Economics & Marginalia: March, 4 2022

Hi all,

What is up with Q1 2022? Did somebody spill it’s drink? Why does it hate us so? Not content with the onset of a horrific—indeed, increasingly horrific—war of Aggression in Eastern Europe, it took Mark Lanegan last week and this week has taken Shane Warne, one of the two the most charismatic cricketers of my lifetime (the other, of course, being Viv Richards). He had a particular hold over the English, who loved, feared and hated him in equal measure; no day of cricket so perfectly sums up that relationship, or Warne himself quite like day 5 of the 2006/07 Adelaide test. Warne won that test with a mixture of skill and sheer force of personality. If you’re not a cricket fan, it’s hard to come up with a comparable figure, an antihero of equivalent charm and skill, loved by opponents and teammates alike. The closest I can come up with is Diego Maradona: equally occupying a space where the rules of judgement are given some flexibility on account of sheer verve. This has been an awful couple of weeks; the constant heart-wrenching stories from Ukraine (a picture of a man holding a toy ambulance very similar to one my son plays with, given to him by his son, whom he will likely never see again set me off properly this morning), the ever-so-slightly increased fear of global annihilation and the loss of cultural icons. Still: economics provides some relief.

1. But only some. Let’s start with Tim Harford using game theory to explain one advantage Putin holds in engaging with the West: the persistent fear that he is not acting rationally, but on whims beyond the realm of logic. It might not be true—in fact, it probably isn’t. But as a strategy in a high-stakes game, it helps him. As ever, Harford is equally comfortable citing Thomas Schelling, or Dixit and Nalebuff as he is illustrating his point with Dashiell Hammett and Humphrey Bogart, and he makes one point very well. When the possible outcome of a nuclear confrontation is as bad as it is, even a very small increase in its probability can have a large impact on our choices. On the same theme, Branko Milanovic is a very good person to be following right now. He makes a few important points in this piece: that oligarchs in Russia have power in some domains, but not many; that the consequences of this last week for global financial practice are likely to be profound; and that the idea of a world where one broad system of socioeconomic organisation is global currency has now been comprehensively buried. Also related: CGD’s Rose Croshier on the governance implications of Starlink.
2. In science communication, a nice trick to engage the reader’s memory is to link the thing you’re writing about to something that is already well-contextualised in their mind. Teaching students in the UK about rational choice theory, I used talk about David Beckham: no-one thinks he’s a genius in physics and dynamics, but he can certainly kick a ball as if he is (the American equivalent would be Steph Curry’s shooting). This FiveThirtyEight piece about how climate change is having a particular effect in certain seasons uses the trick beautifully, by talking about the disappearance of gumbo weather. I’ve never been to New Orleans, but I have had a lot of gumbo (people from Louisiana might say that that sentence is a contradiction in terms). Climate change isn’t just about degrees of warming, it’s about losing specific aspects of our cultural world. I feel like we often forget about that when trying to get people to care about responding.
3. Jie Bai and co-authors have a good VoxDev write-up of their great new ReStat paper on the importance of ‘collective reputation’ in international trade; the idea being that consumers usually do not make granular assessments of individual firms or markets, but lump them together in convenient groupings like ‘Made in Taiwan’ electronics or ‘French wines’. In such circumstances, what happens when there is a negative event in one part of a market that damages its reputation? The whole grouping suffers, and sometimes the damage lasts for a long time. Now is not a good time to be a Russian brand, for example, regardless of ownership.
4. I’m going to thread a very narrow needle here. For the coders and Wordle fans among us: an R package and simulation script to identify the best words to try as your first go on the puzzle. Full disclosure: I found running this code more fun than doing Wordle itself. Related, for the football fans: an R package to model football results.
5. Development Impact have had a few good links on time-use surveys and how to use them recently, and I liked this from Kathryn Beegle: an easier, less expensive way of collecting the data in the first place.
6. This is fascinating, if not enormously easy for me to summarise. Andrew Gelman on the potted history of a story—that Chinese labourers once hired an overseer to whip them to ensure their effort did not flag—that has no basis in fact, but nevertheless shows up in a scintillating selection of economics and political science papers and books (a version of even appears in Asterix and Cleopatra, though this instance has eluded Andrew’s history). It’s a really interesting piece, from the genesis of the story to Gelman’s attempt to understand why it’s so appealing to researchers. I can easily understand it: it’s vivid, surprising and can be neatly mapped on to a theory—a great teaching aid. If only it was actually true.
7. I’ll end this week on a feelgood note, because we all need one. The stories of how Germans have been welcoming fleeing Ukrainians have been incredibly heartwarming, and a small selection are collected here. And in a completely unrelated link that nevertheless made me smile, Daniel Becker talks about some of the most unexpected, difficult words that have cropped up in rap, from lugubrious to exfoliating (obviously, that one’s from Andre 3000). I’m still waiting for heteroskedasticity, but I’m not holding my breath…

Have a great weekend, everyone!

R