Mobility and democracy

If you graph UK economic performance over 1979-2007 – these look like the natural breaks nowadays – then we do pretty well:

Real GDP per capita 1979-2007 (WDI via Google; log scale)

But at the end of this period, there was increasing immigration to the UK, from Eastern Europe as well as from traditional sources like South Asia. This immigration resulted in growing political dissatisfaction, which came firmly on to the agenda in the 2010 election.

Population growth rate 1979-2007 (WDI via google)

The two great areas of democracy in the world today, the US and the EU, are also areas of free mobility. The US was a frontier society until 1890: dissatisfied employees could move West and find a homestead.

Wagons heading West

Today, it remains a decentralized country – the United States – and the states have been called “laboratories of democracy”. The EU even more so: written into its founding charter are the principles that member states must be democratic, and that labour, like other goods and services, must be free to move between them.

There are many reasons why democracy and mobility might go together. It's no coincidence that dictatorships like North Korea and Cuba are prison states that try to stop their subjects leaving. Mobility might protect you from the tyranny of the majority: political scientists like Carles Boix have argued that democratization is more likely when wealth is mobile, so that the rich no longer fear being expropriated by a poor majority.

On the other hand, mobility brings with it certain problems for systems where good governance depends on the wisdom of the citizenry.

First, intelligent policy-making is always a public good – something that benefits everyone in a community, no matter who pays for it. But freedom of movement makes good governance a public good between communities, as well as within them. Suppose, choosing two countries at random, that Spain is worse governed than France, and therefore a poorer and less pleasant place to live. Without free movement, the citizens of Spain have a strong incentive to do something about that, for example by voting for policies that work better. With freedom of movement, they have a simple alternative: pop across the border. Under the (very idealized) assumption that mobility is free and frictionless, they will continue to do so until “utilities are equalized”: that is, until France and Spain are equally un/pleasant, perhaps because of all the migrants moving into France and using public services.

Of course, that politics is a public good means that self-interested people will never provide enough of it. But existing national communities are organized in ways to get round this problem: they have newspapers which keep people informed and encourage them to participate, national parties to link politicians with an active citizenry, patriotism as a source of willingness to work for the community, and so forth. The political collective action problem within nations is hardly solved, but it is mitigated. That is much less true for the collective action problem between nations.

Another problem for democracies comes from the same source. People are politically ignorant: this is one of the best-established empirical generalizations in political science. It, too, is probably a result of the public good aspect of politics: when you have little influence over something, ignorance is rational. The most reliable knowledge we have about our politicians' performance is not the information we seek out – which is often schematic, sketchy and biased towards our pre-existing beliefs – but what we learn “by accident” in everyday life. If you lose your job, then you can assume the economy is not going very well, and you can (and will) blame the government.

But again, free mobility makes that signal noisier. If your child waits a long time for healthcare, do you blame the government's handling of the NHS? Or do you blame the increased demands placed on the system by more people using it? (Some local authorities have blamed poor performance on immigration in the past.) If free mobility equalizes utility between countries, then good and bad governance are no longer distinguishable.

A final problem with mobility is the issue of fairness between different groups, such as the old and the young. European welfare states are built on intergenerational compacts, and these national compacts vary from country to country. Mobility allows people to arbitrage these differences. Young singles turn up to work in London's vibrant freemarket economy; couples with children can move to take advantage of Holland's education system. These problems are known in America, where there is talk of a “race to the bottom” between states in welfare provision; though at least America has a big-spending federal government to iron out these differences.

None of these arguments make me long for the return of border controls in Europe. But they do show there is some tension between the ideals of democracy and freedom of movement. As long as European countries remain widely divergent in wealth and standards of public services, this tension is likely to stay prominent. Denmark's recent decision to impose border controls even within the Schengen area is one example.

Newspapers from broken homes more likely to hype dodgy science

Ok, I'm a cultural conservative but this is still just dire: http://www.telegraph.co.uk/news/uknews/8728398/Children-whose-parents-divorce-more-likely-to-become-binge-drinkers.html.

How can we stop this? Should every Telegraph science hack maybe have an enforced intimate tattoo saying "Correlation is not Causation"?

Honore-style fixed effects estimators for censored data in R

Below is some R code to implement fixed effects Tobit, a la Honore (1992) "Trimmed LAD and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects", and also fixed effects double-censored Tobit a la Alan, Honore and Petersen (2008).

