Thursday, January 31, 2013

Antigua’s WTO-Authorized Retaliation Against U.S. Copyrights

. Thursday, January 31, 2013

Without getting into the details of the case at all, Antigua prevailed in a WTO case against the U.S.  The U.S. has refused to implement the WTO’s ruling.  As a result, Antigua is permitted to implement retaliatory measures.  It has threatened to do so by permitting violations of U.S. copyrights.  There have been a host of reactions to Antigua’s proposed/authorized suspension of these IP protections. 
Some have suggested that the WTO’s approach is absurd, likening “authorized retaliation” to a two-wrongs-make-a-right mentality (see, e.g., here).  First of all, though, cross-retaliation is not rare in the WTO.  Many countries, including the U.S., have resorted to WTO-sanctioned retaliation when they prevailed in a WTO suit and the other party failed to satisfactorily implement the Appellate Body’s ruling.  The U.S. itself has done it before, and will do it again.  In fact, ironically, U.S. negotiators were among those initially pushing for cross-retaliation as a potential avenue for recourse (see here).
In any case, I think the anti-retaliation point of view often doesn’t fully appreciate the role of measured retaliation.  Sure, it seems silly to “allow” one country to breach an international obligation because another has, but at least the conflict can be reasonably contained.  By letting the WTO determine the amount of retaliation that is appropriate (i.e., an economic value commensurate with the economic disruption caused by the offending measure) we are more likely to avoid having a situation where domestic forces end up creating a trade war.  I’d rather have a WTO body determine the appropriate level of retaliation than a bunch of parliamentarians.
Even if you’re on board with the principle of authorized retaliation, you might also critique Antigua’s proposal because it specifically targets IP protection.  Not surprisingly, the Int’l Intellectual Property Alliance is not a fan.  ("We are of the firm view that suspending intellectual property rights is not the right solution, and that state-sanctioned theft is an affront to any society”)  See here.  I think there are a couple arguments to make on this.   First, it has long been argued that maybe IP protection should be separated from trade policy – that is, placed outside the purview of the WTO and trade agreements.  A lot of people opposed the TRIPS agreement on these grounds.  I am sympathetic to these arguments, but don’t see how the U.S. can really take this position now.  It was, after all, the U.S. that fought so hard for IP to be part of the WTO regime in the first place.  Having won that battle, I think it'd be tough to contend that TRIPS obligations are not fair game for retaliation.  
Another argument, however, may carry some more weight.  What if Antigua’s suspension of IP protection for U.S. copyrights violates another one of Antigua’s international commitments?  Commitments outside the context of TRIPS or the WTO.  The opposition party in Antigua seems to be concerned with this (here).  The opposition leader warned that “Antigua & Barbuda has copyright obligations by binding international treaties apart from the WTO.  Among the binding obligations to respect and uphold copyright are those under the World Intellectual Property Organization.”*  That's interesting.  Should it be required that any retaliatory measure chosen be consistent with these non-WTO-obligations?  I.e., should the WTO take this into account when determining whether proposed retaliation is appropriate?
As a side note, it is also worth considering whether this particular form of retaliation is the most useful option for Antigua.  On the one hand, it wants to punish key U.S. industries to encourage compliance with the WTO decision.  On the other hand, it could probably use its victory at the WTO to get some other form of compensation from the U.S.  But, in the end, this calculation should be made by the government of Antigua.  The WTO's authorization makes this possible, and in my view that's a good thing.

*And its not like the opposition leader is some kind of U.S. apologist – it was his Labour party that brought/prosecuted the subject case before the WTO.

Sunday, January 27, 2013

New Study on Domestic Trade Politics Studies Domestic Trade Politics

. Sunday, January 27, 2013

I like to complain a lot. A recent example was this little tirade about how IR/IPE academics don't do domestic politics very well, partially because we tend not to read much work done by other academics who specialize in domestic politics.

Well, this study (in the new International Organization) looks like an improvement over the norm:

A Referendum on Trade Theory: Voting on Free Trade in Costa Rica 
Robert Urbatsch 
Iowa State University, Ames. E-mail: 
Research on mass opinion in international political economy overwhelmingly relies on survey data. This poses problems of external validity, especially for a frequently low-salience issue such as trade policy. To examine whether survey findings about attitudes toward economic openness apply outside of surveys, this note considers patterns of voting in the 2007 Costa Rican plebiscite about joining the Central American Free Trade Area. Several extant theories appear to explain voting patterns, but the results are less in line with traditional economic models based on locally important economic sectors.
I haven't read it yet, and my brain is so riddled with some nasty virus that comprehending anything denser than genre fiction is impossible so it'll have to wait. It looks interesting. The external validity problem doesn't go away... Costa Rica in 2007 isn't exactly representative. But still.

