catalunya (some of the income tax here is regional) how has the 3rd highest income tax rates in the world, after Aruba and Sweden (and believe me, public services are not like in Sweden). Strikingly, actual tax revenue relative to GDP is one of the lowest in the OECD -- a full 9% less than the Netherlands, 7% less than Germany, and about on par with Switzerland, where tax rates on the same income are on average half.

This is another way of saying that taxation in Spain (and much of Latin Europe) is hugely distortionary - you have a small part of the economy that can be taxed, and the state squeezes out the last drop; and then there are vast parts where there is hardly an attempt to tax at all. Notary records of property values? much less than what people paid, no problem? No receipt for your purchase in the pharmacy? No problem. Italy introduced an obligation to carry the receipt within a certain distance of every shop to stop tax fraud... not here. The list goes on; all those cars with Andorra licence plates in Barcelona - do these guys really live there? I doubt it. And so, as rates have gone up, the incentive for people to switch from the (legal, efficient) part of the economy to the (untaxed, inefficient) part has gone up hugely. And guess what, it doesn't help with aggregate productivity.

More reasons to worry (Kenen-Mundell edition)

about the Euro, in case you needed them. If countries suffering negative shocks see their young leaving for greener pastures, there is nobody left to pay the debts. Frances Coppola has some good info on this; Paul Krugman spells out the implications for optimum currency area theory. You could add a related wrinkle -- as a country's finances suffer, and tax rates go up, the mobile part of the labor force calls it quits. From anecdotal evidence, there has been a huge outflow from the expat community in Spain, and near-confiscatory taxation (as well as lousy demand conditions) has a lot to do with it. Which is another way of saying that fiscal integration may be the only answer (other than a LOT of trade). 

Barcelona is No. 1 in the World!

in at least one dimension ... not sure what this is based on it, but there is no doubt that there is a real problem here. Just the other day I sat on a plane where the person right and left of me had been robbed, and then got to discuss with the row behind the when where and how because they, too, had lost wallets, passport, luggage, cameras, etc. etc. And if you are wondering if it is a question of will or ability - there is absolutely no problem for the authorities to issue a parking fine within 30 seconds of the infraction having occurred; if they could make money from catching pickpockets, the problem would disappear in matter of months.

Frankfurt gets it...

perhaps some financial history is not a bad thing. Two banks (Metzler and de Rothschild) have endowed a (visiting) professorship in financial history in Frankfurt. It's a timely move... 

bubble time?

To the man with a hammer, everything looks like a nail... So when I first started to ask myself if there is a bubble brewing in German real estate, it seemed at least possible. After all, prices were increasing rapidly, while rents are pretty stable. Surely this is a sign of trouble? Actually, no. I just wrote a small article for the FAZ (in German) arguing that

• prices of existing homes are still lower in real terms than in 1995
• rental yields are healthy - around 4-5%, and not 2% like in Spain at the height of the bubble
• relative to incomes, German real estate is too cheap
• bank credit is being offered with care -- there are no 110% mortgages to illegal immigrants

All of this looks more like a market recovering from decades of relative stagnation, and not like a bubble. What I really want to write about is why the German real estate market is actually an important source of competitive advantage for German industry... but there are all these revisions on my desk...

Clio's rescue mission...

The FAZ blog has a small write-up about why economic history has become more important in recent years, and it cites yours sincerely's work on Philip II (with Mauricio Drelichman) at length... [in German].

The unbearable slowness of financial reform

Over the last few weeks, I have been reading Richard Rhodes' superb The Making of the Atomic Bomb. I was also teaching a class on financial crises last week in the BMSS summer school this year at CREI. One of the striking things is how little financial regulation has come out of the last financial crisis of 2007-08. The Great Depression gave us Glass-Steagall, the SEC, deposit insurance, and ~40 years without a single banking crisis in Europe or the US. Today, we are a full 6 years into the biggest financial crisis since the 1930s, and the proposed tweaks and twists -- read Basle III and related regulation -- are mostly puny. Some procyclical capital provisioning, ok; some limits to off-balance sheet exposures, tick. Serious rethinking of maximum size? Simple leverage limits? Massively higher equity cushions - no, none of the above. Debate is continuing... and it has for about the same length of time as it took to build the first nuclear bomb. As an advisor of mine once used to say "nothing important should take much longer than World War II"...

dark side of social capital

Nico Voigtländer, Shanker Satyanath and I have a new working paper about the "dark side" of social capital. Slate's formidable Ray Fisman (when not writing crystal-clear prose, he moonlights as Lambert family professor at Columbia Business School) has picked up the story here.