# FE tobit a la Honore (1992). See Honore (2002) Port Econ J for a simple guide

# y1 partner y2 other

honore <- function (b, x1, x2, y1, y2) {

dxb <- (x1 - x2) %*% b

sum(

(pmax(y1, dxb) - pmax(y2, - dxb) - dxb)^2 +

2*(y1 < dxb)*(dxb-y1)*y2 +

2*(y1 < -dxb)* (-dxb-y2)*y1

)

}

fetobit <- function (x1, x2, y1, y2) {

# x <- model.matrix(form, dataset)

initvals <- lm.fit(x1 - x2, y1 - y2)$coefficients

res <- optim(initvals, fn=honore, x1=x1, x2=x2, y1=y1, y2=y2,

method="BFGS", control=list(reltol=1e-8, maxit=1000))

if (res$convergence != 0) warning("Didn't converge")

res$par

}

# estimate the standard error, asymptotically.

fetstderr <- function(x1, x2, y1, y2, bhat) {

N <- nrow(x1)

x <- x1 - x2

xb <- x %*% bhat

G <- matrix(0, nrow=length(bhat), ncol=length(bhat))

V <- G

# this should be done faster...

for (i in 1:N) {

xtx <- outer(x[i,], x[i,])

G <- G + ( - y2[i] < xb[i] & xb[i] < y1[i] ) * xtx

V <- V + ((y2[i]^2) * (y1[i] <= xb[i]) +

(y1[i]^2) * (xb[i] <= - y2[i]) +

(y1[i] - y2[i] - xb[i])^2 * (- y2[i] < xb[i] & xb[i] < y1[i])

) * xtx

}

G <- G / N

V <- V / N

Ginv <- solve(G)

sqrt(diag(Ginv %*% V %*% Ginv / N)) # right?

}

# two-sided censoring

# y's must be censored at 0 and 1

alan <- function (b, x1, x2, y1, y2) {

d <- pmax(-1, pmin(as.matrix(x1-x2) %*% as.matrix(b), 1))

# sum of R(y1, y2, max(-1, min(,(x1-x2) %*% b, 1)))

r1 <- r2 <- rep(NA, length(d))

r1 <- ifelse(d <= y1 -1, d + d^2/2 +(y1-1)^2/2,

ifelse(y1-1 < d & d <= 0, d*y1,

ifelse(0 < d & d <= y1, d*y1 - d^2/2,

ifelse(y1 < d, 2,<="" div="" y1^2="">

NA))))

r2 <- ifelse(d <= -y2, -y2^2/2,

ifelse(-y2 < d & d <= 0, d^2/2 + d*y2,

ifelse(0 < d & d <= 1-y2, d*y2,

ifelse(1-y2 < d, (y2-1)^2="" -="" 2,<="" 2="" d="" d^2="" div="">

NA))))

- sum(r1 - r2) # Alan et al say minimize, but I say maximize, ie minimize the minus sum

}

fe2tobit <- function (x1, x2, y1, y2) {

initvals <- lm.fit(x1 - x2, y1 - y2)$coefficients

res <- optim(initvals, fn=alan, x1=x1, x2=x2, y1=y1, y2=y2,

method="BFGS", control=list(reltol=1e-8, maxit=1000))

if (res$convergence != 0) warning("Didn't converge")

res$par

}

fet2stderr <- function (x1, x2, y1, y2, bhat) {

N <- nrow(x1)

x <- x1 - x2

xb <- x %*% bhat

V <- G <- matrix(0, nrow=length(bhat), ncol=length(bhat))

u1 <- ifelse(xb > 0, pmax(y1-xb,0), pmin(y1,1+xb))

u2 <- ifelse(xb > 0, pmin(y2, 1-xb), pmax(y2+xb, 0))

u <- u1 - u2

gwt <- ifelse(xb < -1 | xb > 1, 0,

(-1 < xb & xb < y1-1) - (0 < xb & xb < y1) -

(-y1 < xb & xb < 0) + (1-y2 < xb & xb < 1))

for (i in 1:N) {

xtx <- outer(x[i,], x[i,])

G <- G + gwt[i] * xtx

if (-1 < xb[i] & xb[i] < 1) {

v <- u[i]*x[i,]/2

V <- V + outer(v, v)

}

}

G <- G / N

V <- V / N

Ginv <- solve(G)

sqrt(diag(Ginv %*% V %*% Ginv / N))

}

Points to note:

• fetobit expects data to be censored at 0; fe2tobit expects censoring at 0 and 1. There should be no NAs. 
• Warning! I have done only a very quick test on these. They seem to work but I am not a proper econometrician. Use at your own risk. 
• The standard errors may be inaccurate for low N. Consider bootstrap estimation. 
• Warning! Google searches for "Trimmed LAD" may lead to unexpected results.

