Cato scholars pose a few suggested questions ahead of tonight’s final debate between Hillary Clinton and Donald Trump. Enjoy.
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Economics Will Be Our Ruination III, the Votening
(This post is an ad for the upcoming debate: Should Libertarians Vote? It’s sure to rock the world of liberty. Sign up at the link.)
The first and second parts of my “Economics Will Be Our Ruination” series highlighted how putatively neutral economic analysis often subtly embeds non-neutral values. Economists tend to prefer human activity that’s measurable using dollars over non-monetary trade or leisure, for example. An economic model of the Fourth Amendment can easily place group interests ahead of individual rights. In this installment I’ll highlight weaknesses in the practice of economic modeling, using the example of voting.
Creating a theoretical construct to depict common transactions or interactions, then assessing such activity as abstracted, is essential to economics. But it is also a profound weakness of that form of analysis, because failing to model accurately will send one’s economic assessment off the rails.
An example of this is economic assessment of voting. Many economists, both professional and amateur, are ineluctably drawn to modeling voting as a process solely for selecting the officials that will serve in a representative government. Given the exceedingly low likelihood that one person’s vote will sway the outcome, the time and effort spent on voting is pure waste. So economists conclude that voting is irrational.
That model of voting is hugely over-simplified, omitting even down-ballot electoral and initiative races, which somewhat increase the still-small odds of casting a decisive vote. But what the model really fails to account for is the effect that margins of victory have on the many, many political and social actors that will consume vote information after election day. As I wrote a few months ago in a piece called Don’t Not Vote, “Votes are a dazzling roman candle of information supplied to elected officials, their staffs, political parties, journalists, opinion leaders, and future candidates, to name a few. All these witnesses to elections incorporate vote information—not just outcome, but win/loss margins—into their actions and assessments well beyond election and inauguration day.”
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Why People Are Joining the Growing Independent Workforce
The days are long past when a person worked from 9 to 5 at the same company for the entirety of their working lives. The ways people earn money are changing, and understanding these new dynamics is key to developing a policy environment that allows new business models and innovations to thrive. A new survey from the McKinsey Global Institute sheds some welcome light on this issue, and in addition to helping to answer who is in the growing independent workforce, they help explain how and why these people participate.
Researchers surveyed roughly 8,000 people from the United States and some European. They excluded what they call “fissured workers” or the people involved when companies use vendors or subcontractors to fulfill non-core functions like technical support or security, because these individuals “are expected to keep regular work schedules with little autonomy, and they have a continuous relationship with their employer.”
Focusing on the independent workers who do meet their criteria, their survey estimates that there are 68 million independent workers in the United States alone, accounting for 27 percent of the working-age population. Perhaps unsurprisingly, young people are the demographic group most involved in independent work: they make up almost a quarter of the independent workforce, and this designation applies to more than half of all earners in this age group. Low-income households with income below $25,000 account for more than a fifth of this workforce, and almost half of earners here participate in some form of independent work.
Segmentation of Independent Workers in the United States
![Media Name: independent_workforce.jpg](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/independent_workforce.jpg?itok=lWBSAvwG)
Source: McKinsey Global Institute, October 2016.
Economic Freedom and Infants’ Lives
Recent reports that infants now die at a higher rate in Venezuela than in war-torn Syria were, sadly, unsurprising—the results of socialist economics are predictable. Venezuela’s infant mortality rate has actually been above Syria’s since 2008.
![Media Name: ven1.png](/sites/cato.org/files/styles/pubs_2x/public/download-remote-images/humanprogress.org/13697689191/ven1.png?itok=bUY368m3)
The big picture, fortunately, is happier. The global infant mortality rate has plummeted. Even Syria and Venezuela, despite the impact of war and failed policies, saw improvements up to as recently as last year. From 1960 to 2015, Syria’s infant mortality rate fell by 91% and Venezuela’s by 78%. This year (not reflected in the graph above or below), Syria’s rate rose from 11.1 per 1,000 live births to 15.4, while Venezuela’s shot up from 12.9 to 18.6. Meanwhile, infant mortality rates have continued to fall practically everywhere else, and have declined even faster in countries that enjoy more freedom and stability. Consider Chile.
