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I like to imagine Jesus has tried a second coming literally hundreds of times and it just keeps getting thwarted.
I like to imagine Jesus has tried a second coming literally hundreds of times and it just keeps getting thwarted.
Cities have two important properties: they are enormously consequential for people’s economic prosperity, and they are very sticky. That stickiness is twofold: cities do not change their shape rapidly in response to changing economic or technological opportunities (consider, e.g., Hornbeck and Keniston on the positive effects of the Great Fire of Boston), and people are hesitant to leave their existing non-economic social network (Deryagina et al show that Katrina victims, a third of whom never return to New Orleans, are materially better off as soon as three years after the hurricane, earning more and living in less expensive cities; Shoag and Carollo find that Japanese-Americans randomly placed in internment camps in poor areas during World War 2 see lower incomes and children’s educational outcomes even many years later).
A lot of recent work in urban economics suggests that the stickiness of cities is getting worse, locking path dependent effects in with even more vigor. A tour-de-force by Shoag and Ganong documents that income convergence across cities in the US has slowed since the 1970s, that this only happened in cities with restrictive zoning rules, and that the primary effect has been that as land use restrictions make housing prices elastic to income, working class folks no longer move from poor to rich cities because the cost of housing makes such a move undesirable. Indeed, they suggest a substantial part of growing income inequality, in line with work by Matt Rognlie and others, is due to the fact that owners of land have used political means to capitalize productivity gains into their existing, tax-advantaged asset.
Now, one part of urban stickiness over time may simply be reflecting that certain locations are very productive, that they have a large and valuable installed base of tangible and intangible assets that make their city run well, and hence we shouldn’t be surprised to see cities retain their prominence and nature over time. So today, let’s discuss a new paper by Michaels and Rauch which uses a fantastic historical case to investigate this debate: the rise and fall of the Roman Empire.
The Romans famously conquered Gaul – today’s France – under Caesar, and Britain in stages up through Hadrian (and yes, Mary Beard’s SPQR is worthwhile summer reading; the fact that Nassim Taleb and her do not get along makes it even more self-recommending!). Roman cities popped up across these regions, until the 5th century invasions wiped out Roman control. In Britain, for all practical purposes the entire economic network faded away: cities hollowed out, trade came to a stop, and imports from outside Britain and Roman coin are near nonexistent in the archaeological record for the next century and a half. In France, the network was not so cleanly broken, with Christian bishoprics rising in many of the old Roman towns.
Here is the amazing fact: today, 16 of France’s 20 largest cities are located on or near a Roman town, while only 2 of Britain’s 20 largest are. This difference existed even back in the Middle Ages. So who cares? Well, Britain’s cities in the middle ages are two and a half times more likely to have coastal access than France’s cities, so that in 1700, when sea trade was hugely important, 56% of urban French lived in towns with sea access while 87% of urban Brits did. This is even though, in both countries, cities with sea access grew faster and huge sums of money were put into building artificial canals. Even at a very local level, the France/Britain distinction holds: when Roman cities were within 25km of the ocean or a navigable river, they tended not to move in France, while in Britain they tended to reappear nearer to the water. The fundamental factor for the shift in both places was that developments in shipbuilding in the early middle ages made the sea much more suitable for trade and military transport than the famous Roman Roads which previously played that role.
Now the question, of course, is what drove the path dependence: why didn’t the French simply move to better locations? We know, as in Ganong and Shoag’s paper above, that in the absence of legal restrictions, people move toward more productive places. Indeed, there is a lot of hostility to the idea of path dependence more generally. Consider, for example, the case of the typewriter, which “famously” has its QWERTY form because of an idiosyncracy in the very early days of the typewriter. QWERTY is said to be much less efficient than alternative key layouts like Dvorak. Liebowitz and Margolis put this myth to bed: not only is QWERTY fairly efficient (you can think much faster than you can type for any reasonable key layout), but typewriting companies spent huge amounts of money on training schools and other mechanisms to get secretaries to switch toward the companies’ preferred keyboards. That is, while it can be true that what happened in the past matters, it is also true that there are many ways to coordinate people to shift to a more efficient path if a suitable large productivity improvement exists.