Saturday, January 26, 2013

A Brief History of Macroeconomics

. Saturday, January 26, 2013

A nice little slideshow, with useful discussion here.

Friday, January 25, 2013

Argentina Withdraws From ICSID

. Friday, January 25, 2013

In a follow up to my previous post, Argentina has announced its intention to withdraw from ICSID. In this clip, government officials and commentators emphasize favoritism of firms over governments in ICSID rules. It bears mentioning that, according to ICSID case statistics, 48% of all cases ever referred to ICSID resulted in a monetary judgement in favor of investors. In 2012, 60% of all referred cases resulted in a similar monetary judgement. So, perhaps opinions on whether ICSID is biased toward investors depend in part on whether you look at levels vs. change. And, it bears repeating, Argentina has (probably) never paid an arbitral award.

HT Rob Galantucci

Thursday, January 24, 2013

Don't Read; Write!

. Thursday, January 24, 2013

In re Will's comments on Chris Blattman's advice to graduate students about selecting research topics, I ran across this advice to young scholars from Richard Thaler:

Work on your own ideas, not your advisor’s ideas (or at least in addition to her ideas). And spend more time thinking and less time reading. Too much reading leads people to think of small variations on existing studies. Admittedly my strategy of writing the paper first and only then reading the literature (or, more likely, letting the referees tell me what they think I should have read) is an extreme one, but it is better than trying to read everything. Try writing the first paper on some topic, not the tenth, and never the 50th.
Part of this seems like solid advice for graduate students and junior faculty. No one gets tenure by reading a lot, so, "don't read, write" is probably good advice (I seem to recall this being favorite advice of Munger). Moreover, given the curse of "shrinkingly important papers," (Thaler's term) there really isn't very much that one needs to read. However, no paper is easier to publish than the one which appears to establish precisely that which everyone already believes to be true but that has not yet been established precisely. And no papers are harder to publish than those that cut against conventional wisdom. So, shooting to write the nth paper is probably a safer tenure strategy than writing the first one.

The Scorched Earth Method of Research Design


Thomas previously had some great thoughts on how to engage in the peer review process, from the perspective of an experienced reviewer. I also like this way of thinking, in many ways saying the same things as Thomas in a different way, from Chris Blattman:

The PhD slides have my first inklings of a framework for thinking about research in political economy of development. My idea is that we should be able to draw a tree from the fundamental questions (the trunk), the big questions (the boughs), and the little questions (the branches). We should be able to hang every paper on that tree. It’s a device I use when I get a paper to referee.
At this stage of my career I take this sort of advice for "reviewing" as advice for how to conceive of and carry out my research. In other words, these types of discussions help me think about what my goals should be for the program of research that I'm engaged in. So I also appreciated Blattman's conclusion:
If you are wondering what the roots to the tree are, well of course it’s the egos and established interests of faculty in the field. So of course the big lesson for my students is that they should mainly aim to burn it down.
Not every paper (or research track) can destroy the entire edifice of all previous research of course, but those that can will certainly get folks' attention.

I used to think that research programs could be divided into high-risk/high-reward strategies and lower-risk/lower-reward strategies: if you strike gold with the former, you'll do well in journals and job markets; but if you strike out you'll... strike out. On the other hand, if you aim a bit lower you'll be more likely to hit the mark. Maybe you'll never be an academic superstar, but you'll never be unemployed either. Using Blattman's metaphor, this is the difference between a research program that exists on the trunk (or sets fire to the roots) and one which lives among the branches.

That may be true, but having recently gone through the job market process for the first time* I'm beginning to think that the "safe" path is actually not low-risk at all. By that I mean that the success of a research program which only asks branch questions is idiosyncratic: some hiring committee better be really interested in those particular branches, or else generating sufficient interest in your research to get a job offer will be difficult. At the same time, there better not be anyone else on the market investigating these particular branches; or if there is, you need to be doing it noticeably better than them.

Branch-work, by definition, does not have immediate appeal to the broad discipline. And broad appeal is helpful when trying to convince hiring committees (and then entire departments) that your work is interesting and important enough that they should pay you to do it, even if most of them don't really understand the particulars of what you're doing.

That doesn't mean that every grad student should try to upend the discipline with every dissertation. That's not my strategy, and I don't think it's a good one. It does mean that research programs which ask big questions of broad interest -- bough and trunk -- are at an advantage to those which do not, holding the quality of the research constant. And those which can ignite the roots are better still.**

*About which more another time, I suppose. I've been planning to write a post about this for awhile now, but haven't been motivated.

**Unless you're trying to get hired in a department where those roots are buried.

Wednesday, January 23, 2013

New Investment Trend Data for 2012 Released

. Wednesday, January 23, 2013

UNCTAD released new figures for 2012 FDI flows. Despite previous projections for a modest FDI increase, 2012 saw FDI flows decline by 18%. The aggregate numbers, however, conceal the fact that investment flow trends vary widely based on: investment source, investment destination, and investment type.

