nhaliday + alesina   12

The Determinants of Trust
Both individual experiences and community characteristics influence how much people trust each other. Using data drawn from US localities we find that the strongest factors that reduce trust are: i) a recent history of traumatic experiences, even though the passage of time reduces this effect fairly rapidly; ii) belonging to a group that historically felt discriminated against, such as minorities (black in particular) and, to a lesser extent, women; iii) being economically unsuccessful in terms of income and education; iv) living in a racially mixed community and/or in one with a high degree of income disparity. Religious beliefs and ethnic origins do not significantly affect trust. The latter result may be an indication that the American melting pot at least up to a point works, in terms of homogenizing attitudes of different cultures, even though racial cleavages leading to low trust are still quite high.

Understanding Trust: http://www.nber.org/papers/w13387
In this paper we resolve this puzzle by recognizing that trust has two components: a belief-based one and a preference based one. While the sender's behavior reflects both, we show that WVS-like measures capture mostly the belief-based component, while questions on past trusting behavior are better at capturing the preference component of trust.

MEASURING TRUST: http://scholar.harvard.edu/files/laibson/files/measuring_trust.pdf
We combine two experiments and a survey to measure trust and trustworthiness— two key components of social capital. Standard attitudinal survey questions about trust predict trustworthy behavior in our experiments much better than they predict trusting behavior. Trusting behavior in the experiments is predicted by past trusting behavior outside of the experiments. When individuals are closer socially, both trust and trustworthiness rise. Trustworthiness declines when partners are of different races or nationalities. High status individuals are able to elicit more trustworthiness in others.

What is Social Capital? The Determinants of Trust and Trustworthiness: http://www.nber.org/papers/w7216
Using a sample of Harvard undergraduates, we analyze trust and social capital in two experiments. Trusting behavior and trustworthiness rise with social connection; differences in race and nationality reduce the level of trustworthiness. Certain individuals appear to be persistently more trusting, but these people do not say they are more trusting in surveys. Survey questions about trust predict trustworthiness not trust. Only children are less trustworthy. People behave in a more trustworthy manner towards higher status individuals, and therefore status increases earnings in the experiment. As such, high status persons can be said to have more social capital.

Trust and Cheating: http://www.nber.org/papers/w18509
We find that: i) both parties to a trust exchange have implicit notions of what constitutes cheating even in a context without promises or messages; ii) these notions are not unique - the vast majority of senders would feel cheated by a negative return on their trust/investment, whereas a sizable minority defines cheating according to an equal split rule; iii) these implicit notions affect the behavior of both sides to the exchange in terms of whether to trust or cheat and to what extent. Finally, we show that individual's notions of what constitutes cheating can be traced back to two classes of values instilled by parents: cooperative and competitive. The first class of values tends to soften the notion while the other tightens it.

Nationalism and Ethnic-Based Trust: Evidence from an African Border Region: https://u.osu.edu/robinson.1012/files/2015/12/Robinson_NationalismTrust-1q3q9u1.pdf
These results offer microlevel evidence that a strong and salient national identity can diminish ethnic barriers to trust in diverse societies.

One Team, One Nation: Football, Ethnic Identity, and Conflict in Africa: http://conference.nber.org/confer//2017/SI2017/DEV/Durante_Depetris-Chauvin.pdf
Do collective experiences that prime sentiments of national unity reduce interethnic tensions and conflict? We examine this question by looking at the impact of national football teams’ victories in sub-Saharan Africa. Combining individual survey data with information on over 70 official matches played between 2000 and 2015, we find that individuals interviewed in the days after a victory of their country’s national team are less likely to report a strong sense of ethnic identity and more likely to trust people of other ethnicities than those interviewed just before. The effect is sizable and robust and is not explained by generic euphoria or optimism. Crucially, national victories do not only affect attitudes but also reduce violence. Indeed, using plausibly exogenous variation from close qualifications to the Africa Cup of Nations, we find that countries that (barely) qualified experience significantly less conflict in the following six months than countries that (barely) did not. Our findings indicate that, even where ethnic tensions have deep historical roots, patriotic shocks can reduce inter-ethnic tensions and have a tangible impact on conflict.

Why Does Ethnic Diversity Undermine Public Goods Provision?: http://www.columbia.edu/~mh2245/papers1/HHPW.pdf
We identify three families of mechanisms that link diversity to public goods provision—–what we term “preferences,” “technology,” and “strategy selection” mechanisms—–and run a series of experimental games that permit us to compare the explanatory power of distinct mechanisms within each of these three families. Results from games conducted with a random sample of 300 subjects from a slum neighborhood of Kampala, Uganda, suggest that successful public goods provision in homogenous ethnic communities can be attributed to a strategy selection mechanism: in similar settings, co-ethnics play cooperative equilibria, whereas non-co-ethnics do not. In addition, we find evidence for a technology mechanism: co-ethnics are more closely linked on social networks and thus plausibly better able to support cooperation through the threat of social sanction. We find no evidence for prominent preference mechanisms that emphasize the commonality of tastes within ethnic groups or a greater degree of altruism toward co-ethnics, and only weak evidence for technology mechanisms that focus on the impact of shared ethnicity on the productivity of teams.

does it generalize to first world?

