Lunchtime Links

  1. David Reich’s essay in the New York Times on genetics, race, and IQ
  2. Henry Farrell’s essay at Crooked Timber on genetics, race, and IQ
  3. Ezra Klein’s essay at Vox on genetics, race, and IQ
  4. Chris Dillow’s essay at Stumbling and Mumbling on genetics, race, and IQ
  5. Andrew Sullivan’s essay at Daily Intelligencer on genetics, race, and IQ

Andrew’s essay is a must read. It’s careful, well thought out, and bolder than the other ones. All are well-worth reading, though.

Reich’s essay has sparked an important dialogue in the Anglo-American world (props to the NY Times). Globally, I think conceptions of race, genetics, and IQ in the non-Anglo world are based on pseudoscience (at best), so it’s nice to see this debate unfold the way it has (so far).

I don’t think any of them have done a good job grappling with Charles Murray’s argument. (More on that later.)

Thanks to Uncle Terry for bringing this to light in the first place.

A short note on Rand Paul’s shaming of the GOP

For those who don’t know what I’m talking about, Rand Paul delayed a new, 700-page congressional budget that purportedly adds $300 billion to the deficit. CNN has the money shot:

“When the Democrats are in power, Republicans appear to be the conservative party,” Paul said at one point. “But when Republicans are in power, it seems there is no conservative party. The hypocrisy hangs in the air and chokes anyone with a sense of decency or intellectual honesty.”

Read the rest. The delay lasted a couple of hours. What I found most interesting was the complaining, by Senators and House Representatives alike, about having to stay up until 4 or 5 in the morning to pass the budget.

Good. At first I was incensed that politicians could think of nothing other than getting a good night’s sleep after adding hundreds of billions of dollars to the deficit (these are the same people who have voted to give themselves six-figure salaries for their “public service”), but then I remembered, thanks in part to Rick’s constant reminders, to give my enemies all my faith. Washington’s politicians probably believe they are doing honest work, and that adding to the already massive deficit is okay as long as it achieves a bipartisan consensus.

One other thought: Rand Paul is playing politics when he uses the term “conservative” to describe budget discipline. He knows, like Jacques, that conservatives are unprincipled, middle-of-the-road opportunists, but in today’s public discourse, fiscal discipline is somehow associated with conservatism, so he uses the term “conservative” to describe his libertarian politics.

Does anybody know where the deficit actually stands?

The US Immigration Lottery

As I write, Democrats and Republicans are gearing up for a battle to transform an American immigration system that has changed little in fifty years. President Trump seems eager to alter both the number of immigrants and the nature of qualifications for immigration. His Democratic opponents call him “racist.” (Democratic extremists call anyone they don’t like “racist,” perhaps because they have exhausted all normal political insults.) The so-called “lottery” door to immigration is attracting special scorn from the president and from other high-ranking Republicans. Many in the general public, not well versed in matters of immigration, listen to the president’s attacks with perplexity or disbelief: a “lottery”? This short essay aims to throw light on the topic with a small number of figures.

In 2016 there were 1,200,000 admissions to permanent residency in the US. That’s the granting of the famous “green card” which gives one full rights to work, to go in and out of the country, but no political rights, no right to vote, and no right to be elected – until now. Permanent residency is not citizenship. This must be obtained later, separately after five or three years (the latter, for spouses of US citizens) in almost all cases. Nearly all legal residents who wish to eventually become American citizens.

“Admission” is a legal-bureaucratic term. Many of those so admitted have already been in the US, some for years, while their case was being processed. The number physically arriving in the US on that year is much larger because it includes tourists, students, and others who are supposed to be visitors staying only for a stated length of time. Immigrants are admitted on the basis of one of five broad categories:

Occupational/business qualification, family relationship to someone already legally in the US. (The latter actually includes two legal-bureaucratic categories. The distinction between the two need not concern us here.) This family-based category accounts for the bulk of legal immigration, 67% of the total in 2016. Refugees (and “asylees”) account for another large number that is variable from year to year. There is also a category “Others” which gathers a small number of odds and ends admissions otherwise not fitting into another category.

The most interesting basis for admission is the quaintly called “Diversity.” It’s an actual lottery. It’s a lottery without admission fee where one can play as often as one cares to. It contributed 50,000 admissions in 2016, or 4% of the total admitted. The number is so small that it hardly would seem to be worth the attention of policy makers, except perhaps when a lottery winner engages in spectacular criminal acts as happened in New York in the fall of 2017.

Once, in the late 80s, Senator Ted Kennedy discovered that immigration to the US included practically no Irish people. He got angry and, on the spot, devised a remedy that became – through his influence in Congress – the diversity lottery. I can’t guarantee this story is true but it’s plausible and its spirit explains well the existence of this strange anomaly.