The EU and the US saw steep declines in FDI inflows; developed economies saw FDI decreases of 32%. Meanwhile, Investment flows to developing countries saw only modest declines of 3%. Africa and Latin America actually saw investment flow increases. Much of the decline in FDI is attributable to a stall in cross-boarder M&As, which were off 41%. Developed economies typically saw a divestment trend in their MNEs while MNEs headquartered in developing economies expanded through M&As. Greenfield investments are off 34%, but still accounted for over 66% of FDI flows for 2012.

You can read more here.

What Might a US-EU FTA Mean for International Investment Treaties?


In a previous post, Will discussed how a potential US-EU free trade agreement might effect widespread trade liberalization through inclusive institutions such as the UN. Indeed, many commentators are wary of the possible deal, believing it to signal the end of inclusive negotiations that characterize the WTO (though Will provides a nice counter to such alarmist claims).

A ratified US-EU FTA also has the capacity to change international investment law quite fundamentally. At stake is whether an agreement would have an investor-state dispute clause (ISD). Unlike traditional dispute settlement mechanisms, ISDs allow firms to sue states directly, usually within the context of an international arbital board such as the International Centre for the Settlement of Investment Disputes (ICSID). ISDs are controversial primarily because there is a widespread fear that MNC with deep pockets will engage in litigation wars of attrition. Furthermore, when investors can sue states directly, governments no longer have access to diplomatic tools to smooth over disputes. And, to the extent that the long term viability of open goods and capital markets requires some flexibility to deal with domestic push-back, the removal of states as arbiters of which investment disputes are worth pursuing and which are better left ignored could have lasting negative implications for the political viability of economic openness.

Unlike some other aspects of FTAs, ISDs can actually become salient issues. In South Korea there were a series of protests against the ISD provision of the recently ratified US-South Korea FTA. Other countries, including India, South Africa, and Australia, have recently decided to nullify portions of trade and investment treaties that include ISD provisions. Still, ISDs are widespread. The model US Bilateral Investment Treaty includes an ISD provision and ISD clauses are standard in US FTAs. However, the types of treaties that contain ISD clauses tend to be signed between states characterized by economic asymmetries.* BITs are a prime example - while over 2000 such treaties exist, there are no BITs between two advanced industrial economies.

So, the question then is whether a US-EU FTA agreement will include an ISD clause. Generally, advanced industrial countries have shown they are more interested in promoting legal regimes that protect "their" MNEs while less willing to cede jurisdiction over investment disputes in which they might be a defendant. For instance, Australia has decided to drop ISD clauses from its BIT and FTA regime after it was sued by Philip Morris; Philip Morris used Australia's BIT with Hong Kong to establish ICSID jurisdiction. Given growing dissatisfaction with the costs of ISD, it will be interesting to see if such clauses would persist if the US and EU decide to not subject themselves to such extra-territorial juridical measures.

My quick, speculative take is that ISDs will be less widely used in the future. As advanced industrial economies begin to receive more FDI from emerging economies with which they have such dispute clauses, they will seek to extract themselves from such agreements. Moreover, a movement away from ISDs may be a good thing. First, ISDs tend to create duplicated layers of juridical authority that generate confusion. Second, as mentioned above, ISDs make it harder for governments to intercede in investor-state disputes in ways that allow for flexibility necessary to maintain broad coalitions of support for deep economic integration. Finally, there is some evidence that states with ISDs tend not to pursue meaningful domestic legal reforms, and thus ISDs can contribute to the persistence of partial economic reforms that ultimately impede broad-based growth.** Removing ISDs may help overcome some of these problems.

*An important semi-exception is that NAFTA includes ISD provisions. However, this clause remains quite controversial in Canada. Canada has not yet ratified the ICSID convention, reiterating the extent to which countries are quite resistant to ceding final arbital authority to an international tribunal. Additionally, the US-Australia FTA suggests, but does not require, dispute settlements between investors and states.
** A place to start reading about this: Ginsburg, Tom (2005) "International Substitutes for Domestic Institutions: Bilateral Investment Treaties and Governance" International Review of Law and Economics 25:107-123.

Tuesday, January 22, 2013

Adventures Near the Inflection Point of the Laffer Curve

. Tuesday, January 22, 2013

First, France: Gerard Depardieu has left the country to avoid paying the new top marginal tax rate of 75%. He's apparently moved to Belgium for now, but Putin has given him a Russian passport and an offer of citizenship just in case he develops a taste for little water.

