Category Archives: Uncategorized

What I’m Reading

HUMANE Act proposed by a GOP Senator and DEM Congressman should give us hope that immigration reform is possible in an incremental, bipartisan fashion.

Does Inequality Matter?  I keep thinking about a village of nine people, incomes equal (Gini coefficient = 0) when a poor migrant arrives with no income. He joins the village and is treated charitably.  But suddenly there is inequality. The Gini coefficient rises by ten percent. Which begs the question: is the measure of inequality a useful way to think about poverty, or economics of a society generally?

Ideas for Renewing American Prosperity. This is a reprint of articles from the WSJ’s anniversary issue (125 years), which included essay by many colleagues  at Hoover.

Exit Strategy note … the man who invented the term “Exit Strategy” was Clinton Sec. of State, Warren Christopher.  His papers are now part of the Hoover Institution Archives.

What is the right number of new Americans?

America welcomes over one million legal immigrants every year, thanks to the most open & generous policy in the world. That’s a good thing. But is 1.1 million in 2013 the right number?  Is there too much of a good thing?

Keep in mind: we are talking about legal immigration. These are the people playing by the rules, waiting in line, getting their green cards, and doing what it takes to qualify for U.S. citizenship. But if 1.1 million is helping to boost our economy and enrich our culture — America is a nation of immigrants, after all — why not 1.3 million?  Seriously, why not add 200,000 green cards just for foreign scientists, engineers, and entrepreneurs?

I asked these questions to a panel of nearly 40 top scholars, conservative, liberal, centrist, and nonpartisan. The answers appear in this new publication from the Hoover Institution that our team put together over the past few months. It’s called Peregrine and I could not be more proud of the result.  Please take a look.

Three Failures on Immigration Reform

Watching President Obama stand outside the White House under this afternoon’s mid-summer sunshine and express frustration with the failure of his 5-year strategy on immigration reform, one could sense his emotions. But on a moment’s reflection, the failure of immigration reform rests entirely on the President’s shoulders.

Obama claimed that he would be taking executive action in the coming weeks. Although I am a proponent of greater immigration, his speech struck me as a huge mistake. What today’s White House narrative reveals, in fact, is insincerity. True, a bipartisan bill did receive 68 of 100 votes in the Senate one year ago (on June 27, 2013), and that legislation has indeed languished because the House of Representatives won’t consider it, not even in committee.

The real story is that Republicans in the House were never willing to pass a comprehensive bill, certainly not one with a hint of amnesty, and the administration knows it. Indeed, one has to wonder if the goal of pushing the all-or-nothing big bill was ever anything more than a media tactic.  Either the President is shedding crocodile tears or he really believes that Republicans in the House – not the Senate, he reminds us – don’t like foreigners.

In his remarks, Obama called out Speaker of the House John Boehner (R-OH) for inaction.  That’s off target. The blame belongs on the Democrats and their failed tactics. Three failures stand out.

First, the evidence is pretty strong that leading Democratic politicians prefer that reform festers unresolved. If Barack Obama really wanted to change immigration law, he would have supported comprehensive reform as a Senator back in 2007 when it was championed by President Bush (Republican) and Senator Kennedy (Democrat).  The even more damning fact is that the Democratic Party had majority control of the Senate and House for two full years in 2009 and 2010 after Obama became President. Nancy Pelosi, not John Bohener, was Speaker. Why wasn’t comprehensive legislation passed then?

Some say that the White House was too busy in the first two years of the Obama Presidency, a ridiculous defense. Candidate Obama had promised action – “I can guarantee that we will have, in the first year, an immigration bill that I strongly support.” – and he turned his back on it when in office. Despite the weak economy, the White House had time to push for and enacted the hugely expensive, controversial Affordable Care Act. The White House had time for lots of other legislation, even time to enact “Cash for Clunkers.” But no time for immigration reform legislation.