Here is the abstract:

Social capital – a dense network of associations facilitating cooperation within a community – typically leads to positive political and economic outcomes, as demonstrated by a large literature following Putnam. A growing literature emphasizes the potentially “dark side” of social capital. This paper examines the role of social capital in the downfall of democracy in interwar Germany by analyzing Nazi party entry rates in a cross-section of towns and cities. Before the Nazi Party’s triumphs at the ballot box, it built an extensive organizational structure, becoming a mass movement with nearly a million members by early 1933. We show that dense networks of civic associations such as bowling clubs, animal breeder associations, or choirs facilitated the rise of the Nazi Party. The effects are large: Towns with one standard deviation higher association density saw at least one-third faster growth in the strength of the Nazi Party. IV results based on 19th century measures of social capital reinforce our conclusions. In addition, all types of associations – veteran associations and non-military clubs, “bridging” and “bonding” associations – positively predict NS party entry. These results suggest that social capital in Weimar Germany aided the rise of the Nazi movement that ultimately destroyed Germany’s first democracy.

The paper will be out as an NBER wp soon; in the meantime, here is a copy on SSRN. 

cool paper of the week

I was in Lisbon last week, for a conference on Political Economy. Danila Serra presented what I thought was one of the most interesting papers. She asks what it takes for people to be good - not to cheat, etc. In many cases, good behavior can be induced if people's actions are observable. It turns out that this effect is not independent of the culture that people come from - students in their experiment from a high rule of law country responded big-time to being observed by others, while students from low-rule-of-law places just didn't care... The paper is here and the abstract is:

We experimentally investigate the extent to which social observability of one’s actions and
the possibility of social non-monetary judgment affect the decision to engage in rule breaking
behavior. We consider three rule breaking scenarios — theft, bribery and embezzlement — in the absence of any formal enforcement mechanism. By involving a student sample characterized
by cultural heterogeneity due to immigration of ancestors to the US, we are able to investigate
whether the effectiveness of informal social enforcement mechanisms is conditional on the
cultural background of the decision-maker. A total of 52 countries are represented in our
sample, ranging from Low Rule of Law countries such as Liberia and Nigeria to High Rule
of Law countries such as Sweden and Norway. Our data provide evidence that people with
different cultural backgrounds do respond differently to increased social observability of their
actions. In particular, while subjects that identify culturally with a High Rule of Law country
respond to social obervability and judgment by lowering their propensities to engage in rule
breaking, subjects that identify with Low Rule of Law countries do not. Our findings suggest
that development policies that rely purely on social judgment to enforce behavior may not
work with Low Rule of Law populations.

intern time

Congratulations to current ITFD student Juan Jose Cortina, who will be working at the World Bank as an intern this summer...

what does it take to improve institutions?

I just came back from Hong Kong, where the annual INET conference was held. I was speaking in the session on austerity and polarization. Niall Ferguson was at the conference as the dinner speaker on day 2, and peddled ideas from his latest book - The Great Degeneration. He basically argued that Western institutions were decaying (generational imbalances, "bowling alone", etc.). He also showed some interesting slides on East Asian countries getting better over time.

I had to ask Niall how he can explain the seeming contradiction with his ideas from 10 years ago (in Colossus), where he argued that colonialism was a splendid thing because it exported good institutions to "lesser breeds without the law". Now, we learn that developing countries are doing fine without help from those spiffing chaps in khaki painting the world red, while the West is decaying on its own. Niall's answer? That if I had read the book, I would realize that in Colossus he warned that the US was not as good a colonizer as Britain had been. Huh? That wasn't the question, was it? Seems like he just dodged the issue. Well, this is the man who declared that Americans were living with double-digit inflation already and refused to ever say sorry for beiing dead-wrong about his prognostications after 2008 ... Anyway, you can read the resident INET blogger taking up the HK exchange here. 

glad to be in good company

The QJE Excellence in Refereeing Awards are out.

vampires

[via economic logic...] There is a new wp on human-vampire interactions, by Dan Farhat. I always stayed away from this phenomenon, but it seems like economics is ready for the final frontier...