Second, France again: Nicholas Sarkozy and Carla Bruni are considering doing the same thing, perhaps by moving to London. In a first-as-tragedy-then-as-farce moment, David Cameron is actively recruiting tax exiles. (Remember that in the not-so-distant past tax exiles were leaving Britain for France, among other locales. Here's a 1977 op-ed talking about the phenomenon among musicians. The Rolling Stones wrote and recorded Exile on Main Street as tax refugees. Others included Ringo Starr, Peter Sellers, Sean Connery, and many more. Here's a slideshow of some notable examples.)

Third, California: Phil Mickelson has said that he may leave the state as a result of significant income tax increases at the state and national levels. California's income tax rate is 13.3% for top earners; Texas and Florida don't have a state income tax at all. Mickelson makes upwards of $40mn/year, so moving from CA to FL could net him $5-6mn/year, if he could save the whole 13.3%. In total, Mickelson claims he'll be losing 62-63% of his income to various taxes.

Note that Piketty and Saez estimated the "optimal" top marginal tax rate -- where "optimal" in this case means maximizing public revenue while minimizing income inequality -- as something like 75-80%. (Although it should be noted that this conclusion is based on an assumption that is less likely to hold in Europe as it is in the U.S.) In other words, that's the approximate point where the slope of the Laffer Curve zeroes out and then turns negative. In this case, the anecdotes roughly correspond to the theory: the margin seems to lie at around a 65-75% top tax rate, which can be sustained before avoidance starts becoming widespread.

As a closing aside, in the U.S. state income taxes can be deducted from federal income taxes. As I understand it, there is no limit to the amount of these deductions. This raises an interesting political question: why don't states set their income taxes at exactly the same levels as federal income taxes? Their tax-paying citizens would be no worse off -- they'd pay the same amount of tax, deducting from their federal bill what they pay to their state -- while the state's finances would be significantly better off. The federal government's budget balance would take a hit, but why should state legislatures care about that? Obviously some complications would arise, e.g. everyone would need to itemize deductions, but it seems like these could be fairly easily managed.

Or maybe not. I'm no accountant or lawyer, so its possible that this is completely wrong. But if it isn't why hasn't anybody tried it?

Monday, January 21, 2013

WTO Director General

. Monday, January 21, 2013

The upcoming transition of the WTO Director General has been getting a lot of press recently.  Pascal Lamy’s successor could potentially have a tough go of it --  taking over in the wake of a less-than-successful Doha Round.  See here and here.  The folks over at IELPB chime in here.
There are 9 candidates in the running, from Ghana, Costa Rica, New Zealand, Kenya, Jordan, Indonesia, the Republic of Korea, Brazil and Mexico.  Stuff on Mexico’s candidate (here), Indonesia’s candidate (here), Kenya’s candidate (here), and New Zealand’s candidate (here).

Wednesday, January 16, 2013

Why Political Scientists Should Take Political Science Seriously

. Wednesday, January 16, 2013

Warning: This post is intentionally inflammatory, over the top, and abrasive. Also, some claims are over-stated. Nevertheless...

So I was just going on a rant to my wife the other day about how we IR folks frequently waste our time because we don't know what other (non-IR) political scientists are doing. For example, the big trend in studies of trade politics now is to find new and novel ways to figure out what peoples' trade preferences are. So scholars are spending tons of time (and sometimes money) running surveys and experiments to figure out whether attitudes towards trade reflect sociotropic interests or self-interests.

All fine and good, but ultimately it just doesn't matter. Why? Because no election in American history  has ever been a referendum on trade policy.* Hardly any elections are decided on foreign policy more generally. Study after study shows that voters don't care about foreign policy, don't know about it, and don't change their vote because of it unless something has gone horribly, horribly wrong. That is, if IPE knew any damn thing about what political scientists who study American politics know we'd leave trade preference formation to the psychologists (and preference aggregation to the Americanists). And if security scholars actually took domestic politics seriously they likely wouldn't've wasted thousands of pages on audience costs, or the "transparency" of democracies vs. non-democracies as causing them to be more peaceful overall (which they aren't).

Instead, we've got reams of literature showing contradictory results regarding the link between trade preferences and policy, and the existence/non-existence of audience costs and democratic propensity for conflict, and then we try to figure out how to rectify these divergent results. Well the answer is to ignore them completely -- at least in the case of the U.S. -- because the supposed mechanism doesn't exist. We would know this if we paid attention to political scientists working in other sub-fields.

This is prompted by this post from Nexon:

Among other things, Saunders argues that theories of “democratic international relations” — particularly those surrounding audience costs — need to incorporate a central insight from the last fifty years of American politics research: that most voters are “low information”* when it comes to most things political–and especially foreign policy.** Thus, elites who provide “cues” to the voting public in general, partisans, ethnic groups, etc. are often key intermediaries in the relationship between foreign-policy and electoral pressures. ...