The main reason some parts of the globe send few immigrants to the US is that most opportunities to do so are sucked up by the prevalence of immigration based on family status in other areas. It’s the result of a quasi-random starting point combined with chain immigration. Suppose a single young Mexican male manages to move to the US legally (worry not how). Within a couple of years he goes back to Mexico to get married. He brings his wife to the US. It turns out he already had a son in Mexico, from another woman. He brings the son over too. The couple has several children, all US born. Soon, they would like to have built-in babysitters. They bring in both of the wife’s parents and the husband’s surviving mother. So, in this unremarkable story, we go – in the space of less than ten years – from one immigrant from Mexico, to six. After a few more years, any of the foreign born adults may bring one or two more immigrants, including brothers and sisters. The US-born children can also bring in their Mexican uncles, aunts, and cousins, though it would take a long time. There is a natural snowball effect built into the system.

To the extent that Congress wishes to cap the total number of immigrants brought in (excluding refugees), national contingents that happened to be numerous early may monopolize a very large number of available immigration opportunities. This leaves the door almost closed to other nationalities that were not present in large numbers early. The purpose of the lottery is to improve the US immigration chances to people living in areas of the world that have been under-served for a little while. Accordingly, lottery slots are allocated among regions observed to be contributing a small number of immigrants by other means. The drawing occurs individual under-served region to under-served region. Each region corresponds more or less to a continent (distinguishing between South America and North America).

The lottery products are interesting. First, the lottery results in a frequency distribution of admissions by country of origin that would be difficult to predict in general. Second, it would be hard to forecast which countries would end up still undeserved. In 2016, lottery admissions included people from 152 countries. Only six countries passed the (arbitrary) bar of “diversity” lottery of 2,000 immigrants into the US. They were, by order of the magnitude of their immigrant contingent:

  • Egypt, Nepal, Iran, Congo (formerly Zaire), Uzbekistan, and Ethiopia.
  • Ukraine, with 1,915, almost made the cut.
  • In 2016 also, four Uruguayans qualified under the lottery (that’s 4, four units.)

Together, the core western European countries of Belgium, Denmark, France, Germany, Italy, Ireland, the Netherlands, Portugal, Spain, the United Kingdom, Sweden, and Norway, sent a grand total of 1,390 to the US under this qualification. That’s between 2 and 3% of the total diversity lottery winners. Although European countries do send immigrants to the US under other programs, Europe is classified as one of the under-served regions. It also turns out to be under-served by the lottery. In 2016, about one per thousand of the immigrants admitted to the US came from the conventionally defined core western European areas under an admission program intended to correct for under-representation. The Republic of Ireland produced 51 winners. Sen. Kennedy hardly got his way.

Anybody who calls the current American immigration system racist is out of his mind, probably dishonest as well as ignorant and, more likely, dishonestly ignorant. Inevitably, any forthcoming reform of American immigration laws is going to give results that will seem racist in comparison. Brace yourselves with facts!

All data from Homeland Security: Immigration Statistics and Data


 

I am an American sociologist by training, with a doctorate from a good university. I am also an immigrant and married to another immigrant, from another country. Together, we have two adopted children, both born abroad. I have lived in the US for fifty years. During that time, I have rarely been out of touch with immigration issues although they are not one of my subjects of systematic scholarly inquiry. Many other essays are here in Notes On Liberty and also on my blog: factsmatter.wordpress.com.

In the Search for an Optimal Level of Inequality

Recently, the blog ThinkMarkets published a post by Gunther Schnabl about how Friedrich Hayek’s works helped to understand the link between Quantitative Easing and political unrest. The piece of writing summarized with praiseworthy precision three different stages of Friedrich Hayek’s economic and political ideas and, among the many topics it addressed, it was mentioned the increasing level of income and wealth inequality that a policy of low rates of interest might bring about.

It is well-known that Friedrich Hayek owes the Swedish School as much as he does the Austrian School on his ideas about money and capital. In fact, he borrows the distinction between natural and market interest rates from Knut Wicksell. The early writings of F.A. Hayek state that disequilibrium and crisis are caused by a market interest rate that is below the natural interest rate. There is no necessity of a Central Bank to arrive at such a situation: the credit creation of the banking system or a sudden change of the expectancies of the public could set the market interest rate well below the natural interest rate and, thus, lead to what Hayek and Nicholas Kaldor called “the Concertina Effect.”

At this point we must formulate a disclaimer: Friedrich Hayek’s theory of money and capital was so controversial and subject to so many regrets by his early supporters – like said Kaldor, Ronald Coase, or Lionel Robbins – that we can hardly carry on without reaching a previous theoretical settlement over the apportations of his works. Until then, the readings on Hayek’s economics will have mostly a heuristic and inspirational value. They will be an starting point from where to spring new insights, but hardly a single conclusive statement. Hayekian economics is a whole realm to be conquered, but precisely, the most of this quest still remains undone.

