Scientific publication is not the same as it was, now that we can easily access the literature over the Internet. No more trips to the library, much fewer waits for interlibrary loans, and no more chasing who took or misplaced the volume in the racks. But did all this change anything in the way we publish our results?
This is what Timo Boppart and Kevin E. Staub study by looking at the diversity of topics covered in journals and how the availability of on-line publication would have changed that. The idea is that on-line publication allows to discover and read more material, and one may in particular stray away from the usual topics. No doubt about that. But I wonder why Boppart and Straub have this focus on journals. After all, working papers is where its at in Economics, and journal readership has not really increased, I believe. The treatment variable is the share of cited articles available on-line the year before publication. This seems so wrong. There is no way it takes only one year from the literature search to the print issue. Not in Economics, where I would say it is a minimum three years, with really rare cases below that. In fact, a good share of mine took more than a year from final acceptance to actual publication. Then, what about working papers? This is what people read, not articles.
Showing posts with label bad research. Show all posts
Showing posts with label bad research. Show all posts
How to design public block and matching grants
In most countries, there are three levels of government: national, regional and local. In Europe, there is even a fourth one, the European Union. In many instances, higher level authorities provide funds to lower levels, either through block grants (allocations for a general purpose) or matching grants (allocations that requires matching funds from the grantee). How this should occur is not well studied, especially when one considers that these funds can be used to build local public capital.
Heng-Fu Zou makes an attempt at this, with a cascading Stackelberg structure from national to regional and local governments. I do not want to mention the conclusions, though, because I think the paper is fundamentally flawed. The most interesting aspects of the problem are bypassed here: first, there is a strong redistributive aspect to block grants, hence taxation need to be part of the model, but it is only modeled as a fix lump sum payment here. Second, the very reason why there are block grant for specific purposes instead on general grants is that lower governments may be tempted to put it all in public consumption. That variable is absent from the model, everything flows into public capital.
Third, the utility function is assumed to be log-linear in all public capital and expenditures individually. This implies that all of them are essential (a government can for example not take over responsibilities from another) and in particular that private consumption or investment is completely useless. As a consequence, it is always good to increases taxes, no matter their current level. Other results also derive directly from this assumption about the utility function. Fourth, the matching grant is so poorly set up that it allows the author to claim in all seriousness that capital can go instantly to infinity if the higher authority matches at 100% the local investment. Fifth, capital does not depreciate, which matters immensely when you write about the long run. Etc.
Interesting question, horrible execution.
Heng-Fu Zou makes an attempt at this, with a cascading Stackelberg structure from national to regional and local governments. I do not want to mention the conclusions, though, because I think the paper is fundamentally flawed. The most interesting aspects of the problem are bypassed here: first, there is a strong redistributive aspect to block grants, hence taxation need to be part of the model, but it is only modeled as a fix lump sum payment here. Second, the very reason why there are block grant for specific purposes instead on general grants is that lower governments may be tempted to put it all in public consumption. That variable is absent from the model, everything flows into public capital.
Third, the utility function is assumed to be log-linear in all public capital and expenditures individually. This implies that all of them are essential (a government can for example not take over responsibilities from another) and in particular that private consumption or investment is completely useless. As a consequence, it is always good to increases taxes, no matter their current level. Other results also derive directly from this assumption about the utility function. Fourth, the matching grant is so poorly set up that it allows the author to claim in all seriousness that capital can go instantly to infinity if the higher authority matches at 100% the local investment. Fifth, capital does not depreciate, which matters immensely when you write about the long run. Etc.
Interesting question, horrible execution.
Ctrl-C Ctrl-V papers
The is a cottage industry that produces papers about rankings in the profession, rankings about journal, departments, or people in various subfields. These papers are mostly unimaginative and uninteresting, yet they find refuge in obscure field journals in the hope that this will attract a few readers and especially mentions in the honored departments. Why mention this literature? Once you have gathered the data for such a study, it is easy to slice the dataset up to produce rankings for a myriad of subfields. Thus a multiplication of papers. We could just ignore those papers, but I cannot. Indeed, there seems to be a tendency for the authors of these studies to just copy-and-paste from one paper to the author. I reported earlier about a case (who also was writing about professional rankings), and here is another one.
The duplicating fellows are George Halkos and Nickolaos Tzeremes. This tandem is incredibly productive, producing new papers by the shovel. And they got the work flow optimized. Produce a study and then replicate it on a slightly different topic. Do not bother with changing the text, simply substitute the numbers, put a paragraphs here and there for the specifics of the particular slice of the data, and done. Oh, and do not forget to change fonts and margins so that the copy job is not too obvious. Take as an example their line of work on ranking journals. First, there is a paper on journals in Economics, then mainstream journals in Economics, then Accounting, Banking and Finance, then agricultural, environmental and natural resource Economics, then socio-demographic journals. We are waiting with a bated breath for future developments.
The duplicating fellows are George Halkos and Nickolaos Tzeremes. This tandem is incredibly productive, producing new papers by the shovel. And they got the work flow optimized. Produce a study and then replicate it on a slightly different topic. Do not bother with changing the text, simply substitute the numbers, put a paragraphs here and there for the specifics of the particular slice of the data, and done. Oh, and do not forget to change fonts and margins so that the copy job is not too obvious. Take as an example their line of work on ranking journals. First, there is a paper on journals in Economics, then mainstream journals in Economics, then Accounting, Banking and Finance, then agricultural, environmental and natural resource Economics, then socio-demographic journals. We are waiting with a bated breath for future developments.
Country size and the unemployment rate
When firms merge, they mention economies of scale and sharing of fix costs. They also sometimes imply increased market power. When firms shed business lines to shrink, they put forward concentrating on core business. From this, it is not very clear where it is an advantage to have a large or small firm. What about countries? Are large countries more successful? One way to look at it, is to compare the unemployment rate to country size. Why not.
