What Parking Tickets and Red Cards Can Tell US About Corruption?

Economists Ray Fisman (Columbia University) and Edward Miguel (California University) have a new book, Economic Gangster: Corruption, Violence and the Poverty of Nation.
Chris Blattman, interviews the two authors over at his blog on their new book. I thought it might be a good opportunity to discuss their two greatest hits.

The first was a paper written a few years ago that measure the relationship between diplomatic parking tickets in New York City and corruption. As I understand it, diplomats at the UN could be issued parking tickets, but did not have to pay them. Fisman and Miguel, found that more corrupt countries like Chad and Bangladesh had over a 1,000 parking tickets, while less corrupt countries like those in Scandinavia had a dozen or less. This might be helpful since parking tickets are easier to measure than corruption. Apparently also countries that have a less favorable view of the US also had more parking tickets.

Miguel is also the lead author on another paper that links the issuing of red cards in international soccer matches and violence within a country. For non-soccer fans red cards are issued when a player commits a severe foul, receiving a red card forces the player to leave the game and the team to play a man short. The paper finds that countries with more violence have soccer players that receive more red cards.

I look forward to reading the book. I’ll end with this bit of advice from Fisman from the Blattman interview: “I always tell graduate students that if they want innovative thesis ideas, to read the newspaper, not the economics literature. This is a case in point. You usually don’t get exciting new research ideas while reading Econometrica.”

Google’s Knol , Technology Adoption, Increasing Returns to Scale, and Paul Krugman

Over at Underlying Logic, Eric Simpson, discusses Google’s new web encyclopedia Knol. Knol is in some sense is competing with Wikipedia, but the difference is that article are written and attributed to an individual author. The idea is that as more people link to an article, the article gains in rankings. Good articles like websites on Google’s search engine will rise to the top.

So what’s the problem? I was thinking of writing an article, but I wasn’t sure if Knol was popular enough. There are few article on there and few with people who seem reasonably credentialed. We might think of the value (or expected value) of me writing an article to be related to the number of articles already written. As more articles are written and Knol becomes more popular the more likely I am to write an article.

A similar problem occurs when countries try to adopt technology. In a developing country a businessman may only pay for internet service if others are also paying for internet services. This is because having e-mail access is a lot more valuable if people you want to e-mail actually have e-mail access to. For a lot of technologies the value of adoption is related to the percentage of other people who have adopted.

The difficult thing is how to get the first few people to write a Knol article or adopt a new technology. As Paul Krugman has suggested, economies cannot adopt new technologies that cost more but are more productive, unless enough others adopt. (See this article, which may be too technical for some)

So what’s the solution, in both cases it might be a “Big Push”, in the case of Knol pay a few well known experts to write articles, increasing Knol’s credibility. In the case of economies it might be to provide incentives to particular sectors to help those sectors grow and making it easier for other businesses to adopt technology.

Paul Krugman Nobel Prize 2008

Paul Krugman coined a phrase called “airport economists” to talk about sensational books with titles like Dow 36,000 and The Next Great Depression. At the same time more serious economics books were hard to follow. Krugman’s Age of Diminished Expectations was one of the first economics books I read, and Krugman bridged the gap between not serious and seriously boring. I like this quote from a recent Krugman interview

“Princeton's Avinash Dixit has said that if Krugman were not so valuable to academics, "we should appoint him to a permanent position as the translator of economic journals into English."

Tyler Cowen over at Marginal Revolution has a run down of Krugman’s greatest hits. Because not only is Krugman a great economist for the popular reader, but he also has numerous famous academic publications. In 1991 he was awarded possibly the 2nd highest honor in Economics the Bates medal, which is given to the best economist under 40 in the US, and a lot of winners of the medal have gone on to win Nobel Prizes.

I have always been partial to his work in economic development and trade theory. He combined previous work on spillovers and put it into a context of geography and specialization. As someone who reads economics article with lots of Greek letters, Krugman’s are some of the most readable and insightful.

There may be a lot to disagree with in Krugman’s NY Times Op. editorials. But, there is a seemingly wide agreement that Krugman’s scholarly work is well deserving of a Nobel Prize.

How the Economic Crisis Can Be Good For You!

If you lose your job or need your 401k money now the economic crisis is bad for you. Wage growth might slow, but I was thinking about ways the economic crisis might be good for some people.

With an economic slowdown, people will purchase less gasoline, this will and caused the price of gas to go down. In the last 4 months gas prices have fallen about 15%.

There is also evidence, reported by Felix Salmon that the food and commodity price bubble is starting to burst, so food prices could come down.

If you are looking to buy a new car you will be able to find some great deals, as a lot of people are switching to purchasing used cars.

This not to say the overall impact of the crisis will be positive, but its worth noting that economic forces have reactionary forces.

What to Do When The Market is Running Wild? Ask Your Mom.

The stock market has been all over the place (although generally going down) over the last few weeks. At this point it might be good to see which sorts personality traits help people best survive the market turmoil.

Recently the Christian Science Monitor had an article on “Why Women Might Be The Winners in
Today’s Market” in short women are less likely to panic and sell in a down market and make more stocks trades. Women are also more likely to seek the advice of a financial profession and are more likely to have a financial plan. Men are also more likely to double down on their investments after an initial loss. Although the article also indicates that women are more likely to use lower risk investment vehicles such as bonds and money market funds. In the long run too little risk can lead to low returns.

When the market falls and you see your 401k plunge it’s hard not to sell off. Aphorism like buy low and sell high are hard to swallow. But it might just the medicine you need to weather the financial sickness.

Make Wall Street Pay Even if It Hurts Us

Duke’s behavioral economist Dan Ariely yesterday on NPR’s market place explains why Americans want revenge against Wall Street.

In lab experiments Ariely and other have found when two players play a game and one player feels cheated, the cheated player will pay money to take away some of the gains of the other player.

This might be worth thinking of in terms of Wall Street and mortgages. A lot of people feel Wall Street cheated them out of their 401k. Similarly in the housing market people who have sat on the sidelines savings, while others in their mind cheated by lying on loans and taking out more than they can afford should suffer too.

There is also a bit of schadenfreude, as Lisa Simpson taught means finding joy in others suffering, on real estate sites, like socketsite.com which covers the bay area market.

Ariely claims its human nature to want some kind of revenge, but can the House of Represenatives rise above that revenge?

What are the Opportunity Cost of 700 Billion Dollars? Aid to Developing Countries Instead of Wall Street.

I have not commented much on the bailout proposal, because I don’t completely understand what is going on (actually this sentiment is quite common among my colleagues). But a good question anytime someone spends money is what where the opportunity costs, or what could the money have been spent on instead?

Over at the Oxfam Blog, Duncan Green, suggests that the 700 billion dollars could be spent on developing countries. The 700 billion is about twice what the poorest 49 countries international debt is. He also suggests it is 5 times the cost of achieving the Millennium Development Goals, which include food, schooling, and basic health care for all.

This makes me think of my class yesterday, we were discussing Paul Collier’s book The Bottom Billion. In the book he discusses his previous research that shows that international aid experiences diminishing returns, that is the first bit of aid helps a lot but each additional bit of aid does not help as much. Collier research showed that once aid reached 16% of GDP additional aid had not impact on GDP growth.

I’m not sure if there is currently the capacity and infrastructure to distribute 700 billion dollars in foreign aid. But a comparison of the numbers is always worthwhile.


h/t to Chriss Blattman