Saunders spent a lot of time walking us through arguments about low-information voters, partisan cueing, and various aspects of contemporary theories of political behavior. During the Q&A period, I asked her, basically, “why are you spending all this time telling us things we already know when you could be using that to further elaborate the implications for international-relations theory?” She responded that, in essence, when she presents the paper, “about half the time” she gets “that reaction”; “the other half of the time people are surprised.”

My reaction to this was, more or less, how could anyone working in political science in 2013 not know this stuff? I don’t mean know it well – I certainly don’t know a lot of the relevant literature or the intricacies of key debates — but rather: know the basic contours at all. And after the last few Presidential campaigns? I suspect most readers of this post will have the same reaction.
My reaction is that social scientists don't take social science all that seriously, and they take the work of other social scientists even less seriously. When was the last time an IR scholar cited The Macro Polity to note that foreign policymakers are generally not constrained by domestic mass politics?

I can't believe I'm even typing this, but despite its many (theoretical, empirical, rhetorical, etc.) flaws a book like The Israel Lobby is at least on the correct track. Foreign policy can be influenced by strong domestic interest groups and is influenced by strong domestic interest groups, so when IR folks study domestic politics we should probably focus on which groups are doing the influencing, rather than inferring causal relationships from mythical qualities of regime type.

I'm sure there are times and places in which foreign policy is exceptionally salient for mass publics. I know, for example, that common people pay lots of attention to exchange rates in Japan. I'm sure that the typical Greek pays more attention to central bank activities than the modal American. But to acknowledge this is to reinforce my point: if we in IR are going to theorize about domestic politics, we cannot simply assume that all polities are the same in all times and places. And we especially cannot do that when comparativists (yes, Americanists are comparativists) are telling repeatedly that that is not the case.

*This is not to say that campaigns will never use trade policy to target particular groups like, say, sugar growers in Florida or steel manufacturers in Ohio. They will. Occasionally winning the support of these groups might even be critical for winning elections. Interest group politics is real, and IR folks should be concerned with the phenomenon. But knowing what the median voter thinks on "trade" as a general intellectual concept just isn't very helpful.

Tuesday, January 15, 2013

21st Century Plastic People of the Universe

. Tuesday, January 15, 2013

From October but I've just seen it. Immediately banned in China, of course. Background here. More here. If you don't "get" the title of this post see here and here.

May the ironic mind always triumph over the literal, and may humor forever overcome the humorless. Live as if you were free.

Monday, January 14, 2013

Human Rights and MNCs

. Monday, January 14, 2013

Recently, the risk analysis company, Maplecroft, published its 2013 Human Rights Risk Atlas, revealing a variety of human rights violations around the world. The findings demonstrate not only a rise in some of the most serious human rights violations, but also that more countries are joining the categories of “extreme” or “high risk” based on their human rights records. Maplecroft CEO, Alyson Warhurst, released the following statement regarding the findings, "Multinational corporations are particularly vulnerable to allegations of complicity in human rights abuses, due to their complex supply chains…Business investment is deeply rooted in emerging economies and many of these countries are affected by social tensions. A decline in the human rights risk landscape is not only an unacceptable situation; it is also a forecaster of political risk and business disruption." Implying that worse human rights practices lead to a decline in overall stability particularly conducive to product output. However, do MNCs truly care about human rights practices when determining whether or not to invest abroad? An empirical study on the determinants of FDI would suggest yes (Blanton and Blanton 2007). More importantly, how does foreign direct investment or MNC involvement affect human rights practices in the host countries? Other research by Layna Mosley (2011) focusing on the relationship between workers’ rights and MNCs suggests that certain types of MNCs positively affect labor rights. Multinational production that is subcontracted as opposed to directly owned can result in a race to the bottom in labor rights practices. The results from these studies demonstrate that MNCs and FDI can have a positive influence on human rights practices at both stages of the process—the beginning and end. However, these positive results are conditional on a number of factors. Thus, begs the question—when is it favorable to MNCs or FDI for human rights violations to become an important factor? Does a governments’ human rights record matter for FDI or MNC prior or post investing in a certain country? Is it always in the best interest of the corporation to “care” about the host governments’ human rights practices?

Austerity Politics: Materialism vs. Ideationalism in the Eurozone


In a series of videos, Mark Blyth discusses the intellectual history of austerity -- the basis for his forthcoming Oxford UP book. Annoyingly, the video is organized as a playlist, so the video switches every ten minutes or so rather than playing through. The talk is well worth an hour's watching nevertheless, and I look forward to reading the book when it comes out in April.