Norbert Berthold and Klaus Gründler did that and find that small is beautiful. Indeed they find a positive correlation of the unemployment rate with population and with area, looking at subcontinents, countries and regions within countries. How could that be? They first offer a bizarre explanation, using a Cobb-Douglas production function where they substitute labor by population times the employment rate, then isolating the unemployment rate. Of course, if you leave the other factors constant, increasing population will increase the unemployment rate. The problem is that the other factors are not constant. The paper later ties the correlations in a parabolic way to collective bargaining and the size of the government, the reasoning being rather obscure.
What bugs me more about the paper, though, is first the underlying assumption that each data point (a region) is treated like a closed economy. Regions trade with each other, and this implies that labor markets are linked. This is especially the case when you look at Europe today where borders have much less significance than just ten years ago. Second, the analysis is performed for 2010, not long term averages. All what is said is thus valid for a particular point in the business cycle. Finally, nowhere in the text it is mentioned that populous regions may have different characteristics that could matter for unemployment, say they are more urban, have more manufacturing, are more diversified. After all, these regions are accidents of geography and history, and both lend some economic characteristics to them. And these are the ones that matter. Otherwise, you would get the idea that you just need to administratively split up countries, and immediately a labor market miracle happens.
Norbert Berthold and Klaus Gründler did that and find that small is beautiful. Indeed they find a positive correlation of the unemployment rate with population and with area, looking at subcontinents, countries and regions within countries. How could that be? They first offer a bizarre explanation, using a Cobb-Douglas production function where they substitute labor by population times the employment rate, then isolating the unemployment rate. Of course, if you leave the other factors constant, increasing population will increase the unemployment rate. The problem is that the other factors are not constant. The paper later ties the correlations in a parabolic way to collective bargaining and the size of the government, the reasoning being rather obscure.
What bugs me more about the paper, though, is first the underlying assumption that each data point (a region) is treated like a closed economy. Regions trade with each other, and this implies that labor markets are linked. This is especially the case when you look at Europe today where borders have much less significance than just ten years ago. Second, the analysis is performed for 2010, not long term averages. All what is said is thus valid for a particular point in the business cycle. Finally, nowhere in the text it is mentioned that populous regions may have different characteristics that could matter for unemployment, say they are more urban, have more manufacturing, are more diversified. After all, these regions are accidents of geography and history, and both lend some economic characteristics to them. And these are the ones that matter. Otherwise, you would get the idea that you just need to administratively split up countries, and immediately a labor market miracle happens.
The Econophysics of migration
Sorry to report a second time in the same week about Econophysics (previous one here), but this paper is just too bizarre for me not to mention it. Physicists have the reputation, maybe wrongly, to be very bright, methodical and keen on logic. Hence it surprises me very much when I see this papers were completely senseless arguments are made and empirical evidence is tortured in utmost comical ways. I sincerely hope only the worst physicists make it to Econophysics and my view of the profession is thus biased.
Today's paper is by Anca Gheorghiu and Ion Spanulescu. It starts with a paragraph that has nothing to do with the topic, migration, that should from the onset get a failing grade from any teacher beyond elementary school:
I think was is meant here is that physics bring statistics to the table when analyzing economic phenomena. Color me shocked. After some generic rambling about what causes migration, the authors come up with an "improved model" (their words) for migration: the net present value of migrating equals the benefits of migrating less the costs of migrating. We are making significant progress here.
But there is more. Gheorghiu and Spanulescu then think of various countries as attractors, and that various forces pull people towards the respective countries. This is of course the well-known gravitational model of migration. Hey, we are using Physics concepts in Economics already! Of course, these economic attractors must be defined, and they come up with gold reserves, computers per capita and the proportion of Internet users. Why is a bit a mystery to me. The empirical evidence is presented in the form of histograms, which are apparently at the forefront of statistical techniques.
For some reason, the authors then compare countries to positive and negative electric charges and try to somehow fit migration into the Coulomb's law of electrostatic interaction. I was hoping the electro-magnetic properties of gold, the use of electrons in computers and the Internet would justify the previous empirical analysis, but no, it is entirely forgotten. Indeed, there is no attempt to somehow link all this to any measurement.
I have already spent too much time on this.
Today's paper is by Anca Gheorghiu and Ion Spanulescu. It starts with a paragraph that has nothing to do with the topic, migration, that should from the onset get a failing grade from any teacher beyond elementary school:
Physics, is the most suitable for modelling the economic phenomena and structures or financial-banking operations, because it takes into consideration the process variables characteristics and permits to use some procedures – including the mathematical one – especially probability theory for minimizing or eliminating such influences depending on human factor and unexpected phenomena also, which cannot be predicted by direct methods.
I think was is meant here is that physics bring statistics to the table when analyzing economic phenomena. Color me shocked. After some generic rambling about what causes migration, the authors come up with an "improved model" (their words) for migration: the net present value of migrating equals the benefits of migrating less the costs of migrating. We are making significant progress here.
But there is more. Gheorghiu and Spanulescu then think of various countries as attractors, and that various forces pull people towards the respective countries. This is of course the well-known gravitational model of migration. Hey, we are using Physics concepts in Economics already! Of course, these economic attractors must be defined, and they come up with gold reserves, computers per capita and the proportion of Internet users. Why is a bit a mystery to me. The empirical evidence is presented in the form of histograms, which are apparently at the forefront of statistical techniques.
For some reason, the authors then compare countries to positive and negative electric charges and try to somehow fit migration into the Coulomb's law of electrostatic interaction. I was hoping the electro-magnetic properties of gold, the use of electrons in computers and the Internet would justify the previous empirical analysis, but no, it is entirely forgotten. Indeed, there is no attempt to somehow link all this to any measurement.
I have already spent too much time on this.
