Wednesday, July 26, 2006

Summer Break

In case it wasn't already clear, I'm taking a little hiatus from this so-called blog. I will be back, tanned and I hope refreshed, sometime in the second half of August. Probably closer to the end of August.

My vacation reading list:
Nancy Folbre's "The Invisible Heart"
Jared Diamond's "Guns, Germs, and Steel"
Katha Pollitt's "Virginity or Death!: And Other Social and Political Issues of Our Time"

No, I don't read fiction very often. I'm too literal. Direct. Tactless. Earnest.

I still haven't managed to write on "Stumbling On Happiness" by Daniel Gilbert, or "Get to Work," a delightful polemic by Linda Hirschman which caused all sorts of unpleasantness in our household last week as a result of consciousness re-raising. (Sample comment: "I'll take away your economist's license if you try to tell me that you making all the money doesn't change the bargaining power in this marriage!")

But I'll get to them. And Nancy Folbre's book promises a more satisfying analysis of Hirschman's advice. So much to say. So little time.

Tuesday, July 11, 2006

Immigration and Political Biases in Economics

This week’s New York Times Magazine attempts to introduce real economic analysis into the immigration debate (available free until Sunday, email me after that). The article is a lovely introduction to the basic theory, however the main focus is the split between George Borjas of the Kennedy School and David Card of Berkeley, which is threatening to turn ugly.* It’s a reminder that personal political biases are pervasive.

The author, Roger Lowenstein, notes, “You can find economists to substantiate the position of either chamber, but the consensus of most is that, on balance, immigration is good for the country.” The interesting thing about the debate within labor economics is the lack of distance between the camps. Everybody agrees on the theory, and the signs on the different economic analyses are all the same. As Lowenstein says, “The debate among economists is whether low-income workers are hurt a lot or just a little.” How economists come down on that question depends on their political and economic biases. Lowenstein seems to impugn Borjas the most for his anti-immigration bias, but I think Lowenstein’s own bias is towards free-market economics, as is David Card’s. Most economists are biased towards free markets (which I think is a pretty good bias to start from), but this leads them to downplay the social significance of immigration’s impact on low-income workers.

As a Native American, my own bias is strong. You might even say that I get rather pissy when I hear anti-immigration rhetoric. What, you mean the borders are closed now?** I have no love for an American culture that doesn’t welcome the striving and the downtrodden alike.

In the end the debate over immigration is a distraction from the real issue: how are we treating low-income workers in our country? Are we ensuring that they have a real opportunity to better their situation? Are we ensuring that their children have the ability move up in the world? If we address inequality of opportunity in this country—I might suggest through universal health care and better funding for education—then immigration becomes a much less important issue. The American economy has an astonishing ability to absorb immigrants, and, in my ever humble opinion, a moral imperative to do so.

*Is it only me that loves to see two labor economists have at it?
**See also the
Op-Ed Contributor from July 9, on the Hispanic history of America and the “poetic justice that now the Hispanic world should return.”

Wednesday, July 05, 2006

Thinking Positively

The three of us--JSM, me, and the littlest one--took a road trip this last weekend. As Bob Marley was singing on the ipod, “Get up, stand up; stand up for your rights,” I took a phone call. As I finished, JSM said, “Play it again, he’s singing.” So I played it again, and from the back we heard, “Get up, stand up. Stand up for your wife.”

Apparently he doesn’t know his rights. (He just turned 3, and I’d never heard him use the word ‘wife’ before, either.) Neither did I, and since Angelina Jolie recently exhorted me to know my rights, I looked them up.

The Universal Declaration of Human Rights

Do check them out. I am pleased with the advancement of humanity, at least in theory. I can’t wait until my country catches up with the rest of the western world.

Leveraging Philanthropy

The cover of this week’s Economist features Bill Gates holding what appears to be a very healthy third-world child, with the headline, “Billanthropy.” The two articles inside discuss Warren Buffett’s decision to donate over $30 billion to the Bill and Melinda Gates foundation, which roughly doubles the Gates Foundation endowment.

Mr. Buffett followed his own investment advice in choosing to donate to the Gates Foundation, allocating his money to the foundation that gives the biggest bang for the buck. It doesn’t surprise me. If I had $30 billion to donate to charity, I’d give it to the Gates Foundation, too, and I didn’t need Mr. Buffett to tell me what was the most effective charitable foundation around. I knew it from the first 1998 announcement that the Gates Foundation was donating $100 million to fund vaccine distribution in developing countries.

I wasn’t always a Bill Gates fan. I went to college in a town where WordPerfect and Novell were big employers, and Microsoft was the enemy, the big bad monopolizer throwing its weight around and killing the competition. For me, Bill Gates personified scheming greed, more than Gordon Gekko in "Wall Street." All that was wiped away the day I read in the paper about that first donation.

It was one of those moments that you remember, for the rest of your life, exactly where you were when you heard—or in this case read—the news. The timing was weird, as the newspapers took pains to point out. The New York Times stated, “The donation…comes as he is battling Government antitrust charges in Federal District Court in Washington,” implying that this might be just a big public relations effort. But I needed no persuading. I walked around in a daze, with the newspaper tucked under my arm and tears of wonder dotting my eyes. *

I have never seen in print the precise reasons that so overwhelmed me, so I share them with you now. They were fresh I my mind, as I had just taken a course by Gary Becker in “Human Capital and Development.” Human capital has been described as “personal productive capacity,” or “human competence.” It is the education, training, or even physical health which individuals use to produce or earn a living. It cannot be transferred or used by anyone else, because it resides in one’s own person. Gary Becker wrote the book on it, as well as “A Treatise on the Family,” an economic analysis of the family, and some papers describing the implications of both for developing countries.

By investing in vaccinations for children, and in research on eradicating major causes of death in developing countries (as Gates has since done), one raises life expectancy in these countries. It saves lives, which is always mentioned in the papers, but they don’t mention the ways the increase in life expectancy multiplies throughout the economy. When children are more likely to survive to adulthood, parents choose to have fewer children, and invest more in each one. As a result children receive better nutrition and more education. This effect continues into adulthood: the longer you expect to live, the bigger the payoff for investing in your own human capital. Education becomes much more important to everyone. Furthermore, the increase in life expectancy raises the importance (the returns) of all sorts of investments in developing countries; from local wells to national elections, the local population has a higher incentive to care about and reinforce the investments being made in their country.

All of these effects compound each other, moving a country from a stagnating third-world nation to a new dynamic state of a robust, growing economy. That’s the theory. The weak link here, of course, is the ability to develop stable government institutions in places wracked with violence. Yet increased life expectancy still has the right effect. It makes war and violence much more costly all around, by raising the value of the alternative.

These are the things I reflected on when I heard about that first vaccination donation. I had never thought about how to give away money, but it was clear that Bill and Melinda Gates had. They had spent at least six years studying, giving away relatively tiny amounts to local causes before going global health, and have been scaling it up every year since. It’s just what you would expect from the world’s richest capitalist. He wasn’t just going to give away more money than any industrial titan in history. He was going to leverage it, and by so doing improve the world more than anyone else in history.

*Yeah, so I'm sensitive. What of it? It's not very often these days that I feel like the world is getting to be a better place.