Second, the President has constantly taken executive action in favor of policies he likes and disregarded parts of laws he dislikes or that are inconvenient. The White House refuses to enforce major provisions in its own signature legislation on health care, and it has overstepped its authority on immigration law as well. Left unsaid in today’s remarks is the fact that two years ago this month, (June 15, 2012) President Obama took executive action on immigration by changing the law through the DACA memorandum. The memo granted what critics call amnesty for undocumented children. It’s more complicated than that, sure, but nobody can deny the action sowed uncertainty, confusion, and the sense this White House could do whatever it wanted. If Americans aren’t clear about the implications of the memo, do you really think the impoverished people of Central America are? And yet we are to believe the surge of children arriving at the southern border are unrelated? Rubbish.

Why would any legislator trust this administration to be an honest broker now? Talking to staffers around Washington, one discovers that the President’s constant threat of more executive fiat is an ever-present destabilizer. Even the President’s Democratic allies admit off the record to the media that this White House is absolutely terrible at fostering trust and good will, even among Democratic legislators.

Third, Democrats have failed to offer incremental reforms, even though it has been clear that nothing comprehensive is viable. If the White House was sincere about wanting to work together, indeed to lead, then it should describe a handful of smaller policies that would work as legislation. Where are the private meetings on incremental legislation? Where is the outreach to top staffers in the House and Senate to craft a small, consensus bill that has 90% support (say on STEM graduates). Where is the effort to re-establish a functioning legislative process?  Nowhere.

To recap: President Obama was elected in 2008 and sworn into office in January 2009. For the next two years, Democrats controlled the Senate and House of Representatives. No bill on immigration reform appears to have been considered by Nancy Pelosi’s House of Representative or the Senate during that time. Eighteen months after the 2010 elections, in mid-2012, President Obama took executive action via the DACA memorandum, an action that could be seen as fomenting an influx of undocumented children. In mid-2013, the Senate passed a comprehensive immigration reform bill despite widely acknowledged resistance among House Republicans. Senator Harry Reid (D-NV) ruled out anything less than the whole comprehensive bill, a position never rebuked by the White House. The White House today says that the lack of a vote in Boehner’s House, unlike the lack of a vote in Pelosi’s House, has forced his hand.

What one sees is a White House taking executive action on immigration five months before an election. It happened in 2012. It is happening in 2014. Coincidence?

When the President neglected to offer any vision of compromise today, one suspects that he has none.

 

Smiles (not standards) to VOX

I haven’t been overly impressed by VOX until I saw this great piece on occupational licensing.

Licensing raises costs and reduces consumer choice, and research has found that these costs are economically significant. For example, economists Morris Kleiner and Alan Krueger have found that licensing is associated with about 18% higher wages on average, and those higher costs are often passed on to consumers. Economists have estimated that entry restrictions on non-physician health care workers cost consumers over $100 billion per year.

The clash of interests – consumers versus workers – leaves the poorest consumers with less money and, sadly, worse care.  One of the surprising graphs at VOX shows how people in states with more dental licensing end up with fewer teeth.

Frustration with occupational licensing is a source of bipartisan agreement. Economist left and right are against it; politicians left and right are for it.  However, it’s also an issue where you don’t hear much meaningful discussion of alternatives, and I think that’s because the only real alternative is libertarian.

There’s a larger parallel to education and health policy. The tendency is for governments to “solve” problems by centralizing authority and then setting standards which the public must then obey. Is this effective? Common Core is the latest effort to set standards, Meanwhile, parents are given fewer choices over which school or teachers they have to accept. I suspect that the market is much better at setting informal standards on teacher quality than the school district is at setting formal standards — if a true teacher choice market existed (imagine parents having complete control over which public classroom their children were assigned).

Do you think education consumers would prefer formal standards or choices?  Would you prefer choosing your college and major or an alternative world where the US Dept of Education established and enforced college-level education standards for all courses?

I’m smiling.