The econophysics of religion
Other social scientists do not like when economists venture into their turf and challenge established methodology. We economists, of course, welcome these instances of Economics imperialism because we believe our methods are superior. But other scientists also venture into Economics, and the most brazen are the physicists. They created a new field, Econophysics, that has been met with bewilderment or amusement by economists, including myself (Exhibits A and B). Economics and Econophysics largely ignore each other. Here is now the paper that will be with upmost bewilderment in social sciences, Econophysics applied to religion.
Marcel Ausloos studies a religious sect, the Antoinists, over 80 years. Lacking information about membership, attention is turned towards income and expense reports. Ausloos tries to find patterns and regimes in the data in order to understand the growth and decay of the cult. While there is some discussion of GDP and demographics, the exercise is all about fitting the evolution of expenses with a mixture of geometric growth and a sine wave in three different regimes. Why is not clear. And I also do not think the data has been adjusted for inflation. A really bizarre study, I doubt scholars in religion will learn much from it, and economists certainly nothing except to view this field even more with suspicion.
Marcel Ausloos studies a religious sect, the Antoinists, over 80 years. Lacking information about membership, attention is turned towards income and expense reports. Ausloos tries to find patterns and regimes in the data in order to understand the growth and decay of the cult. While there is some discussion of GDP and demographics, the exercise is all about fitting the evolution of expenses with a mixture of geometric growth and a sine wave in three different regimes. Why is not clear. And I also do not think the data has been adjusted for inflation. A really bizarre study, I doubt scholars in religion will learn much from it, and economists certainly nothing except to view this field even more with suspicion.
The corporate tax Laffer curve
Given the mobility of the headquarters of financial holding firms, there is much more diversity in corporate tax rates than tax competition would call for. Looking at OECD countries, the effective tax rate peaks at 40% in Japan and the US, while it is half this, or below, in other countries. Given the high mobility, would it be government revenue maximizing to reduce the tax rate in the US or Japan? In other words, are these two countries to the right of the Laffer curve peak?
Kazuki Hiraga asks this question for Japan, but in a closed economy, thus ignoring international tax competition. Japan is still on the wrong side of the corporate tax Laffer curve. Decreasing the tax not only increases tax revenue, it leads to more growth through stronger capital accumulation. Add tax competition, and you have even better reasons to cut the corporate tax rate. Hence, the argument likely also applies to the US.
But wait a moment, let us have a look at the model. It is a standard real business cycle model with various distortionary taxes. The collected revenue is rebated in lump-sum fashion to households, which own the firms. In other words, this is a model where taxes a never optimal. Indeed, nothing useful is done with tax revenue, and there is no redistribution going on. No need for fancy solution techniques to understand the results...
Kazuki Hiraga asks this question for Japan, but in a closed economy, thus ignoring international tax competition. Japan is still on the wrong side of the corporate tax Laffer curve. Decreasing the tax not only increases tax revenue, it leads to more growth through stronger capital accumulation. Add tax competition, and you have even better reasons to cut the corporate tax rate. Hence, the argument likely also applies to the US.
But wait a moment, let us have a look at the model. It is a standard real business cycle model with various distortionary taxes. The collected revenue is rebated in lump-sum fashion to households, which own the firms. In other words, this is a model where taxes a never optimal. Indeed, nothing useful is done with tax revenue, and there is no redistribution going on. No need for fancy solution techniques to understand the results...
The surprisingly low border effect of the BigMac
The Economist's BigMac Index is widely used as an indicator of purchasing power parity. I have never been convinced that it is an appropriate indicator, though. But studies keep using it, and teachers keep mentioning it.
The latest is Anthony Landry who uses it to study the border effect, i.e., how a border adds to the cost of transportation. That assumes that BicMacs are all produced in one location and then shipped to all stores worldwide. This clearly is not the case, both for the raw material and for the assembly. While the raw material is produced centrally in each country, it is only rarely passing a border due to regulation and preferences for local product. I thus do not see the point of estimating borders effects with BigMacs.
The latest is Anthony Landry who uses it to study the border effect, i.e., how a border adds to the cost of transportation. That assumes that BicMacs are all produced in one location and then shipped to all stores worldwide. This clearly is not the case, both for the raw material and for the assembly. While the raw material is produced centrally in each country, it is only rarely passing a border due to regulation and preferences for local product. I thus do not see the point of estimating borders effects with BigMacs.
The recent collapse in the trade of durable goods
One important feature of the recent crisis has been a significant drop in international trade. There is nothing surprising in this, as it is a regular feature of recessions that imports decrease more than GDP, as they are mostly composed of intermediate and investment goods. And it is well known that investment is very volatile through the business cycle. This are all well-known facts, that are easy to replicate with standard international business cycle models.
Dimitra Petropoulou and Kwok Tong Soo look at this trade drop from the perspective of trade theorists. They use a small open economy model (hence prices are exogenous) with two-period overlapping generations (hence we are talking about long-term movements, not business cycles) with tradable durable goods and a non-tradable non-durable good. There is a fix endowment of labor and capital that can freely be allocated between sectors (hence there is no investment, or savings). Agents can freely borrow and lend within a generation, but not between generations or with abroad.
Why do I mention this? Because Petropoulou and Soo try to reinvent the wheel and make it square. There is a large international business cycle literature that has gone through all this with much more realistic assumption and delivered quantitative results. And this not the first time I see that trade theorists could learn a lot by reading a little bit outside their bubble.
Dimitra Petropoulou and Kwok Tong Soo look at this trade drop from the perspective of trade theorists. They use a small open economy model (hence prices are exogenous) with two-period overlapping generations (hence we are talking about long-term movements, not business cycles) with tradable durable goods and a non-tradable non-durable good. There is a fix endowment of labor and capital that can freely be allocated between sectors (hence there is no investment, or savings). Agents can freely borrow and lend within a generation, but not between generations or with abroad.