I don't want to take too much away from him, but I have a few problems with in Blyth's analysis of current events. When he talks about the eurozone crisis he diagnosis it correctly: in a currency union, if everyone devalues internally then recession will continue; in a currency union, devaluation externally is impossible; the only other option is default. Where Blyth goes wrong is when he says that austerity is a choice, even under these conditions. Here I disagree for reasons I outlined in a previous post (see also the follow-up: "There Will Be Austerity"). Any of default, internal devaluation, and external devaluation is a form of austerity. What form is chosen is a political question. Each of these imposes costs on a different groups of people, so the political battle is of a distributional nature. Blyth insists (sometimes) that this is not the case, that austerity is the result of a cognitive or ideological blunder, and expresses a preference for a policy which is not politically feasible, nor normatively desirable (at least for much of the eurozone): turn the ECB into a "bad bank", and load it up with all of the underperforming assets being carried by eurozone banks.* While this would be great for some eurozone countries, it would be horrible for others. Which is why I think this political question is ultimately of a distributional, rather than ideational, nature.

In a another, somewhat similar way I think Blyth contradicts himself about the causes of the eurozone mess. On the one hand, he maintains that the root cause is profligacy on the part of the eurozone banks: they loaded up on too much sovereign debt from the europeriphery, as evidenced by declining interest rate spreads among the eurozone members. On the other hand, Blyth argues that the sovereigns themselves were not profligate; with the exception of Greece, they were all fiscally sound before the crisis and bailouts. But both cannot be true. If the euro sovereigns did not issue massive quantities of bonds, then there would not be massive quantities of sovereign bonds for banks to buy, in which case the banks would not be in any trouble at all.

This is an important point for him, because he claims that the eurozone crisis (and the US crisis) is the "greatest bait-and-switch in human history". Specifically, he claims that private obligations -- incurred by banks -- became public obligations -- via bailouts -- and now governments are the ones being chastised for fiscal profligacy and the public is having to pay through austerity policies. While not entirely false, this account needs more than he gives it. The story he's telling goes like this: Sovereign debt becomes bank assets, which then become sovereign liabilities again once the sovereigns begin to have trouble servicing they debt, which pushes the banks into insolvency, thus necessitating a bail out. But if this is not the fault of sovereigns then there must be a missing step somewhere. Otherwise I'm not sure where the "bait-and-switch" comes in. I think he can fairly easily square this circle by reference to capital inflows from the eurocore to the europeriphery which fed real estate booms, as well as European appetite for U.S. asset-backed securities. But then he can't explain the convergence in European sovereign borrowing costs so simply.

In the Q&A someone asks Blyth how he defines "austerity". I perked up at this point, because I've written about the slipperiness of definitions of austerity before. His answer, I think, leaves something to be desired. Blyth answers that to him "austerity" is not a combination of any particular policies, but rather a belief in the supposed expansionary properties of fiscal consolidation. Krugman also talks about the problems with "expansionary austerity" a lot, but it seems to me that this contradicts Blyth's own narrative about the ideological history of austerity. As Blyth tells it, austerity has traditionally been viewed (by Schumpeter and others) as the "purge" which must follow the "binge". It is the necessary hangover after the party. Well, such analogies provide no indication that austerity will be expansionary; quite the opposite. It is called "austerity" after all, not "luxury".

At times, Blyth conflates the "expansionary austerity" argument with the "Treasury View" (and earlier versions such as Ricardian equivalence). This is incorrect. The Treasury View -- which largely prompted Keynes' General Theory, as a retort -- is that government spending would "crowd out" spending in the private sector, so the effect of public spending would be neutral (or negligible), not expansionary.

Later, Blyth tries to make the case that shift from Schumpeterian "hangover" austerity to "expansionary" austerity occurred in the Bocconi school of economics in Milan, and was given full voice by Alberto Alesina.** So far as I can tell, this entire school of thought consists of a mere handful of academic papers authored by an even smaller number of economists (see lit review in this paper), the most significant of which (Alesina's) was published in 2010, well after austerity politics had begun in Europe and the U.S. Does Blyth seriously think that the German Finance Ministry, or U.S. Federal Reserve Board of Governors, are primarily influenced by these somewhat-marginal Italian economists rather than more traditional, distributional, political economy concerns? If so, he needs to do more to make case. Perhaps it's in the book, but as I've written before claims of expansionary austerity are mostly attacking a straw man.

These qualms aside, as intellectual history Blyth's talk is excellent and I expect his book will be outstanding as well. I've been waiting for it for what seems like years now, and I'll be happy to get my hands on a copy.

*Note that I think this is possible, and perhaps normatively desirable, but only if the legal standing and conceptual nature of the ECB changes in fundamental ways. As many have noted, this would transform the ECB into a quasi-dictatorial body with nearly no democratic oversight. Perhaps this is itself desirable to some, but there are major downsides to such a policy choice even assuming that the ECB chooses to behave as Blyth seems to think it will. As such, I see no clear sign that it will happen the way Blyth wants it to happen in the near term. Also note that Blyth says that the U.S.'s TARP was an analogous policy. It wasn't. TARP was administered by the Treasury, not the central bank, and was therefore the sort of private-obligation-into-public-obligation program that Blyth decries as a "bait and switch". The TALF program, which was administered by the Fed, supported new issuance of asset-backed securities (with the securities as collateral) as a means of unfreezing credit markets during the winter of 2008-9. The Fed bought some "toxic assets" as part of PPIP, but these later turned into billions in profit. The Fed is not now, nor has it ever been, a "bad bank".

