How much better off are we?

Tyler Cowan has an interesting post:

I say I prefer $100k today to $100k in 1964, that being a nominal rather than a real comparison. If you are not convinced, try comparing $1 million or $1 billion (nominal) today to 1964. For some income level, we have seen net deflation.
But here’s the catch: would you rather have net nominal 20k today or in 1964? I would opt for 1964, where you would be quite prosperous and could track the career of Miles Davis and hear the Horowitz comeback concert at Carnegie Hall. (To push along the scale a bit, $5 nominal in 1964 is clearly worth much more than $5 today nominal. Back then you might eat the world’s best piece of fish for that much.)
So for people in the 20k a year income range, there has been net inflation.
Think about it: significant net deflation for the millionaires, but significant net inflation for those earning 20k a year. In real terms income inequality has gone up much more than most of our numbers indicate.
(See more at: http://marginalrevolution.com/marginalrevolution/2014/12/comparing-living-standards-over-time.html#sthash.Lu1wmUlF.dpuf)

I am not so sure about this. My maternal great-grandfather was a judge and an member of the Prussian diet; I don't think his income in relative terms at the time was higher than mine (and my wife's) combined. But he owned a large villa in Potsdam, had a car with a driver, employed a cook, nanny, several servants, and a gardener. Yes, there was no penicillin nor netflix, but the real estate and services consumed are beyond those of even people with twice our family income... and since nobody else had a car, it took 20 minutes' driving to the center of Berlin. I think the idea that somehow the "rich" have done better is misguided; they consume more services than most, and it is not clear that these have become cheaper. 

Changes at Explorations in Economic History

Kris Mitchener and I are the editors of Explorations in Economic History. Over the last year, we have discussed how to strengthen the journal. Here is a summary of what we came up with:

What’s new at Explorations?

Content

Surveys and Speculations. As a periodic feature, we are reviving S+S. The idea is to combine the style of JEL articles with the more speculative ideas that one might put in a book – producing surveys that can help to guide future research. The emphasis can either be on the survey or the speculation part. The format is flexible, but we would typically expect a length of 4,000 to 8,000 words. If you are interested in contributing a Survey + Speculation article, please approach one of the editors with a one-page outline of what you have in mind.

Article formats. Explorations will publish research articles in two formats – main research articles (for major research advances) and shorter papers. While the length of submissions to all economics and economic history journals has grown, journal space has typically not kept pace. Almost all articles nowadays contain extensive literature surveys, many robustness checks, detailed  historical background descriptions, etc., which, while important, are not always essential for communicating the main point.

We therefore encourage authors to consider submitting short articles. Examples that potentially fit into this category include replication studies, negative results, new methods, and new data. Despite being at the heart of the scientific enterprise, replication studies are often frowned upon in economics and economic history. We believe this is in error. If you (or your students) have performed replication work, and in particular, if you find significant differences with published results or major fragility, this is the category of submission to consider. Negative results, when a well-defined hypothesis was tested in the data and no results were found, are often not published. Our aim is to counteract this tendency by providing an outlet for such studies. Often, the first application of major new research tool does not, in and of itself, constitute a breakthrough. If you are one of the first to use a new tool in economic history, we encourage you to submit a short summary and illustration to the “shorter papers” section. All shorter papers (just like main research articles) can contain additional material which will be published as an online appendix. While a new data source is often essential for publishing in top field journals, it is sometimes not enough. For projects that generated new data, but failed to shift the priors of the profession in a major way, EEH shorter papers provides an outlet. In this way, other scholars can use the dataset in their own work, and the people who have performed this service to the profession are rewarded with a publication – even if their risk-taking didn’t fully pay off.

Paper handling

New and Improved Submission Procedures. We continue to accept submissions in the normal format. In addition, we offer two new ways to submit your paper. First, if you have had your paper considered at another journal, and were rejected, you are free to send us the old reports, ideally with a covering note explaining what happened, in your view, and why you feel the paper still deserves a shot. Second, you can now propose potential reviewers in your covering letter (as well as a suggestions on who should not referee the paper – similar to the lists submitted for tenure cases). This is not a requirement, and the editors can and will make their own choices, either from the list submitted or drawing on other experts. The point is simply – as specialization increases – to use the authors’ own expertise for insight into the right group of scholars to assess a submission.

Desk rejections and revision rounds. These are not new policies at EEH, but we intend to use them more extensively going forward. We feel that is it fairer to the author(s) if papers that are unlikely to make it through the review process are rejected outright, instead of delaying the final outcome by several months. We also feel that multiple revision rounds should be a (rare) exception; if papers have a clear revision path to a publishable paper, we will say so in round 1, and if the paper has not converged after one revision, we are inclined to reject it instead of creating long drawn-out revision processes that may not converge.

Data replication

This is not new; a data replication policy has been in force since the start of the year. Replication is at the heart of the scientific enterprise. Every accepted paper at Explorations has to be accompanied by a full replication data file and computer instructions for producing the relevant statistical output (such as a STATA do-file). We do not expect authors to share all of their data; but the variables used for the tables in the paper have to be available so that results can be checked and alternatives tested.

We hope you will be encouraged to submit – in categories both old and new – at http://www.journals.elsevier.com/explorations-in-economic-history/

editing news

I have been an editor at Explorations in Economic History for a year and 9 months now, and was an editor at the European Review of Economic History beforehand. And then, the other day, I got an email asking me to join the Economic Journal as one of their editors. The EJ is one of the grand dames of the economics profession,  a journal I read religiously as a student, and of course the journal that JM Keynes edited... their citation impact scores are going up, and they have more submissions with a historical twist. Kris Mitchener and I have a lot of plans for EEH, and we will do what we can to implement them soon. Nonetheless, I decided to resign from Explorations some time next year, and to take up my duties at the EJ in mid-2015. 

