Worth reading on increasing retractions

From the Atlantic, a well-researched text on retractions:
by one estimate, from 2001 to 2010, the annual rate of retractions by academic journals increased by a factor of 11 (adjusting for increases in published literature, and excluding articles by repeat offenders) [2]. This surge raises an obvious question: Are retractions increasing because errors and other misdeeds are becoming more common, or because research is now scrutinized more closely?
The short answer: both.

How does economists feel about the effective altruism movement?

The effective altruism movement is growing. Here is Alex Tabarrok reviewing MacAskill's "Doing Good Better", and here is Eva Vivalt urging economists to speak at the Effective Altruism Global summits.

So how does economists feel about effective altruism?
While economists like efficiency, they are less sure about altruism: For one thing, does it even exist? Or is it just long-run selfishness in the form of reciprocity, signaling or reputational concern? If one or more of these explanations of altruism are relevant, it is far from obvious what that means for effective altruism. Regardless of which, is altruism necessarily desirable?

On the other hand: If effective altruism simply means "doing good better", one could argue that this is exactly what welfare economics has been analyzing for decades: take a normative criterion (such as utility maximization, perhaps with some distributional restrictions) and maximize it subject to resource constraints.

To avoid having to define what "doing good" entails, economists often use less controversial normative criteria, such as the Pareto criterion or the Kaldor-Hick criterion, and look for win-win situations. But if you are doing good for someone else and for yourself at the same time, it is hardly altruism, is it?

Somewhat along these lines, I've been working on a paper that argues that under broad circumstances, investing is doing more good than giving.*
Tabarrok concludes his review as follows:
What is needed is a cultural change so that people become proud of how they give and not just how much they give.
I am tentatively leaning towards the conclusion that it would be even better if we take pride in how we trade with and invest in poor countries, rather than how we give.
Perhaps the effective altruism movement should be called the effective world improvement movement?

*The paper is called "Adam Smith vs Jeffrey Sachs: Can Social Norms in Rich Countries Explain Why Other Countries Remain Poor?" and was presented in Stockholm in june (no pdf exist yet). It is currently under revision, and a revised version will be presented at the SEA meetings in New Orleans in november.

My presentation on Hayekian Welfare States in Santander, Spain

Last week I was one of several teachers at a summer course on Economic freedom held in Santander, Spain (link). In addition to enjoying inspiring talks by giants such as Robert Lawson and Erich Weede, I gave a presentation titled
Are there Hayekian Welfare States? Why Some Countries with Big Government also Have High Economic Freedom
based on an idea I recently sketched in Econ Journal Watch. Hopefully, a working paper version based on the talk will appear after the summer. Here are the slides:

The QoG-institute solves the causality problems for you by sorting variables into three neat categories...

The Quality of Government Institute has a really nice data visualization tool, similar to gapminder. It is really useful to get a quick look att cross country correlations, check for outliers, and to see how the pattern changes over time - and create scatter plots for lectures et cetera.

I was a bit surprised to see that all variables are accessed through one of three categories: definitions of "Quality of government (QoG)", causes of QoG and consequences of QoG.

Who needs identification strategies now?

A best-practice frontier in the efficiency equity space?

Torben M. Andersen has a new book (co-edited with Michael Bergman and Svend E. Hougaard Jensen), and an official government report (SOU 2015:53, bilaga 4 till Långtidsutredningen 2015) on the welfare state and economic performance. A particularly interesting idea is that Norway, Switzerland and the US are on the best-practice frontier in the efficiency equity space, suggesting that there is indeed some kind of Okun trade-off (pdf), but also suggesting that it is not very steep.

Referring to figure 2.1 above, Andersen writes in the government report:
The analysis shows that
i) the elasticity of the frontier is close to minus one, i.e. a one percent lower equality is associated with a one percent higher income level,
ii) the slope of the frontier has not become more steep over the sample period (1980–2010), [...] and
iii) for the countries at or close to the frontier (best practice countries), there is a significant negative effect of taxes on both income and inequality, as predicted by standard theory.
The idea that a line connecting Norway, Switzerland and the US can be thought of as an efficiency frontier is interesting, but (in my view) misleading. By not accounting for the role of social trust, the trade-off seems less steep than it most likely is.
We know that countries with higher social trust tend to have higher economic growth (Algan and Cahuc, 2010; Dincer and Uslaner, 2010). A link has also been established from social trust to welfare state size (Bergh and Bjørnskov, 2011; Bjørnskov and Svendsen, 2012). Most importantly, social trust seems to cause equality both via the welfare state and directly (ie. when controlling for welfare state spending) (Bergh and Bjørnskov 2014).

