Whig Zhou

In recent decades, the Republican Party has moved to the right on some issues, notably immigration. More recently, the Democrats have moved left on issues like trade, fiscal stimulus and the minimum wage. And taxes, as the following story illustrates:

Rand Paul's tax reform plan is utterly bizarre. I don't even mean that as a criticism. It's not that the plan is bad, though it is; it's just downright weird. It calls for a 14.5 percent flat tax, which is substantially lower than just about every other Republican flat tax plan. That's normal enough, if a bit extreme, but then Paul takes a strange turn, altering his proposal in a way that suggests he's borrowing it from a completely baffling source: current California Gov. Jerry Brown's eccentric, ideologically unclassifiable 1992 Democratic presidential primary campaign. . . .

In 1992, Jerry Brown -- who was Bill Clinton's main rival in the late stages of the primaries, mostly running to his left -- proposed abolishing the payroll tax for Social Security as well as personal and corporate income taxes, and replacing them with a 13 percent flat tax on personal income (with deductions only for rent, mortgage interest, and charitable donations), and a 13 percent VAT.

That's right: Rand Paul has taken Jerry Brown's tax plan and then raised the tax rates in it. Brown's plan was more regressive than Paul's as well. Brown would've eliminated personal exemptions and the standard deduction, which makes the flat tax far more regressive. He would've eliminated the Earned Income Tax Credit, which Paul keeps; Paul also retains the Child Tax Credit, which helps many low-income families, and didn't exist yet in 1992. While in the past Paul has proposed slashing those credits by making them nonrefundable, they're still fully refundable under this plan. Paul does eliminate the estate tax, unlike Brown, but on the whole, his plan can be fairly characterized as to the left of Brown's.

For one thing, while Paul's plan cuts taxes for all income groups on average (albeit more for rich people), the working class would actually be worse off under Brown's plan.

I find it sad to contemplate the fact that there is no longer any possibility of finding bipartisan support for tax reform---the parties are far too far apart. For better or worse we are stuck with our current system.

PS. It also seems like the Vatican is moving sharply to the left on economic issues. Yesterday I read Pope Francis's recent statement on global warming, and was struck by the strongly anti-capitalist tone of the document. As an aside, I agree with the Pope on many issues, such as the need to do more about the environment, to be more aware of the risks posed by technology, skepticism about the "over-population" theory, as well as the need to treat migrants better. But the anti-market tone of the document was really striking, appearing in dozens of places. The term "privatization" was consistently used in a negative manner. The opposition to carbon credits (although perhaps a minor issue) best exemplifies my point. It just seemed weird. Apparently the Church even opposes using markets to solve global warming. You can't get much more anti-market than that.

PPS. Rand Paul's plan is obviously an improvement over the current system, but I think it's a tactical mistake to add a VAT to the current income tax regime. Rates would creep up again. True tax reform would involve abolishing the income tax, and replacing it with a progressive consumption tax. Which reminds me, the Pope seemed particularly upset with the high consumption levels of the global elite.

Allison Schrager has a new piece on that topic in Playboy, and with a new (old) idea, here is one part:

Harvard economist Lawrence Katz thinks that when the economy shifts, those who lose out experience “retroactive unemployment” in pursuit of jobs that no longer exist; however, he anticipates a bright future for men in the new economy. As an expert in the ways technology affects the middle class, Katz predicts the rise of the “new artisan” as a substantial trend in middle-class employment.

His theory holds that technology will commoditize and cheapen products in all industries but that artisanal workers will offer a superior interpersonal experience coupled with unique goods and services, commanding premium prices in turn. Men, he notes, are especially well suited to such roles. “These kinds of jobs go back to colonial times,” Katz says. “Individuals brought their own ingenuity and creativity to provide small-scale, high-quality products. In the 19th century they were displaced by mass production, but technology is already bringing a resurgence of this type of work.”

…If Katz’s prediction about new artisans comes to pass, the ways men and women fit into the economy will come to complement each other. Their roles will change, in some ways becoming more traditional and in others less: Women may be likelier to spend their careers in nine-to-five corporate positions, enjoying the regular hours, benefits and predictable pay those jobs entail. Forty-nine percent of women already work in firms with more than 500 employees, compared with 43 percent of men, and their share of the corporate pie is growing. That certainty will empower men to take on less predictable but possibly higher-paying work in self-employment.

A world in which men strive to learn new skills and take on riskier, entrepreneurial household roles may even prove more fulfilling than office work—but this requires changing our definition of a “good job.” Expecting men to be better-educated, office-work-oriented breadwinners is an outmoded idea. The artisan of the future will still be skilled and possess just as much potential to provide for his family. The technological revolution is yet another turn in the cycle of economic progress, and workers of both genders must learn to adapt. The end of men is not nigh; the end of our dated notion of work, however, is.

I believe the link would count as “safe for work,” but do note you may get a Playboy pop-up as I did, and there are sidebar ads, no full nudity but still this is Playboy beware if need be.

When Americans think about inequality, it is often linked to ethnic differences. Sometimes that's also true in Europe (as with the Roma), but more often the inequality is regional. Perhaps the starkest example lies in Italy, where even in 2007 the south lagged far behind the north. Since then, things have only gotten worse:

According to the Economist, in some respects the mezzogiorno is doing worse than Greece:

The country is, in effect, made up of two economies. Take that 2001-13 stagnation. In that period northern and central Italy grew by a slightly less miserable 2%. The economy of the south, meanwhile, atrophied by 7%.

