Economics & Marginalia: August 27, 2021

Hi all,

God, I love cricket. Even when one team is miles, miles, ahead there’s drama and intrigue to keep you interested. Though England’s performance on the first couple of days has once again provided a stern lesson to the commentariat that variance neglect and over-interpretation of the win/lose binary and under-appreciation of the margin of victory makes can make you look very silly (I’m looking at you, Maninder Singh), day three is one of those glorious occasions where nothing much happens to absolutely riveting effect. Whoever first came up with the structure and rules of the game deserves a Nobel prize; in no other sport can a beatdown be so interesting. And I need it today: the news from Afghanistan continues to be grim, as does the reaction of much of the British public, apparently more concerned with pets making an escape than people fleeing for their lives, and Charlie Watts is gone. I did a quick back of the envelope calculation to work out how much of my life has been taken up by listening to him play with the Stones, and it amounted to around 0.5% of my life so far – rather a lot of time on my side.

1. Remember that paper that came out of the World Bank about a year or two ago which claimed to find evidence that inflows from the Bank to more aid-dependent countries was led to more offshore banking deposits, with the strong suggestion that the aid was being captured by illicit forces and facilitating their efforts to take money out of the country? I was never much convinced by the original paper (the results looked really dependent on a tiny handful of countries, and there were too many innocuous explanations that weren’t ruled out), but in a top piece of trolling the Bank’s neighbours in DC have run the same analysis on their own operations and found no such evidence of appropriation. In the last few years it’s certainly appears that the IMF’s research division has developed a sense of humour, as well as a healthy scepticism of what the rest of the organisation – and the DC aid establishment – does.
2. Speaking of healthy scepticism, more coverage of the Ariely-honesty-fraud brouhaha, this time in Science. The whole thing is fishier than a Cornish boat.
3. Something I’ve come to realise as I’ve gotten older is that dumb systems can persist for an extremely long time, through a combination of laziness, vested interests and path dependency. This piece by Tim Harford, an extract from his forthcoming book on the modern economy, drives the point home rather well: did you know that the postal system used to involve payment for letters upon receipt, rather than sending? A postman would show up with mail, dangle it in front of you enticingly and refuse to allow you to open the letter without shelling out what was the equivalent of a day’s wages in England at the time. The system of stamped letters – the stamp of course signalling prepayment by the sender, at much lower cost than the price paid till then by recipients – was developed by an outraged teacher, who was then ignored by the Government until he published his proposals to great media fanfare, eventually being appointed to install the system in the UK – from where it quickly spread across the world. I’m always so impressed by the way Harford manages to get so much economics into so few words, and so unobtrusively.
4. I mentioned Afghanistan in the intro. Two – unsurprisingly downbeat – assessments of its economy: first, Planet Money look prospectively at how the Taliban might try and manage it (transcript), and secondly, Atif Mian has a super short thread on the unproductive – indeed counterproductive – aid economy that sprung up after the war. He says that you cannot import development, and I think he’s right, though you can pay for homegrown plans with grants or loans.
5. Alex Bryson and David Blanchflower have a piece in VoxEU on the use of qualitative and sentiment indices for macroeconomic forecasting and projection. They argue that there is more information and predictive power in these than there is in the standard data used. Using these indices is a way of aggregating the ‘economics of walking around’ into measurable and actionable data. I have a lot of sympathy for this approach. Asking people if they’re worried about unemployment tells you something, as people have a lot of information available to them that is very difficult to systematize in other ways – the mood of their shopfloor, or the rumours they hear. There’s value in that information, if only we could mine it better. This is one way.
6. In VoxDev, a nice piece of work from Ethiopia that shows how the quality of infrastructure moderates the effect of trade liberalisation on local firms. It’s not just through better-connected places feeling a stronger hit from liberalisation, but also the quality of their connections with other domestic firms that determines their ability to become more productive and meet the competitive challenges and take advantage of the opportunities that liberalisation bring. Meanwhile, another piece finds – rather less informatively – that there is a trade-off between the number of people who use a public toilet and how clean it is.
7. Lastly, perhaps life is – in some places – taking some baby steps back to normal: Marvel content is once again hitting the big screens and oh my god have I missed it. You cannot take my money fast enough for me to see Shang Chi – Simu Liu from Kim’s Convenience, Tony Leung Chiu-wai (the greatest actor of his generation) and Michelle Yeoh in a film with ridiculously glowing reviews? Someone please volunteer to babysit! And then the trailer for Spider-Man: No Way Home dropped, with tantalising hints that we’ll get villains and Spideys from past films returning (please, please can we have Tobey Maguire’s Venom walk again?). Although if they don’t bring back Daredevil, I am going to boycott the film. Maybe.

Have a great weekend, everyone!

R