Month: September 2017

Renee Haltom interviews Jesse Shapiro on the topic of media bias and political bias in Econ Focus,  published by the Federal Reserve Bank of Richmond (2nd Quarter 2017, pp. 24-29).  The entire interview is worth reading, but here are a few points that caught my eye. The headings are my words, and the explanations are Shapiro.

Newspaper political bias is more likely to reflect readership, rather than bias of owners.

\”What we were trying to figure out is which newspapers are right-leaning and which newspapers are left-leaning and by how much. In the context of the news media in the United States, there isn\’t really a training set. So we took an idea that was developed by Tim Groseclose and Jeffrey Milyo to use the Congressional Record as the training set. We have a lot of text by speakers who have a known political affiliation — what party they belong to and how they vote on issues. Then we find the phrases that are diagnostic of the speaker\’s party. We came up with things like \”death tax\” for Republicans and \”estate tax\” for Democrats, or \”personal retirement accounts\” for Republicans and \”private retirement accounts\” for Democrats, or \”the war in Iraq\” for Democrats and \”the war on terror\” for Republicans. We could then look for those keywords or key phrases in newspapers and answer the question: If this newspaper were a speaker in Congress, would it be more likely to be affiliated with the Republican Party or the Democratic Party? That\’s our quantitative answer to how right-leaning or left-leaning a newspaper is. …

\”What we found is that newspapers with a more Republican customer base are much more Republican than newspapers in more Democratic markets. And once you control for geography, there\’s very little evidence of an influence of owner ideology — whether you measure that by the positions of the other newspapers owned by that owner or by the owner\’s donations to different political parties. There really isn\’t much evidence that the owner plays a big role in how a newspaper slants the news.

There is less ideological segregation in online media than you might have thought. 

\”Think of an online news outlet, like a blog, as a neighborhood, and let\’s measure who\’s in that neighborhood: What fraction of those people would self-identify as conservative? What fraction would self-identify as liberal? And let\’s calculate how segregated is this universe, how segregated is the Internet. To what extent are people visiting news sites that are only populated by other people like them ideologically?

\”We found that the extent of segregation on the Internet is surprisingly low. It\’s certainly true that people gravitate to like-minded sources. So for example, foxnews.com has a more conservative audience than nytimes.com. 

\”But the Internet is not radically different from traditional media. Take the fraction of the audience on a given news site that is conservative and call that the conservativeness of the site. Then take the website visited by the average conservative on the average day — that website is about as conservative as usatoday.com. Now do that same thing for the average liberal, that\’s about as liberal as cnn.com. If you were to read those two outlets, you wouldn\’t find that they\’re radically different.

\”In fact, we find that isolation is very rare in the data. We have individual-level data on users on the Internet. People who get all of their news from outlets to the left of, say, the New York Times are very unusual. Likewise, people who get all of their news from sites to the right of Fox News are extremely rare. Folks that go to a fringe conservative site like rushlimbaugh.com are more likely to go to nytimes.com than readers of Yahoo News. The people who are consuming niche media are probably pretty politically engaged people, and therefore they want to read a lot of things. So in the end, the picture is a lot more muted than what people have feared.\”

Use of online news and social media is not correlated with political polarization. 

\”We just compare trends in polarization for groups of people that have high or low propensities to use the Internet and social media. Our favorite and most important comparison is with respect to age. People who are 75 years and over rarely use social media and don\’t report getting a lot of political information online. People who are 18 to 25 frequently use social media and report getting a lot of political information online. So if you thought that social media was contributing to the rise in polarization, what you would expect to see in the data is that polarization is rising especially fast for younger Americans — and if anything, the story is the opposite. The rise in polarization is similar between the relatively old and the relatively young, and if anything, maybe polarization is rising faster among the relatively old. So in that sense the data don\’t line up with the hypothesis that social media is driving the rise in polarization.

\”I think the effect of the Internet on polarization remains an open question. We\’re arguing that it doesn\’t appear that social media is accounting for the increase in polarization, but we haven\’t offered a constructive account of what is driving it. Until we have a better understanding of that, it\’s hard to rule anything out.\”

Political phrases have become more specialized and identifiable by party affiliation over time. 

\”So what we did is try to figure out, for every session of Congress and every point in time, how easily a neutral observer could tell whether someone is a Republican or Democrat based on how they talk. We took the entire Congressional Record and used computer scripts to turn it into quantitative data about the use of phrases. Then we took the counts of phrases by every speaker and every session of Congress back to the 1870s and fed that through a model of speech. The model can tell us, at every point in time, how informative your speech is about your party.

