Being stuck in traffic: worse than you think

Superstitions, Street Traffic, and Subjective Well-Being
by Michael L. Anderson, Fangwen Lu, Yiran Zhang, Jun Yang, Ping Qin – #21551 (DEV EEE PE)

Congestion plays a central role in urban and transportation economics. Existing estimates of congestion costs rely on stated or revealed preferences studies. We explore a complementary measure of congestion costs based on self-reported happiness. Exploiting quasi-random variation in daily congestion in Beijing that arises because of superstitions about the number four, we estimate a strong effect of daily congestion on self-reported happiness. When benchmarking this effect against the relationship between income and self-reported happiness we compute implied congestion costs that are several times larger than conventional estimates. Several factors, including the value of reliability and externalities on non-travelers, can reconcile our alternative estimates with the

existing literature.

Opening our doors to more refugees

Henry Ergas offers let’s say a bracing perspective on our increased refugee intake which is to say that we should profile refugees to try to screen out those with odious views – many of whom will be Muslims. It’s quite compelling. Then again doing so opens a Pandora’s box of concerns. I’d feel it was a more compelling issue if we were proposing a much higher intake – as Germany is.

What do others think? If you’re locked out by the Oz’s paywall, for a limited time, I’ve made Henry’s article available on this link.



Holding out against the GotchaBots

I know nothing of Jeremy Corbyn other than that he’s reported to be about to win the leadership of the British Labour Party. The video above was literally the first I’d seen of him. But on looking at it I was struck by the similarity of his interview with the first I saw of Yanis Varoufakis interviewed by a similar GotchaBot. Unfortunately the interview with Varoufakis was removed from YouTube by the BBC almost immediately, but it had the same quality of a person trying to express clear views – with which one might agree or disagree – but being systematically harassed to undermine that effort so that the conversation could be corralled into the grooves of the gotcha talking points of the day.

I know nothing of Liz Kendall either, but as you can see she’s got the talking points schtick down pat and works them into the little crevices left her by the GotchaBot.

I’ve long thought that one of the main reasons that Julia Gillard failed was that she went from the appearance of being a feisty, Deputy Leader who said what she thought to being a talking points ZombieBot. People hate that. I think they do anyway, but that might just be my projection. I really really hate it. It makes me feel like we’re all going mad. Perhaps that’s why Corbyn is winning in the party. Not so much for his ideology, but because people want out of BotWorld.

The VCAT model – civil litigation revolution-in-progress

lawyer-no-ethicsNicholas Gruen recently posted about the high cost of civil court proceedings in Australia (and for that matter throughout the common law world):

A more promising kind of imperialism would be the application of simple economic principles to the way various social systems are managed. HECs and managing child support within the tax system are examples of this kind of reform. We should apply it more widely to our system of civil law which, as it stands is a scandal – available to the rich and those poor enough to access legal aid, but only otherwise to those willing to risk a large part of their life savings.

I can see what Nicholas is saying, and it’s a powerful indictment of a legal system whose traditional design may (perhaps) deliver Rolls Royce justice but also at Rolls Royce prices. Moreover, well-intentioned reforms based on the recommendations of the UK Woolf Committee from the 1990s, the most frequently adopted approach to achieving more accessible and affordable civil justice, have at best had mixed success.  Woolf-style reforms have been implemented to varying degrees by courts throughout Australia, arguably most fully in the Northern Territory’s Supreme Court.

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Competition – important but no silver bullet

It’s hardly a surprise, but somehow we put too much faith in competition, and not enough in all the other things like building capability not to mention a bunch of other things – not covered in the study below – like getting market architecture right, improving information flows. Anyway, here’s a straw in the wind.

Business Practices in Small Firms in Developing Countries by David McKenzie, Christopher Woodruff – #21505


Management has a large effect on the productivity of large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? We develop 26 questions that measure business practices in marketing, stock-keeping, record-keeping, and financial planning. These questions have been administered in surveys in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria and Sri Lanka. We show that variation in business practices explains as much of the variation in outcomes – sales, profits and labor productivity and TFP – in microenterprises as in larger enterprises. Panel data from three countries indicate that better business practices predict higher survival rates and faster sales growth. The effect of business practices is robust to including numerous measures of the owner’s human capital. We find that owners with higher human capital, children of entrepreneurs, and firms with employees employ better business practices. Competition has less robust effects.

The United States of Germany?

The Germans have surprised me by eagerly welcoming a million migrants originating from Syria, Pakistan, Afghanistan, Africa and elsewhere. They seem to invite many more to join them in years to come. Why are they doing this?

From the perspective of my Dutch upbringing, the Germans were the aggressive tribes of the East, speaking a coarse Dutch dialect, drinking beer made just like it was 500 years ago, too serious for their own good. ‘Blut und boden’ (blood and earth) signified their adherence to German ancestry and their connection to their land. To be German meant having 20 generations of German ancestors, even if that included Bavarian Catholics and Protestant Prussians.

Their experience with millions of migrants from within Europe has been very mixed. Economic refugees from Spain, Italy, Eastern Europe and Greece have been welcomed and have fitted in quite nicely. But millions of ‘gastarbeiters’ from Turkey who came into Germany in the 60s and 70s have still not integrated well. Letting in a million migrants now from decidedly non-German and non-European regions will surely encourage millions more to follow suite, turning Germany into the kind of country that the US was in the 19th century, and that Australia was after WWII: a country that took in the desperate, the poor, and the strange.

