Nonsense, horsefeathers, and idle musings from a decade in South Korea (2002-2012).

28 April, 2011

Keynes vs. Hayek: Round II

By Aaron
28 April, 2011

At long last, John Papola and Russ Roberts have released their second "Keynes vs. Hayek" rap video (above, or here). This one, entitled "Fight of the Century," has the two famed economists engaging in verbal - and actual - fisticuffs over how an economy emerges from recession. For a humorous, informative introduction to the competing theories of these two thinkers, you could do a lot worse than "Fight of the Century." Give it a look-see and, if you need them, follow the lyrics here.

This video follows on the heels of an earlier Papola-Roberts collaboration, "Fear the Boom and Bust:"

26 April, 2011

On Natural Hypocrisy

By Aaron
26 April, 2011

How coherent are your opinions and beliefs?

Robin Hanson recently posted the above video on his website. In it, university students are asked to sign a petition in support of redistributing GPA points from high-achieving students to low-achieving students.

"After all, do you really need a 4.0?" asks the student posing as an activist. Not surprisingly, most students balk at the notion that points should be taken from high-achieving Peter and given to low-achieving Paul.

Most of these same students, however, readily support the redistribution of wealth via taxes. Is there a difference between redistributing grades and redistributing wealth? Probably, but this isn't Hanson's main point.

Rather, writes Hanson: "We humans are much better at coming up with reasons for opinions than at choosing coherent sets of opinions – we clearly have a powerful inbuilt capacity for hypocrisy."

On the same video, Arnold Kling comments: "I was curious to see this exercise tried in other contexts. Ask government officials about a proposal to redistribute power, so that voters get to make more budget decisions directly. Ask Ivy League university presidents about a proposal to redistribute college endowments. Ask Ivy League professors about a proposal to redistribute academic status."

Gotta love a good thought experiment.

25 April, 2011

More Matt Ridley

By Aaron
25 April, 2011

Despite having heard many of Matt Ridley's lectures, I'll always make time for one more. Here he is (above, or here for the full length program) speaking recently about the contents of his excellent book The Rational Optimist. Have a listen: the program is sure to cheer you up.

24 April, 2011

'Sustainability:' a Puzzling Concept

By Aaron
24 April, 2011

I've long been troubled by the term "sustainable," though I've hitherto been unable to explain exactly why. Mostly, I reckon, it just struck me as yet another hip buzzword to which few people had devoted much thought, not unlike 'green' or 'diversity' - words that, when you really start to think about them, aren't as easy to define as they first seem.

David Friedman, however, has thought about the matter and he does the best job yet of showing the problems with the popular notion of sustainability (h/t David Henderson). In this lecture, Friedman argues that the problem with sustainability, as commonly defined, boils down to this: "implementing it requires us to predict what the future will be like in order to know what the needs of future generations will be."

23 April, 2011

Easterly on Benevolent Autocrats

By Aaron
23 April, 2011

I've recently been poking around the academic literature on dictators and growth, thinking (as I wrote here) that the narrative on Park Chung-hee and Korea's development is in need of reevaluation. Fortunately, I'm not alone in my dissatisfaction with the "benevolent autocrat" storyline: NYU economist William Easterly (prime mover behind the excellent Aid Watch blog and author of The Elusive Quest for Growth) has also been active in this area recently. In fact, just last month Easterly released the early workings of a paper entitled "Benevolent Autocrats." The abstract:

“Benevolent autocrat” is a perpetually popular concept in development policy discussions. This paper suggests this popularity is not solely explained by academic theory and evidence. The history of the concept shows the role of political motivations for embracing the concept. The literature on cognitive biases shows multiple biases that would lead to beliefs in benevolent autocrats even if they did not exist, especially as these interact with stylized facts about autocracy and growth. Neither political motivations nor cognitive biases imply disproof of the concept, but they do suggest the need for even more rigorous scrutiny. The theory implied by a benevolent autocrat story is na├»ve relative to modern theories of autocracy, and it presumes an implausible level of knowledge by autocrats. The evidence underlying “benevolent autocrat” interpretations has equally plausible – or more plausible -- alternative explanations. The well-known “leaders matter” results of Jones and Olken (2005, 2009) do not demonstrate that intentions and actions of individual autocrats affect growth. Since democratic rights are an end in themselves, the burden of proof is on autocrats to show that they provide material payoffs that offer a trade-off with such rights. This paper argues they fail to meet that burden of proof.

