Sunday, 30 November 2014

End November Links

# Chris Dillow makes good points in The Heritability Red Herring, on how cross country evidence shows that the success of the children of rich and bright parents cannot just be due to heritability. In particular the point that "The correlation between parental education and children's education is higher in more unequal countries. This is consistent with income inequality buying unequal access to education - for example, because rich parents in unequal countries buy private tuition."
This is not just private tuition or private education though. I suspect that there will be greater variance in property values in unequal countries as rich seek to cluster and so buy access to higher than average quality public education. If I'm correct about this, then it will be a multiple equilibrium effect:

   1.  house prices are highly unequal reflecting a large amenity values from good local schools, and so rich will be willing to pay (thus supporting high prices in such areas); or
   2. house prices are much more equal as are schools, and so no-one is willing to pay any house price premium for access to a specific school.

I further suspect that equilibrium 2 is more fragile, in that the dynamics around it have a much narrower or shallower basin of attraction. But not so shallow that it cannot be stable, given a relatively narrow spread of incomes: as Lesley Riddoch and others have commented, the segregation by income is much less strong in more equal countries, which I suspect means that these countries are even more equal relative to the UK than their lower GINI coefficient would suggest.

Nick Rowe is also thinking about this area, in Reverse Regression and the Great Gatsby Curve

# My Smith Commission submission is reported in the Modern Scotsman and my article in the Conversation

# Some interesting posts on English devolution:
   - The Greater Manchester Agreement is only a small step towards greater devolution in England
   - The ‘Devo Manc’ proposals represent centralisation on steroids

# Krugman resurrects a fantastic post of his from 1998 on Networks and Economic History. Basically Zipf's Law offsets Metcalf's Law meaning that increasing returns are limited. I suspect that this is relevant in domains other than the profitability of communication networks.

# On oil prices and prosperity is a generally good article. But I'm more pessimistic than the following paragraph since the rate of innovation must be related in some way to the price of fossil fuels. "The only real concern ... is in regard to the viability of alternative energy. Renewables have become significantly more competitive ... in a world of expensive fossil fuels. ... But the falling price of solar energy is ultimately a long-term trend driven by technology. ... cheaper oil prices could push adoption back to some degree, especially in regard to electric vehicles. But it can't hold back the broad strokes of history, either." I think it is possible that these broad strokes of history could either feature or not feature the adoption of alternative energies. It is possible that, as a species, we may make catastrophic choices, and the current state of incentives for the development of alternative energy technologies is in no way helpful.

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