This is partly because the south grew more slowly than the north before the financial crisis. But the main source of the divergence has been the south's disastrous performance since then: its economy contracted almost twice as fast as the north's in 2008-13--by 13% compared with 7%. The mezzogiorno--eight southern regions including the islands of Sardinia and Sicily--has suffered sustained economic contraction for the past seven years. Unicredit, Italy's biggest bank, expects it to continue this year. The Italian economy is both weaker and stronger than it appears, depending on the part of the country in question.

Of the 943,000 Italians who became unemployed between 2007 and 2014, 70% were southerners. Italy's aggregate workforce contracted by 4% over that time; the south's, by 10.7%. Employment in the south is lower than in any country in the European Union, at 40%; in the north, it is 64%. Female employment in southern Italy is just 33%, compared with 50% nationally; that makes Greece, at 43%, look good. Unemployment last year was 21.7% in the south, compared with 13.6% nationally. The share of northern and southern families living in absolute poverty grew from 3.3% and 5.8% respectively in 2007, to 5.8% and 12.6% in 2013.

Downward pressure on demand is exacerbated by the south's lower birth rate and emigration northward and abroad. The average southern woman has 1.4 children, down from 2.2 in 1980. In the north, fertility has actually increased, from 1.4 in 1980 to 1.5 now. Net migration from south to north between 2001 and 2013 was more than 700,000 people, 70% of whom were aged between 15 and 34; more than a quarter were graduates. Marco Zigon of Getra, a Neapolitan manufacturer of electric transformers, says finding engineers in Naples, or ones willing to move there, is becoming ever harder. According to Istat, Italy's statistical body, over the next 50 years the south could lose 4.2m residents, a fifth of its population, to the north or abroad.

American progressives will sometimes argue that we have much to learn from the successful welfare states in northern Europe. Perhaps that's true. But I'd have a bit more confidence in that claim if they could explain what we have to learn from the failed welfare states in southern Europe. Indeed I'd have more confidence in progressive ideas if they even had an explanation for the failed welfare states of southern Europe. But I don't ever recall reading a progressive explanation. Indeed the only explanations I've ever read are conservative explanations, tied to cultural differences.

PS. The mezzogiorno has roughly 1/3 of Italy's 60 million people, making it almost twice as populous as Greece. In absolute terms, incomes there (17,200 euros GDP per person in 2014) are far lower than among American blacks or Hispanics. In contrast, GDP per person in northern Italy was about 31,500 euros in 2014. And while the gap between eastern and western Germany is narrowing, the gap in Italy is widening. Why?

The New England Conference of United Methodist Churches, a group of 600 churches, has issued a resolution calling for an end to the war on drugs. The resolution draws on ethical principles and also a remarkably astute reading of economics and social science:

Whereas: The public policy of prohibition of certain narcotics and psychoactive substances, sometimes called the “War on Drugs,” has failed to achieve the goal of eliminating, or even reducing, substance abuse and;

Whereas: There have been a large number of unintentional negative consequences as a result of this failed public policy and;

Whereas: One of those consequences is a huge and violent criminal enterprise that has sprung up surrounding the Underground Market dealing in these prohibited substances and;

Whereas: Many lives have been lost as a result of the violence surrounding this criminal enterprise, including innocent citizens and police officers and;

Whereas: Many more lives have been lost to overdose because there is no regulation of potency, purity or adulteration in the production of illicit drugs and;

Whereas: Our court system has been severely degraded due to the overload caused by prohibition cases and;

Whereas: Our prisons are overcrowded with persons, many of whom are non-violent, convicted of violation of the prohibition laws and;

Whereas: Many of our citizens now suffer from serious diseases, contracted through the use of unsanitary needles, which now threaten our population at large and;

Whereas: To people of color, the “War on Drugs” has arguably been the single most devastating, dysfunctional social policy since slavery and;

Whereas: Huge sums of our national treasury are wasted on this failed public policy and;

Whereas: Other countries, such as Portugal and Switzerland, have dramatically reduced the incidence of death, disease, crime, and addiction by utilizing means other than prohibition to address the problem of substance abuse and;

Whereas: The primary mission of our criminal justice system is to prevent violence to our citizens and their property, and to ensure their safety, therefore;

Be it Resolved: That the New England Annual Conference supports seeking means other than prohibition to address the problem of substance abuse; and is further resolved to support the mission of the international educational organization Law Enforcement Against Prohibition (LEAP) to reduce the multitude of unintended harmful consequences resulting from fighting the war on drugs and to lessen the incidence of death, disease, crime, and addiction by ending drug prohibition.

That is the new IEA book from Nima Sanandaji, freely available here (pdf), introduction by Tom G. Palmer.  Here is one short bit:

The descendants of Scandinavian migrants in the US combine the high living standards of the US with the high levels of equality of Scandinavian countries. Median incomes of Scandinavian descendants are 20 per cent higher than average US incomes. It is true that poverty rates in Scandinavian countries are lower than in the US. However, the poverty rate among descendants of Nordic immigrants in the US today is half the average poverty rate of Americans – this has been a consistent finding for decades. In fact, Scandinavian Americans have lower poverty rates than Scandinavian citizens who have not emigrated. This suggests that pre-existing cultural norms are responsible for the low levels of poverty among Scandinavians rather than Nordic welfare states.