As Easterly admits, this paper is only the rough beginning of his project, but even in this nascent state, its well worth a read.

20 April, 2011

This Week's Buffet of Goodness

By Aaron
20 April, 2011

  • Oh, dear! We're "addicted to economic growth." Video from this year's Conference on Economic Illiteracy (also above).
  • In other video, co-founder of Microsoft and owner of my beloved Portland Trailblazers Paul Allen speaks with Leslie Stahl on 60 Minutes (with additional interview footage here) about his life, his newly released autobiography (excerpted in Vanity Fair), and the stresses of working with Bill Gates.
  • Francis Fukuyama has a new book out, and it's every bit as ambitious as you'd expect from the man who wrote The End of History and Trust. Here's a recent profile in Newsweek, in which Fukuyama notes in frustration that the current Republican Party is filled with "total amateurs on foreign policy."
  • Want to chat on Skype with Nobel Prize-winner Gary Becker or Freakonomics author Steven Levitt? Well, now you can...if you have the cash.
  • Richard Epstein, as usual, is correct: " is a good thing, not a bad thing, if the richest person in society gets richer—so long as no one else is made poorer."
  • China's Ghost Cities and Malls. The Chinese government is, by some estimates, building ten new cities each year, even if those cities have no inhabitants. Why? Because government spending is a component of GDP (Y=C+I+G, in which the 'G' is government spending), and the Chinese government is utterly obsessed with maintaining high rates of economic growth. Thus, the government spends vast sums to build these new cities and, voila, whether actual value has been created or not, the economy has "grown." But for how long can this continue?

18 April, 2011

Stranger Than Fiction: the Rajneeshees in Oregon

By Aaron
18 April, 2011

I don't know what it is about Oregon, but the state sure has a knack for generating odd pieces of history. For instance: There was D.B. Cooper, who hijacked a passenger jet out of the Portland Airport in 1971 and then parachuted into oblivion with $200,000, never to be seen again. The state's first newspaper was named the "Flumgudgeon Gazette" and was written out longhand by a man named Philosopher Pickett (aka The Curltail Coon). The Japanese had the temerity to attack the Oregon Coast in 1942. Tonya Harding (The Pride of Oregon City) and her crew tried their damndest to keep Nancy Kerrigan out of the 1994 Winter Olympics, going so far as to knee-cap poor Nancy. And despite making his name on the dusty streets of Tombstone, Dodge City, and Prescott, Virgil Earp (brother of Wyatt, and played by Sam Elliot in Tombstone) is, for some reason, buried in Portland's Riverview Cemetery.

Not a bad tourist brochure there if you ask me.

And then there was Bhagwan Shree Rajneesh, an Indian guru who was driven out of India for his views on sex and spirituality, as well as for tax fraud, and who wound up in the hinterlands of Central Oregon. Incidentally, you know you've found yourself a quirky religion when it's too strange even for India. Anyway, in 1981, Rajneesh made his way to the remote town of Antelope, Oregon, where he bought a 65,000 acre ranch and 93 Rolls-Royce sedans, attracted thousands of disciples to his commune, and then proceeded to go slowly insane. His stint in the United States came to an end when, in 1985, he was deported for his involvement in attempted murders and the largest bio-terrorism case in U.S. history. He returned to India and died at his ashram in Pune five years later.

Now, Portland's Oregonian newspaper has unveiled a treasure trove of additional information and stories about the Rajneesh saga, including original documents, video, and more. As the teaser says, this is a tale that's stranger than fiction, which is sure to make for fun reading if you've got a hankering for the peculiar or for contemporary American history.

