I've been playing host to a small conference on the political power of blogging. Although some of the participants got a bit stressed prepping for the conference, on the whole it led to some very stimulating discussions

Ethan Zuckerman has a round-up of some of the papers. And those interested in international relations should check out his blog anyway.

UPDATE: Laura McKenna has some kind words -- "it was quite excellent talking to people whose blogs are part of my daily consumption and who are just as freakishly obsessed as I am."

Kevin Drum reacts to some of Jay Rosen's comments at the conference.

And Eszter Hargittai has pictures!

Brad DeLong has a very good post up detailing the split among economists at a Jackson Hole conference (poor Brad) about what will happen when the dollar falls in value:

My conversations quickly exposed a deep fault among the conference attendees. Those who analyzed or forecast the U.S. domestic macroeconomy agreed that a steep decline in the value of the dollar sometime in the next five years was overwhelmingly likely, but by and large they did not think that such a decline would pose a big problem for the U.S. economy. (They agreed that it might well pose a very big problem for some of America's trading partners.) By contrast, those who analyzed or forecast the international economy as a whole were typically terrified by the prospect of a steep (30% or more, perhaps much more) decline in the value of the dollar: they thought a severe U.S. recession was a definite possibility, and that the situation would require exceptionally skillful handling to keep from becoming a serious economic problem....

Martin Feldstein said something very smart just after we had both taken off our shoes at Jackson Hole airport. He said that the domestic-side economists were keying off the past experience of the U.S. after 1985 and of Britain after 1982, and so were saying "no big deal"; while the international finance economists were keying off of the experiences of developing countries that had run large current-account deficits--Mexico 1994, East Asia 1997, Argentina 2001. Each side had its own preferred models that functioned very well at explaining the past historical cases that they focused on. But there was no way right now of settling, empirically, whether a model built to explain the U.S. in 1985 or Korea in 1998 was more applicable to the U.S. in 2006--you had to make a bet, either that continuities in U.S. economic structure were important, or that financial globalization was important, in choosing your model and your terms of analysis.

It was very interesting. And very disturbing. Brilliant economists, thinking hard, unable to reach even the beginnings of analytical agreement about how to model the distribution of possible futures.

Read the whole thing.

Erik Gartzke sends along his reponse to R.J. Rummel's critique of his chapter "Economic Freedom and Peace" in Cato's 2005 annual report on Economic Freedom in the World. (click here and here for my previous blog posts on this topic.

I've put Gartzke's reply after the jump, because it's on the longish side and may bore non-IR types. I will, say, however, that the reply addresses many of the concerns I had about the study.

[So did you send it out for external review?--ed. Alas, no -- Erik can't count this as a refereed publication. It should count for something, though.]

UPDATE: Rummel replies here.

REPLY TO RUMMEL

by Erik Gartzke

In a recent blog post titled “The CATO Institute Gets It All Wrong” posted on his webpage, Dr. R.J. Rummel presented some rather intense criticism of my recent chapter “Economic Freedom and Peace” in the 2005 edition of Economic Freedom of the World. I offer this note as a reply.

Dr. Rummel claims that I am wrong to write that “researchers have found that democracies are less likely to fight each other, while being no less ready to use force generally.” This is what other researchers have found. In fact, it is what most proponents of the democratic peace claim to show. Dr. Rummel knows that the majority of studies by democratic peace proponents do not support the assertion that democracies are generally less warlike (Rousseau, et al. 1996). Indeed, he has advocated the strong claim that democracies are generally pacific, in opposition to other proponents of the democratic peace. This difference of views within the democratic peace research community is not made clear in Dr. Rummel’s comments and may confuse his readers.

The comment that Dr. Rummel objects to thus simply summarizes the dominant view among democratic peace researchers. As Huth and Allee put it “patterns of military conflict between democracies and non-democracies are not very different from patterns of military conflict among non-democracies” (page 1, 2002). Bruce Russett, the dean of quantitative democratic peace researchers acknowledges that there is “little systematic evidence” in support of the claim that democracies are generally less warlike (page 11, 1993). Together, Russett and his research partner John Oneal, state that, “Our analyses clearly reveal the separate peace among democratic states” (page 288, 1997). There are many other examples. I quote the wikipedia encyclopedia:

Democratic peace theorists make two possible connections between democracy and war:

Babst, Singer, Rummel and Doyle claimed that democracies, properly defined, have never made war on each other; such DPTs face the difficulty that Ted Gurr classes both Spain and the United States as democracies in 1898, the year of the Spanish-American War.

Most more recent studies assert that two democracies are less likely to make war on each other than other pairs of states.

Thus, even if one admires Dr. Rummel’s research, it is simply not correct for him to suggest that I have mischaracterized the literature. Further, he does not make clear why I should adhere to his version of democratic peace when he has failed, despite vigorous efforts, to persuade other democratic peace researchers to do so. As a critic, I must address the most widely used version of an argument, or risk being attacked for setting up a “straw man.” In fact, by using the special dyadic claim of democratic peace, I am able to acknowledge that the study in question does not directly contradict the claims of dyadic researchers, though of course my findings also do not support the assertions of those who make the strong claim that democracies are generally more peaceful. (In other research, my results seem to show that even the weaker, dyadic version of democratic peace is not sustained when any of several measures of capitalist development and market integration are included in the analysis, but this is a discussion for another time.)