The book has many other points of interest.

Some progressives complain that American CEOs are overpaid. They point to the fact that the spread between the highest and lowest employee in a Japanese corporation is far lower than in the US. The implication is that if only the CEOs in the US would accept smaller salaries, the shareholders would gain larger profits. In fact, as the Japanese case shows the exact opposite is far more likely. Here's a graph from a recent article in The Economist:

The performance of Japanese corporations in recent decades has been abysmal.

Obviously there is no single factor involved, but the Economist does a nice job of explaining many of the peculiarities of the Japanese labor market, such as the lifetime employment system (which increasingly excludes younger workers), rigid promotion by rank and tenure, and fixed pay scales. Here's one company that is beginning to change:

There is no firm that better embodies the results that reform can achieve than Hitachi. It was formerly one of Japan's most conservative: the consummate "community" firm, at which employees and their families, and suppliers and their dependents, all took precedence over shareholders. In 2008 it notched up the largest loss on record by a Japanese manufacturer. Since then it has spun off its consumer-related businesses in flat-panel TVs, mobile phones and computer parts to refocus on selling infrastructure such as power plants and railway systems. More recently Hitachi has made efforts to change its internal culture. Last year it all but abandoned one of the central pillars of Japanese business: the seniority-wage system, in which salaries are based on age and length of service rather than on performance. The results of all this have been stellar. Its operating profits in the year to March rose by 12% to ¥600 billion ($5 billion).

Now, says Kathy Matsui of Goldman Sachs in Tokyo, stockmarket investors are all searching for the next Hitachi. Activists and private-equity firms are sensing an opening up of opportunities. Seth Fischer, an activist investor, says the government's backing makes all the difference when it comes to shaking up firms. He is preparing to take on two industrial giants, Canon, a camera-maker, and Kyocera, an electronics and ceramics manufacturer, over their complex corporate structures.

The growing proportion of shares in Japan's listed companies owned by foreigners (see chart 2) has undoubtedly added to the pressure on firms to change.

Japanese firms have clung to their traditions of lifetime employment in a single workplace, and of paying and promoting people according to seniority, because they believe those traditions have merits. Indeed, they foster loyalty, and thereby encourage firms to invest in training graduates without fear of them being poached by rivals, argues Yoshito Hori, the founder of GLOBIS, a business school. However, it is no way to produce the sort of managers needed to lead modern, knowledge-based industries. "Imagine if you took managers at Apple, Google and Amazon and replaced them with people promoted on the basis of length of service rather than merit," says Atul Goyal, an analyst at Jefferies, a stockbroker. "How long do you think those companies would last?"

Young and frustrated
The voice of Japan's young workers, who are generally underpaid and underpromoted, recently found an outlet in a surprise hit television drama, set in a fictional version of Japan's largest bank. Much of the country seemed to identify powerfully with the show's talented hero, Naoki Hanzawa, a loan manager, who kicks back against the bank's higher-ups and refuses to take the blame, as Japanese corporate culture dictates he ought, for the bosses' many profit-destroying blunders.

Hitachi's salarymen are similarly cheering the firm's shift to performance-related pay and promotion. If you are in your late 40s you might be nervous, since the ascent of the corporate ladder now comes with some uncertainty, says one. But younger hires are ecstatic. It won't even matter as much if you went to the wrong university as long as you work hard, exults another employee. Panasonic, Sony and Toyota are also moving towards more performance-related pay and promotion.

Those who plod their way to the top of Japanese firms tend too often to be conservative and narrow-minded. The way they are rewarded does not provide much incentive to try hard: not only is their pay smaller than that of their peers in other developed economies, it is less tied to their performance (see chart 4). When it comes to aligning the interests of bosses and shareholders, Japan is stuck roughly in the 1970s, says Jesper Koll, an economist and adviser to the government.

Of course Japan is far from being the worst off country in the world. But giving its rapid growth in the period leading up to 1991, its quite well educated and highly disciplined population, its relatively long work hours, and its 3.2% unemployment rate, it should not have a per capita GDP (PPP) 30% lower than America, Singapore and Hong Kong, and productivity levels far below those of Germany. Something is wrong.

"At least half of Germans, French and Italians say their country should not use military force to defend a NATO ally if attacked by Russia," the Pew Research Center said it found in its survey, which is based on interviews in 10 nations.

There is more here, and so every great moderation must come to an end...

This is also of note:

According to the study, residents of most NATO countries still believe that the United States would come to their defense.

Meanwhile:

Eighty-eight percent of Russians said they had confidence in Mr. Putin to do the right thing on international affairs...

Solve for the equilibrium, as they like to say.  It is much easier to stabilize a conservative power (e.g., the USSR) than a revisionist power (Putin's Russia).

In contrast, I think (a) a Russian attack on a NATO member is highly unlikely, and (b) would provoke a massive military response by NATO.  Even a low-level, unofficial war in Ukraine has cost Russia dearly, and it looks to me like it will slowly become another "frozen conflict" in the Russian sphere of influence.  Attacking a NATO member would not be suicide for Putin, but still much too risky for his taste.