\”What we find is that in the 1870s, if I give you a minute of random speech from somebody in Congress, you\’re going to guess his party correctly about 54 percent of the time, only modestly higher than chance. In the late 1980s, you\’d be doing a little bit better, but barely. By the 2000s, the number is closer to 75 percent. Something enormous changes between the late 1980s and the 2000s to cause the parties to diverge tremendously in how they\’re talking — many more phrases like \”death tax\” and \”estate tax.\”

\”The timing of the change coincides with the \”Contract with America\” and the Republican takeover in the 104th Congress in 1994. That was a watershed moment in political marketing. It showed the power of language to frame a set of issues and craft a narrative that could be very powerful in winning elections and changing policy views. In the wake of that, strategies on both sides crystallized around trying to have a very consistent message and use very consistent language to try and influence how voters saw the issues. I think that\’s what\’s reflected in the data.

\”In terms of implications, one speculative possibility is that the fact that Republicans and Democrats are speaking differently to each other might contribute to hostility. It might make it harder for them to find common ground or recognize positions on which they do agree. That\’s not something that we show in the study, but that\’s one not-so-optimistic possibility suggested by it.\”

Densely populated Netherlands, with 17 million people and a GDP similar to the state of Illinois, is the second-largest exporter of food products in the world as measured by volume of sales. Frank Viviano explains in \”This Tiny Country Feeds the World: The Netherlands has become an agricultural giant by showing what the future of farming could look like,\” which appears in the September 2017 issue of National Geographic magazine.

Essentially, Netherlands does it with high-tech farming and greenhouses, which enable very high yields. The online version of the essay has a number of remarkable photographs. Here\’s one showing a farmer\’s home surrounded by greenhouses:

The essay has lots of details and is worth reading in full, but the main points that jump out at me are that yields of many crops are vastly higher while environmental effects are lower. And while the high-tech agricultural model cannot be directly applied to every crop in every country (of course!), it does offer lessons that can be much more broadly applied.

For example, the Dutch are the world\’s top exporters of tomatoes, potatoes, and onions, and second-largest overall in vegetables (by value of sales). \”More than a third of all global trade in vegetable seeds originates in the Netherlands. Some of the example read like science fiction: 15 varieties of tomato plants that are 20 feet tall, growing not in soil but in fibers spun from basalt and chalk.

Meanwhile, the plentiful use of sensors and enviromental controls means that many \”have reduced dependence on water for key crops by as much as 90 percent. They’ve almost completely eliminated the use of chemical pesticides on plants in greenhouses, and since 2009 Dutch poultry and livestock producers have cut their use of antibiotics by as much as 60 percent.\”

Of course, the Dutch expertise cannot simply be tranplanted to other places. Part of the technology is a use of geothermal energy–plentiful in Netherlands–to keep greenhouses at a reasonably consistent temperature. Another issue is that the Dutch are (understandably) focused on vegetable crops with relatively high values, more than on the field crops that are food staples around the world.

But there are lessons be learned, and probably the main one is the importance of research and development, even in an industry like agriculture that may seem fairly mature already. Apparently in the Netherlands, developments in high-tech agriculture and are facilitated by Wageningen University & Research. Instead of a US-style Silicon Valley, they aspire to a Food Valley. Moreover, there are now \”a thousand WUR projects in more than 140 countries.\” However, \”Less than 5 percent of the world’s estimated 570 million farms have access to a soil lab.\”

In the big picture, a crucial issue for the world economy is how to feed a world population that is projected to exceed 9 billion by 2050 or so. For some earlier posts on aspects of this topic, see:

• \”How the World Can Feed 9 Billion People\” (October 20, 2011)
• \”Is the World Already Growing Sufficient Food?\” (June 5, 2014)
• \”Meat Substitutes: Soy, Mealworms, and Crickets\” (May 23, 2017)

The Middle East and North Africa region contains about half of the world\’s proven reserves of oil and natural gas. This has already proven to be a mixed blessing for economic growth in the region, and in a world economy where many countries are making efforts to reduce carbon-emitting sources of energy, a dependence on production of fossil fuels will be even more problematic. Abdelhak, Bassou, Mario Filadoro, Larabi Jaidi, Marion Jansen, Yassine Msadfa, and Simone Tagliapietra consider these isues in \”Towards EU-MENA Shared Prosperity,\” a report recently co-published by the European think tank Breugel and the Moroccan think tank OCP Policy Center (which receives funding through Office Chérifien des Phosphates, a Morocco-based mining company).

