The Albert Hirschman Bio

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It is The Worldly Philosopher, by Jeremy Adelman. Tyler Cowen offers praise although he is only partly into it. I finished it, which is something I am guessing few others will do, although I imagine a lot of people will make some sort of attempt. My reactions:

1. Reading about Hirschman reminded me of my father. 1920’s Berlin and 1920’s St. Louis were both cities where assimilated German Jews tried to distance themselves from the more backward/traditional Russian Jews, and neither my father nor Hirschman identified with traditional Judaism. Hirschman grew up in an assimilated family (although the family covered up his father’s Ostjuden background), whereas my father’s parents were blatantly Polish-Russian and therefore embarrassing to him. Both Hirschman and my father had sisters who were staunch Communists, and both had their career opportunities limited in the McCarthy era. Both Hirschman and my father specialized in Latin America. Both lacked mathematical tools and instead relied on a broad-based humanistic approach, including psychology and literature. My guess is that their paths would have crossed had my father not deserted research for administration just as Hirschman’s career took off. Both were skeptical of universal laws in social science. One of my father’s favorite sayings was what he called the First Iron Law of Social Science: sometimes it’s this way, and sometimes it’s that way.

2. Success is contingent. It is easy to imagine Hirschman with a Nobel Prize. It is also easy to imagine him never emerging from obscurity. On p. 447, Adelman quotes Gordon Tullock’s scathing (we would now say snarky) review of Exit, Voice, and Loyalty.

clearly there is room in the literature for a 155-page book on the responses of customers to declining efficiency on the part of their suppliers, and on the differences between changes in quality and changes in price. Unfortunately, this is not the book.

As Adelman points out, Hirschman (unlike Tullock, I might add) left behind few disciples, much less a complete “school.”

3. Adelman develops the theme that much of Hirschman’s appeal was literary. Like a highbrow novelist, he gave the reader a sense of pride in being able to appreciate his word plays and allusions.

4. Perhaps Hirschman’s most admirable achievement was the one he liked least to discuss: his involvement in the black market in Marseilles in 1940 to extricate prominent Jews from Hitler’s Europe.

Bryan Caplan on the Marriage Premium

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He writes,

It’s easy to see the appeal of the selection story: Married people have many traits in common: willingness to commit, to defer gratification, to conform to social norms. Why then, though, do married men earn a large premium, while married women earn a modest penalty? Shouldn’t favorable selection enhance women’s earnings, too?

Read the whole thing. If beliefs were intellectual, rather than tribal, you would think that the same people who think that people would be more likely to either attribute causality to both the marriage premium and the college premium or to neither. The fact that so many people readily treat the college premium as causal and the marriage premium as coincidental (or vice-versa) is evidence for tribalism, in my view. In particular, treating the marriage premium as causal tends to align with civilization vs. barbarism, so that it appeals much more to conservatives than to progressives.

Knowledge vs. Incentives

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Ing-Haw Cheng, Sahil Raina, and Wei Xiong write,

Our analysis shows little evidence of securitization agents’ awareness of a housing bubble and impending crash in their own home transactions. Securitization agents neither managed to time the market nor exhibited cautiousness in their home transactions. They increased, rather than decreased, their housing exposure during the boom period through second home purchases and swaps into more expensive homes. This difference is not explained by differences in financing terms such as interest rates, or refinancing activity, and is more pronounced in the relatively bubblier Southern California region compared to the New York metro region. Our securitization agents’ overall home portfolio performance was significantly worse than that of control groups. Agents working on the sell-side and for firms which had poor stock price performance through the crisis did particularly poorly themselves.

Of course, the bad incentives in the securitization market could have selected for people who believed in the housing bubble. Still, I believe that the authors have dispelled a notion that the “insiders” knew more than the “outsiders” about the housing bubble.

UPDATE: James Hamilton comments

Suppose we gave an individual securitization agent perfect foresight of what was to come, that is, exact knowledge of the current and future path of their personal bonuses, stock options, and career path. If they had this information, would they have made the same decisions as they actually made in 2005-2006? If so, that would be confirmation that the basic problem was one of misaligned incentives.

Lifted from the Comments on the Three-Axis Model

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On this post.

Watching some Kenneth Branagh documentary about Goebbels I was surprised how central oppressor-oppressed narrative was in Hitler’s speeches. Oppressor-oppressed narrative is crucial to forming in-group identities, and in-group identity is a useful and powerful tool.

Oppressor-oppressed narrative is used to form co-operation to take over existing structures. Civilization/barbarism narrative is used to preserve status quo. Freedom/coercion narrative is for individualists. Individualism is for the wealthy and secure.

Worth pondering. However, I think that most progressives really want to preserve the status quo. They do not try to argue that they are the oppressed class. Rather, they argue that they represent the oppressed class. More important, progressives characterize their opponents as the apologists for oppression.

A Higher Education Data Point

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From Dean Baker.

My colleague John Schmitt and former colleague Heather Boushey looked at this issue a couple of years ago. They noted that there was a far larger dispersion in the wages of men with college degrees than was the case with women. In fact, there was a substantial overlap between the distribution of wages of men without college degrees and men with college degrees.

The ev-psych story is that men tend to have wider variance in general. They dominate both the best jobs and the worst jobs. College may not affect this.

Pointer from Mark Thoma.