17 April, 2011

Public Choice & Prostitution

By Aaron
17 April, 2011

I'm sure there's a lesson in Public Choice economics lurking here, and certainly one seldom seen in the United States:

(The Korea Times) Protest against anti-prostitution law: Prostitutes and their pimps stage a protest to call for the abolition of the Special Law on Prostitution in front of Times Square in Yeongdeungpo, Seoul, Thursday. They claimed the law threatens their livelihood

(h/t: The Marmots Hole)

08 April, 2011

On The Great Stagnation

By Aaron
08 April, 2011

A couple months back, damn near every corner of the American politics/economic blogosphere – from left to right and all points in between – seemed to be discussing Tyler Cowen’s short new book The Great Stagnation, published only in e-book form (and costing only $5.20). Being, as usual, a bit late to the party, I only this week managed to get around to reading Cowen’s book. ‘Tis a pity I waited so long.

Cowen, a professor of economics at George Mason University and a blogger on all topics at the excellent Marginal Revolution, is nominally a libertarian (he details his philosophical development here) but he has consistently shown himself willing to challenge any and all orthodoxies. The Great Stagnation is no exception to this tendency, scolding both the left- and right-wings of American politics with equal vigor for their insistence on adhering to worn-out dogmas. The left, argues Cowen, believes that the United States can simply redistribute its way to greater prosperity, while the right too often insists that tax cuts alone are the panacea for all that ails the nation. Neither side seems willing to acknowledge that government cannot be the same creature in a world of low economic growth as it was during the days of high economic growth.

But, to back up...

From about 1870-1970, the world economy exploded thanks to what Cowen calls an abundance of “low-hanging fruit” – that is, incredible advances in transportation, communication, sanitation, health care, etc., which brought enormous and rapid increases in productivity and thus material well-being for millions of people. These technologies were further augmented in the United States by an abundance of cheap or free land (often, yes, stolen from Native Americans) and a mass inflow of immigrants.

Trouble is, sometime in the early 1970s, the rate of technological advance slowed. Cowen points out that the 1969 moon landing was initially seen as the gateway to a new era of technological advances, but in fact the event may have marked the pinnacle of a previous era that was then coming to a close. Importantly, Cowen does not argue that we are slipping backward, but rather that our economies are growing at a much slower rate than in the past.

Unfortunately, human expectations – about lifestyles, government functions, etc. – were strongly shaped by the earlier period of abundant low-hanging fruit and economic growth rates of 3% a year, for years on end. But what happens when the economy only grows at 1% a year? Well, not surprisingly, when you behave as though you’re richer than you are, you will eventually run out of money and into trouble – which is exactly what Cowen sees happening. In fact, sorting through the many suggested causes of this latest financial crisis, Cowen sums it up thus: “We thought we were richer than we were.”

Cowen’s overarching attitude, however, is far from defeatist. He does not argue that technological advance has permanently vanished, much less that humans are destined to slide backward into a stone age existence. Indeed, Cowen sees much potential growth to be had in the areas of education, health care technology, and the internet (which, he argues, has thus far had very little net impact on economic growth). For now, though, Cowen suggests that we'd all do well to prepare ourselves for a recession that may last longer than anything most of us have yet experienced.

In addition to being supremely insightful, Cowen's book sports the virtue of brevity. It reads like an extended, but well-sourced, newspaper editorial - free of jargon and equations - and I consumed it over the span of two weekend breakfasts. Apparently, such conciseness was planned: according to Cowen (in this Econtalk conversation on The Great Stagnation), he intended the book to follow in the footsteps of great pamphleteers like Thomas Paine.

Quite simply, put the The Great Stagnation at the top of your reading list.

Caplan's 40 Years of Wisdom

By Aaron

Happy birthday to economist Bryan Caplan who recently turned 40 years old. To commemorate the event, Caplan has published a list of 40 things - relating to economics, philosophy, politics and life - that he has learned in his first four decades on this earth. As with the bulk of Caplan's writing, this post is well worth your time, so read the whole list for yourself.

06 April, 2011

Korean Women, Culture and Discrimination

By Aaron
06 April, 2011

In his latest column for the Pittsburgh Tribune-Review, Don Boudreaux takes up the challenge of evaluating culture as an economic determinant. Many economists - indeed, many good economists - shy away from culture as an explanatory variable, seeing it as the last, nebulous resort of shoddy scholarship. As Boudreaux writes, however, nebulous does not equal unimportant:

Now, "culture" itself can be a vague and gauzy term. It is difficult to quantify, measure and observe. Even defining it is a challenge. So economists resist including culture in their explanations of how economies work. This resistance is understandable, for it's tempting for lazy scholars to use culture as a generic explanation for any economic fact that isn't easily understood by using the tools of basic economics.