The report offers a reminder that while oil and gas money is intertwined with the economy of the Middle East and North Africa region, the energy resources are not evenly distributed across countries.  Countries like Libya, Iraq, and Saudi Arabia are highly dependent on oil, while others like Egypt and Jordan are actually oil importers.

For the oil-rich countries of this region, oil tends to be a very large share of government revenues and of exports. In Saudi Arabia and Kuwait, more than 60% of the citizen workforce (that is, not counting immigrant workers from other countries) work in the government sector.

But countries that are heavily dependent on natural resources, and especially oil reserves, have often found themselves without much economic growth. Around the world, Nigeria, Angola, Venezuela, and Saudi Arabia have examples of some extraordinary wealth for the few, but it\’s hard to make the case that This pattern is so common that it is sometimes called the \”natural resources curse\” or the \”Dutch disease,\” after Netherlands experienced a slowdown in economic growth after tapping into North Sea natural gas resources. For an overall discussion, I recommend the article by Anthony J. Venables,\”Using Natural Resources for Development: Why Has It Proven So Difficult?\” in the Winter 2016 issue of the Journal of Economic Perspectives. Or you can check an earlier blog post on the subject, \”The Natural Resources Curse\” (October 27, 2011), discussing an article by Jeffrey Frankel.

The present report looks at both economic and political causes of the resource curse. On the economic side, it cites \”Resource Curse Theory\”:

\”Richard M. Auty (1993) formulated the Resource Curse Theory to describe the reasons why natural resource-abundant countries often perform poorly in economic and political terms. He claimed this can happen for several reasons, such as the presence of weak institutions, commodity price volatility, conflicts and the so-called ‘Dutch disease’ – a perverse mechanism by which the increased revenues from natural resource discoveries lead to appreciation of the local currency, thus negatively affecting the exports of all other sectors in the economy.\”

They supplement this argument with \”rentier state theory\”:

Listening to complaints about the effects of globalization on the US economy, one might be tempted to believe that the US economy is more exposed to the pressures of global trade than most other countries, and that the US market is uniquely open to world trade. countries.

But these beliefs are not true. A common pattern is that large economies have lower levels of global trade relative to GDP–because so much of their economy happens inside their own  borders. Moreover, countries like the US with some geographic separation from most other substantial economies have less trade. Thus, the ratio of exports/GDP for the world economy is about 30%. But the export/GDP ratio for the US is only about 13%. Japan has an export/GDP ratio of about 17%. Canada is near the world average, with an export/GDP ratio of 31%, while Mexico is above the world average with an export/GDP ratio of 38%. For a small economy in the middle of the European Union, like Belgium, the export/GDP ratio is 84%.

Moreover, US markets are not especially open to international trade. The evidence comes from the fourth edition of the International Chamber of Commerce Open Markets Index 2017. The index rates 75 large economies across the world in four broad areas: observed openness to trade; trade policy settings; foreign direct investment (FDI) openness; and trade-enabling infrastructure. These scores are combined to a ranking on a scale from 1 (least open) to 6 (most open). The US economy is in a tie for 40th place in openness. Here are the rankings:

Among the group of larger economies around the world known as the G20, the US ranks 8th, behind Japan, Germany, Canada, Korea, and others in this measure of trade openness. In the more detailed analysis, the US scores higher in the categories of explicit trade policy and trade-enabling infrastructure, about average on openness to foreign direct investment, and below average on \”observed openness to trade.\”

Globalization and trade are forces of economic disruption and change, and those forces have grown stronger in recent decades. But the notion that the enormous US economy is vulnerable to international trade or especially buffeted by the winds of trade just doesn\’t hold up.

It\’s just a fact that blacks fare worse than whites in the US labor market using basic comparisons like average wage levels or unemployment rates. However, controversy arises in the possible explanations for these differences. It\’s easy enough to put forward potential hypotheses. For example, does the wage gap mostly represent discrimination by employers between equally well-qualified applicants? Or does it reflect a lower average level of education for black workers, which in turn might in part trace back to societal discrimination in housing patterns or methods of school funding? Is it differences in occupational choices, which might in part trace back to patterns of expectations in social networks?