The upshot of these findings (not cited by Andersen) - is that the countries on the frontier are improper counterfactuals for each other. A comparison between any Nordic country and the US is a comparison of a high-trust country to a medium-trust country. As a result, the efficiency-equity trade-off will appear relatively flat.
In reality, however, we simply do not know how USA would perform with tax revenue around 50 percent of GDP, as was the case for Sweden in the 1980s and still is the case in Denmark. Similarly, we do not know how a country with Nordic trust levels would perform with a public sector of US-size. Inference regarding the efficiency-equity trade-off should be based on cross-country evidence that control for trust. As a simple alternative we could draw the frontier between the US and a country with similar trust levels and higher equality, such as Austria or Germany (all with trust around 40 percent).

In any case: If we accept that Figure 2.1 can be thought of as a best practice frontier, the most striking pattern is arguably that most countries exhibit strikingly high levels of inefficiency.
---
Algan, Y., and Cahuc, P. (2010). Inherited Trust and Growth. American Economic Review, 2060-2092.
Bergh, A., and Bjørnskov, C. (2011). Historical trust levels predict the current size of the welfare state. Kyklos, 64, 1-19.
Bergh, A. and Bjørnskov, C. (2014). Trust, welfare states and income equality: Sorting out the causality. European Journal of Political Economy 35:183-199.
Bjørnskov, C., and Svendsen, G. (2012). Does social trust determine the size of the welfare state? Evidence using historical identification. Public Choice, 1-18.
Dincer, O.C., and Uslaner, E.M. (2010). Trust and growth. Public Choice, 142, 59-67.

Christian Bjørnskov: Does foreign aid work?

Here is an excellent summary of the aid-growth debate, by Christian Bjørnskov. The conclusion:
The depressing conclusion of more than 40 years of research is therefore that although some types of aid work under some types of conditions, it does not do what is was intended to do: help poor countries grow faster and lift people out of poverty. At best, our financial aid to poor countries can help them overcome disasters in the same way as US aid helped Europe find its footing again after World War II.
I agree with this conclusion - except I don't find the conclusion depressing: Knowing that aid does not help poor countries grow faster is useful information, and it should make it easier to focus on things that matter more.
btw, don't miss the comments - Christian actually gets the last word (so far at least...) by asking the following:
I don't think any of us would believe research into the effects of drugs if the researchers were paid by the pharma industry. Then why do so many people put so much faith in research [on the effects of aid] done by people paid by the donor community?

Peak experiment and the revenge of neo-classical economics?

Two weeks ago, I attended a (very good) workshop on experimental political science. The keynote, given by Neil Malhotra, was titled
Are We At Peak Experiment? Confronting Publication Bias and Research Transparency in Political Science Experiments
The talk adressed publication bias, the need for replication studies and similar issues - but he avoided one critical issue: Fraud.
Economists - the old school, neoclassical type - talk of moral hazard problems, and assume that people are tempted to cheat, especially when stakes are high and the probability of being caught is low. Recommendations to minimize these problems typically include transparency, checks and punishment. But when transparency is necessarily low due to information asymmetries, and when checks and punishment are costly, there will be some cheating.
This reasoning is completely standard when is comes to, for example, tax evasion, the take-up of welfare benefits or corruption. But it also applies to economists themselves - and in this case, to experimental political scientists LaCour and Green, authors of the now retracted study
LaCour, Michael J. and Donald P. Green. 2014. When contact changes minds: An experiment on transmission of support for gay equality. Science 346(6215): 1366-1369.
Research fraud in connection with experiments has already been exposed in psychology several times: Diederik Stapel and Marc Hauser. (Have there been any major scandals in experimental economics yet?)
So, what's next? I see three scenarios:
Worst case scenario:
  • More fraud is discovered.
  • Credibility of experimental research falls.
  • We were indeed at peak experiment.
More likely scenario:
  • The discovery of some fraud cases has a disciplining effect.
  • Replications are encouraged and rewarded much more than today.
  • Perhaps it is finally time for Journal of Robustness Analysis and Replication Studies?
What one could hope for:
  • A separation of experiment design and experiment implementation.
  • Less focus on "statistical significance"
  • Some acknowledgement of the upside of doing research with data that anyone can easily download and verify
  • Less whining about neoclassical economics being unable to predict human behavior

Per Bylund reviews Sweden and the revival of the capitalist welfare state

Per Bylund has a review of Sweden and the revival of the capitalist welfare state in The Quarterly Journal of Austrian Economics (entire issue)18(1). It is in general friendly, but with some interesting remarks that I will for sure come back to.