For example, if we assume – as it does the said post – that ultra-loose monetary policy enlarges inequality and engenders political instability, then we are bound to find a monetary policy that delivers, or at least does not avoid, an optimal level of inequality. As it is explained in the linked lecture, the definition of such a concept might differ whether it depends on an economic or a political or a moral perspective.

Here is where I think the works of F.A. Hayek have still so much to give to our inquiries: the matter is not where to place an optimal level of inequality, but to discover the conditions under which a certain level of inequality appears to us as legitimate, or at least tolerable. This is not a subject about quantities, but about qualities. Our mission is to discover the mechanism by which the notions of fairness, justice, or even order are formed in our beliefs.

Perhaps that is the deep meaning of the order or equilibrium that it is reach when, to use the terminology of Wicksell and Hayek’s early writings, both natural and market interest rates are the same: a state of affairs in which the most of the expectancies of the agents could prove correct. The solution does not depend upon a particular public policy, but on providing an abstract institutional structure in which each individual decision could profit the most from the spontaneous order of human interaction.

What is going on in Brazil

I’ve been thinking about writing a short essay about some of the things going on in Brazil right now, especially concerning politics and economics, for my English speaking friends. I guess one can get really lost in the middle of so much news, and to the best of my knowledge, some left-leaning journalists are saying quite some nonsense already. So here we go!

President Dilma Rousseff was impeached over a year ago. Her party, the Workers Party (Partido dos Trabalhadores, or PT in Portuguese) is officially a social democrat party, close to the European social democracy tradition, i.e., socialists who want to attain power through a non violent, non revolutionary path. In the end, as it happens with so many big parties, PT has many internal tendencies and in-fighting, but I believe the party can be summarized especially in two tendencies.

On one hand you have cultural Marxists, in the Frankfurt School but even more in the Antonio Gramsci tradition. Many people in PT and other Brazilian socialist parties understood long ago that they had to win a cultural war before they won the political war. And so, these factions are much more interested in feminism, gay rights, and minority rights in general than in anything else. To the best of my knowledge, this is a strategy that backfires somewhat: cultural Leftism is a self defeating philosophy, and so, cultural Marxists are more and more into a witch hunt that damages even themselves. They make a lot of noise, to be sure, but they can’t run a country.

On the other hand, many Brazilian socialists are almost entirely pragmatic. It seems that they forgot about Marxism long ago, and are somehow even convinced of the Washington Consensus. They know basic economics, such as money doesn’t grow on trees and there’s no such thing as free lunch. But they also don’t want to lose face, and most importantly, don’t want to lose position. So, they surely won’t take measures that really shrink the size of the state to a healthy degree.

Dilma’s supporters still say she was the victim of a coup. Of course, she wasn’t. She was impeached with overwhelming evidence of her wrongdoings according to Brazilian law. Other than that, it is hard to believe in a coup where all branches of government agree and the military are not involved in any way. Eventually her supporters sophisticated the argument by saying she was the victim of a “parliamentary coup.” It is nonsense, but if we take it with a grain of salt we can be reminded of something important in Brazilian politics – or politics in general. Dilma was not impeached because of her wrongdoings. Many politicians in Brazil have done similar or worse things than her. She was impeached because she lost support, mostly in the legislative branch. For the wrong reasons (opposition to Dilma), the representatives did the right thing.

One of the problems that Brazil faces today is that the same congress that impeached Dilma for the wrong reasons expects from her successor, Michel Temer, the political favors they used to get from Dilma’s predecessor, Luis Inacio Lula da Silva. But these favors are not cheap. Other than that, even if he is a crook, Temer seems to realize that Brazil can’t suffer any more socialism. In the end Brazil is facing some (sort of) free market reforms, but without really shaking the basis of a state too big to function properly.

Minimum Wages: Where to Look for Evidence

A recent study on the effect of minimum wages in the city of Seattle has produced some conflicted reactions. As most economists expected, the significant increase in the minimum wage resulted in job losses and bankruptcies. Others, however, doubt the validity of the results given that the sample may be incomplete.

In this post I want to focus just one empirical problem. An incomplete sample in itself may not be a problem. The issue is whether or not the observations missing from the sample are relevant. This problem has been pointed out before as the Russian Roulette Effect, which consists in asking survivors of the increase in minimum wages if the increase in minimum wages have put them out of business. Of course, the answer is no. In regards to Seattle, a concern might be that fast food chains such as McDonald’s are not properly included in the study.

