Tyler gives reasons why politicians will rebuild New Orleans even if cost-benefit aalysis would indicate otherwise.

This quote is from Ed Glaeser:

“We have an obligation to people, not to places,” says Edward Glaeser, a Harvard professor who specializes in urban economics. “Given just how much, on a per capita basis, it would take to rebuild New Orleans to its former glory, lots of residents would be much [better off] with $10,000 and a bus ticket to Houston.”

Sounds like an un-compassionate statement. What kind of person would desire for a city NOT to be rebuilt? Answer: an economist who values local individuals well being more than that of non-locals (tourists, postcard sellers, public opinion, etc.)–that is a compassionate economist without the sugar coating.

Becker & Posner also opine here.

Hoy divagué contra los poetas en clase. No hay nada malo con ser poeta. El problema es otorgarle (o esperar) razón y verdad de los poetas solamente porque hablan bonito.

Estirando el argumento: desde su tumba, Platón sabe que los filósofos corren regresiones, pero no los poetas. (Nota: Si eres poeta, por favor no te tomes esto en serio :-)


Platón vs. los poetas en tres caídas:
————————————-
(From Plato’s Republic, Book X)
http://classics.mit.edu/Plato/republic.11.x.html


“there is an ancient quarrel between philosophy and poetry; of which there are many proofs, (…) and there are innumerable other signs of ancient enmity between them”


Round 1: El pintor está más interesado en las “apariencias” que en las “realidades”:
(Traducción cuant: El pintor se basa en pocas observaciones que “parecen reales”)

Which is the art of painting designed to be –an imitation of things as they are, or as they appear –of appearance or of reality?

—Of appearance.

Then the imitator, I said, is a long way off the truth, and can do all things because he lightly touches on a small part of them, and that part an image. For example: A painter will paint a cobbler, carpenter, or any other artist, though he knows nothing of their arts; and, if he is a good artist, he may deceive children or simple persons, when he shows them his picture of a carpenter from a distance, and they will fancy that they are looking at a real carpenter.

Round 2: El poeta no es más que un pintor
(Traducción cuant: El poeta sabe poco, pero lo adorna como si supiera mucho)

Then must we not infer that all these poetical individuals, beginning with Homer, are only imitators; they copy images of virtue and the like, but the truth they never reach? The poet is like a painter who, as we have already observed, will make a likeness of a cobbler though he understands nothing of cobbling; and his picture is good enough for those who know no more than he does, and judge only by colours and figures.

—Quite so.

In like manner the poet with his words and phrases may be said to lay on the colours of the several arts, himself understanding their nature only enough to imitate them; and other people, who are as ignorant as he is, and judge only from his words, imagine that if he speaks of cobbling, or of military tactics, or of anything else, in metre and harmony and rhythm, he speaks very well –such is the sweet influence which melody and rhythm by nature have. And I think that you must have observed again and again what a poor appearance the tales of poets make when stripped of the colours which music puts upon them, and recited in simple prose.

Round 3: El poeta apela a las pasiones y no a la razón.
(Traducción cuant: El poeta no tiene una teoría subyacente)

Then the imitative poet who aims at being popular is not by nature made, nor is his art intended, to please or to affect the principle in the soul; but he will prefer the passionate and fitful temper, which is easily imitated?

–Clearly

And now we may fairly take him and place him by the side of the painter, for he is like him in two ways: first, inasmuch as his creations have an inferior degree of truth –in this, I say, he is like him; and he is also like him in being concerned with an inferior part of the soul; and therefore we shall be right in refusing to admit him into a well-ordered State, because he awakens and nourishes and strengthens the feelings and impairs the reason. As in a city when the evil are permitted to have authority and the good are put out of the way, so in the soul of man, as we maintain, the imitative poet implants an evil constitution, for he indulges the irrational nature which has no discernment of greater and less, but thinks the same thing at one time great and at another small-he is a manufacturer of images and is very far removed from the truth.