Early on:
Overall, the book is a great and informative read, and it provides a fact-based and balanced view of the world-renowned Swedish welfare state, its development and evolution. Yet while the vast amount of supportive data, presented throughout the book’s chapters as well as in five appendices, is a major strength, it is also the book’s main shortcoming: Bergh follows the data, but refrains from attempting explanations that do not follow directly from them. As a consequence, many a stone is left unturned.
and the end:
Bergh truly does a great job at dispelling myths about the Swedish welfare state, its rise and presumed effects and achievements. He is perhaps too dedicated to the institutional explanation and a little too reluctant to speculate on possible explanations, but there should be no doubt that this book is a very nice contribution to our understanding of the reality of the welfare state in contrast to progressive mythology. The book is money well spent for anyone interested in contemporary politics and political economy.

What are the problems with ethical consumerism? A comment on Terry Hathaway

At the LSE-blog (politics and policy), Terry Hathaway argues that ethical consumption is “dangerous to the values ethical consumers seek to promote".

According to Hathaway “[t]he seduction of ethical consumption comes with the idea that making purchasing choices is akin to voting", and he clearly dislikes Friedman’s idea that acting on the market is similar to voting in a democracy.

Sure, there are obvious differences between buying stuff and voting in a democracy. But when Hathaway goes on to explain why ethical consumerism is different from voting, almost all of his examples are cases when ethical consumerism is strikingly similar to voting:

“ethical consumption is akin to voting in a system where many of the desired goods are not available for purchase"

Correct, but so is voting is a democratic election. Many positions that a particular voter would like to vote for may not be supported by any candidate or party.

“A consumer may buy a hoover that was made with limited pollution seeking to ensure clean air for instance. However, they will not realise their interest unless everyone else makes similar choices."

Correct, but this collective action problem applies to voting as well. The policies I vote for will be implemented only if enough voters vote the way I do.

“Democracy is not a system whereby everyone makes their own choice and the outcome for society follows from these individual choices. Democracy is where the views of both majorities and minorities are aggregated (with, ideally, conflicts between different interests being resolved in the process of this aggregation) in a system of collective decision making"

Actually, an aggregation mechanism will not resolve conflicts between different aspects. Rather it will generate a collective decision based on individual choices. Furthermore, we know from social choice research (Arrow’s theorem) that the aggregation rule may very well result in paradoxical or seemingly irrational outcomes.

I agree, however, that a free debate in a democratic society will ideally resolve conflicts between different interests, and generate better decisions. Ethical consumerism may well be part of such a debate.

“Even the most hyper-vigilant, well-informed shopper cannot know everything […] the consumer must buy in partial ignorance"

Again, correct. And again it applies to voters as well. We buy, we vote, we simply act in partial ignorance.

“there is a degree of ambiguity in just quite what or who you are voting for by purchasing something that complicates the idea further. For example, buying a Fairtrade Nestle KitKat from an Asda works as support for Fairtrade, support for Nestle, support for the particular product and support for Asda […] a consumer’s “vote" for a particular product may support one of the consumer’s values, but it could also equally (and simultaneously) support a value they oppose"

Again, correct. And again, the same goes for voters in a representative democracy.

“if consumer are the ones determining the market then corporations are effectively non-actors (or heavily-bounded actors) who do not take decisions in terms of production, marketing and retail in line with their financial bottom line. This discourse thus presents a bizarre inversion of reality, whereby consumers are collectively responsible for corporate decisions, rather than corporations themselves"

This, I believe, is not correct. Consumers determine only demand, market outcomes are determined by demand and supply. Of course, one can on ethical grounds question both what (some) consumers are willing to pay for and what (some) suppliers are willing to sell. The same goes for politicians and voters.

“purchasing as voting is a weak feedback mechanism at best and there are other actors who are able to influence the system."

Correct again, but correct for both ethical consumerism and democratic voting.

In my opinion, the conclusion that ethical consumerism is dangerous to the values ethical consumers seek to promote, is still correct. The reason, however, is the general pattern that good intentions sometimes have unintended consequences.

I believe that Hathaway is right about the reason for such unintended consequences. As he nicely puts it, we all act in partial ignorance.