Why do I mention this? Because Petropoulou and Soo try to reinvent the wheel and make it square. There is a large international business cycle literature that has gone through all this with much more realistic assumption and delivered quantitative results. And this not the first time I see that trade theorists could learn a lot by reading a little bit outside their bubble.
The history of negative nominal interest rates
There is much talk about the zero bound on nominal interest rates and how this is constraining the policy options of many central banks. How can of course ask oneself why there would be such a restriction on nominal interest rates. Would it be possible to tax (nominal) money holdings? It is certainly conceivable to have negative interest rates on some bank accounts, and it has happened before. Switzerland and Germany imposed negative rates on non-resident account holders in the 1970's, and the Swiss National Bank is currently contemplating doing this again (New York Times). Sweden imposed them recently on mandatory reserve holdings of commercial banks. There is, however, very little theory on this.
Cordelius Ilgmann and Martin Menner try to make sense of the existing literature on the topic. There are essentially two strands, according to them: the first is started with Silvio Gesell in the 19th century and proposes taxing money, the second lies within the very recent money-search literature.
Gesell was the proponent of an anarchist free-market utopia, the free-economy movement. He proposed that bank notes would need to have a weekly stamp affixed to remain valid, amounting to a 5% tax every year. The stated reason is that while other goods depreciate naturally, money does not and may be withheld from circulation. The tax alleviates that, and should in particular be used in times of crisis, because it increases the velocity of money and prevents its hoarding. That argument can be made for today, but it neglects the influence of inflation on all this, and that is crucial.
The recent money-search literature uses taxes on money holding as a proxy for inflation. My understanding that this is really for analytic convenience but in no way a policy proposal. Indeed, what this literature cares about is the real return on money, not the nominal one. But Ilgmann and Menner run with it and believe there is an endorsement of a Gesell tax.
PS: a third way is discussed in the paper, recently proposed by Willem Buiter. It is based on the silly idea that the various function of money are taken over by separate currencies and backed up by equally silly arguments with money in the utility function.
Cordelius Ilgmann and Martin Menner try to make sense of the existing literature on the topic. There are essentially two strands, according to them: the first is started with Silvio Gesell in the 19th century and proposes taxing money, the second lies within the very recent money-search literature.
Gesell was the proponent of an anarchist free-market utopia, the free-economy movement. He proposed that bank notes would need to have a weekly stamp affixed to remain valid, amounting to a 5% tax every year. The stated reason is that while other goods depreciate naturally, money does not and may be withheld from circulation. The tax alleviates that, and should in particular be used in times of crisis, because it increases the velocity of money and prevents its hoarding. That argument can be made for today, but it neglects the influence of inflation on all this, and that is crucial.
The recent money-search literature uses taxes on money holding as a proxy for inflation. My understanding that this is really for analytic convenience but in no way a policy proposal. Indeed, what this literature cares about is the real return on money, not the nominal one. But Ilgmann and Menner run with it and believe there is an endorsement of a Gesell tax.
PS: a third way is discussed in the paper, recently proposed by Willem Buiter. It is based on the silly idea that the various function of money are taken over by separate currencies and backed up by equally silly arguments with money in the utility function.
Anonymous applications on the Economics PhD market. Really?
There is unfortunately still some discrimination left in labor markets. Literature has shown that in particular race and gender may matter in some cases, as well as beauty. While this is usually demonstrated by looking at the significance of some characteristic dummies that should not matter in hiring or wage decisions, another way to test for discrimination, at least in hiring, is to compare anonymous job applications to open ones. This is costly to do, and it may infringe some ethical issues, hence this is a rare exercise.
Annabelle Krause, Ulf Rinne and Klaus Zimmermann did this for applications of Economics PhDs to a position in a European institution. I am really puzzled what they expected to learn from such a peculiar market. Indeed, part of the recruitment pool was anonymized before being submitted to the recruitment team. This is very difficult to do properly, as CV, papers and reference letter have plenty of mentions of names and gender. And how to hide that when a candidate has published or is previously known to recruiters? And of course, this can only test up to the selection for the live interview, which is very early in the recruitment process.
In addition, it is very unlikely to find discrimination in such a specialized market. One, recruiting in an academic environment is usually closely scrutinized for discrimination. In fact I have been highly annoyed by the burden it takes to prove one has not discriminated. Two, I would even argue there is reverse discrimination, as recruitment committees are often under strong pressure to hire from "under-represented" groups. Three, the institution that agrees for this exercise is not discriminating consciously, or it is very foolish.
The results are not surprising. No discrimination is found, except a little reverse discrimination for women. It is impossible to generalize the results, as the sample is so small and so specific to this recruiting institution. I really do not see the point of this paper.
Annabelle Krause, Ulf Rinne and Klaus Zimmermann did this for applications of Economics PhDs to a position in a European institution. I am really puzzled what they expected to learn from such a peculiar market. Indeed, part of the recruitment pool was anonymized before being submitted to the recruitment team. This is very difficult to do properly, as CV, papers and reference letter have plenty of mentions of names and gender. And how to hide that when a candidate has published or is previously known to recruiters? And of course, this can only test up to the selection for the live interview, which is very early in the recruitment process.
In addition, it is very unlikely to find discrimination in such a specialized market. One, recruiting in an academic environment is usually closely scrutinized for discrimination. In fact I have been highly annoyed by the burden it takes to prove one has not discriminated. Two, I would even argue there is reverse discrimination, as recruitment committees are often under strong pressure to hire from "under-represented" groups. Three, the institution that agrees for this exercise is not discriminating consciously, or it is very foolish.
The results are not surprising. No discrimination is found, except a little reverse discrimination for women. It is impossible to generalize the results, as the sample is so small and so specific to this recruiting institution. I really do not see the point of this paper.