Higher Intelligence Groups Have Higher Cooperation Rates in the Repeated Prisoner's Dilemma: https://ideas.repec.org/p/iza/izadps/dp8499.html
The initial cooperation rates are similar, it increases in the groups with higher intelligence to reach almost full cooperation, while declining in the groups with lower intelligence. The difference is produced by the cumulation of small but persistent differences in the response to past cooperation of the partner. In higher intelligence subjects, cooperation after the initial stages is immediate and becomes the default mode, defection instead requires more time. For lower intelligence groups this difference is absent. Cooperation of higher intelligence subjects is payoff sensitive, thus not automatic: in a treatment with lower continuation probability there is no difference between different intelligence groups

Why societies cooperate: https://voxeu.org/article/why-societies-cooperate
Three attributes are often suggested to generate cooperative behaviour – a good heart, good norms, and intelligence. This column reports the results of a laboratory experiment in which groups of players benefited from learning to cooperate. It finds overwhelming support for the idea that intelligence is the primary condition for a socially cohesive, cooperative society. Warm feelings towards others and good norms have only a small and transitory effect.

individual payoff, etc.:

Trust, Values and False Consensus: http://www.nber.org/papers/w18460
Trust beliefs are heterogeneous across individuals and, at the same time, persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that individuals extrapolate from their own type when forming trust beliefs about the same pool of potential partners - i.e., more (less) trustworthy individuals form more optimistic (pessimistic) trust beliefs - and that this tendency continues to color trust beliefs after several rounds of game-play. Moreover, we show that one's own type/trustworthiness can be traced back to the values parents transmit to their children during their upbringing. In a second closely-related experiment, we show the economic impact of mis-calibrated trust beliefs stemming from false consensus. Miscalibrated beliefs lower participants' experimental trust game earnings by about 20 percent on average.

The Right Amount of Trust: http://www.nber.org/papers/w15344
We investigate the relationship between individual trust and individual economic performance. We find that individual income is hump-shaped in a measure of intensity of trust beliefs. Our interpretation is that highly trusting individuals tend to assume too much social risk and to be cheated more often, ultimately performing less well than those with a belief close to the mean trustworthiness of the population. On the other hand, individuals with overly pessimistic beliefs avoid being cheated, but give up profitable opportunities, therefore underperforming. The cost of either too much or too little trust is comparable to the income lost by forgoing college.


This framework allows us to show that income-maximizing trust typically exceeds the trust level of the average person as well as to estimate the distribution of income lost to trust mistakes. We find that although a majority of individuals has well calibrated beliefs, a non-trivial proportion of the population (10%) has trust beliefs sufficiently poorly calibrated to lower income by more than 13%.

Do Trust and … [more]
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august 2017 by nhaliday
ethnic fractionalization (does this extend to 1850-1920 migration?)

there is this:
The fact that the American working class was formed by waves of immigration also contributed to preventing the formation of a European style class consciousness. Ethnic divisions within the working class (for instance old Protestant immigrants on one side, new Catholic immigrants on the other) were as strongly felt as class-based cleavages.28 Even contemporary socialist leaders (including Engels) recognized the powerful effect of ethnic fragmentation within the union movement.
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june 2017 by nhaliday
No easy answers: why left-wing economics is not the answer to right-wing populism - Vox
hence why Cato loves mass migration
jfc, by the book: https://www.youtube.com/watch?v=ORWM0ukT-Xw
"If we broke up the big banks tomorrow would that end racism? Would that end sexism? Would that end discrimination against the LGBT community? Would that make people feel more welcoming to immigrants overnight?"

The End of Liberalism - Samuel Bowles: https://www.bostonglobe.com/opinion/2017/06/19/the-end-liberalism/GLVtC7fExhFPwhOx31fXrN/story.html
The progressive's immigration dilemma: https://www.adamsmith.org/blog/international/the-progressives-immigration-dilemma
Poor people's lives are made enormously better off by moving from poor countries to rich countries. Thanks to remittances, migrants also may have a significant positive impact on their home countries. For any progressive who wants to improve human welfare, facilitating more immigration from poor to rich countries should be an overriding priority.