Rafael DiTella et al. take endogenous beliefs (ideology?) VERY seriously.  Assuming that pro-market beliefs and policies are conducive to growth, their findings are extremely relevant:

First, some micro level evidence:

Property Rights and Beliefs: Evidence from the Allocation of Land Titles to Squatters
Rafael Di Tella, Sebastian Galiani, Ernesto Schargrodsky
http://www.iq.harvard.edu/NewsEvents/Seminars-WShops/PPE/papers/di%20Tella2.pdf

Abstract
The possession of property rights may change the beliefs that people hold. We
study this hypothesis using a natural experiment from a squatter settlement in the
outskirts of Buenos Aires ensuring that the allocation of property rights is
exogenous to the characteristics of the squatters. There are significant differences
in the beliefs that squatters with and without property rights declare to hold.
Property rights make beliefs closer to those that favor the workings of a free
market. Examples include materialist and individualist beliefs (such as the belief
that money is important for happiness or the belief that one can be successful
without the support of a large group). The effects appear large. The value of a
(generated) index of pro market beliefs for squatters without property rights is
78% of that of the general Buenos Aires population. The value for squatters that
receive property rights is 98% of that of the general population. In other words,
giving property rights to squatters causes a change in their beliefs that makes
them indistinguishable from those of the general population, in spite of the
dramatic differences in the lives they lead. Our experiment is less informative as
to the precise way property rights change beliefs, although there is suggestive
evidence of a behavioral channel.

Next, some macro-level evidence:

Quote of the day:

You will observe that I give 0% weight to the hypothesis that it was a shift in culture–a rise in the belief that managers had “primary responsibility to the shareholders”–that was responsible for the very real change that you ask about. This is a professional deformation: for 27 years I have been trained to look first at changes in technologies, resources, institutions, forms of organization, and incentives, and only after all of these have failed to give answers to throw up my hands and disappear in a “blaze of amateur sociology.”

The Collection Efficiency of the Value Added Tax: Theory and
International Evidence
by Joshua Aizenman, Yothin Jinjarak  –  #11539 (ITI PE)

Brad De Long is a super-smart guy, a top economist and top blogger. Unlike
many economists, he takes the time to argue with *non-economists* (that
weird super super majority of humankind).

I agree with him: Every discipline develops a specialized language both as
an analytical tool but also as an entry barrier for “unsophisticated
outsiders”… The real challenge is to read between the lines and beyond
the entry barriers to beat pseudo-arguments with real arguments–this is a
large portion of the “fun” in academia.

http://delong.typepad.com/sdj/2005/08/more_guns_germs.html

“It’s beginning to look as if people calling [Jared Diamond’s] “Guns, Germs,
and Steel” “quasi-racist” and that it “perpetuates racism” may simply be
aping their elders.

It appears to be a thing their sub-group does in order to close the circle
of discourse against outsiders–just as economists close the discourse to
outsiders by saying “they don’t have a mathematical model” and historians
close to discourse to outsiders by saying “they don’t have any new
primary-source evidence.”

If so, Ozma’s and Tak’s claims that Diamond is “quasi-racist,” or
“perpetuates racism” should not be understood as empirical claims about the
world but merely as markers of their own commitment to a group that seeks to
close the discourse to outsiders.”

(…) “And here we have why, in Holberg’s eyes, Diamond is a racist:
Diamond (in Guns, Germs, and Steel) focuses not on how human agency is
culturally-inflected, but on how it is geographically-inflected and
environmentally-inflected. That’s materialism. That’s reductionism. That’s
determinism. That’s not racism.”

Inefficiency in Legislative Policy-Making: A Dynamic Analysis
by Marco Battaglini, Stephen Coate – #11495 (PE)
Abstract:
This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining. The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense or air quality) and the distributive spending is district-specific transfers (e.g., pork barrel spending). Investment in the public good creates a dynamic linkage across policy-making periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady state level of taxation and allocation of tax revenues. The model sheds new light on the efficiency of legislative policy-making and has a number of novel positive implications.
http://papers.nber.org/papers/W11495

Law, Endowments, and Property Rights
by Ross Levine – #11502 (IFM LE)
Abstract:
While scholars have hypothesized about the sources of variation in property rights for over 2500 years, it is only very recently that researchers have begun to test these theories empirically. This paper reviews both the theory and empirical evidence supporting and refuting the law and endowment views of property rights. The law view holds that historically determined differences in national legal traditions continue to shape cross-country differences in property rights. The endowment view argues that during European colonization, differences in climate, crops, the indigenous population, and the disease environment influenced long-run property rights.
http://papers.nber.org/papers/W11502