Risk taking and the menstrual cycle
Women are grumpy during their period, and they have good reasons to be so. That this can impact some of their decisions should come as no surprise, yet it can be useful to determine how and how much.
Matthew Pearson and Burkhard Schipper do this by running an experiment that tries to tease out risky behavior and find that women bid higher in an auction when in the most fecund phase of their menstrual cycle or when they are on hormonal contraceptives. OK.
But wait, much like in an infomercial on TV, there is a bonus. In a second paper, the same authors find that the ratio of the length of the index and ring fingers of the right hand has no impact on risk taking. While that seems to be a rather odd measure to look at, there is a good reason to do so. But what annoys me that this is the exact same experiment as in the previous paper, they just use a different characteristic of the participants.
This is a bad case of turning a research project into many thin salami slices. The authors did not even bother rewriting much of the paper, with many part being cut-and-pasted from one to the other. Sadly, this second paper is already scheduled to appear in Experimental Economics. What are we to expect next? A paper about hair color? Astrological sign?
Matthew Pearson and Burkhard Schipper do this by running an experiment that tries to tease out risky behavior and find that women bid higher in an auction when in the most fecund phase of their menstrual cycle or when they are on hormonal contraceptives. OK.
But wait, much like in an infomercial on TV, there is a bonus. In a second paper, the same authors find that the ratio of the length of the index and ring fingers of the right hand has no impact on risk taking. While that seems to be a rather odd measure to look at, there is a good reason to do so. But what annoys me that this is the exact same experiment as in the previous paper, they just use a different characteristic of the participants.
This is a bad case of turning a research project into many thin salami slices. The authors did not even bother rewriting much of the paper, with many part being cut-and-pasted from one to the other. Sadly, this second paper is already scheduled to appear in Experimental Economics. What are we to expect next? A paper about hair color? Astrological sign?
When random taxation is better
As many governments are scrambled for new revenue, tax evaders are falling under more intense scrutiny than usual. Southern European countries are particularly well known to be a paradise for tax evasion, as authorities are rather week and corruptible. As enforcement is rather difficult to improve, could an institutional change work better?
Stéphane Gauthier and Guy Laroque think they have found a solution, which is to randomize taxes. This builds on the fact the risk tolerance varies across tax payers and that the latter can face stiff penalties (or inconvenience) when caught evading. Suppose the skilled worker is more risk averse than the unskilled one, and you want to redistribute from skilled to unskilled, but cannot observe skills (or risk aversion). The skilled will try to pretend to be unskilled to avoid taxation. But if taxes are random, then he has fewer incentives to do so. If risk aversion goes the other way, then of course, tax evasion becomes worse. The authors offers no evidence on the correlation of risk aversion and skills or income, thus it is hard to tell how useful this scheme would be, and how welfare would be improved.
NB: The authors could have just spent a couple of seconds at the paper before submitting it. The forgot to BibTeX it, and none of the references show up. This is unfortunately a carelessness that I have encountered too often with French economists.
Stéphane Gauthier and Guy Laroque think they have found a solution, which is to randomize taxes. This builds on the fact the risk tolerance varies across tax payers and that the latter can face stiff penalties (or inconvenience) when caught evading. Suppose the skilled worker is more risk averse than the unskilled one, and you want to redistribute from skilled to unskilled, but cannot observe skills (or risk aversion). The skilled will try to pretend to be unskilled to avoid taxation. But if taxes are random, then he has fewer incentives to do so. If risk aversion goes the other way, then of course, tax evasion becomes worse. The authors offers no evidence on the correlation of risk aversion and skills or income, thus it is hard to tell how useful this scheme would be, and how welfare would be improved.
NB: The authors could have just spent a couple of seconds at the paper before submitting it. The forgot to BibTeX it, and none of the references show up. This is unfortunately a carelessness that I have encountered too often with French economists.
Growth by saturation
When you compare rich and poor economies, you notice that many things differ between them One of them is that rich countries enjoy a much larger diversity of goods. It is not just that they carry more broads categories of goods, there are also more variations of a given good. For example, rich countries may have more car types and each model is sold with many more variations than in poor countries. Explaining this could be interesting.
This may be the motivation of Kozo Kunimune who builds a growth model with three essentially characteristics: there is constant growth in factor productivity, there is a ranking of goods with respect to the utility they provide, and consumers have a saturation point for each good. This implies that once they are saturated with a good, any "excess" production capacity can be dedicated to another good. As there is a strict ordering, goods are satisfied in succession and the number of goods defines the level of development. Also, the time needed to satisfy a new good decreases if the growth rate is constant, a feature that sounds empirically correct. But of course, there is no evidence whatsoever that we have such "lexicographic cum Leontieff" preferences. The model also violates elementary principles of Economics, such as local non-satiation. Not a particularly useful model.
This may be the motivation of Kozo Kunimune who builds a growth model with three essentially characteristics: there is constant growth in factor productivity, there is a ranking of goods with respect to the utility they provide, and consumers have a saturation point for each good. This implies that once they are saturated with a good, any "excess" production capacity can be dedicated to another good. As there is a strict ordering, goods are satisfied in succession and the number of goods defines the level of development. Also, the time needed to satisfy a new good decreases if the growth rate is constant, a feature that sounds empirically correct. But of course, there is no evidence whatsoever that we have such "lexicographic cum Leontieff" preferences. The model also violates elementary principles of Economics, such as local non-satiation. Not a particularly useful model.
Ethnic heterogeneity and natural disasters
Some countries seems to be very poorly located, as they are in the path of all sorts of natural disasters. But some do better than others in coping with their perilous situation. In particular, death tolls from cataclysms seems to be, in general, of an order of magnitude larger in developing countries. What else could influence such numbers?