Not only does a big welfare state reduce the number of immigrants that are politically accepted, a heavily regulated labour market seems to be associated with immigrants having a worse impact on natives. Even policies that seem like they would be good for Britons might still do much more harm than good if they make Britons less willing to accept higher levels of immigration.

This is a serious dilemma for any progressive who wants all humans to live good lives, not just ones of the same race or nationality. It means that these political concerns alone may demand a low regulation, low redistribution state.

fucking traitors

Essential liberal values:
You: My countrymen get to speak, think, commerce, associate freely.
Vox: Here are some new countrymen. Enjoy!
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march 2017 by nhaliday
Culture and Institutions - American Economic Association
Importing people is not like importing apples: http://worthwhile.typepad.com/worthwhile_canadian_initi/2016/02/importing-people-is-not-like-importing-apples.html
"Total Factor Productivity" is not some geological feature like the Canadian shield. There has to be a reason why some countries are rich and other countries are basket cases, and unless you are lucky enough to find yourselves sitting on great reservoirs of oil that someone else will pay you to pump out of the ground, that reason seems to have something to do with social/economic institutions, and social/economic institutions seem to have something to do with people.

If you have a model which treats Total Factor Productivity as exogenous, then yes, if "resources" flow from places with low TFP to places with high TFP, as they will if the invisible hand is allowed to operate, that would be a Good Thing. But you need to stop and ask: "Hang on. I wonder why TFP is higher in some places than in others?" Which should lead you to the next question: "I wonder if TFP really would be exogenous to the sort of policy experiment I'm using my model for?". Which should lead you to the next question: "I wonder if social/economic institutions really would be exogenous to the sort of policy experiment I'm using my model for?"

How exactly will social/economic institutions change when we import people? God only knows. They might change for the better; they might change for the worse. It depends on them; it depends on us. But they almost certainly will change. And if you can't even see that question, and wonder about it, then you really are missing something that even the great unwashed uneducated rabble can see. And the great unwashed uneducated rabble are going to put even less credence on what you intellectual elites are telling them they ought to think.

Migration is complicated. Don’t pretend it’s not: https://www.spectator.co.uk/2017/09/migration-is-complicated-dont-pretend-its-not/
The concept of freedom of movement is quite different to that of the freedom of goods.

I expect you’ve already noticed it, but in case you’ve been living in a cave or an economics faculty for the past ten years, I’ll repeat it. Goods are not like people. Goods only move wherever they are needed. They don’t come laden with an attachment to a homeland or a social network. Your Bosch dishwasher doesn’t pine for its washing-machine mates back in Stuttgart. Your Ikea sofa doesn’t claim benefits. If you buy a Mercedes, you don’t suddenly find two Audis and a Volkswagen turning up on your drive claiming to be close relatives and demanding to live in your garage.
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march 2017 by nhaliday
Why Aren't the Italians Libertarians?, Bryan Caplan | EconLog | Library of Economics and Liberty
Do Italians cheat on their taxes more than Swedes?: http://marginalrevolution.com/marginalrevolution/2016/05/the-culture-that-is-swedish-italian.html

Also bureaucracy = big weak state as opposed to small strong state. Anarchotyranny is Sam Francis's idea that combines bureaucracy w anarchy

The modern world's sickness in one tweet

Last night proved, once again, that there is no anxiety or sadness or fear you feel right now that cannot be cured by political action.

Here’s a post I wrote in 2009 (no indent) that I will update today:

In an interesting paper, Aghion, Algan, Cahuc and Shleifer show that regulation is greater in societies where people do not trust one another. The graph below, for example, shows that societies with a greater level of distrust have stronger minimum wage laws. Note that the result is not that distrust in markets is associated with stronger minimum wages but that distrust in general is associated with greater regulation of all kinds. Distrust in government, for example, is positively correlated with regulation of business. Or to put it the other way, trust in government (as well as other institutions) is associated with less regulation.

Aghion et al. argue that the causality flows both ways on the regulation-distrust nexus. Distrust makes people turn to government but in a society with a lot of distrust government is often corrupt and this makes people distrust even more. Crucially, when people distrust others they invest not in the highest return projects but in human and physical capital that is complementary to distrust–for example, they invest in human capital that helps them bond with their group/tribe/family rather than in human capital that helps them to bond with “outsiders” and they invest in physical capital that is more difficult to expropriate rather than in easier to expropriate capital, even though in both cases the latter investments may be the all-else-equal higher return investments. Such distrust traps are quite similar to Bryan Caplan’s idea traps.

Thus, societies with a lot of distrust generate regulation and corruption and citizens who don’t have the skills or preferences to break out of the distrust equilibrium. Consider, for example, that in societies with a lot of distrust parents are less likely to consider it important to teach their children about tolerance and respect for others.