Dr. Rummel argues that I am doing democratization injustice by using the term “impose.” He suggests no alternative term, but references another blog post titled “Unchaining Human Rights, Not Imposing Democracy.” Certainly, “unchaining” sounds more affirmative, just as “freedom fighter” sounds more affirmative than “terrorist.” By “imposed,” I meant situations like Iraq, where democracy has not evolved endogenously. In Iraq, for example, unless democratic peace exists and is general (monadic), there can be no robust effect of democratization because other states in the region (besides Israel and Turkey) are not democracies. Research by Hegre (2004) shows that increasing democracy when few states are democratic tends to increase, not decrease, conflict. Even many advocates of democratic peace doubt that democratization in the Middle East will lead to peace in anything but the very long run. This, of course, also requires that we assume that US efforts to democratize Iraq will succeed, a debatable claim in its own right.

Dr. Rummel takes my study to task because I point out that the democratic peace observation has recently been limited to prosperous states. Here again, I am simply reporting the evolving consensus of democratic peace researchers themselves. Mousseau (2000) and Hegre (2000) report that an interaction term between variables for democracy and economic development leads the democracy term to become no longer statistically significant. In a newer study, John Oneal himself collaborates with Mousseau and Hegre in further substantiating this conclusion. As the result makes clear, democratic peace, if it exists, is conditioned by economic development. My view is that it is development itself, along with economic liberalization, that explains the peace.

Dr. Rummel claims that my assertions are falsified in my own data. As evidence, he argues that there are no “wars” between democracies. The specific claims that I make, and the data that I use involve militarized interstate disputes (MIDs), a broader category of conflict behavior. Wars are very rare. There are just 44 state participations in wars beginning in 1970, the earliest date for which the Index of Economic Freedom supplies data. Less than 1% of state years (think “man hours”) involve a war. For this reason, democratic peace researchers and others studying conflict among nations have overwhelmingly preferred in recent years to examine MIDs.

Still, it is not difficult to have a look. I examined the Correlates of War project listing of wars (conflicts involving at least 1000 battle deaths per year per participant). I find no statistical relationship between either the index of economic freedom, or the democracy variable, either separately or together, using these data. The effect of capitalism is either more subtle, reducing conflicts only over a lower intensity, or the sample of wars is too small, or both. In any case, democracy does not have the effects Dr. Rummel claims in these data, even when it is left by itself in the regression. As a further check on these findings, I also examined data from the Stockholm International Peace Research Institute (SIPRI). These data report conflicts involving at least 25 fatalities. Thus, they are clearly conflicts involving “violence.” Using SIPRI conflicts as the dependent variable, I am again unable to find a statistically significant relationship linking democracy and peace. I can, on the other hand, find weak support for the suppression of major violence by the economic freedom variable. This variable is just short of the 5% significance threshold in a quick statistical comparison of democracy and capitalism as determinants of peace.

So, to summarize, Dr. Rummel’s critique that I should look at wars seems unfounded, though it did not hurt to check. The claim that democracy generally causes peace is again unsupported.

Dr. Rummel claims I am using the wrong data and that my study “confounds nonviolence with violence.” I am not sure what this means. Every Correlates of War Project MID involves threats or acts of a militarized nature, almost all of which involve violence (the threshold for inclusion in the dataset is high, resulting in relatively few threats and more “uses of force”). Again, I rely on the same data as democratic peace researchers, the most widely used and referenced data, in fact, in the quantitative study of international relations. For Dr. Rummel to claim that the MIDs data are not an appropriate framework for testing the democratic peace is to reject most studies of democratic peace out of hand, something I, and most other researchers, are unwilling to accept.

Still, it would be nice to establish that my findings do not depend on a particular kind of data source. MIDs, COW wars, and the SIPRI data code conflict behavior of a given intensity level or higher. The Interstate Crisis Behavior dataset, on the other hand, examines crises. This can be useful because some conflicts, even relatively violent ones, do not involve direct leadership decisions. Suppose some sergeant decides to lob mortar shells at the enemy, perhaps because he is tired, irritated, or afraid. This would be a MID, and possibly a SIPRI conflict, depending on casualties, but it would not be an ICB crisis if the actions of the sergeant were not initiated by national leaders. The ICB data have also been used in studies that support the democratic peace (Hewitt and Wilkenfeld 1996), and potentially better reflect some of the arguments made about why democracies should be more peaceful. If democracies are more peaceful in any context, it should be in situations where decision making is explicit, conscious, deliberate, and not the result of accidents on the front lines. Results using the ICB dataset, however, are largely the same as those I report for MIDs in my chapter in the 2005 edition of Economic Freedom of the World.