Good riddance to bad rubbish

So, last week was a good time to write about media prurience.

I am vindictively glad about the News of the World being cancelled. The NotW was not a good paper that went wrong. It was always a bottom-feeder. Its privacy-invading habits aren't new either. Ony the methods are new.

The NotW was not unique. The Sun is not much better. Nor is the Mirror. The Star is probably worse. All of these papers feed off and feed the worst in human nature: sexual prurience, the vicarious enjoyment of cruelty, other people's misery as entertainment, phony outrage, simplistic politics, and demonizing people who can't answer back.

A strong tabloid press can be a great advantage for a democracy. I hope this country gets one. The British people deserve it.

In the round, the British media are not much to be proud of, but Rupert Murdoch had a special, particular role in bringing this about. He took the Sun and the NotW downmarket. He also turned one of the great papers of the world, the Times, which Trollope satirized as the all-powerful Thunderer, into a competitor with the Daily Mail. On its own terms, the Times is a great product. It has the mix of news its readers want. It's well written and full of content. But there is a useful way to draw the line between quality paper and others: do the writers assume that their readers are as intelligent as they are? I think the Times crossed that line a long time ago. Great product. Lousy paper. So my dream story for next week is “Murdoch arrested. Photos page 2, 3, 4, 5, 6.”

Meanwhile... I have not heard much about what economists would call the demand side. There will always be a market for gossip, sensationalism, celebrity and trivia. A healthy society accepts that, but it also knows that these are not really things to be proud of. Perhaps now would be a good time to reconsider our collective reading habits.

Mothers-in-law

So, I avoided the “future mother-in-law sends rude email” story. It looked very funny and juicy, but it seemed not nice of the email recipient to forward it to all his friends. Now it turns out that maybe the whole thing was a publicity stunt for the groom's wedding business.

There's a fine line here between funny and shameful. Firmly on the shameful side are all the tweeters spreading gossip about footballer's private lives. Some parts of the press were trying to make them into heroes of free speech. Not really. Worse still is the self-publicizing Lib Dem MP who raised the footballer's name in the House, using parliamentary privilege to get round the privacy injunction. Anyone should think very hard before using that privilege. It may be very important in remedying injustices. It is not for retweeting prurient gossip which a judge has decided ought to be private.

Wanting to know about other people's private lives is dirty. Of course we all want to do it. But it is dirty, the industry that exists around it is dirty too, and if you do it, then worthless people will use it against you.

There's a relevance to the DSK affair. This is more complex. The French public has an interest in knowing the character of candidates for high office; a lot of evidence came out suggesting Strauss-Kahn did not have a respectful attitude to women. But he did not deserve to be tried by the media, and found guilty of rape by public opinion because he “seemed like the type”. That kind of logic is strictly banned from the courtroom, for the good reason that it would expose defendants to the sort of exploitation that may have been planned here. Banning it from our thoughts would also be good. Partly because we would be less vulnerable to spin, manipulation and free PR for wedding catering businesses, but mostly because it is bad in itself.

Re chavs

There's a new book out in defence of chavs. It argues that the working class have simultaneously been beaten up by the forces of neoliberal capitalism, and vilified by class snobbery. Sounds interesting.

Not all the aspersions on chav behaviour and lifestyle are cast by toffs in Kensington drawing rooms. A lot of the venom comes from the people who have to live with those behaviours – i.e. other working class and/or not very rich people. Chav is not a synonym for poor. It can mean any or all of poor, badly dressed, badly behaved, drunk, criminal.... Being rude about these latter kinds of behaviour is not wrong. People do it out of resentment, and also because they are trying to establish and maintain, by contrast, norms of good, decent and respectable behaviour. What is bad and unfair, is tarring entire social classes with this brush.

Vice versa, is the media's attitude to chavdom one of unmixed contempt? Maybe there's some sneaking admiration in there as well, in shows like Shameless or The Only Way is Essex. (This is only an impression. I don't actually watch any shows like that, you understand, I just hear about them.)

two debt stories

Mark Harrison squishes two debt myths.

New field research results: what does every woman truly need?

AV simulations

On May 5th, Britain will have a referendum on changing the electoral system to the Alternative Vote (AV). Over the weekend I decided to simulate the 2010 election under AV. (Some people prefer gardening....)