Eiji Yamamura, from a rich and homogeneous country that does quite well with earthquakes, tsunamis and typhoons, studies ethnic heterogeneity in two different ways in this regard. The first is ethnic polarization, which describes how close the distribution of ethnic group is from a fifty-fifty one, and ethnic fractionalization, which can be interpreted as the probability that two random people are from the same ethnic group. Once one adds the miracle instrument of cross-country regressions, legal origins, the first indicator has shows that heterogeneity has a positive impact on natural disaster deaths (meaning more of them), while the second has none.
Now Yamamamura takes this as a sign that ethnic polarization is a better indicator of ethnic heterogeneity than ethnic fractionalization. This looks like some seriously flawed reasoning here, which is repeated several times in the papers: the fact that some indicator tests favorably some hypothesis does not necessarily mean that it measures what the hypothesis says. What if in really the hypothesis is false? And in any case, on what theory would this hypothesis be based? I can easily imagine good reasons why homogeneity would lead to fewer deaths, a better social cohesion that leads to better institutions coping with disasters, like in Japan.
Eiji Yamamura, from a rich and homogeneous country that does quite well with earthquakes, tsunamis and typhoons, studies ethnic heterogeneity in two different ways in this regard. The first is ethnic polarization, which describes how close the distribution of ethnic group is from a fifty-fifty one, and ethnic fractionalization, which can be interpreted as the probability that two random people are from the same ethnic group. Once one adds the miracle instrument of cross-country regressions, legal origins, the first indicator has shows that heterogeneity has a positive impact on natural disaster deaths (meaning more of them), while the second has none.
Now Yamamamura takes this as a sign that ethnic polarization is a better indicator of ethnic heterogeneity than ethnic fractionalization. This looks like some seriously flawed reasoning here, which is repeated several times in the papers: the fact that some indicator tests favorably some hypothesis does not necessarily mean that it measures what the hypothesis says. What if in really the hypothesis is false? And in any case, on what theory would this hypothesis be based? I can easily imagine good reasons why homogeneity would lead to fewer deaths, a better social cohesion that leads to better institutions coping with disasters, like in Japan.
How to publish prolifically
I dedicated several posts to Bruno Frey and his chronic self-plagiarism. In retrospect, one should have seen that something was fishy from the mere fact that he was simply publishing too much for it to be normal, 600 articles by his own count. It is not possible for an academic, at least in Economics to be that productive. Yet, there are some who seem to be on a similar path.
Take, for example, Michael McAleer. He is an Australian econometrician who had a very respectable career in the 1980's, publishing in the AER with Adrian Pagan (and a homophone of Paul A. Volcker), four Review of Economic Statistics, a Review of Economic Studies, an Economic Journal and plenty of other decent publications. McAleer get elected into the Academy of Social Science in Australia in 1996. Then the quality of the publications dips, as he must be facing the same loss in productivity so many in the profession suffer in their forties. Still a good stream of publications.
Then suddenly, a burst of historic proportions.
Let us first look at working papers. According to his RePEc page (that is all I could find, a 2004 CV has 32 pages despite having no publications listed): 12 in 2008, 45 in 2010, 39 in 2010, and so far 15 in 2011. And these are according to their titles, at least, distinct papers. How can one do this? First McAleer has many co-authors, but he is no Paul Erdős, as his has a small set of regular collaborators. Second, many of the papers are about the same theme, with small variations: journal impact, with applications to neuroscience, tourism studies, econometrics, and economics in general, including one that I discussed. There is nothing wrong with this, except that entire sections are copy-and-pasted from one paper to the next. His other papers, for example on tourism demand in the Far East, are incredibly thin slices of research.
But these are all working papers, and he is free to write all this as long as he does not pretend this is all original and substantially new work when submitting to journals that have such requirements. McAleer is, however, also publishing avidly, although luckily few of the papers mentioned above get placed, and then only poorly. In terms of publishing, he has found another niche, the Journal of Economic Surveys:
The journal has 5 issues a year, averaging 7 articles in each issue. That is a remarkable publishing success in a generalist journal. It turns out frequent co-author Les Oxley is the editor, who himself does not hesitate to frequently publish in his own journal. I counted 17 articles of non-editorial nature, several over 60 pages long, as well as 7 reports on conferences he attended.
A good number of those articles are titled "The Ten Commandments of ...", which I find rather pretentious. I was curious about The Ten Commandments for Academics, which could reveal some of the motivations of McAleer. They are:
What I find interesting here is what was not considered. I think a better alternative, and one that would condemn much of what McAleer is doing, are due to Wesley Shrum:
These are principles about integrity, about changing the world and putting the scientific interest ahead of oneself. McAleer, rather, seems keen on clogging journals and working paper series with useless drivel, showing off and self-plagiarizing. At least for the latter part of his career, I do not see a positive externality from his efforts.
To come back to my initial question, to be prolific: find willing co-authors and editors, slice thinly, copy-and-paste, and do not think too hard what academia is about.
Take, for example, Michael McAleer. He is an Australian econometrician who had a very respectable career in the 1980's, publishing in the AER with Adrian Pagan (and a homophone of Paul A. Volcker), four Review of Economic Statistics, a Review of Economic Studies, an Economic Journal and plenty of other decent publications. McAleer get elected into the Academy of Social Science in Australia in 1996. Then the quality of the publications dips, as he must be facing the same loss in productivity so many in the profession suffer in their forties. Still a good stream of publications.
Then suddenly, a burst of historic proportions.
Let us first look at working papers. According to his RePEc page (that is all I could find, a 2004 CV has 32 pages despite having no publications listed): 12 in 2008, 45 in 2010, 39 in 2010, and so far 15 in 2011. And these are according to their titles, at least, distinct papers. How can one do this? First McAleer has many co-authors, but he is no Paul Erdős, as his has a small set of regular collaborators. Second, many of the papers are about the same theme, with small variations: journal impact, with applications to neuroscience, tourism studies, econometrics, and economics in general, including one that I discussed. There is nothing wrong with this, except that entire sections are copy-and-pasted from one paper to the next. His other papers, for example on tourism demand in the Far East, are incredibly thin slices of research.