Vampires are a prominent feature of modern culture. Past research identifies the ecological and economic relationship between vampires and living humans under the assumption that 'representative agents' are capable of characterising entire communities. Whether populations of individuals can coordinate themselves sufficiently or not to achieve the same outcomes as the representative agent is not addressed. The purpose of this study is to create a human-vampire ecosystem using artificial social simulation. An agent-based computational model is constructed in which heterogeneous vampire and human individuals engage in one-on-one interaction within a virtual landscape. These interactions result in the emergence of aggregate-level phenomena. Simulating alternative virtual economies under different model calibrations shows under what conditions these emergent phenomena are similar to those produced by the representative agents in previous studies. This article contends that growing human-vampire economies can shed light on an array of social and economic issues even if vampires never existed at all.

Economic logic makes some insightful observations about agent-based modelling in the case of vampire-human interactions... 

just listen

to the right music, and your age will change. Apparently, this is scientifically proven. Psychological Science reports a study where subjects were asked to give their birthday after listening to different songs; listening to the Beatles ("When I'm 64") actually reduces your age...

Huh? The paper (by Simmons et al.) is actually meant to show how easy it is to get even absurd hypothesis above the threshold for statistically significant rejection. In this case, the researchers a. kept adding to the sample until the "right" result emerged b. used a variety of control variables, only one of which actually produced the desired significance level on the coefficient for the main exogenous variable. It is not quite as wild as the IG Nobel - award winning study demonstrating (with MRI imaging) that there was brain activity in a dead salmon, but it is close...

The authors also propose an interesting list of "best practices" to avoid this kind of data mining. Among them is one that economic history journals would do well to implement - the requirement to deposit the data used for a study in an online archive, where other researchers can try to replicate the results. Most leading economics journals already have such a policy; but economic history journals - despite their emphasis on data (or because of it?) - do not require the posting of data, descriptions, or do-files. 

Foreign policy

profiles Nico's and my forthcoming paper on the indirect (and positive) effects of the Black Death...

French roast

Here is a paper I wish I had written... this time by two Indian scholars (Pandya and
Venkatesan) working in the US, about the effect of the Iraq war squabbles between France and the US on sales of French-sounding consumer goods. Here is the abstract:

International conflicts frequently prompt boycott calls but scholars dispute whether consumers participate. Theories of conflict and economic interdependence fail to account for marketing that distorts consumers’ perception of product origin. For the 2003 US-France dispute over the Iraq invasion we analyze weekly supermarket sales data from 2500 supermarkets for 8729 grocery brands. Our difference-in-difference estimates show that in weeks with more intense boycott calls sales of French-sounding brands declined. For just the week of March 16 the boycott cost over forty-four million dollars in lost sales. This finding is robust to controls for pro-French sentiment, gas price fluctuations, and possible xenophobic responses. We also find no change in sales of French-owned US-trademarked brands. This study highlights new dimensions of economic integration along which conflict’s effects manifest and contributes precise tests of underlying causal mechanisms. More generally we demonstrate the untapped potential of consumer behavior as a metric of political sentiment.

another lament about economic history in Germany...

The German weekly Wirtschaftswoche has a small article about the decline of economic history in Germany. Apart from the fact that they got the offers that some people declined wrong (tough business that, Munich is not Berlin), it is also interesting in a number of dimensions. It laments the fact that some German economic historians now teach abroad. The article is right that chairs are being closed down or re-designated, and that there is little love of economic history in most German economics departments. But in my view, it gets two crucial things wrong.

First, the fact that some Germans teach abroad in itself is not a sign of crisis or decline; it is perfectly normal in a globalized world. What is problematic is the fact that there are almost no foreigners going to Germany to take up teaching positions there - it's the inflows, darling, not the outflows. In this day and age, there is nothing natural about locals teaching local students in their local university; it's a recipe for provincialism.

The fact that only Germans - by and large - teach at German universities of course has something to do with terms and conditions (lots of teaching, lousy pay). If you want to do research, look no further than the May issue of the AER (gated). Every year, they publish the results of their salary survey. The pay rate for full professors at first-tier US research universities (rank 1-15) was $224,000 - for 9 months of the year (that means you can earn another 2/9 of that if you have grant or your employer is generous - we are talking around $273,000 p.a.). The st.dev. is 47,000, meaning that most salaries fall in the interval $150-300,000. From what I hear and see, not many German offers exceed €100,000 by a healthy margin, if they ever get there [and with much higher taxes to boot). Put another way, if you paid the players in Bayern Munich in relative terms what German professors earn compared to the international market wage, they would be kicking balls in the local league. Why expect a different outcome in academia?