Passover 2013 Edition

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Random thoughts:

1. Passover is the original oppressor-oppressed narrative.

2. Sheryl Sandberg is much in the news with her book arguing that women ought to be more willing to choose to be ambitious and men ought to be more accomodating toward ambitious women. Here is her Ted talk. My takes:

a. I think a lot of the pushback that she gets in fact reinforces one of her points, which is that leadership qualities that are admired in men are resented in women.

b. The main pushback I would give is that I do not think that our goal should be to raise some women’s ambition up the level of that of the most-ambitious men. I think that hyper-ambitious males are a problem. They are a problem in finance, where they take excessive risks with other people’s money. They are a problem in government, where they exercise too much power. I think that ambition requires checks and balances. The market works imperfectly as a check on the ambition of executives. I think that institutional structures and social norms can provide a check on the ambition of politicians, and I regret that in our country both the structures and the norms have deteriorated considerably from that perspective.

c. I think that Sandberg’s thesis would provide a good discussion topic for a seder.

3. On April 3, Russ Roberts and Jared Bernstein will participate in a debate on whether or not to abolish the minimum wage. Tickets are $40. I am not sure what the audience expects at that price, and I expect that the price will affect the outcome. If you pay that much to get in, how can you not feel guilty voting to abolish the minimum wage? Especially so soon after Passover? My thoughts are:

a. The optimum minimum wage is probably closer to 0 than to $22 an hour, which is where Elizabeth Warren claims it might be.

b. The minimum wage issue is high on symbolism and low on substance. Few workers earn the minimum wage. As a practical matter, most workers’ reservation wage is much, much higher, as is demonstrated by the existence of unemployment. And most of the friction in the labor market comes from other factors, such as the payroll tax and employer-provided health insurance.

Shoplifting and Illegal Immigration

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Quote from a Canadian:

Illegal immigrants are to immigration what shoplifters are to shopping.

Let me continue with the analogy. We have a store that makes the process of dealing with the sales clerks very complicated, with people having to stand in line at the cash register for years. Maybe we would not have so much shoplifting if we fixed the checkout process–or at least if we offered an “express lane” to people willing to pay a fee of $5,000 or so.

Institutions of Lower Learning

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At Reason Magazine, Nick Gillespie voices a reactionary point of view.

What actually sets institutions of higher learning apart from high schools, barbers’ colleges, online academies, and various universities-in-name-only is that they are centers of knowledge production. That is, they revolve around faculty scholars who are actively expanding, revising, and remaking the received wisdom in their given fields. Active researchers, whether in astronomy or zoology or cultural studies or good old American literature, are the folks that make college worth a damn.

This is part of a symposium on higher education, which includes several other contributors. I think Gillespie touches on an important point: not all colleges are the same. If you drop from the 100th most prestigious school down to the 300th, somewhere along the way you will have hit the level where one must shed one’s idealistic illusions about “higher learning.”

How should we term these non-elite schools? Perhaps we should call them institutions of lower learning. At many of these, you will find a handful of highly capable students. But they are diamonds in the rough.

The cost of attending institutions of higher learning has increased, but I do not think that is where the crisis lies. Students at those schools tend to get what their parents are looking for, which is confirmation of their membership in the upper strata of society.

My guess is that the real crisis is at the institutions of lower learning. Cost have gone up there as well, and so have the hopes of progressives for results. But they are not wildly successful, to say the least.

By Richard Vedder’s count, close to half of college graduates, including over 100,000 janitors, hold jobs that do not require a college degree. This makes perfect sense, given that more students attend institutions of lower learning than institutions of higher learning. Vedder says that the default rate on student loans is 12 percent. I would bet that at least 2/3 of those defaults come from institutions of lower learning.

That is not to say that institutions of lower learning are bad. It is possible that they teach more effectively than the elite schools, with the latter simply enjoying the halo effect created by being able to reject anyone who is not sufficiently prepared and motivated.

Lisa Snell points out that many students enter college requiring remedial education. For the most part, these students get sifted into the institutions of lower learning.

I do not see the majority of students at institutions of lower learning becoming affluent professionals or articulate intellectuals. In that regard, I think that the potential for online courses taught by elite university professors to penetrate the institutions of lower learning is rather low.

Pundits and policy makers tend to ignore the reality at the institutions of lower learning. They need to give it more consideration.

Libertarian or Conservative?

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A reader pointed me to the home page for this year’s Freedom Fest, presumably a libertarian event. It features a 2-minute video with the theme that we are like the Roman empire, in its state of decline. The reader sees this video as

completely based on the civilization-barbarism axis.

My reaction:

1. Although the video does pay some lip service to freedom issues, I tend to agree with the reader. It seems to me that the video itself would appeal more to conservatives than to libertarians. My guess is that libertarians will not be totally turned off by the video, but they may not be attracted by it, either.

2. There is some irony in talking negatively about Roman debauchery in advertising a conference that is held annually in Las Vegas.

3. The conference agenda is rather heavily weighted toward investment strategy. Only a couple of the currently-listed speakers have topics that pertain to libertarian theory or practice.

4. Perhaps these ambiguities are a good thing. The conference may attract a mix of libertarians and conservatives, wealthy right-wingers, financial advisers, and academics.

5. I do not like large conferences at all, but perhaps that means I should force myself to go to some of them. But not in Las Vegas, which is one of my least favorite cities.

Asymmetrical Surveillance

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Bruce Schneier writes,

welcome to a world where all of this, and everything else that you do or is done on a computer, is saved, correlated, studied, passed around from company to company without your knowledge or consent; and where the government accesses it at will without a warrant.

I was strongly influenced by David Brin’s The Transparent Society, which envisioned a world where surveillance is symmetric: you can be watched by corporations and government, but in turn you can watch them. The current state, as described by Schneier, is asymmetrical.

My own view is that we need a new set of checks and balances for the 21st century. I articulated this about ten years ago in The Constitution of Surveillance. Comments on that essay would be welcome. However, please compare my proposals to the status quo or to alternative proposals, not to nirvana.