Ethnic heterogeneity and natural disasters

Some countries seems to be very poorly located, as they are in the path of all sorts of natural disasters. But some do better than others in coping with their perilous situation. In particular, death tolls from cataclysms seems to be, in general, of an order of magnitude larger in developing countries. What else could influence such numbers?

Eiji Yamamura, from a rich and homogeneous country that does quite well with earthquakes, tsunamis and typhoons, studies ethnic heterogeneity in two different ways in this regard. The first is ethnic polarization, which describes how close the distribution of ethnic group is from a fifty-fifty one, and ethnic fractionalization, which can be interpreted as the probability that two random people are from the same ethnic group. Once one adds the miracle instrument of cross-country regressions, legal origins, the first indicator has shows that heterogeneity has a positive impact on natural disaster deaths (meaning more of them), while the second has none.

Now Yamamamura takes this as a sign that ethnic polarization is a better indicator of ethnic heterogeneity than ethnic fractionalization. This looks like some seriously flawed reasoning here, which is repeated several times in the papers: the fact that some indicator tests favorably some hypothesis does not necessarily mean that it measures what the hypothesis says. What if in really the hypothesis is false? And in any case, on what theory would this hypothesis be based? I can easily imagine good reasons why homogeneity would lead to fewer deaths, a better social cohesion that leads to better institutions coping with disasters, like in Japan.

How to publish prolifically

I dedicated several posts to Bruno Frey and his chronic self-plagiarism. In retrospect, one should have seen that something was fishy from the mere fact that he was simply publishing too much for it to be normal, 600 articles by his own count. It is not possible for an academic, at least in Economics to be that productive. Yet, there are some who seem to be on a similar path.

Take, for example, Michael McAleer. He is an Australian econometrician who had a very respectable career in the 1980's, publishing in the AER with Adrian Pagan (and a homophone of Paul A. Volcker), four Review of Economic Statistics, a Review of Economic Studies, an Economic Journal and plenty of other decent publications. McAleer get elected into the Academy of Social Science in Australia in 1996. Then the quality of the publications dips, as he must be facing the same loss in productivity so many in the profession suffer in their forties. Still a good stream of publications.

Then suddenly, a burst of historic proportions.

Let us first look at working papers. According to his RePEc page (that is all I could find, a 2004 CV has 32 pages despite having no publications listed): 12 in 2008, 45 in 2010, 39 in 2010, and so far 15 in 2011. And these are according to their titles, at least, distinct papers. How can one do this? First McAleer has many co-authors, but he is no Paul Erdős, as his has a small set of regular collaborators. Second, many of the papers are about the same theme, with small variations: journal impact, with applications to neuroscience, tourism studies, econometrics, and economics in general, including one that I discussed. There is nothing wrong with this, except that entire sections are copy-and-pasted from one paper to the next. His other papers, for example on tourism demand in the Far East, are incredibly thin slices of research.

But these are all working papers, and he is free to write all this as long as he does not pretend this is all original and substantially new work when submitting to journals that have such requirements. McAleer is, however, also publishing avidly, although luckily few of the papers mentioned above get placed, and then only poorly. In terms of publishing, he has found another niche, the Journal of Economic Surveys:

• 2011, issue 2: 1 article
  
• 2011, issue 1: 2 articles
  
• 2010, issue 1: 2 articles
  
• 2009, issue 5: 2 articles
  
• 2007, issue 5: 1 article
  
• 2006, issue 4: 3 articles
  
• 2005, issue 5: 1 article

The journal has 5 issues a year, averaging 7 articles in each issue. That is a remarkable publishing success in a generalist journal. It turns out frequent co-author Les Oxley is the editor, who himself does not hesitate to frequently publish in his own journal. I counted 17 articles of non-editorial nature, several over 60 pages long, as well as 7 reports on conferences he attended.

A good number of those articles are titled "The Ten Commandments of ...", which I find rather pretentious. I was curious about The Ten Commandments for Academics, which could reveal some of the motivations of McAleer. They are:

1. choose intellectual reward over money;
2. seek wisdom over tenure;
3. protect freedom of speech and thought vigorously;
4. defend and respect intellectual quests passionately;
5. embrace the challenge of teaching undergraduate students;
6. acknowledge the enjoyment in supervising graduate students;
7. be generous with office hours;
8. use vacation time wisely;
9. attend excellent conferences at great locations;
10. age gracefully like great wine.

What I find interesting here is what was not considered. I think a better alternative, and one that would condemn much of what McAleer is doing, are due to Wesley Shrum:

1. Thou shalt not work for deadlines;
2. Thou shalt not accept prizes or awards;
3. Honor thy forebears and colleagues regardless of status;
4. Thou shalt not compete for recognition;
5. Thou shalt not concern thyself with money;
6. Thou shalt not seek to influence students but to convey your understandings and be honest about your ignorance;
7. Thou shalt not require class attendance or emphasize testing;
8. Thou shalt not worry about thy own intelligence or aspire to display it;
9. Thou shalt not condemn those with different perspectives;
10. SEEK TO UNDERSTAND THE WORLD.