The inability to hire foreigners also has to do with the use of German as a language of instruction. Let's face it (with apologies to the French): English is the lingua franca of the modern age; it is to economists, physicists, and statisticians what Latin was to Erasmus. At UPF, all graduate instruction (and 1/4 of undergrad instruction) is in English. You can really only hire foreigners if you forget about the idea that they have to learn one of the hardest grammars in the world.

The second mistake, in my view, is that many German economic historians ended up in an intellectual no-man's land -- not economics, but not really history, either, where echist is thoroughly unloved by historian colleagues increasingly smitten by the weird and wonderful babble of the linguistic turn. Put another way, before people pound the lectern with their clogs demanding to be loved by all and sundry, they could perhaps try to contribute a little more to the intellectual debate in economics. The article cites Davide Cantoni, who - for a year that was much too short - was my colleague here at UPF - to the effect that economic history can thrive if it integrates more into economics. I think that is exactly right: I am actually quite sanguine that the better German econ departments would welcome first-rate applied researchers like Davide with open arms, independent of whether they use old data or not. Now, if only the government found it within its heart to pay professors a reasonable premium relative to school teachers... (the constitutional court the other day declared professor's pay illegal in Germany because it is too low - no joke).

extremely good

and equally disturbing: Cormac O'Grada's latest wp is on cannibalism during famies, Eating People is Wrong:

Cannibalism is one of our darkest secrets and taboos. It is the ultimate measure of the resilience or otherwise of civilizational processes to extreme conditions. How common was cannibalism in times of famine in the past? Both the nature of the evidence for famine cannibalism and the silences about it challenge the empirical historian to the limit. After a review of the global historiography, this talk will attempt to assess the evidence for cannibalism during Ireland’s many famines, culminating in the Great Irish Famine of the 1840s.

click here

and lose your will to live. Whoever invented web-based forms should be a non-believer (and right about the absence of an afterlife)...Personally, I think that one of the choice circles of hell should be reserved for them. You see: There was a time when providing a reference for a student or submitting a paper was straightforward. You printed it and mailed it. It took 30 seconds. Sure, it took time to arrive. But since admission decisions take ~6 months, and journals can take up to 2 years easily, it didn't matter.

And today? Every university (and every journal) has its own web-based form, with radio buttons neatly arranged so that you can click on whether the student is in the top 10%, top 5%, in terms of motivation, skill, technical knowledge, etc. Mind you, the categories are always subtly different. Sometimes, you need to provide exact class rank. Sometimes, you can compare with multiple cohorts. I am sure it is tremendously important that one university asks about motivation for proposed course of study, and the next one about interest and enthusiasm for research. And so on. No way to delegate this. What took 5 minutes now takes 20-25 minutes, every time. The effect? I limit references to no more than 5, and that is getting to be too much. So far, so simple, so bad.

Now, let's think about the economics of this. I am sure the web-based forms save somebody's time. Probably that of the secretary of the institution receiving applications. Instead of assembling packages with multiple letters and the application form, they can now just look at the web application - already all in one place. In other words, we found a way to use professors' time on a vast scale to save a tiny bit of secretarial time. I am sure nobody in the admissions office got fired because we can now deal with the applications in half the time. The net result is that a precious - and unpriced - resource is wasted, and a relatively cheap and easily replaced resource - administrator time - is saved. This outcome is thoroughly negative in terms of mapping people's time into output, and using precious resources for what they are best at; it is division-of-labor in reverse. Of course, it would take a social planner to undo this; every single admissions office loves the new system, I am sure, and the professors' mostly don't scream bloody murder about it because everyone is doing it.

Of course, this is only a tiny bit of one's academic duties; why think about it? Because it stands pars pro toto for many other examples of seeming productivity improvements that simply push costs elsewhere, and distort outcomes and incentives. Submitting a paper? You have a manuscript with tables and figures, all where they should be? Please take them apart for the web-based submission. You had a single file? You will now please produce 17 files - one for the manuscript, one for the title page, one for each table and figure - and then the online system produces an integrated pdf with your files (which you already had ready to go).