As always, I am willing to bet on my forecast.  I give even odds that Russia attacks zero NATO members for the next 25 years.  I also give 5:1 odds that Russia attacks zero NATO members in the next 5 years.  If anyone wants to bet, we can hammer out the exact  definition of "attacks."  I'm inclined to say that if the New York Times, Wall St. Journal, and Washington Post all have front-page stories saying that 1000 or more Russian troops have entered a specific NATO member, I lose.  But I'm open to other definitions.

匈牙利是个小国，原材料匮乏，人口只有1000万。目前其领土上没有爆发内战，也没有出现什么民众起义或恐怖行动。它一直未被卷入任何战争，不曾面临即时破产的威胁。那么，为何匈牙利发生的事情仍然不可掉以轻心呢？因为属于北约和欧盟一员的匈牙利，正在抛弃1989～1990年政权更迭时所取得的巨大成就——民主、法治国家、自由工作的公民社会、多元化的精神生活，在全世界众目睽睽之下攻击私有财产和自由市场机制；...

李嘉诚旗下的电能实业(Power Assets)已把一家子公司价值10亿美元的股权出售给私人股本公司卡塔尔控股(Qatar Holding)。电能实业是香港大亨李嘉诚控制下的一家公共事业集团，业务为电力生产与供应。

持有香港电灯(Hongkong Electric Company)49.9%股权的电能实业表示，其将以76.8亿港元（合10亿美元）的价格处置其中16.5%的股权，...

Lindsey M. Burke reports:

On Tuesday night, Nevada governor Brian Sandoval signed into law the nation’s first universal school-choice program. That in and of itself is groundbreaking: The state has created an option open to every single public-school student. Even better, this option improves upon the traditional voucher model, coming in the form of an education savings account (ESA) that parents control and can use to fully customize their children’s education.

…As of next year, parents in Nevada can have 90 percent (100 percent for children with special needs and children from low-income families) of the funds that would have been spent on their child in their public school deposited into a restricted-use spending account. That amounts to between $5,100 and $5,700 annually, according to the Friedman Foundation for Educational Choice. Those funds are deposited quarterly onto a debit card, which parents can use to pay for a variety of education-related services and products — things such as private-school tuition, online learning, special-education services and therapies, books, tutors, and dual-enrollment college courses. It’s an à la carte education, and the menu of options will be as hearty as the supply-side response — which, as it is whenever markets replace monopolies, is likely to be robust.

The pointer is from Adam Ozimek.

最新贸易数据显示，5月中国经济持续疲软，进口额出现2月以来最大跌幅。

5月中国进口同比下跌17.6%（以美元计），几乎是10%的预测跌幅的两倍。这是中国进口连续第七个月下跌，表明消费持续萎缩。

曾是中国经济推动力的出口在5月同比下跌2.5%，为连续第三个月下跌。不过出口下跌幅度低于预期。今年3月和4月的中国出口同比跌幅分别为15%和6.4%。

进口下...

That is from Dianne Theodora Kenny, via Ted Gioia.  Kenny notes:

For male musicians across all genres, accidental death (including all vehicular incidents and accidental overdose) accounted for almost 20% of all deaths. But accidental death for rock musicians was higher than this (24.4%) and for metal musicians higher still (36.2%).

Suicide accounted for almost 7% of all deaths in the total sample. However, for punk musicians, suicide accounted for 11% of deaths; for metal musicians, a staggering 19.3%. At just 0.9%, gospel musicians had the lowest suicide rate of all the genres studied.

Murder accounted for 6.0% of deaths across the sample, but was the cause of 51% of deaths in rap musicians and 51.5% of deaths for hip hop musicians, to date.

Beware selection, because of course most rap musicians aren’t dead yet.  This problem will be more extreme, the younger is the genre.  Another selection effect may be that getting killed, or dying in an unusual way, contributes to your fame.

Several of you asked me to write about that chocolate article that went viral recently. From I Fooled Millions Into Thinking Chocolate Helps Weight Loss. Here’s How:

“Slim by Chocolate!” the headlines blared. A team of German researchers had found that people on a low-carb diet lost weight 10 percent faster if they ate a chocolate bar every day. It made the front page of Bild, Europe’s largest daily newspaper, just beneath their update about the Germanwings crash. From there, it ricocheted around the internet and beyond, making news in more than 20 countries and half a dozen languages. It was discussed on television news shows. It appeared in glossy print, most recently in the June issue of Shape magazine (“Why You Must Eat Chocolate Daily,” page 128). Not only does chocolate accelerate weight loss, the study found, but it leads to healthier cholesterol levels and overall increased well-being. The Bild story quotes the study’s lead author, Johannes Bohannon, Ph.D., research director of the Institute of Diet and Health: “The best part is you can buy chocolate everywhere.”

I am Johannes Bohannon, Ph.D. Well, actually my name is John, and I’m a journalist. I do have a Ph.D., but it’s in the molecular biology of bacteria, not humans. The Institute of Diet and Health? That’s nothing more than a website.