Leadership versus Management?

Dear readers,

I would greatly appreciate your answers to a survey here. This is for my research about leadership culture and talent management at all types of employers to shed some contrast on the way the Pentagon works. It follows the research that backed up my 2012 book, Bleeding Talent.  Please take a few minutes to answer it – privacy guaranteed – and share with any colleagues. Getting this survey to military veterans would be especially helpful, but I’d like to gather insights from you whether you wore the uniform or not.

Thanks,
Tim

Survey link is https://www.surveymonkey.com/s/LeaderTalent1

Tim Kane
Research Fellow  |  Hoover Institution  |  Stanford University

P.S. Here are some reviews of Bleeding Talent that may be of interest:
National Review: “It is essential reading.”
JFQ: “His survey resonated across the Services.”
New York Times: “As an all-volunteer force, the young men and women who serve these days are top drawer; it is the institution that is idiotic, he argues. And [Kane] has a drastic remedy in mind: a dose of classic economics.”

WIRED article on the game of Go, and computers

I recommend this very good WIRED article about computers, go, and intelligence at a high level:

And while programmers are virtually unanimous in saying computers will eventually top the humans, many in the Go community are skeptical. “The question of whether they’ll get there is an open one,” says Will Lockhart, director of the Go documentary The Surrounding Game. “Those who are familiar with just how strong professionals really are, they’re not so sure.”

According to University of Sydney cognitive scientist and complex systems theorist Michael Harré, professional Go players behave in ways that are incredibly hard to predict. In a recent study, Harré analyzed Go players of various strengths, focusing on the predictability of their moves given a specific local configuration of stones. “The result was totally unexpected,” he says. “Moves became steadily more predictable until players reached near-professional level. But at that point, moves started getting less predictable, and we don’t know why. Our best guess is that information from the rest of the board started influencing decision-making in a unique way.”

All of nothing on immigration = failure

Kudos to Senator Marco Rubio for this insight:

“A comprehensive, single piece of legislation on any topic, but especially on immigration, is going to be very difficult to achieve,” Rubio, a potential presidential candidate, said when asked whether he’d push a large overhaul in the 2015-16 session. “We keep talking about the same issue now for 15 years, and everybody is doing this all-or-nothing approach. And all-or-nothing is going to leave you with nothing.”

Read more: http://www.politico.com/story/2014/05/immigration-bill-congress-obama-106467.html#ixzz31FCOUI4k

As I have been saying for some time, “comprehensive” in Washington is code for grandstanding.  I want a bill, not an issue. So do the vast majority of Americans, but unfortunately this is a minority position in DC — in both parties.  Rubio is not only on the right side of this issue, but he’s smart enough to have decoded the Senate’s machinations.

Low-hanging fruit abounds

This is a chart for the Cowenists – believers in my friend, Tyler Cowen’s, vision of technological progress slowing because humans have already reached all the low-hanging fruits of innovation. I’m of the belief, to borrow his metaphor, that growth means we are getting taller with each invention, making the higher fruit more accessible. What hath the computer wrought? Greater reach for inventors! A democracy of information!

Consider the amazing diffusion of smart phones, from Pew:

Figure 1

In TWO years, the percentage of people with No Cell Phone was cut in half, down to a level where choice, not income, was probably the deciding factor. The non-adopters are overwhelmingly elderly.

I think Tyler would agree that this is impressive, and maybe dents the pessimists’ case (and he is far more nuanced than the anti-progress pessimist). Nonetheless, I think this chart does much more violence to the Piketty argument that inequality is the defining issue of our time. Hogwash. The young are significantly lower-income than the elderly, yet they have much higher ownership rates of the most amazing piece of property ever, a tangible thing of monstrous value that did not exist half a generation ago.

If mind-blowing, inexpensive, mass-market technological property is the fruit of inequality, then let’s have more. No?