On hold on the phone when calling your airline or bank? Surely, the average person on hold has a higher opportunity cost of their time than the average operator (more often than not, in India). Total welfare goes down, but some productivity statistic somewhere is being flattered. A huge part of economics is about how individual optimizing behavior can produce sub-optimal outcomes in the aggregate; me thinks someone should consider seriously if the internet and web-based solutions have not just multiplied the "waste someone else's time" form of seeming productivity gains by a factor of 10.

time for a change

It is time for a change - I will join the Economics Department at the University of Zurich, starting January 2014. UPF gave me my first job out of grad school, and I have been happy and productive here. In Zurich, I will join a distinguished and growing group of scholars working in several of my active areas of interest, including the evolution of social norms, macroeconomics, and economic history. I will take fond memories of UPF colleagues and students with me, and I look forward to working in an exciting new environment.

there is something about that flyout list...

spot the only (!) European place on the Princeton list (via the jmwiki):

Agarwal (Harvard), Morales (Columbia), McQuade (Harvard), Diamond (Harvard), Morten (Yale), Chetverikov (MIT), Kolesar (Harvard), Varas (Stanford), da Silverira (NYU), Persson (Columbia), Oberfield (Chicago), Dovis (Minnesota), Dobbie (Harvard), Larsen (MIT), Abito (Northwestern), Rossin-Slater (Columbia), Ponticelli (UPF), Di Tella (MIT), Golub (Stanford), Xandri (MIT)

more fan blogging...

a friend just alerted me to a (quite dated) blog post by one Dr. Duke, apparently a former member of the House of Representatives, about Nico's and my research on anti-semitism. It's polemical and silly... as one would expect from a white suprematist who is selling titles like the following through his website:

JEWISH DOMINATION OF WEIMAR GERMANY 

Originally published in 1933 by The General League of Anti-Communist Associations. Shows that during the period of the Weimar Republic, Jews heavily dominated industry, finance, commerce, medicine, law and theater, yet made up only 1% of the population. The Jews became apostles of communism and carriers of corruption, which forced the Government of Germany to adopt certain legal measures to curtail the authority exercised by Jews. Contains many pictures and charts. 8 1/2" x 11", 32 pages.

Rubbing people up the wrong way is normally not a good idea, but I, for one, am kind of proud of the hate mail and silly posts that continue to trickle in response to Nico's and my research.

oh no...

not the austerity paper again! Well, yes. La Vanguardia runs an annual competition for the best piece of scientific research in Spain... and Jacopo and I are finalists, out of a group of eight. Our joint paper investigagtes the effects of austerity on social unrest and instability:

Does fiscal consolidation lead to social unrest? Using cross-country evidence for the period 1919 to 2008, we examine the extent to which societies become unstable after budget cuts. The results show a clear correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the case. While autocracies and democracies show a broadly similar responses to budget cuts, countries with more constraints on the executive are less likely to see unrest after austerity measures. Growing media penetration does not strengthen the effect of cut-backs on the level of unrest.

one of the reasons

why Spain is poorer than the rest of most of Europe - lack of competition, protection of insiders, low competitive intensity. You want proof? I give you one image.

Like many European cities, Barcelona has a bike renting scheme, run by the city. You pay a modest fee per year, and you can rent bikes as often as you like, all over the city. Use it for less than 30 minutes each time, and you don't pay a penny extra. For the most part, it works great. Visitors are VERY keen to use this - and they can't. Why? Because the firms that rented bikes to tourists made sure through a major lobbying effort that they can't. The public system even advertises where to rent a bike if you are not a local (picture). The idea is to protect local businesses. Hmmm.

And it is not just the slightly unsavory let's-rip-off-the-foreigners; it costs the public system real money. Half the day, stations are either overflowing (with no place to leave your bike) or empty. Why? Because people live in one corner of the city, and work in another. If tourists used the system (as they can with great ease in Paris, say), there would be many more matching flows - tourists going one way, to areas with tourist attractions but where people live (Sagrada Familia, say), and citizens going the other (down to the sea, where many jobs + hotels are). So protecting insiders a. raises the cost of the public system, with lots of little vans driving around redistributing bikes (yes, all very ecological) b. costs revenue c. keeps firms in business that add nothing to social welfare, other than redistributing money.

another winner...