Nevertheless, the fact that a phenomenon is impossible to quantify does not mean that that phenomenon doesn't significantly influence human affairs. If culture does play a role in human society, we economists must include it in our theories.

Only a few hours after reading Boudreaux's piece, I came across this small item in the Korea Times, which reports - and I know this'll shock your pants off - that sexual discrimination is rampant in Korean offices.

In the case of women, the largest portion, or 35 percent, felt discriminated against for being tasked to do trifling jobs, such as making coffee.

Other degrading duties included pouring drinks at office gatherings (25 percent), being subjected to remarks on appearance (24 percent), followed by discrimination on salaries and restricted vacation days.

I nodded knowingly, agreeing that discrimination is a real problem in Korean offices. But then I remembered writing, just last week (in reference to Walmart discrimination Supreme Court case), that discrimination is a charge often levied but rarely substantiated. And I still believe this to be generally true. After all, in order to truly prove discrimination we would have to be mind-readers, capable of knowing why a person hired a man rather than a woman, an Asian over a white person, or a young man before an older man.

Having worked in Korea for the better part of a decade, however, I must admit that while the lot of women in Korea has improved greatly in recent generations, a large portion of the local female talent is wasted. The intelligence, creativity, and motivation of Korean women too often simply rot on the vine.

As I wrote last week, discrimination tends to occur less when the cost of engaging in it is higher. Thus, if Korean employers are indeed discriminating against their female employees, we must conclude that either A) they suffer no cost as a result of their actions, or B) the cost of not "discriminating" is higher. Or, as I suspect, the answer involves a bit of both.

First, the latter: Korean culture - especially business culture - is traditionally patriarchal, and it isn't easy to be the boss who bucks this trend and brings a female into the clubby male world of corporate Korea. Whether you're a chauvinistic jackass or not, if your customers are men who like playing golf and drinking to excess at the local hostess bars, you might think twice about putting a female on that sales account. That is, the cost of being egalitarian and not discriminating against your female sales reps will likely put your company at a disadvantage.

We must also ask, however, if Korean firms face the necessary incentives to put their female workers to the most productive use? As Korea rose from the rubble of colonialism and the Korean War, the government largely protected the domestic market. Korean firms were thus shielded from the true winds of competition and, as a result, had less incentive to exploit every last ounce of available talent. As the Korean market continues to open, however, and as Korean firms compete more in overseas markets, I suspect that women will find an ever-more welcoming environment for their talents. One test of this theory would be to compare the working conditions and job descriptions of women at Korean firms (particularly small, local companies) with those at large, foreign firms.

Finally, Korean culture continues to shape the expectations of women and the companies who employ them. Traditionally, Korean women quit their jobs when they marry or, at the latest, when they give birth to their first child. For Korean companies, then, it thus makes little sense to devote scarce resources to training workers who are virtually guaranteed to leave within five years. Far better to invest in those (male) workers who are likely to be with you for the long haul.

These considerations - who Korean businessmen prefer to deal with, an underestimation of female talent, and the role of mothers - all fall under the "culture" category about which Boudreaux wrote. We may not be able to quantify traditions, sentiments and prejudice, but we'd be foolish to deny their influence.

So does discrimination exist in Korea? Sure it does, although it's not quite as simple as it seems at first glance. Whose fault is it? Well, everyone's and no one's. And while it's nice to think that we could waive our magic governmental wand and simply make such inequality disappear, no legislation will erase thousands of years of evolved norms and traditions. As Boudreaux writes, culture may not explain everything, but it does matter - a lot.

05 April, 2011

Post Park, Ergo Propter Park

By Aaron
05 April, 2011

As North Korea watchers know plenty well, Kim Jong-il likes to tour the countryside giving "on-the-spot guidance" to workers. Kim is qualified to dole out such advice because, well, he's an expert in everything. Among other things, he knows the best way to plant rice, to harvest cotton, to drive a train, and to make rubber boots. He is, in short, the rennaissance man.