Inequality
by Edward L. Glaeser – #11511 (PE)
Abstract:
This paper reviews five striking facts about inequality across countries. As Kuznets (1955) famously first documented, inequality first rises and then falls with income. More unequal societies are much less likely to have democracies or governments that respect property rights. Unequal societies have less redistribution, and we have little idea whether this relationship is caused by redistribution reducing inequality or inequality reducing redistribution. Inequality and ethnic heterogeneity are highly correlated, either because of differences in educational heritages across ethnicities or because ethnic heterogeneity reduces redistribution. Finally, there is much more inequality and less redistribution in the U.S. than in most other developed nations.
http://papers.nber.org/papers/W11511

Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers
by B. Douglas Bernheim, Antonio Rangel – #11518 (HE PE)
Abstract:
This paper has two goals. First, we discuss several emerging approaches to applied welfare analysis under non-standard
(“behavioral”) assumptions concerning consumer choice. This provides a foundation for Behavioral Public Economics. Second, we illustrate applications of these approaches by surveying behavioral studies of policy problems involving saving, addiction, and public goods. We argue that the literature on behavioral public economics, though in its infancy, has already fundamentally changed our understanding of public policy in each of these domains.
http://papers.nber.org/papers/W11518

Aid and Growth: What Does the Cross-Country Evidence Really Show?
by Raghuram G. Rajan, Arvind Subramanian – #11513 (IFM)
Abstract:
We examine the effects of aid on growth–in cross-sectional and panel data–after correcting for the bias that aid typically goes to poorer countries, or to countries after poor performance. Even after this correction, we find little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth. We also find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others. Our findings, which relate to the past, do not imply that aid cannot be beneficial in the future. But they do suggest that for aid to be effective in the future, the aid apparatus will have to be rethought. Our findings raise the question: what aspects of aid offset what ought to be the indisputable growth enhancing effects of resource transfers? Thus, our findings support efforts under way at national and international levels to understand and improve aid effectiveness.
http://papers.nber.org/papers/W11513

Mexican Entrepreneurship: A Comparison of Self-Employment in Mexico and the United States
by Robert Fairlie, Christopher Woodruff – #11527 (ITI LS)
Abstract:
Nearly a quarter of Mexico’s workforce is self employed. But in the U.S. rates of self employment among Mexican Americans are only 6 percent, about half the rate among non-Latino whites. Using data from the Mexican and U.S. population census, we show that neither industrial composition nor differences in the age and education of Mexican born populations residing in Mexico and the U.S. accounts for the differences in the self employment rates in the two countries. Within the U.S., however, the data show self employment rates are much higher in ethnic enclaves. In PUMAS with a high percentage of residents of Latino origin, rates of self employment are comparable to rates among non-Latino whites. The data also indicate that the lack of English language ability and the lack of legal status among Mexican American immigrants helps account for their lower rates of self employment.
http://papers.nber.org/papers/W11527

If you are ethically-minded, this is cool stuff to argue–for or against.

The Future of Tradition
By Lee Harris
(Lee Harris is the author of Civilization and Its Enemies: The Next Stage of
History)
http://www.policyreview.org/jun05/harris.html

…the transgenerational duty to one’s grandchildren may be put in these
simple
terms: Members of each generation are committed to making sure that the
ethical baseline of their society does not move in a manner that their
visceral code instantly tells them is wrong. How much philosophical thought
is given in explaining this wrong, or in disputing its validity – all that
is irrelevant to the theory of tradition contained here.

But, once again, we confront the practical problem: How does a society go
about ensuring that the ethical baseline will be maintained at all costs,
and even when it is most tempting to depart from it in a downward direction?
Through appeals to enlightened self-interest, or through sermons and
philosophical tracts?

…

For us, it is imperative that an eight-year-old boy should have esteem for
himself, for the person that he is. We do not want him thinking, “I wish I
could be like John”; instead, we demand that he think, “I’m just fine the
way I am. I don’t need to model my behavior on anyone else.” But our
insistence on creating self-esteem in an eight-year-old boy comes with a
high price tag – by refusing to encourage the boy’s dissatisfaction with
himself as he is, we are inadvertently taking from him the primary human
motivation to change oneself for the better. By pumping him full of
self-esteem, we rob him of the will to set himself transformative projects
and goals. Totally at peace with what he is, he ceases to have any reason to
become something more – and certainly no reason at all to become what he
could be.