But these are all working papers, and he is free to write all this as long as he does not pretend this is all original and substantially new work when submitting to journals that have such requirements. McAleer is, however, also publishing avidly, although luckily few of the papers mentioned above get placed, and then only poorly. In terms of publishing, he has found another niche, the Journal of Economic Surveys:
- 2011, issue 2: 1 article
- 2011, issue 1: 2 articles
- 2010, issue 1: 2 articles
- 2009, issue 5: 2 articles
- 2007, issue 5: 1 article
- 2006, issue 4: 3 articles
- 2005, issue 5: 1 article
The journal has 5 issues a year, averaging 7 articles in each issue. That is a remarkable publishing success in a generalist journal. It turns out frequent co-author Les Oxley is the editor, who himself does not hesitate to frequently publish in his own journal. I counted 17 articles of non-editorial nature, several over 60 pages long, as well as 7 reports on conferences he attended.
A good number of those articles are titled "The Ten Commandments of ...", which I find rather pretentious. I was curious about The Ten Commandments for Academics, which could reveal some of the motivations of McAleer. They are:
- choose intellectual reward over money;
- seek wisdom over tenure;
- protect freedom of speech and thought vigorously;
- defend and respect intellectual quests passionately;
- embrace the challenge of teaching undergraduate students;
- acknowledge the enjoyment in supervising graduate students;
- be generous with office hours;
- use vacation time wisely;
- attend excellent conferences at great locations;
- age gracefully like great wine.
What I find interesting here is what was not considered. I think a better alternative, and one that would condemn much of what McAleer is doing, are due to Wesley Shrum:
- Thou shalt not work for deadlines;
- Thou shalt not accept prizes or awards;
- Honor thy forebears and colleagues regardless of status;
- Thou shalt not compete for recognition;
- Thou shalt not concern thyself with money;
- Thou shalt not seek to influence students but to convey your understandings and be honest about your ignorance;
- Thou shalt not require class attendance or emphasize testing;
- Thou shalt not worry about thy own intelligence or aspire to display it;
- Thou shalt not condemn those with different perspectives;
- SEEK TO UNDERSTAND THE WORLD.
These are principles about integrity, about changing the world and putting the scientific interest ahead of oneself. McAleer, rather, seems keen on clogging journals and working paper series with useless drivel, showing off and self-plagiarizing. At least for the latter part of his career, I do not see a positive externality from his efforts.
To come back to my initial question, to be prolific: find willing co-authors and editors, slice thinly, copy-and-paste, and do not think too hard what academia is about.
Has the US economic policy been Keynesian for centuries?
Suppose the abstract of a paper starts with "It is demonstrated that the US economy has on the long-term in reality been governed by the Keynesian approach to economics independent of the current official economical policy." My first reaction is that of puzzlement, as I would not have thought as the US being particularly keen on Keynesian policy, except for the recent years (which are not considered in the quoted study). But again, data may speak differently from policy intentions, so let us dig deeper.
A. (Agung?) Johansen and Ingve Simonsen come to this stunning conclusion by looking at the correlation between (nominal?) (federal?) public debt and the Dow Jones Industrial Average. One can first question whether public debt is a good indicator of Keynesian policy. Public deficits or even public expenses would be better. And does the DJIA represent the US economy? It is certainly not an indicator of current activity, but rather of expected present value of future profits from a particular class of firms.
Whatever. Let us go with that. The analysis is done by computing over the 1791-2000 sample a sliding correlation between these two indicators over a five-year window. Surprise, the correlation is zero most of the time, except during some wars when it is strongly positive (and strongly negative during the second war with the Seminole Indians). From this they conclude the Keynesian policy was mostly pursued during wars. Now let us take a step back: the authors show that there is by their definition no Keynesian policy during peacetime. But during wartime, the government is credited with a policy geared towards expansion of the DJIA. They, one may ask, if this is the government overwhelming policy, as the authors seem to believe, why did the US wait so long to get into the two World Wars when the opportunity was there? I cannot make sense of all this.
A. (Agung?) Johansen and Ingve Simonsen come to this stunning conclusion by looking at the correlation between (nominal?) (federal?) public debt and the Dow Jones Industrial Average. One can first question whether public debt is a good indicator of Keynesian policy. Public deficits or even public expenses would be better. And does the DJIA represent the US economy? It is certainly not an indicator of current activity, but rather of expected present value of future profits from a particular class of firms.
Whatever. Let us go with that. The analysis is done by computing over the 1791-2000 sample a sliding correlation between these two indicators over a five-year window. Surprise, the correlation is zero most of the time, except during some wars when it is strongly positive (and strongly negative during the second war with the Seminole Indians). From this they conclude the Keynesian policy was mostly pursued during wars. Now let us take a step back: the authors show that there is by their definition no Keynesian policy during peacetime. But during wartime, the government is credited with a policy geared towards expansion of the DJIA. They, one may ask, if this is the government overwhelming policy, as the authors seem to believe, why did the US wait so long to get into the two World Wars when the opportunity was there? I cannot make sense of all this.
How not to think about class struggles
Depending on the research question being asked, some degree of heterogeneity is required in a model. Sometimes this modeling requires distinguishing between those who provide capital and those who work. This is obviously an abstraction, because in reality these "capitalists" may just be shareholders who also work on the labor market. In fact, they often are, and they save and invest for various purposes, like self-insurance, retirement or bequests. But making households purely capitalists and workers can sometimes prove useful in making a result emerge more clearly, as long as one is conscious of the abstraction. In some circumstances, it is useful to explain why these "classes" emerge, like differences in access to credit or in subjective discount rates. But again, these are abstractions useful for modeling.