With cities, coordinating on the new productive location is harder. In France, Michaels and Rauch suggest that bishops and the church began playing the role of a provider of public goods, and that the continued provision of public goods in certain formerly-Roman cities led them to grow faster than they otherwise would have. Indeed, Roman cities in France with no bishop show a very similar pattern to Roman cities in Britain: general decline. That sunk costs and non-economic institutional persistence can lead to multiple steady states in urban geography, some of which are strictly worse, has been suggested in smaller scale studies (e.g., Redding et al RESTAT 2011 on Germany’s shift from Berlin to Frankfurt, or the historical work of Engerman and Sokoloff).
I loved this case study, and appreciate the deep dive into history that collecting data on urban locations over this period required. But the implications of this literature broadly are very worrying. Much of the developed world has, over the past forty years, pursued development policies that are very favorable to existing landowners. This has led to stickiness which makes path dependence more important, and reallocation toward more productive uses less likely, both because cities cannot shift their geographic nature and because people can’t move to cities that become more productive. We ought not artificially wind up like Dijon and Chartres in the middle ages, locking our population into locations better suited for the economy of the distant past.
2016 working paper (RePEc IDEAS). Article is forthcoming in Economic Journal. With incredible timing, Michaels and Rauch, alongside two other coauthors, have another working paper called Flooded Cities. Essentially, looking across the globe, there are frequent very damaging floods, occurring every 20 years or so in low-lying areas of cities. And yet, as long as those areas are long settled, people and economic activity simply return to those areas after a flood. Note this is true even in countries without US-style flood insurance programs. The implication is that the stickiness of urban networks, amenities, and so on tends to be very strong, and if anything encouraged by development agencies and governments, yet this stickiness means that we wind up with many urban neighborhoods, and many cities, located in places that are quite dangerous for their residents without any countervailing economic benefit. You will see their paper in action over the next few years: despite some neighborhoods flooding three times in three years, one can bet with confidence that population and economic activity will remain on the floodplains of Houston’s bayou. (And in the meanwhile, ignoring our worries about future economic efficiency, I wish only the best for a safe and quick recovery to friends and colleagues down in Houston!)
A good rule of thumb is that you will want to read any working paper Melissa Dell puts out. Her main interest is the long-run path-dependent effect of historical institutions, with rigorous quantitative investigation of the subtle conditionality of the past. For instance, in her earlier work on Peru (Econometrica, 2010), mine slavery in the colonial era led to fewer hacienda style plantations at the end of the era, which led to less political power without those large landholders in the early democratic era, which led to fewer public goods throughout the 20th century, which led to less education and income today in eras that used to have mine slavery. One way to read this is that local inequality is the past may, through political institutions, be a good thing today! History is not as simple as “inequality is the past causes bad outcomes today” or “extractive institutions in the past cause bad outcomes today” or “colonial economic distortions cause bad outcomes today”. But, contra the branch of historians that don’t like to assign causality to any single factor in any given situation, we don’t need to entirely punt on the effects of specific policies in specific places if we apply careful statistical and theoretical analysis.
Dell’s new paper looks at the cultuurstelsel, a policy the Dutch imposed on Java in the mid-19th century. Essentially, the Netherlands was broke and Java was suitable for sugar, so the Dutch required villages in certain regions to use huge portions of their arable land, and labor effort, to produce sugar for export. They built roads and some rail, as well as sugar factories (now generally long gone), as part of this effort, and the land used for sugar production generally became public village land controlled at the behest of local leaders. This was back in the mid-1800s, so surely it shouldn’t affect anything of substance today?
But it did! Take a look at villages near the old sugar plantations, or that were forced to plant sugar, and you’ll find higher incomes, higher education levels, high school attendance rates even back in the late colonial era, higher population densities, and more workers today in retail and manufacturing. Dell and Olken did some wild data matching using a great database of geographic names collected by the US government to match the historic villages where these sugar plants, and these labor requirements, were located with modern village and town locations. They then constructed “placebo” factories – locations along coastal rivers in sugar growing regions with appropriate topography where a plant could have been located but wasn’t. In particular, as in the famous Salop circle, you won’t locate a factory too close to an existing one, but there are many counterfactual equilibria where we just shift all the factories one way or the other. By comparing the predicted effect of distance from the real factory on outcomes today with the predicted effect of distance from the huge number of hypothetical factories, you can isolate the historic local influence of the real factory from other local features which can’t be controlled for.