**Alesina did do his undergraduate degree in economics at Bocconi, but he did his PhD at Harvard and has been on Harvard's faculty for almost his entire career. At one point he was the department chair. I.e., Alesina's saltwater credentials are intact. For the record, here are Alesina's current views on the effects of austerity on growth. The short answer? It depends. The longer answer? Austerity via tax increases harms economic growth, while austerity via spending cuts has a neutral effect. Nowhere does he say that austerity of any sort will be expansionary. So it is probably better to put Alesina in the "Treasury View" camp, at least as it relates to spending cuts, rather than the "expansionary austerity" camp. In which case, Blyth may need a better definition.

Saturday, January 12, 2013

Aaron Swartz, RIP

. Saturday, January 12, 2013

I never met him, but for some reason this one stings a bit more than most. Maybe more from me later. Likely not.

Thursday, January 10, 2013

Anti-GMO Activist "Apologizes"

. Thursday, January 10, 2013

A few days ago, Mark Lynas, a British environmentalist who led the charge against the use of genetically modified organisms (GMOs) in agriculture, announced that he has reevaluated his position.  As a major crusader against genetically modified farming, he previously wrote a piece titled “The world trade organisation and GMOs,” where he warned that “the WTO will increasingly remove people's right to choose healthy food and a safe environment for themselves and their children” (here, gated).  Coming from such an outspoken critic, his reconsideration of these earlier views seems like it might carry some weight.  I imagine that is why his announcement -- and apology(!) -- made such a splash (see here, and here).

To readers of this blog, the GMO debate might recall the “US-EU Beef Hormones” dispute (one of the longer running trade conflicts).  There, EU countries prohibited the import of certain meat products from the US, because the products contained genetically modified hormones.  The US challenged the ban, asserting that it violated the EU’s WTO commitments. The EU argued, in response, that it should be permitted to invoke an exception to its WTO obligations:  GMOs are harmful, and thus a ban of their importation is justified.  The case was tried before a WTO panel and then went to the Appellate Body.  In short, the WTO determined that there was a lack of scientific evidence supporting the EU’s position on GMOs, and the EU ban was deemed illegal.  Choosing not to implement the WTO ruling, the EU faced authorized retaliation from the US.  This retaliation took the form of tariffs on certain EU products, to the tune of an annual trade value of $116.8 million.  (See here for a summary of the case.)

Anyway, back to Lynas.  I wonder what his decision/announcement really means for policy on  GMOs.  In his remarks, Lynas characterized the GMO debate as “over.”  On the one hand, maybe his announcement suggests a sea change in scientific/public opinion on GMOs? (...I know nothing about the science of GMOs, or any relevant survey work done on this).  On the other hand, though, a few areas of the US have recently considered legislation relating to mandatory GMO labeling.  A GMO-related bill was introduced yesterday in New Mexico, and last week in Washington (here).  In California, a couple months ago, voters considered a ballot initiative that would have required the labeling of food with genetically modified ingredients.  The CA measure was rejected, though the vote was pretty close (here).   Maybe efforts such as these have been ongoing and just flew under my radar.  In any case, it’ll be interesting to see how these bills play out, and whether Lynas's high-profile announcement has any impact on their fate.

(h/t Kyle Goehner)




Wednesday, January 9, 2013

James Buchanan, RIP

. Wednesday, January 9, 2013

I met him only once, briefly, and it was this past summer. He was clearly diminished, but still remarkably sharp for a man in his 90s.

Buchanan's influence will be felt by those who study constitutional economics, law and economics, and theories of logrolling. My sense is that outside of those areas his (direct) influence has slipped in recent decades, although that impression may be incorrect. In any case, he helped resurrect political economy as a field of study distinct from welfare economics. I do a very different sort of political economy from him, and yet I am in his debt. Early neoliberal institutionalists in IPE built some of their work off of his foundation, see e.g. this 1982 article by Keohane which laid the groundwork for After Hegemony, and which cites Buchanan alongside Coase.

Here is his Wikipedia page. Here is his Google Scholar page. Here is his 1986 Nobel Memorial Prize lecture, which concludes with the question which motivated Buchanan's entire career:

How can we live together in peace, prosperity, and harmony, while retaining our liberties as autonomous individuals who can, and must, create our own values?