Other than those fibs, the study was 100 percent authentic. My colleagues and I recruited actual human subjects in Germany. We ran an actual clinical trial, with subjects randomly assigned to different diet regimes. And the statistically significant benefits of chocolate that we reported are based on the actual data. It was, in fact, a fairly typical study for the field of diet research. Which is to say: It was terrible science. The results are meaningless, and the health claims that the media blasted out to millions of people around the world are utterly unfounded.

Bohannon goes on to explain that as part of a documentary about “the junk-science diet industry”, he and some collaborators designed a fake study to see if they could convince journalists. They chose to make it about chocolate:

Gunter Frank, a general practitioner in on the prank, ran the clinical trial. Onneken had pulled him in after reading a popular book Frank wrote railing against dietary pseudoscience. Testing bitter chocolate as a dietary supplement was his idea. When I asked him why, Frank said it was a favorite of the “whole food” fanatics. “Bitter chocolate tastes bad, therefore it must be good for you,” he said. “It’s like a religion.”

They recruited 16 (!) participants and divided them into three groups. One group ate their normal diet. Another ate a low-carb diet. And a third ate a low-carb diet plus some chocolate. Both the low-carb group and the low-carb + chocolate group lost weight compared to the control group, but the low-carb + chocolate group lost weight “ten percent faster”, and the difference was “statistically significant”. They also had “better cholesterol readings” and “higher scores on the well-being survey”.

Bohannon admits exactly how he managed this seemingly impressive result – he measured eighteen different parameters (weight, cholesterol, sodium, protein, etc) which virtually guarantees that one will be statistically significant. That one turned out to be weight loss. If it had been sodium, he would have published the study as “Chocolate Lowers Sodium Levels”.

Then he pitched it to various fake for-profit journals until one of them bit. Then he put out a PR release to various media outlets, and they ate it up. They ended up in a bunch of English and German language media including Bild, the Daily Star, Times of India, Cosmopolitan, Irish Examiner, and the Huffington Post.

The people I’ve seen discussing this seem to have drawn five conclusions, four of which are wrong:

Conclusion 1: Haha, I can’t believe people were so gullible that they actually thought chocolate caused weight loss!

Bohannon himself endorses this one, saying bitter chocolate was a favorite of “whole food fanatics” because “Bitter chocolate tastes bad, therefore it must be good for you” and “it’s like a religion.

But actually, there’s lots of previous research supporting health benefits from bitter chocolate, none of which Bohannon seems to be aware of.

A meta-analysis of 42 randomized controlled trials totaling 1297 participants in the American Journal of Clinical Nutrition found that chocolate improved blood pressure, flow-mediated dilatation (a measure of vascular health), and insulin resistance (related to weight gain).

A different meta-analysis of 24 randomized controlled trials totalling 1106 people in the Journal of Nutrition also found that chocolate improved blood pressure, flow-mediated dilatation, and insulin resistance.

A Cochrane Review of 20 randomized controlled trials of 856 people found that chocolate improved blood pressure (it didn’t test for flow-mediated dilatation or insulin resistance)

A study on mice found that mice fed more chocolate flavanols were less likely to gain weight.

An epidemiological study of 1018 people in the United States found an association between frequent chocolate consumption and lower BMI, p

A second epidemiological study of 1458 people in Europe found the same thing, again p

A cohort study of 470 elderly men found chocolate intake was inversely associated with blood pressure and cardiovascular mortality, p

I wouldn't find any of these studies alone very convincing. But together, they compensate for each other's flaws and build a pretty robust structure. So the next flawed conclusion is:

Conclusion 2: This proves that nutrition isn’t a real science and we should all just be in a state of radical skepticism about these things

What we would like to do is a perfect study where we get thousands of people, randomize them to eat-lots-of-chocolate or eat-little-chocolate at birth, then follow their weights over their entire lives. That way we could have a large sample size, perfect randomization, life-long followup, and clear applicability to other people. But for practical and ethical reasons, we can’t do that. So we do a bunch of smaller studies that each capture a few of the features of the perfect study.

First we do animal studies, which can have large sample sizes, perfect randomization, and life-long followup, but it’s not clear whether it applies to humans.

Then we do short randomized controlled trials, which can have large sample sizes, perfect randomization, and human applicability, but which only last a couple of months.

Then we do epidemiological studies, which can have large sample sizes, human applicability, and last for many decades, but which aren’t randomized very well and might be subject to confounders.

This is what happened in the chocolate studies above. Mice fed a strict diet plus chocolate for a long time gain less weight than mice fed the strict diet alone. This is suggestive, but we don’t know if it applies to humans. So we find that in randomized controlled trials, chocolate helps with some proxies for weight gain like insulin resistance. This is even more suggestive, but we don’t know if it lasts. So we find that in epidemiological studies, lifetime chocolate consumption is associated with lifetime good health outcomes. This on its own is suggestive but potentially confounded, but when we combine them with all of the others, they become more convincing.

(am I cheating by combining blood pressure and BMI data? Sort of, but the two measures are correlated)

When all of these paint the same picture, then we start thinking that maybe it’s because our hypothesis is true. Yes, maybe the mouse studies could be related to a feature of mice that doesn’t generalize to humans, and the randomized controlled trial results wouldn’t hold up after a couple of years, and the epidemiological studies are confounded. But that would be extraordinarily bad luck. More likely they’re all getting the same result because they’re all tapping into the same underlying reality.