Consumption right next to old, long-destroyed factories is 14% higher than even five kilometers away, education is 1.25 years longer on average, electrification, road, and rail density are all substantially higher, and industrial production upstream and downstream from sugar (e.g., farm machinery upstream, and processed foods downstream) are also much more likely to be located in villages with historic factories even if there is no sugar production anymore in that region!
It’s not just the factory and Dutch investments that matter, however. Consider the villages, up to 10 kilometers away, which were forced to grow the raw cane. Their elites took private land for this purpose, and land inequality remains higher in villages that were forced to grow cane compared to villages right next door that were outside the Dutch-imposed boundary. But this public land permitted surplus extraction in an agricultural society which could be used for public goods, like schooling, which would later become important! These villages were much more likely to have schools especially before the 1970s, when public schooling in Indonesia was limited, and today are higher density, richer, more educated, and less agricultural than villages nearby which weren’t forced to grow cane. This all has shades of the long debate on “forward linkages” in agricultural societies, where it is hypothesized that agricultural surplus benefits industrialization by providing the surplus necessary for education and capital to be purchased; see this nice paper by Sam Marden showing linkages of this sort in post-Mao China.
Are you surprised by these results? They fascinate me, honestly. Think through the logic: forced labor (in the surrounding villages) and extractive capital (rail and factories built solely to export a crop in little use domestically) both have positive long-run local effects! They do so by affecting institutions – whether villages have the ability to produce public goods like education – and by affecting incentives – the production of capital used up- and downstream. One can easily imagine cases where forced labor and extractive capital have negative long-run effects, and we have great papers by Daron Acemoglu, Nathan Nunn, Sara Lowes and others on precisely this point. But it is also very easy for societies to get trapped in bad path dependent equilibria, for which outside intervention, even ethically shameful ones, can (perhaps inadvertently) cause useful shifts in incentives and institutions! I recall a visit to Babeldaob, the main island in Palau. During the Japanese colonial period, the island was heavily industrialized as part of Japan’s war machine. These factories were destroyed by the Allies in World War 2. Yet despite their extractive history, a local told me many on the island believe that the industrial development of the region was permanently harmed when those factories were damaged. It seems a bit crazy to mourn the loss of polluting, extractive plants whose whole purpose was to serve a colonial master, but the Palauan may have had some wisdom after all!
2017 Working Paper is here (no RePEc IDEAS version). For more on sugar and institutions, I highly recommend Christian Dippel, Avner Greif and Dan Trefler’s recent paper on Caribbean sugar. The price of sugar fell enormously in the late 19th century, yet wages on islands which lost the ability to productively export sugar rose. Why? Planters in places like Barbados had so much money from their sugar exports that they could manipulate local governance and the police, while planters in places like the Virgin Islands became too poor to do the same. This decreased labor coercion, permitting workers on sugar plantations to work small plots or move to other industries, raising wages in the end. I continue to await Suresh Naidu’s book on labor coercion – it is astounding the extent to which labor markets were distorted historically (see, e.g., Eric Foner on Reconstruction), and in some cases still today, by legal and extralegal restrictions on how workers could move on up.
Read more of this story at Slashdot.
Read more of this story at Slashdot.
Last week, Ars introduced readers to Hajime, the vigilante botnet that infects IoT devices before blackhats can hijack them. A technical analysis published Wednesday reveals for the first time just how much technical acumen went into designing and building the renegade network, which just may be the Internet's most advanced IoT botnet.
As previously reported, Hajime uses the same list of user name and password combinations used by Mirai, the IoT botnet that spawned several record-setting denial-of-service attacks last year. Once Hajime infects an Internet-connected camera, DVR, and other Internet-of-things device, the malware blocks access to four ports known to be the most widely used vectors for infecting IoT devices. It also displays a cryptographically signed message on infected device terminals that describes its creator as "just a white hat, securing some systems."