US declaration of independence shelved

after UK courts declared the move unconstitutional. George Washington has now announced that there would be a voluntary, pseudo-declaration on the original date, with no real representation of the colonies or democratic safeguards in place... but there may be some other declaration later.

Well, that is pretty much what the current Catalan government has just done, declaring that they would not continue with plans to hold a referendum on independence. What did they think the Supreme Court would decide after the went for the November 9 referendum? It was clear they would try to block it. Surely, the only principled stand was to say "this is an inherent right of a people; no court can take it away." The only context in which the original decision made any sense was to go ahead with the vote regardless... but no. We'll get a vote organized by "volunteers" with no legal basis, etc. Congratulations to Snr. Mas and his merry gang for throwing away the single best chance of the Catalan people to become independent since 1714. 

Low rents

by government fiat. You don't have to be a genius to figure out that this one is a bad idea. At least, if you had a first college class in economics.

Turns out that in Germany, the easy stuff is still too hard for the political class. Having successfully destroyed the market in housing by freezing rents on old contracts, they are now extending this to new ones... because the new contracts are going up at something approaching the rate of inflation. You couldn't make it up. I can think of no rich, industrialized country in which quality housing is as cheap as in Germany - either to buy or to rent. What will the future bring? In a small piece for the FAZ, I look at the historical experience in Spain and the US.

An embarrassment of riches, doctoral student edition

This year, I have four Ph.D. candidates on the market... and they are terrific. Here are the abstracts of their job market papers:

Vicky Fouka: "Backlash: The Unintended Effects of Language Prohibition in US Schools after World War I"

Can forced assimilation policies successfully integrate immigrant groups? As cross-border migration surges, more countries must grapple with this question. A rich theoretical literature argues that forced integration can either succeed or create a powerful backlash, heightening the sense of cultural identity among the minority. This paper examines how a specific integration policy — namely language restrictions in elementary school — affects integration and identification with the host country later in life. I focus on the case of Germans in the United States during and after World War I. In the period 1917–1923, several US states barred foreign languages from their schools, often targeting German explicitly. Yet rather than facilitating the assimilation of immigrant children, that policy instigated a backlash. In particular, individuals who had two German parents and were affected by these language laws were less likely to volunteer in WWII; they were also more likely to marry within their ethnic group and to choose decidedly German names for their offspring. These observed effects were greater in locations where the initial sense of German identity, as proxied by Lutheran church influence, was stronger. These findings are compatible with a model of cultural transmission of identity, in which parental investment overcompensates for the direct effects of assimilation policies.

Felipe Valencia: The Mission: Economic Persistence, Human Capital Transmission and Culture in South America 

This article documents the positive long-term economic impact of the Jesuit Missions in South America, combining information from historical archives and municipal census data from Argentina, Brazil and Paraguay. Guarani Jesuit Missions (1609-1767) resulted in income levels that are 10% higher today. I stress human capital as the main channel of transmission, finding a 10-15% increase in educational attainment. Results are robust to the inclusion of geographic controls, the usage of placebos (abandoned and Franciscan missions) and instrumental variables estimation. Using historical censuses, human capital appears even higher closer to missionary districts during intermediate times. Such enduring educational differences are consistent with particular cultural mechanisms of occupational persistence—through labor specialization and changes in sectoral employment— and inter-generational knowledge transmission. Additional empirical tests suggest that migration, urbanization and tourism are not driving the results.

Andrea Matranga: Climate change and the Neolithic Revolution: Increased seasonality caused the multiple adoption of agriculture

The Neolithic Revolution saw seven different populations independently abandon nomadic hunting and gathering, in favor of settled agriculture. Plausible explanations exist for each of these parallel archaeological sequences, but none of the proposed theories is applicable across all of them. In this paper, I show that the Neolithic Revolution coincided with a large and global increase in climatic seasonality. I argue that hunter-gatherers in the most affected regions became sedentary in order to store food and smooth their consumption, and that this sedentary lifestyle eventually resulted in their development of cultivation techniques. I construct a model to generate empirical predictions, which I test against a global panel dataset of climatic conditions, and Neolithic adoption dates. I identify a causal link between higher seasonality and earlier adoption of agriculture, and find that this effect manifested itself both in increased probability of invention, and faster geographic spread. These global-scale results are confirmed by a site-level analysis of the domestication of cereals in the Middle East, and their subsequent spread into Europe. The findings of this paper imply that seasonality patterns 10,000 years ago were amongst the major determinants of the present day global distribution of crop productivities, ethnic groups, cultural traditions, and political institutions.

 Jörg Stahl: Capital Gain - The Returns to Locating in the Capital City

In many countries, company headquarters are concentrated to an extraordinary degree in the capital city. Geographic proximity to a country's leading politicians may be beneficial for a number of reasons, including greater opportunities to influence policy makers. In this paper, I examine a unique event – the relocation of the German Federal Government from Bonn to Berlin in 1991. Following reunification, there was a free vote in the German parliament. Berlin won by a narrow margin, an event that could not be anticipated even days before. I then examine the value of being co-located with the government by examining stock returns. Using a Fama-French Multi-Factor framework, I find that firms with operational headquarters in Berlin experienced mean cumulative abnormal returns of about 3 percent within the two days following the relocation decision. These returns were even higher two weeks later, do not seem to be driven by industry composition, and are robust to different model specifications.

If Catalans were black...

people would be outraged about what is happening in Spain. You can hear an interview with me about this (in German) at Swiss Radio here.