Nigeria Spins Out of Control, and the IMF Remains Unaware
Nigeria’s President, Muhammadu Buhari, and his government have lost control as Nigeria’s economic crisis sends that African nation into a doom-loop. Everyone, including the President’s wife, Aisha, knows that Nigeria is going down the tubes. But not the International Monetary Fund (IMF). As is often the case, the IMF doesn’t have a clue. The IMF’s October 2016 World Economic Outlook projects Nigerian inflation to average 15.4 percent for 2016. This number is in sharp contrast to my Johns Hopkins-Cato Institute Troubled Currencies Project’s inflation estimate for Nigeria. We estimate that the year-over-year inflation rate is currently 104.8 percent (see the chart below).
Why is the IMF so far off base? Because it is doing what it often does: it is taking the Central Bank of Nigeria’s (CBN) official inflation data at face value. That official rate averaged 14.3 percent from January to August of this year. For the IMF forecast to materialize, official annual inflation in Nigeria would need to average 17.6 percent for the September through December period. What did the latest inflation report from the Central bank of Nigeria show? According to the CBN, annual inflation was 17.9 percent in September. The IMF’s blind acceptance of the CBN’s data is a big mistake.
![Media Name: current_world_inflations_and_volatilities_ng_an.png](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/current_world_inflations_and_volatilities_ng_an.png?itok=hLr38VHC)
Texas Wisely Concedes Economic Liberty Case
Last month, I wrote about a case challenging medical-licensing rules that prevented an innovative health-services company, Teladoc, from using advanced technology to provide care to hard-to-reach patients. The Texas Medical Board, which isn’t supervised by any branch of state government, oversaw the restrictions, which a district court threw out on antitrust grounds. After the board appealed, Cato filed a brief supporting Teladoc. And we weren’t alone; the range of briefing was impressive, particularly for a case that hadn’t yet reached the Supreme Court.
Well, today the Texas attorney general’s office filed an unopposed motion to dismiss the state’s own appeal. That should be the end of this case. Although I’m sure Teladoc and its fellow plaintiffs would’ve loved to finish litigating the appeal and get a favorable Fifth Circuit ruling, it’ll take this win all the way to the economic-liberty bank.
It’s always hard to know what impact an amicus brief has — even when you’re cited, it might be for a tangential point, or indeed to counter your argument — and this case illustrates that lesson: there’s not even a court ruling here, but the quality of amicus briefs certainly contributed to Texas’s decision to abandon the medical board’s appeal.
Congrats to Teladoc, its counsel, and the people of Texas!
Lies, Damned Lies, and Trade Statistics
Adam Davidson of the New Yorker has written a profile of Donald Trump’s trade adviser Peter Navarro. Here’s a key excerpt: “Navarro’s views on trade and China are so radical, however, that, even with his assistance, I was unable to find another economist who fully agrees with them.”
That’s the big picture of the trade views of Trump/Navarro. Now here’s a closer look at a very specific claim in a Trump campaign memo co-authored by Navarro. This kind of claim is, in my view, very enlightening about how this crowd approaches trade policy:
Over the last 25 years, Bill and Hillary Clinton have championed one-way deals like 1993’s NAFTA, China’s 2001 entry into the World Trade Organization, and the 2012 South Korea-US Free Trade Agreement. These poorly negotiated deals benefit the elite corporate interests that finance the Washington politicians even as they impoverish our heartland and destroy the livelihoods and lives of working Americans.
…
Michigan farmers lost out too. U.S. exports to Canada and Mexico of cattle – one of Michigan’s top agricultural products — fell 59 percent in the first 22 years of NAFTA.
What’s nice about this claim about cattle exports is that, unlike many of the vague criticisms people make about trade agreements, this one can be tested: Did these exports actually fall? The authors don’t give a citation for the data, which makes it difficult to double-check, but here’s some data from the U.S. International Trade Commission on exports of “bovine animals” (including cattle and buffalo, but mostly made up of cattle):
![Exports of Bovine Animals](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/beef_1.png?itok=mnic4m30)
It turns out he’s roughly correct in terms of the 22 year trend. So does that mean he has a point about NAFTA? Could lowering Mexican and Canadian tariffs through the NAFTA somehow have hurt U.S. exports, contrary to all logic? The answer is no, for two reasons.
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