This is the way science usually works, it’s the way nutrition science usually works, and it’s the way the science of whether chocolate causes weight gain usually works. These are not horrible corrupt disciplines made up entirely of shrieking weight-loss-pill peddlers trying to hawk their wares. They only turn into that when the media takes a single terrible study totally out of context and misrepresents the field.

Conclusion 3: Studies Always Need To Have High Sample Sizes

Here’s another good chocolate-related study: Short-term administration of dark chocolate is followed by a significant increase in insulin sensitivity and a decrease in blood pressure in healthy persons.

Bohannon says:

Our study was doomed by the tiny number of subjects, which amplifies the effects of uncontrolled factors…Which is why you need to use a large number of people, and balance age and gender across treatment group

But I say “Short-term administration…” is a good study despite having an n = 15, one less than the Bohannon study. Why? Well, their procedure was pretty involved, and you wouldn’t be able to get a thousand people to go through the whole rigamarole. On the other hand, their insulin resistance measure thing was nearly twice as high in the dark chocolate group as the white chocolate group, and p

(Another low sample size study that was nevertheless very good: psychiatrists knew that consuming dietary tyramine when taking a MAOI antidepressant can cause a life-threatening hypertensive crisis, but they didn't know how much tyramine it took. In order to find out, they took a dozen people, put them on MAOIs, and then gradually fed them more and more tyramine with doctors standing by to treat the crisis as soon as it started. They found about how much tyramine it took and declared the experiment a success. If the tyramine levels were about the same in all twelve patients, then adding a thousand more patients wouldn’t help much, and it would definitely increase the risk.)

Sample size is important when you’re trying to detect a small effect in the middle of a large amount of natural variation. When you’re looking for a large effect in the middle of no natural variation, sample size doesn’t matter as much. For example, if there was a medicine that would help amputees grow their hands back, I would accept success with a single patient (if it worked) as proof of effectiveness (I suppose I couldn’t be sure it would always work until more patients had been tried, but a single patient would certainly pique my interest). You’re not going after sample size so much as after p-value.

Conclusion 4: P-Values Are Stupid And We Need To Get Rid Of Them

Bohannon says that:

If you measure a large number of things about a small number of people, you are almost guaranteed to get a “statistically significant” result…the letter p seems to have totemic power, but it’s just a way to gauge the signal-to-noise ratio in the data…scientists are getting wise to these problems. Some journals are trying to phase out p value significance testing altogether to nudge scientists into better habits.

Okay, take the “Short-term administration” study above. I would like to be able to say that since it has p

Effect size is supposed to help with that. But suppose I tell you "There was a study with fifteen people that found chocolate helped with insulin resistance. The effect size was 0.6." I don't have any intuition at all for whether or not that's consistent with random noise. Do you?

Okay, then they say we’re supposed to report confidence intervals. The effect size was 0.6, with 95% confidence interval of [0.2, 1.0]. Okay. So I check the lower bound of the confidence interval, I see it’s different from zero. But now I’m not transcending the p-value. I’m just using the p-value by doing a sort of kludgy calculation of it myself – “95% confidence interval does not include zero” is the same as “p value is less than 0.05″.

(Imagine that, although I know the 95% confidence interval doesn’t include zero, I start wondering if the 99% confidence interval does. If only there were some statistic that would give me this information!)

But wouldn’t getting rid of p-values prevent “p-hacking”? Maybe, but it would just give way to “d-hacking”. You don’t think you could test for twenty different metabolic parameters and only report the one with the highest effect size? The only difference would be that p-hacking is completely transparent – if you do twenty tests and report a p of 0.05, I know you’re an idiot – but d-hacking would be inscrutable. If you do twenty tests and report that one of them got a d = 0.6, is that impressive? No better than chance? I have no idea. I bet there’s some calculation I could do to find out, but I also bet that it would be a lot harder than just multiplying the value by the number of tests and seeing what happens. [EDIT: On reflection not sure this is true; the possibility of p-hacking is inherent to p-values, but the possibility of d-hacking isn’t inherent to effect size. I don’t actually know how much this would matter in the real world.]

But wouldn’t switching from p-values to effect sizes prevent people from making a big deal about tiny effects that are nevertheless statistically significant? Yes, but sometimes we want to make a big deal about tiny effects that are nevertheless statistically significant! Suppose that Coca-Cola is testing a new product additive, and finds in large epidemiological studies that it causes one extra death per hundred thousand people per year. That’s an effect size of approximately zero, but it might still be statistically significant. And since about a billion people worldwide drink Coke each year, that’s a ten thousand deaths. If Coke said “Nope, effect size too small, not worth thinking about”, they would kill almost two milli-Hitlers worth of people.

Yeah, sure, you can never use p-values again, and run into all of these other problems. Or you can do a Bonferroni correction, which is a very simple adjustment to p-values which corrects for p-hacking. Or instead of taking one study at face value LIKE AN IDIOT you can wait to see if other studies replicate the findings. Remember, the whole point of p-hacking is choosing at random form a bunch of different outcomes, so if two trials both try to p-hack, they’ll end up with different outcomes and the game will be up. Seriously, STOP TRYING TO BASE CONCLUSIONS ON ONE STUDY.

Conclusion 5: Trust Science Journalism Less

This is the one that’s correct.