Inequality is (Relatively) Unimportant

I am inspired and bemused by the intense interest in Thomas Piketty’s book Capital in the Twenty-First Century. The formula for becoming the top-selling book (including fiction) in the modern era appears to include these core ingredients:

1. Load with rich, rock-solid historical data about something of keen interest along a political fault line. (In Piketty’s case this data is about income inequality, wealth inequality, and capital).  

2. Write hundreds of pages about the data using tones of caution and care about interpretation.

3. Conclude with wild claims, both about things related to the data as well as things unrelated to the data.

What is bemusing is how the assertion that inequality is “dangerous” has been allowed to run wildly through educated discussion. Do a Google search and you find pamphleteering, not economic science (witness this DeLong link) Maybe it is true, and if it is true, sign me up to stop it.  But is inequality actually important, dangerous, or significantly correlated with something, you know, real?  How does inequality rank against very tangible and measurable ills in our world: child mortality, deforestation, AIDS, slavery, or poverty? Here’s a hint: according to Gallup’s classic “Nation’s Most Important Problem” question, inequality has a mere 3 percent score, and it seems to have been that way for many decades. Inequality just does not rate as a real problem compared to unemployment, growth, health care, education, and honest to God poverty.

Piketty and his apologists assume that inequality matters. Is there any evidence to support the assumption?  Is there, say, a correlation in panel data of nations in Europe over a hundred years between wealth inequality and child mortality? Is it lagged, conditional on income levels and other things? Better yet: Is there a threshold to inequality, where it becomes dangerous above (or below) some Goldilocks zone?

Recall just last year when critics went ballistic over a Reinhart and Rogoff claim about the relationship between national debt and slower GDP growth. There was a 90% threshold  claim, such that debt above that level was dangerous, and some scholars found an error in the data about that threshold (but not the linear relationship) which was then the basis for a full-on paranoid liberal freak-out. As RR noted, even their critics found the same negative relationship between debt and growth, but merely challenged the threshold.

Now contrast the RR debate with this one. Piketty doesn’t even pretend to establish a relationship between inequality and something real.  Imagine Reinhart and Rogoff writing a massive tome and concluding with:  “____ is desirable up to a point. But beyond a certain level it is useless.” or “History suggests that this kind of _______ level is not only useless for growth, it can also lead to a capture of the political process …” which is exactly the ambiguous kind of assertion Piketty gets away with in interviews

I care deeply about poverty; it’s why I chose to study economics. Poverty is real. Inequality is a false idol. Those like Piketty who wish to make it the defining issue of our time have a burden to prove why democracy should shift resources away from other battles against disease, poverty, and pollution. It absolutely must be noted that one of the trade-offs a “war on inequality” will extract is a vast reduction in the number of legal immigrants — one million foreigners legally move to the U.S. under current law, but the Piketty war would drop that by 900,000. “Huddled masses yearning to breathe free?  Sorry, no more space for inequality.” Piketty’s agitation fuels the nationalist sentiment.

If the inequality alarmists cannot substantiate the “danger,” then they stand guilty of empty  ideological posturing.

Fivers

George Will recommends a path toward a balanced budget amendment to the Constitution. Using Article 5, the states can make this happen even if the Congress refuses to act.

Congress, which relishes deficit spending, would not, unilaterally and unpressured, send this amendment to the states for ratification. Hence theGoldwater Institute’s recourse to Article V.

It provides, in the same sentence, two amendment procedures, one of which has never been used — the calling of a convention by two-thirds of the state legislatures. Many prudent people — remembering that the 1787 Constitutional Convention’s original purpose was merely to “remedy defects” of the Articles of Confederation — recoil from the possibility of a runaway convention and the certainty that James Madison would not be there to make it turn out well. The compact, however, would closely confine a convention: State legislatures can form a compact — a cooperative agreement — to call a convention for the codified, one-item agenda of ratifying the balanced-budget amendment precisely stipulated in advance.