Sunday, January 6, 2013

Peer Review

. Sunday, January 6, 2013

Peter Henne posted a series of questions about peer review. Dan Nexon noted that while the post had generated lots of traffic, no one had offered answers to Peter's questions. Here are mine.

1. Is there an objective standard for “so what?” No, there is not. Yet, this doesn't make it fully subjective. Any good paper will explain why what it reports matters, and few papers under-sell their findings. A reviewer's job is to evaluate the degree to which those assertions are warranted. A good rule of thumb here might be, if you are struggling to decide whether a paper you are reviewing is important, it isn't.

2. When is a methodological flaw a disqualifier? Always. Whether such flaws warrant a reject or an R&R depends upon the severity of the flaw and the potential significance of the results once the flaw is corrected. 

3. Should I take into account the prestige of the journal? Yes. But this consideration matters only in regard to the "so what" question. Thus, disallow flawed research everywhere. Competent work (even cutting edge methods) that makes smaller contributions belongs in less prestigious outlets. Thus, many reviews I write begin with, "this is an excellent piece of research, but it is not important enough to be published in (APSR/IO/AJPS)."

4. Is it fair to impose my sub-field's standards on interdisciplinary journals? Yes, interdisciplinary does not mean absence of discipline. If you do not impose the standards that you know (those in your discipline), what standards will you apply?

5. Should theory-free inductive studies be published in scholarly journals? Isn't this a variant of the so what question?

6. Can I tell them to cite me? Sometimes. See below.

7. How extensive should the literature review be? As extensive as it needs to be, and not a bit more so. The purpose of the lit review is to answer the "so what" question. Presumably, the research a paper reports offers a novel contribution to some research program. To do so the lit review must accurately characterize the current state of knowledge. If important contributions are omitted, the author must be encouraged to incorporate them. If your work is an important and omitted contribution, then yes, you can tell them to cite you. If your work isn't an important contribution, then find some other way to get people to read your work.

More broadly, Peter asks, "what constitutes a publishable paper, what necessitates revise and resubmit, and when is a rejection fair?" There are no rules, but here are my general guidelines. Well-written papers that report well-designed and well-executed research that speaks to some problem of public or scholarly concern deserve to be published (but not necessarily in the APSR). Rejection is fair when a paper is profoundly flawed or is trying to punch above its weight. Everything else warrants a revise and resubmit on the first iteration. Be unforgiving on the second iteration.

Friday, January 4, 2013

No Social Science Among Social Scientists

. Friday, January 4, 2013

Matt Yglesias, one of the most econ literate journalists going, is at the annual flagship conference for economists and notes something odd:
I'm in San Diego for the American Economics Association's annual meeting, and so naturally I wanted to grab a cup of coffee in the hotel lobby before the 8AM sessions started. Imagine my surprise to find that as of 7:45 AM the lines were punishingly long and there was no way I'd be able to get to the session on high-skill immigration if I waited around.  
Sad. And a result of a shocking lack of economics. Clearly the price charged should have been much, much higher. You only have the logistical capacity to serve so many people between 7:30 and 8:00 AM, so you ought to serve the people with the most willingness to pay. Let folks who don't care about being on time to an 8AM session just wait around and buy their coffee later after prices fall. Let those who place a strong premium on both coffee and punctuality pay through the nose. It seems so simple and yet even at a conference of economics nobody wants to apply economic ideas.
I find the same thing is true in political science. For example, when Jeff Flake launched a campaign to cut federal funding of political science research what did political scientists do? Did we utilize our theories of politics to form an effective lobbying organization? Did we use our professional organization to overcome the collective action problem and secure our rents? No. APSA released an outraged statement on its website and encouraged members to... write their Congressperson. How imaginative, how theory-driven, how efficacious. The Monkey Cage reviewed a bunch of studies which had received NSF funding. That's about the sum total of the response from political scientists, excepting snarky posts on Facebook and Twitter.

Similarly, it is a cliche that political science faculty departments are often governed, shall we say, sub-optimally. While I'm not yet a faculty member, and thus don't yet have much experience in this area, I hear stories all the time (not just from my department) about how weird and screwed up things frequently get in faculty meetings. Why not use our theories to improve this in Pareto-improving ways? We supposedly know how to do that. While we're at it, why don't political scientists control governance at the university level? Don't we know how insurgencies succeed?

And why do most of us vote, contribute to campaigns, and even volunteer to work for particular candidates? Leaving aside whether voting is "rational" for instrumental reasons, most of our theories suggest that actual policy differences between candidates will be minimal and that most of politics occurs in a bureaucratic setting anyway. Why not direct our efforts towards influencing that process instead? For that matter, why are the successful politicians a bunch of lawyers rather than political scientists?

I could go on but you get the point: all too often social scientists tend to not take their theories seriously enough to actually make use of them in the real world. That says something. Not sure what, but something.

International Political Economy at the University of North Carolina: January 2013




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