Of course, people outside North Korea find this laughable - even to the point of making websites which lampoon Kim's guidance tours. You simply don't have to be a genius to know that Kim Jong-il has little to contribute to a successful business operation - especially one that is not his own. While Kim might be able to teach the North Korean commonfolk a thing or two about keeping a grip on one's political power while at the same time ruining a nation's economy, he cannot possibly have anything useful to say on the subject of, say, pig breeding.

And yet, far too many people are willing to ascribe the same limitless talents and knowledge to Park Chung-hee, who ruled Korea for nearly twenty years in the 1960s and 1970s. In his memoir, Policy-making on the Front Lines, Chung-yum Kim (who, to be fair, was a leading figure in economic policy-making during the Park era) writes of Park in language that epitomizes this view:

...after a while I found myself thinking of [Park Chung-hee], of all things, as a sort of conductor of an orchestra - with his helicopter as his baton. Up and down he would go, this time with a team of geologists to figure out what was wrong with some mountainside that had crumbled on our tunnel-makers, the next time with a couple of United Nations hydrologists to figure out how our own surveyors had got some water table wrong. If he didn't know the answer on Tuesday, Mr. Park was back with it on Thursday or Saturday.

Even among his many critics, who argue that Park was a brutal despot, the common view is that, yes, Park was responsible for Korea's economic miracle but the price was simply too high. There is, in short, an unending desire to believe in, as economist William Easterly (as summarized by Christopher Faris) puts it, "the abiding power and potential for a benevolent technocrat to guide countries through transition; to protect the nation’s economic well-being from the foibles of the electoral process; or in the cultural appropriateness of more autocratic leadership in some countries at certain points in their history." As Easterly never tires of arguing, however, "the theory of growth-boosting ‘benevolent autocrats’ (think China’s economic boom) is, at best, not proven and at worst a compelling but flawed idea to which development practitioners hopefully cling – to everyone’s detriment."

Why, then, despite a lack of evidence, do people still cling to the idea of benevolent autocrats? Easterly points to several cognitive biases that serve to keep the myth alive:

  • the problem of reversing conditional probability...[all recent growth stories are autocracies, therefore all autocracies lead to growth];
  • confirmation bias: despite there being a roughly equal number of stagnant autocracies and high-growth autocracies, there are probably 12 times as many academic papers on the successes than the failures;
  • availability bias: there's more data available on China than Zimbabwe;
  • leadership bias: psychologically, we tend to impute the success or failure of a group to the leader, regardless of contrary evidence;
  • narrative bias: it's easier to tell and believe narratives about heroic individual leaders than about complex self-reinforcing political and economic systems;

  • We rightly laugh at Kim Jong-il's useless tutorials because his nation's economy is in shambles. By contrast, we heap praise on Park Chung-hee largely because South Korea has grown into one of the world's largest economies, even as Park's public persona presaged that of Kim Jong-il in certain respects. But, of course, correlation is not causation: simply because South Korea grew rapidly during Park's reign does not prove that Park deserves the kudos for such growth. In fact, as some writers have pointed out, many of Park's policies were either growth-retarding or laid the groundwork for later disasters (e.g. the 1997-98 financial crisis).

    Where, then, is the proper place of Park Chung-hee in the history of South Korea's economic development? He was clearly an autocrat, and South Korea certainly experienced rapid growth during his tenure, so something obviously went right. What was it? And how much credit does Park deserve? And most importantly: what forces and/or groups sufficiently constrained Park's power so that the nation's economy could get moving?

    I'm not convinced that anyone has adequately answered these questions, but if you have reading suggestions, please send them my way. Otherwise, prepare to suffer through my clumsy attempts to answer them for myself around here.