The big questions are hard to answer. But Mary C. Daly, Bart Hobijn, and Joseph H. Pedtke set the stage for a more insightful discussion in their short essay, \”Disappointing Facts about the Black-White Wage Gap,\” written as an \”Economic Letter\” for the Federal Reserve Bank of San Francisco (September 5, 2017, 2017-26). Here are  a couple of figures showing the black-white wage gap, and then seeking to explain what share of that gap is associated with differences in state of residence, education, part-time work, industry/occupation, and age. The first figure shows the wage gap for black and white men; the second for black and white women.

Here are some thoughts on these patterns:

1) The black-white wage gap is considerably larger for men (about 25%) than for women (about 15%). Also, the wage gaps seem to have risen since the 1980s.

2) The three biggest factors associated with the wage gap seem to be education level, industry/occupation, and \”unexplained.\”

3) The \”unexplained\” share is rising over time time. As the authors explain: \”Perhaps more troubling is the fact that the growth in this unexplained portion accounts for almost all of the growth in the gaps over time. For example, in 1979 about 8 percentage points of the earnings gap for men was unexplained by readily measurable factors, accounting for over a third of the gap. By 2016, this portion had risen to almost 13 percentage points, just under half of the total earnings gap. A similar pattern holds for black women, who saw the gaps between their wages and those of their white counterparts more than triple over this time to 18 percentage points in 2016, largely due to factors outside of our model. This implies that factors that are harder to measure—such as discrimination, differences in school quality, or differences in career opportunities—are likely to be playing a role in the persistence and widening of these gaps over time.\” The authors also cite this more detailed research paper with similar findings.

4) In looking at the black-white wage gap for women, it\’s quite striking that this gap was relatively small back in the 1980s, at only about 5%, and that observable factors like education and industry/occupation explained more than 100% of the wage gap at the time. But as the black-white wage gap for women increased starting in the 1990s, an \”unexplained\” gap opens up.

5) It is tempting to treat the \”unexplained\” category as an imperfect but meaningful measure of racial discrimination, but it\’s wise to be quite cautious about such an interpretation. On one side, the \”unexplained\” category may overstate discrimination, because it doesn\’t include other possible variables that affect wages (for example, one could include previous years of lifetime work experience, or length of tenure at a current job, scores on standardized tests, or many other variables). In addition, the variables that are included like level of education are being measured in broad terms, and so it is possible that, say, a blacks and whites with a college education are not the same in their skills and background. On the other side, the \”unexplained\” category could easily understate the level of discrimination. After all, education levels and industry/occupation outcomes don\’t happen in a vacuum, but are a result of the income, education, and jobs of family members. For this reason, noting that a wage gap is associated with some different in education or industry/occupation may reflect aspects of social discrimination. The kinds of calculations presented here are useful, but they don\’t offer final answers.

In short, the black-white wage gap is rising, not falling. The wage gap is also less associated with basic measures like level of education or industry/occupation than it was before. I can hypothesize a number of explanations for this pattern, but none of my hypotheses are cheerful ones.

For those who need a dose of economics with their end-of-summer Labor Day family cookout (and really, don\’t we all need that?), here\’s a sampling of some earlier posts.

1) \”Origins of Labor Day\” (September 7, 2015)

The first Labor Day march and celebration almost didn\’t happen, for lack of a band. Also, was Maguire or McGuire the one who had the idea for such a holiday?

The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. … They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it.

This passage comes at the end of a more extended discussion. For additional context, here\’s a longer cut from paragraphs 183-190:

But though the common people cannot, in any civilized society, be so well instructed as people of some rank and fortune, the most essential parts of education, however, to read, write, and account, can be acquired at so early a period of life that the greater part even of those who are to be bred to the lowest occupations have time to acquire them before they can be employed in those occupations. For a very small expence the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education.

The public can facilitate this acquisition by establishing in every parish or district a little school, where children may be taught for a reward so moderate that even a common labourer may afford it; the master being partly, but not wholly, paid by the public, because, if he was wholly, or even principally, paid by it, he would soon learn to neglect his business. … There is scarce a common trade which does not afford some opportunities of applying to it the principles of geometry and mechanics, and which would not therefore gradually exercise and improve the common people in those principles, the necessary introduction to the most sublime as well as to the most useful sciences.

The public can encourage the acquisition of those most essential parts of education by giving small premiums, and little badges of distinction, to the children of the common people who excel in them. …

A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it.