The contemporary gospel of individual self-esteem is at odds with the
universal tradition of mankind – a tradition that the German poet, Rilke,
summed up in the concluding lines of a poem addressed to the torso of
Apollo, whose heroic perfection Rilke saw as a challenge to our own far from
perfect status quo – “Du must dein Leben andern.” You must change your life.

…You must change yourself, as Rilke’s poem tells us, but into what? A
tolerant person? A wise person?

…

This is how those fond of abstract reasoning can destroy the ethical
foundations of a society without anyone’s noticing it: They throw up for
debate that which no one before ever thought about debating. They take the
collective visceral code that has bound parents to grandchildren from time
immemorial, in every culture known to man, and make of it a topic for
fashionable intellectual chatter.

…The intelligentsia have no idea of the consequences that would ensue if
middle America lost its simple faith in God and its equally simple trust in
its fellow men. Their plain virtues and homespun beliefs are the bedrock of
decency and integrity in our nation and in the world. These are the people
who give their sons and daughters to defend the good and to defeat the evil.
If in their eyes this clear and simple distinction is blurred through the
dissemination of moral relativism and an aesthetic of ethical frivolity,
where else will human decency find such willing and able defenders?

Even the most sophisticated of us have something to learn from the
fundamentalism of middle America. For stripped of its quaint and antiquated
ideological superstructure, there is a hard and solid kernel of wisdom
embodied in the visceral code by which fundamentalists raise their children,
and many of us, including many gay men like myself, are thankful to have
been raised by parents who were so unshakably committed to the values of
decency, and honesty, and integrity, and all those other homespun and corny
principles. Reject the theology if you wish, but respect the ethical
fundamentalism by which these people live: It is not a weakness of
intellect, but a strength of character.

If voting has signalling purposes, voting by mail “may” reduce total
turnout… but increase the share of informed voters…

“Theory and Evidence on the Role of Social Norms in Voting”
BY: PATRICIA FUNK
Stockholm School of Economics
Stockholm Institute of Transition Economics (SITE)
http://papers.ssrn.com/paper.taf?abstract_id=627347
Date: March 2005

ABSTRACT:
This paper investigates social norms and voting behavior. I argue that
social norms create incentives for signaling, i.e., voting for the purpose
of being seen at the voting act. Empirical evidence on signaling can be
gained by looking at the introduction of optional postal voting in
Switzerland. Even though the possibility of mail voting reduced voting costs
substantially, it didn’t increase turnout. Consistent with my model’s
predictions, voter turnout decreased more in the smaller communities, but in
the meantime, the share of cooperators (=interested voters) was more
positively affected there. Therefore, modern voting tools may decrease
average turnout, but nevertheless, increase the quality of the voting
outcome. Current models predict the opposite, but ignore the effect of
different voting systems on the incentive for signaling.

(This is her model:)

If voting is only possible by going to the polls, potential signaling
benefits thus originate from being seen (or not being seen) at the voting
both. However, in small communities, people know each other and gossip about
who was observed at the booth and who wasn’t. Therefore, total signaling
benefits are assumed to decrease in community size (and) a nonpositive
relationship between voter turnout and community size.

(…) It can be shown that the introduction of postal voting has a
non-positive impact on turnout in small communities and a non-negative
impact on turnout in large communities (third result). The intuition behind
result three is that the introduction of postal voting has two
countervailing effects: a cost-reduction effect (with a positive effect on
turnout) and a reduced signaling effect (with a negative effect on turnout).

As for the latter, imagine a small community, where voting is only possible
at the polls. Due to the strong social pressure and the high signaling
benefits, a large share of defectors goes to the polls e.g. to avoid social
sanctions from non-voting. As soon as postal voting is allowed, cheating
becomes easy and defectors don’t vote anymore. In large communities, on the
other hand, signaling was less rewarding (or necessary) under the old voting
system, so that the cost-reduction-effect of mail voting dominates.

These predictions from the signaling model stand in contrast to the
predictions of standard models of voting, which only consider the modern
voting tools’ effect on the voting costs.