But it’s not totally correct. Bohannon boasts of getting his findings in a couple of daily newspapers and the Huffington Post. That’s not exactly the cream of the crop. The Economist usually has excellent science journalism. Magazines like Scientific American and Discover can be okay, although even they get hyped. Reddit’s r/science is good, assuming you make sure to always check the comments. And there are individual blogs like Mind the Brain run by researchers in the field that can usually be trusted near-absolutely. Cochrane Collaboration will always have among the best analyses on everything.

If you really want to know what’s going on and can’t be bothered to ferret out all of the brilliant specialists, my highest recommendation goes to Wikipedia. It isn’t perfect, but compared to anything you’d find on a major news site, it’s like night and day. Wikipedia’s Health Effects Of Chocolate page is pretty impressive and backs everything it says up with good meta-analyses and studies in the best journals. Its sentence on the cardiovasuclar effects links to this letter, which is very good.

Do you know why you can trust Wikipedia better than news sites? Because Wikipedia doesn’t obsess over the single most recent study. Are you starting to notice a theme?

For me, the takeaway from this affair is that there is no one-size-fits-all solution to make statistics impossible to hack. Getting rid of p-values is appropriate sometimes, but not other times. Demanding large sample sizes is appropriate sometimes, but not other times. Not trusting silly conclusions like “chocolate causes weight loss” works sometimes but not other times. At the end of the day, you have to actually know what you’re doing. Also, try to read more than one study.

I am still re-reading The Blank Slate. In his chapter on violence, he endorses Hobbes. On p. 330, he writes,

Adjudication by an armed authority appears to be the most effective general violence-reduction technique ever invented. . .there can be no debate on the massive effects of having a criminal justice system as opposed to anarchy. The shockingly high homicide rates of pre-state societies, with 10 to 60 percent of the men dying at the hands of other men, provide one kind of evidence. Another is the emergence of a violent culture of honor in just about any corner of the world that is beyond the reach of the law. Many historians argue that people acquiesced to centralized authorities during the Middle Ages and other periods to relieve themselves of the bureden of having to retaliate against those who would harm them and their kin. And the growth of those authorities may explain the hundredfold decline in homicide rates in European societies since the Middle Ages.

See also Mark Weiner, The Rule of the Clan. A few remarks.

1. This chapter challenges the more anarchist-leaning libertarian views. Instead, Pinker argues that it is natural for humans to form coalition, to fear others’ coalitions, and to launch pre-emptive strikes on relatively small pretenses. (Of course, governments do this as well. Pinker would not argue that nation-states are inherently peaceful with one another. Quite the contrary.) Another excerpt, from p. 331:

When law enforcement vanishes, all manner of violence breaks out: looting, settling old scores, ethnic cleansin, and petty warfare among gangs, warlords and mafias.

2. Reading this chapter, I could not help thinking of Baltimore. Another excerpt, also from p. 331:

The generalization that anarchy in the sense of a lack of government leads to anarchy in the sense of violent chaos may seem banal, but it is often overlooked in today’s still-romantic climate. Government in general is anathema to many conservatives, and the police and prison system are anathema to many liberals. Many people on the left, citing uncertainty about the deterrent value of capital punishment compared to life imprisonment, maintain that deterrence is not effective in general. And many oppose more effective policing of inner-city neighborhoods, even though it may be the most effective way for their decent inhabitants to abjure the code of the streets. Certainly we must combat the racial inequities that put too many African American men in prison, but. . .we must also combat the racial inequities that leave too many African Americans exposed to criminals.

He does proceed to point out that drug laws, by creating an underground economy in which participants cannot call in police to contain disputes, help to promote a climate of violence.

That is the new Anders Aslund book, and it is instructive throughout.  Here are a few things I learned:

1. 80 percent of Ukrainian youth receive higher education of some kind.

2. Ukraine has the world’s highest rate of pension expenditures as a share of gdp, at about 18 percent, circa 2010.  Most of that is old age pensions, and that is for a population with a relatively short lifespan, 68.5 years, 122th in the world according to UNDP.

3. At the time of publication, Ukraine’s public expenditures stood at 53 percent of gdp.

4. “Ukraine is running out of money…”  OK, that one I already knew.

5. “No economy has fared as poorly in peacetime as Ukraine did from 1989 to 1999.  For a decade, Ukrainian GDP plummeted by a total of 61 percent, according to official statistics.”  Some of this, however, was offset by the growth of black markets.

6. Crimea is no longer included in Ukraine’s formal measure of gdp, although Donbas is still included.

Here are the 10 biggest cities in America in 1950, when most hit their peak:

Tyler Cowen recently linked to an article that has lots of interesting information about Baltimore’s decline.

As a result of Baltimore’s multiple social, economic, and educational problems, the city’s population has declined from 939,000 in 1960 to just622,000 today. In silent, gloomy testament to this prolonged exodus, some47,000 abandoned houses and 16,000 vacant buildings now stand like pulled teeth in Baltimore’s urban landscape.