But unlike the bare-bones functionality found in Mirai, Hajime is a full-featured package that gives the botnet reliability, stealth, and reliance that's largely unparalleled in the IoT landscape. Wednesday's technical analysis, which was written by Pascal Geenens, a researcher at security firm Radware, makes clear that the unknown person or people behind Hajime invested plenty of time and talent.
To say that my law firm’s international trade law team has been busy lately would be like saying the Great Wall of China is long. They have been crazy busy because the United States has gone wild with trade case against Chinese companies and their U.S. importers — and against other countries and their importers as well.
If you import products from China, listen up.
US Importers of Record are liable for antidumping and countervailing duties tied to the product they import. The Importer of Record is the company listed in Block 26 of the U.S. Customs 7501 form.
Under US Antidumping, Countervailing Duty and Customs laws, the Importer of Record must exercise reasonable care in importing products and in filling out Customs forms. The Importer of Record must correctly state a product’s country of origin and also whether Antidumping and Countervailing duties apply to the imported product. A knowingly false statement on a Customs form constitutes criminal fraud.
If AD or CVD rates go up in a subsequent review investigation, the Importer of Record is retroactively liable for the difference, plus interest. Retroactive liability for AD and CVD cases is a particular problem involving goods imported from China because the United States treats China as a non-market economy country. Since China is a non-market economy country, the U.S. Commerce Department refuses to use actual China prices and costs to determine whether a Chinese company is dumping. All this makes it nearly impossible for U.S. importers to know whether it is bringing in dumped goods. See Don’t Get Crushed When You Import.
In the last week or so, the Trump trade war has escalated big time with new U.S. antidumping and countervailing duty cases being filed against Mechanical Tubing, Tool Chests and a new Section 232 National Security case against all Steel imports. These trade cases move and at warp speed and that means that if your company shows up as the producer or the importer on any of these cases, you have no time to waste. A brief summary of each of these three cases follows.
1. Cold-drawn mechanical tubing from China, Germany, India, Italy, Korea and Switzerland. On April 19, 2017, ArcelorMittal Tubular Products, Michigan Seamless Tube, LLC, PTC Alliance Corp., Webco Industries, Inc., and Zekelman Industries, Inc. filed Antidumping and Countervailing Duty cases against hundreds of millions of dollars of cold-drawn mechanical tubing from the six countries in 2016. The petition alleges antidumping duties ranging as follows:
The cold-drawn mechanical tubing covered by the complaint is used to produce numerous different products in the United States, including auto parts and machinery.
The United States International Trade Commission (ITC) will conduct its preliminary injury hearing on May 10, 2017 and US importers’ liability for countervailing duties on imports from China and India will start on September 16, 2017, and Antidumping Duties will start on November 15, 2017. Antidumping and countervailing duty orders can last for 5 to 30 years. These sorts of duty orders can and often do mean the end of U.S. imports and sales for many of the named companies, especially those that do not fight the cases against them from the very beginning.
2. Tool chests from China and Vietnam. On April 11, 2017, Waterloo Industries Inc. filed Antidumping and Countervailing Duty cases against hundreds of millions of dollars of imports of certain tool chests and cabinets from China and Vietnam. The ITC will conduct its preliminary injury hearing on May 2, 2017 and US importers’ liability for countervailing duties on imports from China and Vietnam will start on September 8, 2017 and for Antidumping Duties on November 7, 2017.
3. National Security Section 232 case against steel imports from many countries, including China. On April 20, 2017, President Trump announced a new trade investigation of steel imports under section 232 to determine if tariffs should be imposed because increased steel imports pose a threat to national security. If the United States Department of Commerce determines that steel imports are a threat to national security, President Trump will be empowered to levy high tariffs and quotas on imports of steel products from various countries. Under Section 232, the Commerce Department will investigate the potential national security threat posed foreign steel entering the U.S. market and then issue its findings and recommendations to the White House. Once Commerce completes its review President Trump will have 90 days to decide whether to accept or reject its recommendations and to impose trade restraints, including tariffs or quotas on steel imports.
If your company has been named in any of these three cases and you want to avoid having to pay massive duties and/or just walk away from the U.S. market for five to thirty years, you need to start organizing your defense NOW.
Read more of this story at Slashdot.