The first reaction is, so what? Why is that a problem? If the issue is to show that an increase of wages above their equilibrium level is going to produce unemployment, all that has to be shown is that this actually happens, not to show where it does not happen. This concern about the Seattle study is missing a key point of the economic analysis of minimum wages. The prediction is that jobs will be lost first among less efficient workers and less efficient employers, not equally across all workers and employers. More efficient employers may be able to absorb a larger share of the wage increase, to cut compensations, delay the lay-offs, etc. This is seen by the fact that demand is downward sloping and that a minimum wage above its equilibrium level “cuts” demand in two. Some employers are below the minimum wage (the less efficient ones) and others are above the minimum wage (the more efficient ones.) Let’s call the former “Uncle’s diner” and the latter “McDonald’s.” This how it is seen in a demand and supply graph:

minimum wage

Surely, there is some overlapping. But the point that this graph is making is that looking at the effects minimum wage above the red line is looking at the wrong place. A study that is looking for the effect on employment needs to be looking at what happens with below the red line. This sample, of course, has less information available than fast food chains such as McDonald’s; this is a reason why some studies focus on what can be seen even if the effect happens in what cannot be seen (and this is a value added of the Seattle study.)

This is why it is important to ask: “what do minimum wage advocates expect to find by increasing the sample size?” To question that minimum wages increase unemployment, then the critics also needs to focus on the “Uncle’s diner” part of the demand curve. If the objective is to inquire about something else, than that has no bearing on the fact that minimum wage increases do produce unemployment in the minimum wage market and at the less efficient (and harder to gather data) portion of it first.

PS: I have a previous post on minimum wages that can be found here.

The importance of understanding causal pathways: the case of affirmative action.

Let us put aside the question of whether affirmative action is a desirable goal. Instead I wish to ponder how to implement affirmative action, given that it will be implemented in some form regardless.

The logic of most affirmative action programs is that X vulnerable community’s outcomes (Y) are significantly below the average. For the sake of example let us say that X is Cherokees and Y is the number of professional baseball players from that ethno-racial group.

Y = f(X) 

A public policy analyst who simply noted the under representation of Cherokees in the MLB, without digging deeper into the causal pathway, may propose that quotas be implemented requiring teams to have a certain share of Cherokee players. Such a proposal would be a bad one. It would be bad because it could lead to privileged Cherokees gaining spots in the MLB at the expense of less privileged individuals from other ethno-racial groups.

A better public policy analysis would note that Cherokees are less likely to enter professional baseball because they are malnourished (Z). This analyst, recognizing the causal pathway, may instead propose a program be implemented to deal with malnourished individuals regardless of their ethno-racial identity.

Y = f(X); X = f(Z) 

Most affirmative action programs that I have come across are of the former type. They recognize that X ethno-racial group is performing poorly in Y outcome, and propose action without acknowledging Z. We need more programs that are designed with Z in mind.

I do not say any of this because I am an upper class white male who resents others receiving affirmative action. To the contrary. I have benefited from this type of affirmative action several times in my life. On paper I am a gold mine for a human resources worker looking to fulfill diversity quotas: I am a undocumented Hispanic of Black-Jewish descent who was raised in a low income household. I am not however vulnerable. I come from a low income household, but my Z is not low. Not really.

Despite my demographic group, I am not malnourished. I could stand to lose weight, but I am not unhealthy. I attended a state university, but my undergraduate education is comparable to that of someone who attended a public ivy. My intelligence is on the right side of the bell curve. Absent affirmative action I am confident I would achieve entry into the middle class.

Nor am I a rarity among beneficiaries. My observation is that many beneficiaries of affirmative action programs are not low on Z and left alone would achieve success on their own. Affirmative action programs are often constructed in such a way that someone low on Z could not navigate their application process. It may seem egalitarian to require applicants to submit course transcripts, to write essays, or present letters of recommendations. However these seemingly simple tasks require a level of Z that the truly under privileged do not have.

Good public policy analysis requires us to understand causal pathway of why X groups do not achieve success at similar rates as other groups. We must design programs that target undernourishment instead of simply targeting Cherokees. If we fail to do so we may have more Cherokees playing for the Dodgers, but will have failed to solve the deeper program.

Note that I say vulnerable as opposed to ‘minority’ in the above passage. This is to acknowledge that many so-called minority groups are nothing of the sort. Hispanics, Blacks, and Asians form majorities in various parts of southwest, south, and the pacific (e.g. Hawaii). Women likewise are not a minority, but are often covered by affirmative action programs. Jews are in many instances minorities, but in contemporary life are far from under represented in society’s top professions. This distinction may seem too obvious to be worth making, but it is not. Both sides of the political spectrum forget that the ultimate goal of affirmative action is to aid vulnerable individuals.  Double emphasize on individuals.