The update should be obvious. More and more this appears to be describing the United States. More distrust in government, more regulation, lower growth and more people who are so distrustful of one another that they can’t cooperate to break out of the bad equilibrium. Here drawn from Our World in Data is interpersonal trust in the United States.

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january 2017 by nhaliday
Ethnic fractionalization and growth | Dietrich Vollrath
Garett Jones did a podcast with The Economics Detective recently on the costs of ethnic diversity. It is particularly worth listening to given that racial identity has re-emerged as a salient element of politics. A quick summary - and the link above includes a nice write-up of relevant sources - would be that diversity within workplaces does not appear to improve outcomes (however those outcomes are measured).

At the same time, there is a parallel literature, touched on in the podcast, about ethnic diversity (or fractionalization, as it is termed in that literature) and economic growth. But one has to be careful drawing a bright line between the two literatures. It does not follow that the results for workplace diversity imply the results regarding economic growth. And this is because the growth results, to the extent that you believe they are robust, all operate through political systems.

So here let me walk through some of the core empirical relationships that have been found regarding ethnic fractionalization and economic growth, and then talk about why you need to take care with over-interpreting them. This is not a thorough literature review, and I realize there are other papers in the same vein. What I’m after is characterizing the essential results.


- objection about sensitivity of measure to definition of clusters seems dumb to me (point is to fix definitions than compare different polities. as long as direction and strength of correlation is fairly robust to changes in clustering, this is a stupid critique)
- also, could probably define a less arbitrary notion of fractionalization (w/o fixed clustering or # of clusters) if using points in a metric/vector/euclidean space (eg, genomes)
- eg, A Generalized Index of Ethno-Linguistic Fractionalization: http://www-3.unipv.it/webdept/prin/workpv02.pdf
So like -E_{A, B ~ X} d(A, B). Or maybe -E_{A, B ~ X} f(d(A, B)) for f an increasing function (in particular, f(x) = x^2).

Note that E ||A - B|| = Θ(E ||E[A] - A||), and E ||A - B||^2 = 2Var A,
for A, B ~ X, so this is just quantifying deviation from mean for Euclidean spaces.

In the case that you have a bunch of difference clusters w/ centers equidistant (so n+1 in R^n), measures p_i, and internal variances σ_i^2, you get E ||A - B||^2 = -2∑_i p_i^2σ_i^2 - ∑_{i≠j} p_ip_j(1 + σ_i^2 + σ_j^2) = -2∑_i p_i^2σ_i^2 - ∑_{i≠j} p_ip_j(1 + σ_i^2 + σ_j^2) = -∑_i p_i^2(1 + 2σ_i^2) - ∑_i 2p_i(1-p_i)σ_i^2
(inter-center distance scaled to 1 wlog).
(in general, if you allow _approximate_ equidistance, you can pack in exp(O(n)) clusters via JL lemma)
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december 2016 by nhaliday
LSE International Development – “Wow!” – Robert Wade’s glowing review of Carles Boix, Political Order and Inequality
The main narrative runs as follows. Forager or simple agricultural societies experienced differential technological change (e.g. irrigation, improved fish traps in reverine environments). At this point two basically different strategies emerged. Those who benefitted from the new technologies and became more productive (achieved a comparative advantage in production) preferred to continue with the existing cooperative equilibrium (“the producers”). Those who saw themselves disadvantaged had an incentive to loot or plunder the output of the more productive individuals or societies (“the looters”). The result could be a Hobbesian world of systematic conflict.

At some times and places a state emerged which restored peace. Boix distinguishes two basic types of states. The more common was created by the looters (also known in the literature as “roving bandits”) when they restrained themselves from plunder and invested in providing permanent protection to producers in return for some continuous flow of resources (food, labor, money) from the latter; they became “stationary bandits”. They tended to create states of monarchical or dictatorial type. Less commonly, the producers succeeded in creating a state and kept control of the levers of power, setting up defensive structures to deter potential looters. The resulting political order took a “republican” form, with an elected leader, a governing committee, an oligarchy of traders, a general assembly, in varying combinations (as in some classical Greek polis and medieval and modern European city-states).

Review by Alesina: http://sci-hub.cc/10.1257/jel.20151366
Political Order and Inequality: Their Foundations and Their Consequences argues that geography, technology, and wars determined the formation of a ruling class, inequality, and institutional development, rather than the other way around. Institutions are not a cause but a consequence. This relatively short book covers an enormous amount of material. I have sympathy for the basic idea of the book, but in some parts I would have liked to see more detailed evidence, especially on the more recent history and the Industrial Revolution. (JEL D02, D63, D72, H11, O43)
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december 2016 by nhaliday

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