    01 April, 2011

    Weekly Audio Goodness

    By Aaron
    01 April, 2011

    A few highlights from my week of podcast listening, for those of you looking for some company on the treadmill:

    • In the Cato Institute video above (or here), Scott Linsecome, Don Boudreaux, and Dan Ikenson discuss the numerous myths and fallacies surrounding discussions of trade deficits and surpluses.
    • In a must-see/listen interview, economist Dan Mitchell interviews Dambisa Moyo about her new book "How the West was Lost" on C-Span's After Words.
    • On this week's Econtalk, Russ Roberts interviews Vincent Reinhart on Bear Stearns, Lehman Brothers and the Financial Crisis.
    • As United States federal spending increases, so too does the concentration of power and influence of those in Washington, DC. The result, as the boys at Coffee & Markets discuss, has been boom times in Washington, even as the rest of America continues to stumble through tough economic times.
    • Business- and sportswriter Jonah Keri discusses his new book "The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team from Worst to First" on the Harvard Business Review's Ideacast.
    • In a lecture from last summer, here's Sheldon Richman of the Foundation for Economic Education on the history of mutual aid societies in the United States prior to the establishment of the welfare state.
    • Back when George W. Bush took the United States into war with Afghanistan and Iraq, he was met with frequent and vociferous anti-war protests. Over on Bloggingheads, Robert Wright and Matt Welch wonder where the anti-war movement has gone now that the war in Libya has kicked off.
    • Speaking of Libya, here's Christopher Preble on what President Obama should have said in his speech on the matter earlier this week.

    The Women of Walmart

    By Aaron

    Many words have been used over the years to describe Walmart - evil, imperious, homogenizing, exploitative - but I've yet to hear anyone accuse the world's largest public company of being stupid. Morons and nincompoops, after all, don't typically generate more than $14 billion in annual profits, as Walmart did in 2009. Say what you will about Walmart, then, but the company's management doesn't appear to want for brainpower.

    And this is what makes a class action lawsuit, alleging formalized gender discrimination by Walmart and currently being heard by the United States Supreme Court, so puzzling. The plaintiff group includes approximately 500,000 women and the damages could be in the billions of dollars if the court sides with the women. The plantiffs' argument, however, as near as I can tell, is that Walmart, despite being the most efficient, cost conscious company the world has ever seen, habitually and intentionally undervalues its female employees even when their qualifications are equal to or better than those of their male colleagues.

    Most discussions of discrimination focus on the costs borne by the alleged victims, while ignoring the costs to those doing the discriminating. Discrimination, however, is not free, and where the costs of discrimination are higher we can expect see less of it. The American retail industry, for example, is extraordinarily competitive, with companies like Walmart and Target fighting for efficiencies that save, on any one item, pennies. Thus, if Walmart makes a habit of passing over its best managerial talent simply because the person has a vagina, the company becomes less competitive. This is not to say that, at some place and time in the Walmart universe, a manager has never promoted a man over a woman on the basis of chromosomes, but it strains credibility to suggest that the company has an official corporate policy that promotes such shoddy HR practices. Justice Anthony Kennedy, evidently as suspicious as I am, pursued just this point in his questioning of the plaintiff's lawyer:

    "Your complaint faces in two directions. Number one, you said this is a culture where Arkansas knows, the headquarters knows, everything that's going on," he said. "Then in the next breath, you say, well, now these supervisors have too much discretion. It seems to me there's an inconsistency there."

    The larger problem with this sort of case - exemplified by the sheer number of plaintiffs - is that it asks society to categorize people into groups rather than treating them as the individuals that they are. Smart companies - and Walmart, by all available evidence, is that - do not hire men and women. Rather, they hire individuals whose talents and qualities are best suited to the position in question at any given moment. Indeed, the women in this case worked in over 3,400 different stores and 170 job classifications. To say, then, that a "man makes more than a woman for doing the same work" at Walmart is a vacuous statement, as jobs are not mere generic sockets into which humans are interchangeably plugged.

    On a related note, CNN reported last month that women make up only 5% of the 53,000 members in the Air Line Pilots Association, with about 450 women serving as airline captains worldwide. Surely this is indicative of rampant discrimination by the likes of Delta, Cathay Pacific, Lufthansa, and the like. So where's the outraged, class action lawsuit? The glib answer is that, as one wit recently pointed out, no one wants to fly an airline whose motto is "Equality First." The longer answer, however, is airlines do not hire men or women, but rather competent pilots, whatever their gender. That more men than women happen to be pilots does not by itself indicate discrimination on the part of airlines. Might it not also be possible that discrimination does not explain the great number of personnel decisions in the Walmart case?