A bit of background: the basis for this was David Sanders et al's paper (viewable here). In the British Election Study survey, they gave respondents an AV-style polling card and asked them how they would vote. They don't have enough respondents to estimate vote shares in every constituency, so instead they start with the First Past The Post vote shares from the real election, and estimate second and further preferences for each party's supporters using the BES survey data. By their reckoning, the Liberal Democrats would have picked up about 30 extra seats under AV -- not enough to make their seats proportional to their votes, but a big change, and enough to let them form a majority coalition with Labour. (Interesting what-if question: if Nick Clegg was part of a Labour coalition government, would he be listening to classical music and crying?)

When I read the paper, I realised that I could take this a step further, and use the survey data to estimate first preferences as well as second preferences. I reran the analysis. The results were not so good for the Lib Dems; instead of 30 seats, I estimate they would gain about 10.  

	Lab	Con	Lib Dem	Green/SNP/PC	Total
England	191	288	50	0	529
Scotland	40	1	12	6	59
Wales	27	7	5	1	40
Great Britain	258 (258)	296 (305)	67 (57)	0/6/1(1/6/3)	628 (630)

Estimated seats per party under the Alternative Vote, Great Britain

Notes: Numbers in brackets are seats in the actual election. Totals are different because I'm missing data for a couple of constituencies.

It seems that AV would have made only a marginal difference to the election result. Of course, as both I and the original writers say, a simulation like this misses out lots of possible changes. Maybe people will vote differently once they are used to the AV system. Surely, by the next election, vote shares will be very different. Still, to the best of my judgment, AV is a small step rather than a massive revolution. I doubt that it will lead to many more coalitions, or to extremists getting elected, as some people claim.

Here's the PDF if you want more details.

TV dons

A collection of distinguished history professors have written to the Times attacking AV. Here are their arguments in full:

• One person's casting ballot might be worth 6 times that of another.
• Extremist and "non-serious" parties might get some votes.
• er... Churchill!

This is a pretty depressing commentary on British intellectual life. Where the Hell does the "6 times" figure from? Under AV, everyone gets one vote, just as now, and everyone's vote is treated equally. The difference is that people might actually be able to vote for the party they like best, instead of having to choose from the top two in their constituency.

I also find it hard to understand what "non-serious" means, unless it just means "anyone but the Big Three". Maybe the profs are worried about a massive swing for the Monster Raving Loony party.

Let's hope some serious political scientists are drafting a rebuttal.

From the "world turns into Daily Mail editorial" department.

And now on a more Right-wing tip: I met a teacher yesterday, who told me that her school has banned kids from going out in the snow, in case they hurt themselves; and banned conkers.

How Things Work

Step 1. Cadbury's chocolate poisons its customers with salmonella.

Step 2. Cadbury's moves its factory to Poland.

Step 3. Cadbury's brings out a chocolate bar with Union Jack packaging.

... and now a tax coda...

Step 4. Cadbury's creates a subsidiary in Ireland to take advantage of its 10% tax, and fights the UK government in the European Court of Justice.

Are they by any chance related?

    

         Neuman                                Manning

I think we should be told.

And on the subject of international mobility...

... here's another story about young people getting out of Ireland.

Most people's sympathies will be more with the unsatisfied young emigrants than with Vodafone. The generation above them spent irresponsibly on both private and public goods. (Distribute the blame between private and public, according to your own political preferences.) Now the young are expected to pay for it.

Some libertarians see mobility ("voting with your feet") as a substitute for the failings of democracy. They can even get a bit utopian about it. This idea does not work so well if societies have to make investments over time. For then, people may exit during the hard times when society invests for the future, and return during the easy times when the investment pays off.  Mobility can also damage the "social contract" whereby young workers pay the pensions of the old, and expect to be paid for in their turn.

(Technical note: in theory, all these problems may be soluble with individualised funded pensions and with government debt to smooth consumption. In theory is the operative phrase. Real societies aren't like that.)

Ireland is a small country with a history of emigration. Crises may be made worse if the young and talented rush for the exit. Positive conclusion: small is not always beautiful.

Normative conclusion: a country is not just a bag to store capital and labour. Concordia parvae res crescunt, discordia maximae dilabuntur ;-)

Vodafone, globalization and taxation

Globalization skeptics argue that tax rates for capital haven't gone down very much as a result of increased capital mobility. Stories like this one suggest that they ought to focus their attention specifically on multinationals. Nick Cohen has a thoughtful take on the issue.

I am slightly more sympathetic to Dave Hartnett. If you are aiming to maximize the government's tax revenue, you probably would like the ability to negotiate with big multinational companies. Treating them the same as everyone else might just lead them to move elsewhere. On the other hand, there is a rules-versus-discretion issue: a reputation for being flexible on tax may lead other companies to demand special deals. Also, as Mr Cohen points out, the moral effects are not good.