On wealth inequality and growth

Is wealth inequality bad for growth? That depends on its origins, according to a new paper by Sutirtha Bagchia and Jan Svejnarb:
The abstract:
A fundamental question in social sciences relates to the effect of wealth inequality on economic growth. Yet, in tackling the question, researchers have had to use income as a proxy for wealth. We derive a global measure of wealth inequality from Forbes magazine's listing of billionaires and compare its effect on growth to the effects of income inequality and poverty. Our results suggest that wealth inequality has a negative relationship with economic growth, but when we control for the fact that some billionaires acquired wealth through political connections, the relationship between politically connected wealth inequality and economic growth is negative, while politically unconnected wealth inequality, income inequality, and initial poverty have no significant relationship.

Graeme Leach: Forget Nordic exceptionalism: Scandinavia grew wealthy despite big government

The Nordic Model has become the intellectual battleground over which the big versus small state war has played out in the twenty-first century. Scandinavian countries have seemingly perplexed free market economists with their ability to achieve world-class competitiveness rankings and high per capita incomes, while at the same time operating very high tax and public spending levels as a proportion of GDP. But a close look at the evidence shows that the Nordic economies aren’t exceptional at all. They don’t defy the economic laws of gravity, they confirm them. When the size of government really started to grow in the 1960s and 1970s, there was economic stagnation. [...]
These economies offset the negative effects of large governments by applying market-friendly policies in other areas, such as trade openness. The Scandinavian economies have relatively high levels of economic freedom, and on some dimensions of economic freedom actually score higher than the USA.
Small homogenous countries, with high levels of trust, can get away with – up to a point – larger welfare states in a way that larger economies cannot. Trust also reduces “transaction costs" and therefore encourages greater economic activity. So powerful is the effect that some studies show that the positive effect of trust outweighs the negative effect of big government on growth. The danger, of course, is that the rise of the welfare state and a dependency culture undermines trust, makes the welfare state increasingly inefficient, and reduces growth prospects all at the same time.
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"economics research is usually not replicable"

This new working paper by Andrew Chang and Phillip Li has some really disheartening - or even depressing - conclusions:
Abstract We attempt to replicate 67 papers published in 13 well-regarded economics journals using author-provided replication files that include both data and code. Some journals in our sample require data and code replication files, and other journals do not require such files. Aside from 6 papers that use confidential data, we obtain data and code replication files for 29 of 35 papers (83%) that are required to provide such files as a condition of publication, compared to 11 of 26 papers (42%) that are not required to provide data and code replication files. We successfully replicate the key qualitative result of 22 of 67 papers (33%) without contacting the authors. Excluding the 6 papers that use confidential data and the 2 papers that use software we do not possess, we replicate 29 of 59 papers (49%) with assistance from the authors. Because we are able to replicate less than half of the papers in our sample even with help from the authors, we assert that economics research is usually not replicable. We conclude with recommendations on improving replication of economics research.


Wanted: Google scholar embedding

Citations are increasingly being counted in academia, and it is becoming increasingly common to put for example google scholar citation counts on your CV. The weird thing is that to get something like this on a webpage...
...I had to copy my citation count from my google scholar page , which means that it is probably (hopefully...) out of date when you read this.
A little research revealed that apparently it can be done using "R, scholar, ggplot2 and cron", but surely someone at google could let users do it simply by pasting some code the way it is done with youtube videos and whatever.

The fact that this yet does not exist is a bit worrying, but much more worrying is the fact that I seem to be almost the only one looking for an easy way to "embed google scholar citations" - googling this results in exactly one hit [oct 4, 2015].

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?