Jacopo Ponticelli is another UPF doctoral candidate on the job market... shooting all the lights out. We have had some spectacular successes in recent years, and I am very happy we have another winner. Jacopo works on the effects of financial reform on credit availability and firm productivity, looking at a natural experiment in Brazil. The abstract of this JMP is

Financial reform designed to improve creditor protection is often encouraged as a way to increase credit access for firms in developing countries. In this paper, I show that when court enforcement works poorly, financial reform is ineffective in fostering both credit access and the productivity of firms. In the empirical analysis, I exploit variation in the quality of court enforcement across Brazilian judicial districts and use a panel of manufacturing firms. I find that, after the introduction of a major pro-creditor bankruptcy reform, firms operating in districts with efficient court enforcement experienced substantially higher increase in capital investment and productivity than firms operating in districts with poor court enforcement. I provide evidence that this effect is due to a higher probability of external funds being used to finance investment in new technologies. To show that the results are not driven by district-level omitted variables, I use an IV strategy based on state laws establishing the geographical boundaries of judicial districts.

His fly-out list now includes Harvard BSchool, Stanford GSB, Berkeley, Princeton Econ, Chicago Booth (another flyout without an interview), Kellogg, Bocconi, LSE, Science Po. Of course, getting the fly-out is only half the job... fingers crossed. So far, I am thrilled. I am not his main advisor, but on the committee... and a co-author on a joint paper on the effects of austerity on social unrest and instability:

Does fiscal consolidation lead to social unrest? Using cross-country evidence for the period 1919 to 2008, we examine the extent to which societies become unstable after budget cuts. The results show a clear correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the case. While autocracies and democracies show a broadly similar responses to budget cuts, countries with more constraints on the executive are less likely to see unrest after austerity measures. Growing media penetration does not strengthen the effect of cut-backs on the level of unrest.

Intermarriage and Intolerance

When is intermarriage a good measure of tolerance? That is the question that Nico Voigtländer and I are asking in our little paper prepared for the ASSA meetings in San Diego (forthcoming in the AER p+p issue this year). Here is part of our conclusion:

Remarkably, attitudes towards intermarriage are stable over more than half a century – in towns and cities where intermarriage rates between Jews and gentiles were high before 1939 because of positive attitudes among the German population, respondents today are much more comfortable with the idea of having a Jewish family member. In contrast, in places where out-marriage rates for Jews were high because the Jewish community was small, attitudes today are also sharply more critical today – not least because the local population was often more hostile, reducing the number of Jews in a location.  

... Only the part of the variation [of intermarriage rates] driven by attitudes directly is valuable in explaining cultural preferences. The share of the variation reflecting the “tightness” of the marriage market can confound the result; in extreme cases – such as Germany before 1939 – it may even induce an inverse correlation.

Human Capital during the IR

Fellow economic historian Karine van der Beek can be seen summarizing her research on human capital during the British IR in this video... clear and clever as always:

now forthcoming in the AER

is Nico Voigtländer's and my paper on the emergence of the European Marriage Pattern:

Europeans restricted their fertility long before the Demographic Transition. By raising the marriage age of women and ensuring that a substantial proportion remained celibate, the "European Marriage Pattern" (EMP) reduced childbirths by up to one third between the 14th and 18th century. In a Malthusian environment, this translated into lower population pressure, raising average wages significantly, which in turn facilitated industrialization. We analyze the rise of this first socio-economic institution in history that limited fertility through delayed marriage. Our model emphasizes changes in agricultural production following the Black Death in 1348-50. The land-intensive production of pastoral products increased in relative importance. Using detailed data from England after 1290, we show that women had a comparative advantage in livestock farming. They often worked as servants in husbandry, where they remained unmarried until their mid-twenties. Where pastoral agriculture dominated, marriage occurred markedly later. Overall, we estimate that pastoral farming raised female age at first marriage by more than 4 years.

who said...

that graduate supervision does not pay direct rewards? Of course, there is the enormous pleasure (and occasional pain) of directing a thesis, batting ideas back and forth, seeing a young mind blossom... and the best then go off to great jobs somewhere, become co-authors, etc. For the most part, these are the benefits for the faculty doing PhD supervision. A senior colleague of mine once suggested we should levy a 10% on the earnings of our grad students, to align incentives (he also suggested econ faculty should be traded like football teams, with the whole outfit moving from one university to the next). What he is pointing out, of course, is that  - like so much else in academia - we do a lot of work with our PhD students, for no immediate material benefit at all. Typically, graduate teaching and supervision don't count for the teaching requirement; there is no extra pay, etc. A warm thank you? Some reflected glory? Sure. But anything more tangible - no. So you can imagine my surprise (and delight) when a former PhD student of mine decided to treat his old advisor to an upgrade to first class, no less, on my trip to the AEA meetings in San Diego... thank you! The email notification just popped up in my inbox yesterday. Totally unexpected, and very much appreciated.