Judging from the popularity of this openness, the pronouncements of the politicians, and the touching scenes of hospitality shown, the Germans also seem to realise the historical significance of what they are doing: they are embracing the change in their culture that will come with newcomers from other cultures. The stories of the Grimm brothers will cease to be the story of German ancestors and become the stories of Germany. Goethe will cease to be a Germanic poet and will become the poet of Germany. Christianity will cease to be the religion of most German ancestors and become a contentious inspiration of German culture. German beer and sausages will cease to be the food of all Germans and become the food of the majority. Etc. To be German will cease to be about ancestors and become something connected to a passport and a German education, something that one can attain within 20 years rather than within 20 generations.

What a turnaround! Why on earth? Continue reading

You’d think that people would have had enough of silly citations

One vice of academic discourse is the compulsion to cite authorities for the simplest, most commonsensical banalities (Gruen, 2010). Anyway, for my own notes, I record a good example of this in the opening of a paper on vocational education and training.

Teaching and innovation have ploughed forward, at least since Greek scholars about two-and-a-half millennia ago lamented an emerging innovation. Thanks to the advent of writing, learners would rely on written records, rather than solely on their memories (Gumport & Chun 1999). Similarly today, scholars, government agencies, administrators, teachers and learners face a growing universe of educational innovations — ideas and technologies — to lament and laud (Commonwealth of Australia 2013; Barber, Donnelly & Rizvi 2013; Daniel 2012). Administrators and teachers in the background and at the coalface seek efficient and effective teaching innovations (Daniel, Kanwar & Uvalić-Trumbić 2009; Murphy 2012).

Sons of Liberty

Samuel Adams (played by British actor Ben Barnes) fights off redcoats in the History Channel miniseries “Sons of Liberty.” Photo: Ollie Upton / Ollie Upton / The History Channel / ONLINE_YESYes, folks flying high above the Pacific Ocean (which as Woody Allen’s father concedes to his mother is a worse ocean than the Atlantic Ocean) I took in the final episode of the History Chanel’s “Sons of Liberty” a mini-series about the American Revolution. I go for historical drama of any kind – even if it’s not very good, you can learn interesting stuff or look at interesting costumes. You can let your imagination run and wonder what life was like.

The production isn’t too bad. Acting was OK. It’s been panned for various reasons including its historical inaccuracy. It wasn’t excruciating by any means, but as you watched the boredom set in. And you started to notice details. The main detail was that the British were all bad. Bad as in “Mwaaahahaha” evil laugh bad. There was the odd obvious anachronism, as much of mood as of anything else. But then there was something so extraordinary that it made me wonder whether I was in fact hallucinating. Perhaps I was drifting off and imagined it. In any event, at least as remembered by me, as they were planning some plan one of the revolutionaries said to one of the others that a particular plan was “batshit crazy”.

I’ve always been intrigued by that expression. It’s stupid that it’s an expression. Why is it an expression? Still it’s kind of fun. I didn’t know that it was coined before 1776, which raises the question of why I’ve never run into it in the Wealth of Nations. But there you go. The very nattily attired George Washingmachine and the gang were wondering around Georgetown and Bunker Hill saying “Batshit crazy” – as in “We hold these truths to be self-evident and these falsities to be batshit crazy”.

Postscript: The place from which I hoisted the picture above picture (nice clobber ey?) confirms that I wasn’t hallucinating. And as I thought I remembered it was Ben Franklin that thought something was batshit crazy – always ahead of his time.

Theorising in science: theorising in economics

Robert Waldman has a fantastic critique of Paul Romer’s recent missives on economic science. He’s commenting ultimately on why Lucas’s work isn’t such a breakthrough. In it he highlights something of immense importance. It’s hard to think of many developments in economic theory in recent decades to which his observations do not apply. His point is that ‘advances’ in theory tend to be advances in conventions of professional practice, rather than new insights into the world.

General Relativity explained an anomaly … the precession of the perihelion of Mercury… predict[ed]… how much gravity caused light to curve… has yielded a huge number of predictions which fit the data exactly… was easily modified to correspond to an expanding universe…. Physicists are quite sure general relativity is not the truth (because it is inconsistent with quantum mechanics and therefore a lot of data). But it is a very empirically successful theory.

In contrast, the Dixit-Stiglitz example did not attempt to explain anomalies. … The aim was to make models with imperfect competition tractable… an example…. They made a modelling choice… neither would guess that people might actually have Dixit-Stiglitz preferences…. It meant there was a standard way to handle imperfect competition…. [But] there are no general results…. Together the assumptions of imperfect competition and Nash equilibrium imply almost nothing….[Dixit-Stiglitz] made it possible to have the illusion that economic theorists understood imperfect competition, but this was discovery by assuming we have a can opener. The example was fruitful because, once a lot of people decided to explore the same special case, they could discuss its interesting behavior…. Theory can grow if people agree on core assumptions. This is progress if the assumptions are useful approximations. Once a field of economic theory has developed, its core assumptions are no longer vulnerable to data. I do not think the the development of a new branch of theory is necessarily scientific progress. Continue reading