These are principles about integrity, about changing the world and putting the scientific interest ahead of oneself. McAleer, rather, seems keen on clogging journals and working paper series with useless drivel, showing off and self-plagiarizing. At least for the latter part of his career, I do not see a positive externality from his efforts.

To come back to my initial question, to be prolific: find willing co-authors and editors, slice thinly, copy-and-paste, and do not think too hard what academia is about.

Has the US economic policy been Keynesian for centuries?

Suppose the abstract of a paper starts with "It is demonstrated that the US economy has on the long-term in reality been governed by the Keynesian approach to economics independent of the current official economical policy." My first reaction is that of puzzlement, as I would not have thought as the US being particularly keen on Keynesian policy, except for the recent years (which are not considered in the quoted study). But again, data may speak differently from policy intentions, so let us dig deeper.



A. (Agung?) Johansen and Ingve Simonsen come to this stunning conclusion by looking at the correlation between (nominal?) (federal?) public debt and the Dow Jones Industrial Average. One can first question whether public debt is a good indicator of Keynesian policy. Public deficits or even public expenses would be better. And does the DJIA represent the US economy? It is certainly not an indicator of current activity, but rather of expected present value of future profits from a particular class of firms.



Whatever. Let us go with that. The analysis is done by computing over the 1791-2000 sample a sliding correlation between these two indicators over a five-year window. Surprise, the correlation is zero most of the time, except during some wars when it is strongly positive (and strongly negative during the second war with the Seminole Indians). From this they conclude the Keynesian policy was mostly pursued during wars. Now let us take a step back: the authors show that there is by their definition no Keynesian policy during peacetime. But during wartime, the government is credited with a policy geared towards expansion of the DJIA. They, one may ask, if this is the government overwhelming policy, as the authors seem to believe, why did the US wait so long to get into the two World Wars when the opportunity was there? I cannot make sense of all this.

How not to think about class struggles

Depending on the research question being asked, some degree of heterogeneity is required in a model. Sometimes this modeling requires distinguishing between those who provide capital and those who work. This is obviously an abstraction, because in reality these "capitalists" may just be shareholders who also work on the labor market. In fact, they often are, and they save and invest for various purposes, like self-insurance, retirement or bequests. But making households purely capitalists and workers can sometimes prove useful in making a result emerge more clearly, as long as one is conscious of the abstraction. In some circumstances, it is useful to explain why these "classes" emerge, like differences in access to credit or in subjective discount rates. But again, these are abstractions useful for modeling.

Alberto Russo takes this abstraction very seriously. In his model, people are born capitalists or workers, which translates in households either investing in an activity with a multiplicative risk or working for a wage with additive risk. Why that is so and what should be achieved with this is left unexplained. Households face an additional risk: they randomly switch between classes, the probability depending on wealth. The model is "closed" with exogenous and distinct propensities to consume for both classes. The model is then calibrated with parameters values not related to anything observable. The simulations reveal that if one starts with everyone having the same wealth, wealth heterogeneity then emerges. Well, that was unexpected... Even back in 1993, Mark Huggett had a much better model to explain heterogeneity in wealth.

The welfare gain from inflation targeting

It is rather well accepted that transparency is preferred for policy, because it anchors better expectations, people generally do not like uncertainty, and discretion can lead to adverse biases compared to set policy rules. Yet, the United States exhibit little transparancy, with the Federal Reserve being one of the few western central banks not to declare some explicit policy target, and fiscal policy being as uncertain as ever. That would not be a big deal if the welfare costs were low, but you can think that there are high and in the case of fiscal policy are currenctly holding back the recovery.

Giorgio Di Giorgio and Guido Traficante are taking a closer look at the welfare benefits of inflation targeting. For this they use a model where households observe policy interest rates and do not know whether their changes are due to reactions to output gaps or shocks to the inflation target. Households are sophisticated, they use a signal extraction device to estimate the latent, unobservable variable. Yet, they still face substantial costs from the uncertainty. Money is not neutral because of Rotemberg pricing, a variant of Calvo pricing. Oh well, I guess this is what you need to do to get a result with some bite.

Households know there is a policy rule that determines the interest rate from the output gap (unobservable) and the inflation target (stochastic and persistent) as well as known preference and cost-push shocks. In other words, households know a lot about the structure of the economy and the shocks, except for the policy shock, but then somehow cannot figure out what the output gap is. The central bank can, though, but then has for obscure reasons a trembling hand when it comes to set its inflation target. That seems to be quite the opposite of what I would have thought: everyone is confused about the output gap, and only the central bank knows what the inflation target is. Instead of a story of households trying to disentangle output gap and inflation target from the interest rate signal, one would have a story of a central banker not quite sure what to do given the circumstances. Too bad, this could have been an interesting paper.