Alberto Russo takes this abstraction very seriously. In his model, people are born capitalists or workers, which translates in households either investing in an activity with a multiplicative risk or working for a wage with additive risk. Why that is so and what should be achieved with this is left unexplained. Households face an additional risk: they randomly switch between classes, the probability depending on wealth. The model is "closed" with exogenous and distinct propensities to consume for both classes. The model is then calibrated with parameters values not related to anything observable. The simulations reveal that if one starts with everyone having the same wealth, wealth heterogeneity then emerges. Well, that was unexpected... Even back in 1993, Mark Huggett had a much better model to explain heterogeneity in wealth.
Alberto Russo takes this abstraction very seriously. In his model, people are born capitalists or workers, which translates in households either investing in an activity with a multiplicative risk or working for a wage with additive risk. Why that is so and what should be achieved with this is left unexplained. Households face an additional risk: they randomly switch between classes, the probability depending on wealth. The model is "closed" with exogenous and distinct propensities to consume for both classes. The model is then calibrated with parameters values not related to anything observable. The simulations reveal that if one starts with everyone having the same wealth, wealth heterogeneity then emerges. Well, that was unexpected... Even back in 1993, Mark Huggett had a much better model to explain heterogeneity in wealth.
The welfare gain from inflation targeting
It is rather well accepted that transparency is preferred for policy, because it anchors better expectations, people generally do not like uncertainty, and discretion can lead to adverse biases compared to set policy rules. Yet, the United States exhibit little transparancy, with the Federal Reserve being one of the few western central banks not to declare some explicit policy target, and fiscal policy being as uncertain as ever. That would not be a big deal if the welfare costs were low, but you can think that there are high and in the case of fiscal policy are currenctly holding back the recovery.
Giorgio Di Giorgio and Guido Traficante are taking a closer look at the welfare benefits of inflation targeting. For this they use a model where households observe policy interest rates and do not know whether their changes are due to reactions to output gaps or shocks to the inflation target. Households are sophisticated, they use a signal extraction device to estimate the latent, unobservable variable. Yet, they still face substantial costs from the uncertainty. Money is not neutral because of Rotemberg pricing, a variant of Calvo pricing. Oh well, I guess this is what you need to do to get a result with some bite.
Households know there is a policy rule that determines the interest rate from the output gap (unobservable) and the inflation target (stochastic and persistent) as well as known preference and cost-push shocks. In other words, households know a lot about the structure of the economy and the shocks, except for the policy shock, but then somehow cannot figure out what the output gap is. The central bank can, though, but then has for obscure reasons a trembling hand when it comes to set its inflation target. That seems to be quite the opposite of what I would have thought: everyone is confused about the output gap, and only the central bank knows what the inflation target is. Instead of a story of households trying to disentangle output gap and inflation target from the interest rate signal, one would have a story of a central banker not quite sure what to do given the circumstances. Too bad, this could have been an interesting paper.
Giorgio Di Giorgio and Guido Traficante are taking a closer look at the welfare benefits of inflation targeting. For this they use a model where households observe policy interest rates and do not know whether their changes are due to reactions to output gaps or shocks to the inflation target. Households are sophisticated, they use a signal extraction device to estimate the latent, unobservable variable. Yet, they still face substantial costs from the uncertainty. Money is not neutral because of Rotemberg pricing, a variant of Calvo pricing. Oh well, I guess this is what you need to do to get a result with some bite.
Households know there is a policy rule that determines the interest rate from the output gap (unobservable) and the inflation target (stochastic and persistent) as well as known preference and cost-push shocks. In other words, households know a lot about the structure of the economy and the shocks, except for the policy shock, but then somehow cannot figure out what the output gap is. The central bank can, though, but then has for obscure reasons a trembling hand when it comes to set its inflation target. That seems to be quite the opposite of what I would have thought: everyone is confused about the output gap, and only the central bank knows what the inflation target is. Instead of a story of households trying to disentangle output gap and inflation target from the interest rate signal, one would have a story of a central banker not quite sure what to do given the circumstances. Too bad, this could have been an interesting paper.
What is the value of research?
What is the value of the research we do? The typical way we have to evaluate the impact of research is to count citations, and possibly weigh them in some way, in Economics and any other sciences (except maybe where patents are relevant). But this only evaluates how the research output is viewed within a narrowly defined scientific community. The contribution to social welfare is an entirely different beast to evaluate.
Robert Hofmeister tries to give research some value. The approach is to consider the scientific process through cohorts, where each wave provides fundamental research as well as end-applications based on previous fundamental research. A particular research results thus can have a return over many generations. It is an interesting way to properly attribute the intellectual source of a new product or process, but the exercise is of little value if it is not possible to quantify the social value of the end-application. Indeed, Hofmeister goes back to using citations in Economics for a data application, which is equivalent to evaluate research only within the scientific community. In terms of the stated goal of the paper, we are back to square one. In terms of getting a better measure of citation impact, this is an interesting application of an old idea. And the resulting rankings of journals and articles look very much like those that are already available.
Robert Hofmeister tries to give research some value. The approach is to consider the scientific process through cohorts, where each wave provides fundamental research as well as end-applications based on previous fundamental research. A particular research results thus can have a return over many generations. It is an interesting way to properly attribute the intellectual source of a new product or process, but the exercise is of little value if it is not possible to quantify the social value of the end-application. Indeed, Hofmeister goes back to using citations in Economics for a data application, which is equivalent to evaluate research only within the scientific community. In terms of the stated goal of the paper, we are back to square one. In terms of getting a better measure of citation impact, this is an interesting application of an old idea. And the resulting rankings of journals and articles look very much like those that are already available.
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