I thought it might be useful to put that decline into some sort of perspective.  Thus I’ll list the population of these same 10 cities in 2013 (many are no longer top 10) as well as the ratio to their 1950 populations.  Then I’ll suggest 5 groupings:

New York  8405k  106.5%

Chicago  2719k    75.1%

LA    3884k   197.2%

Philly   1553k   75.0%

Detroit  689k   37.2%

Baltimore  622k   65.5%

Cleveland   390k  42.6%

St Louis   318k  37.1%

Washington   646k  80.5%

Boston  645k     80.5%

I see 5 groupings:

Cities hitting record population, and still growing.  (NYC, LA)

Cities down substantially, but growing really fast since 2010 (Boston & DC, which were both smaller than Baltimore as recently as 2010.)

Cities down substantially and growing modestly (Chicago, Philly)

Cities down substantially and barely growing (Baltimore)

And cities down catastrophically and still losing population (The terrible three; Detroit, Cleveland and St. Louis.)

A few observations.

1.  Some of the population decline since 1950 is due to smaller families.  Thus a city with exactly the same number of houses might have 25% fewer people due to lower birthrates.  Older American cities are hemmed in by suburbs, which generally grow as the inner city declines.  Almost all of the older cities were losing population until 1990, if only due to smaller families, but the more dynamic ones have recently turned it around.

2.  One possibility is that Baltimore is underperforming due to governance issues. That might seem surprising, as its population numbers are far better than the terrible three.  Indeed the rust belt also has many smaller examples of catastrophic population loss (Buffalo, Gary, Flint, Youngstown, etc.)  But Baltimore seems more like Philadelphia, a fairly big city in the shadow of a more dynamic neighbor (DC and NYC, respectively.)  As recently as 1990 Baltimore still had 77.5% of its peak population, while Philly had 76.5%, DC had 75.7% and Boston had 71.7%. It was holding its own.  Then it started falling dramatically behind other cities in that group.  I see Philly as the closest comparison because they are geographically close, and lack the special characteristics of Chicago, Boston and DC. Both are big, bland east coast cities with a few strong points (Johns Hopkins, Penn, historical neighborhoods, etc.)

3.  The first time I ever heard of urban revival was Baltimore’s Inner Harbor project, which was soon followed by Boston’s Quincy Market.  Obviously things didn’t pan out for Baltimore.

4.  I think Chicago’s data masks a tale of two cities.  It’s 1/2 catastrophic rust belt and 1/2 Manhattan.  It’s numbers end up halfway between Detroit and NYC.

5.  I recently visited the St Louis Fed, and learned about its history.  When the Fed was created, St. Louis was America’s 4th biggest city.  Now it’s smaller than many cities that most Americans have never even heard of (Aurora, Santa Ana, Mesa, etc.)

6.  AFAIK all of America’s catastrophic urban failures lie on a line from St. Louis to Buffalo, passing through Gary, Detroit and Cleveland.  I wonder why?  (Excluding much smaller cities like Camden.)  Even Newark still has 63% of its peak (1930) population.

7.  East coast cities are clearly more dynamic that midwest cities.  But oddly the Midwest has grown faster than the Northeast since 2000, by 5.0% vs. 4.6%. Midwesterners are more inclined toward suburban living.  (The West grew 18.5% and the South grew 19.1%.)

Update:  The New Zealand iPredict NGDP futures markets are up and running. I’ll have a formal announcement later today.

About 90% of the macroeconomics you read in the media is pop macro, which basically caters to the prejudices and ignorance of the average reader. For instance, I recently did a post discussing the media's focus on "currency manipulation" (as if there are any countries in the world central banks that do not manipulate the value of their currencies.)

Today I'd like to talk about the data on change. How fast are things changing today? Are we in a period of unprecedented change? Can we no longer expect to work for the same company throughout our entire career? Are jobs rapidly being displaced by robots?

There's lots of data one could bring to bear on these questions, and I don't have all of the answers. But the data I have been able to find suggests the economy is increasingly inertial, or slow to change. One type of change is moving to a new residence, perhaps associated with a job change:

So we are moving less frequently than ever before. But what about the fact that companies no longer have any loyalty to workers, and lay them off at the drop of a hat? In the past few weeks the rate of new claims for unemployment (as a share of total employment) has reached an all-time low since records began in the mid-1960s. Indeed much lower than in 1969, which was the strongest job market in my lifetime.

As far as those robots are concerned, we don't see any job market impact in the productivity data. For reasons not well understood, productivity growth has slowed sharply in the past few years. The very low long-term bond yields suggests that market participants expect slower RGDP growth going forward.

Last year the US saw a 0.73% increase in its population, the slowest since 1937.

My grandma was born in 1890 into a middle class family in small town Wisconsin. Her home probably lacked indoor plumbing, most home appliances, electric lights, telephone, TV, radio, car, etc., etc. Slightly improved from life in ancient Rome. She lived to see jet air travel, computers, atomic bombs, antibiotics, and died the week they landed on the moon.

I was born in a world of indoor plumbing, atomic bombs, jet air travel, home appliances, computers, cars, telephones, TV, radio, antibiotics. I'll turn 60 this year, and live in a world of indoor plumbing, atomic bombs, jet air travel, home appliances, computers, cars telephones, TV, radio, antibiotics, plus the internet and cell phones. Yeah, I'd say change is slowing down, really fast.

I look forward to the comment section where you'll tell me I'm hopelessly wrong.

PS. Yes, my "ancient Rome" comment was an exaggeration. She had access to trains and the telegraph.