By making so much information so accessible, social media has drastically changed the way we consume information and form opinions in the modern era. The danger, however, is that social media creates an “echo chamber” that filters the information people receive so that it largely supports their existing opinions.
A recent study published in PNAS examines this phenomenon and finds that social-media users show marked focus in the types of news that interests them. These social-media participants tend to develop strong and well-defined communities around the news outlets they support, and they tend to make connections with like-minded people regardless of the geographic distance between them.
The PNAS study looked at the Facebook activity of a whopping 376 million English-speaking users. Its authors examined how these people interacted with English-speaking news sources on the platform in terms of their consumption of news, as well as their connectivity in terms of sharing, liking, and commenting on news-related items.
This site is seven years old, during which time I have not written a single post which is not explicitly about economics research. The posts have collectively reached well over a half million readers in this time, and I have been incredibly encouraged to see how many folks, even outside of academia, are interested in how economics, and economic theory in particular, can help explain the social world.
I hope you’ll permit me to take one post where I break the “economic research only” rule. The executive order issued yesterday banning entry into the United States for citizens of seven nations is an abomination, and directly contrary to both the words of Lazarus’ poem on the Statue of Liberty and the 1965 immigration reform which banned discrimination on the basis of national origin. It is an absolute disgrace, particularly to me as an American who, like the majority of my countrymen, see the immigrant experience as the greatest source of pride the country has to offer. Every academic, including myself, has friends and colleagues and coauthors from the countries included on this ban.
I understand that there are citizens of the affected countries worried about how their studies will be able to continue given these immigration restrictions. While my hope is that the courts will overturn this un-American executive order, I want our friends from these countries to know that there are currently plans in the works to assist you. If you are a economics or strategy student affected by this order, or have students in those fields who may need temporary academic accommodation elsewhere, please email me at firstname.lastname@example.org . This is of particular importance for students from the affected countries who are unable to return to the United States from present foreign travel. I can’t make any promises, but I have been in contact with a number of universities who may be able to help. If you are a PhD program director who may be able to help, I’d ask you to also contact me and I can keep you informed as to how things are progressing and how you can assist.
There is a troubling, nativist, anti-liberal (in the sense of Hume and Smith and Mill) streak in the world at the moment. The progress of knowledge depends on an open, free, and international system of cooperation. We in academia must stand up for this system, and for our friends who are being shut out of it.
It’s well established that people with low economic status are the hardest hit by the current obesity pandemic, as well as related health problems such as diabetes. Poor healthcare, stress, unhealthy lifestyles, and a cornucopia of cheap junk food are all thought to play a role. But a new study suggests there’s a subconscious component, too.
When researchers merely prompted study volunteers to consider themselves low-class, they were more likely to prefer, choose, and eat larger amounts of food, as well as higher-calorie foods. The findings, published in the Proceedings of the National Academy of Sciences, echo what’s been seen in a variety of animals—from birds and rodents to nonhuman primates. Thus, the authors speculate that the mental glitch may be an evolutionary holdover intended to boost survival by compensating for a lack of social and material resources.
More important for humans, the findings suggest that we may not be able to tackle obesity by just improving access to healthier foods and promoting exercise.
After news broke that a group of Milwaukee police officers savagely beat an unarmed black man named Frank Jude in 2004, the city saw crime-related 911 calls drop by about 20 percent for more than a year—totaling about 22,200 lost reports of crimes—according to a new study by a group of sociologists at Harvard, Yale, and Oxford universities.
The outcome wasn’t unique to Jude’s beating, the researchers found. Looking at the city's 911 call-records from 2004 to 2010, they noted similar drops after other highly publicized local and national cases of police violence against unarmed black men.
The findings square with earlier research showing that communities—specifically black communities given recent events—become more cynical of law enforcement after brutality cases. But the new study, published in the October issue of the American Sociological Review, is the first to show that people actually change their behavior based on that elevated distrust. Namely, community members become less likely to report crimes to law enforcement, likely out of fear of interacting with police or skepticism that police will take them seriously and help.
Hovertext: I just wish your sister would settle down one day and emit some self-replicating positronium assemblages.
Read more of this story at Slashdot.
Hovertext: It's time to take our children back from the Puppet Establishment.