Dr. Rummel argues that collinearity between economic freedom, other variables, and democracy interfere with the effect of democracy on militarized disputes. As Dr. Rummel almost certainly knows, but did not explain to the reader, multicollinearity is not a severe problem in multivariate analysis until correlations are quite high, on the order of 0.9 (he argues they are 0.7. I find that the two key variables correlate at 0.4135). Similarly, the idea that democracy creates capitalism is, I think, questionable. Few, if any, of the archetypal laissez faire economies of nineteenth century Europe would be considered democratic by contemporary standards, though they became democratic in time. Similarly, in South Korea, Singapore, Taiwan, and elsewhere in recent decades, capitalism and development gave rise to pressures to democratize, not the other way around. Rather than treat democracy as a gift of the gods or something that landed from outer space, it seems more reasonable to recognize that democracies formed out of the same soup as did contemporary capitalism and economic development. In any event, the claim that capitalism and democracy are correlated does not obviously lead to the conclusion that democracy should be given preference (or deference) as the key contributor to liberal peace. If the two processes are related, then why treat one as if it is important and the other as if it does not exist?

Yet, again to be safe, I remove all of the variables from the regression model, except democracy. Democracy is not remotely statistically significant, even with no competitors (P value 0.448). Maybe economic freedom gets “help” from the other variables? I ran the regression model with just democracy and the freedom index, and find that economic freedom is statistically significant (P value 0.001), while democracy is insignificant. The claim about sampling is debatable, and is debated, in the literature. Whether we observe all possible states of the world, or just the ones that came to pass in this iteration of history hinges on issues outside the realm of the knowable. Democratic peace researchers have consistently used the statistical significance of democracy as evidence of the validity of their claims. How else can I challenge the conventional wisdom?

At several points, Dr. Rummel notes that “there are NO (zero) wars between democracies over almost two-centuries.” This sounds persuasive, but note that the claim treats as a conclusion that which is presumably the subject of this debate. Is it democracy that makes peace or something closely associated with democracy? Dr. Rummel emphasizes that capitalism is correlated with democracy, but refuses to treat seriously the possibility that it is capitalism that causes peace. The “two-centuries” claim is also misleading. Democratization is a recent phenomenon in world affairs. How many two-centuries old democracies are there? Indeed, we can also say that over the same period, no advanced free market economies have gone to war with each other, either.

Dr. Rummel asks “How could CATO let such a poor study into their prime report?” Clearly, this is a rhetorical question, but let me answer it as honestly as I can. The study conforms as closely as possible to the state of the art in democratic peace research. Rather than being “incompetent,” I adopted the same variables and evaluation standards, and a similar research design to those of the most widely cited research program on the democratic peace. That this happened to be the approach of Oneal and Russett and not Rummel is unfortunately a consequence of the greater popularity of the former among researchers and the wider public. Dr. Rummel does not like the choices I made in my analysis, but he does not like the choices made by other democratic peace researchers either. Differences between Dr. Rummel’s views and those of the larger democratic peace research community were not made clear in his comments, a possible source of confusion.

At the same time, I do not claim that my findings are definitive. They are a cautionary tale that gives some backing to those who are concerned that enthusiasm for the democratic peace has exceeded good judgment. No doubt this is not the end of the debate, though I hope Dr. Rummel and other interlocutors will cease from impugning my professional reputation every time I offer evidence that differs from their conclusions. Science is a perpetual learning process, in which we gradually whittle away at uncertainty. The fervor with which researchers on the subject hold to their respective visions of democratic peace should itself lead intelligent observers to caution.

Let me add in closing that, while the study Dr. Rummel critiques does not directly contradict the dyadic version of the democratic peace, my other research does. I have replicated the major dyadic studies of Oneal and Russett and others, using several indicators of capitalism, including but not limited to, the Index of Economic Freedom. I find that democracy does not sustain a dyadic effect on conflict either (there is not even a special peace among democracies), when appropriate measures of global market integration and economic development are introduced. I have shared these findings with democratic peace researchers (John Oneal, Bruce Russett, Erik Weede, Patrick James, James Lee Ray, to name a few), and expect that they will soon be available in print. Of course, I will also provide copies to Dr. Rummel, if he wishes.

Three months ago I and many others blogged about Ivan Tribble's Chronicle of Higher Education essay on blogging and academic hiring. Shorter Tribble: "Don't blog, because it's kind of strange, my colleagues and I don't quite get it, and your online self might come off as an unstable git."

Tribble responded to his critics yesterday in the Chronicle. He appears a touch miffed:

A lot can happen when you try to help some people land tenure-track jobs....

While not a scientific sampling by any means, what I saw suggested a trend worth warning others about. The ensuing outcry against my words of warning -- both on The Chronicle's discussion forums and on some blogs -- gave me pause. Clearly I had offended a number of bloggers and hurt some feelings. For that I offer my apology to any who will accept it.

But I still stand by my basic point....

As my original column made clear (and many amid the outcry reiterated) when it comes to blogging, I just don't "get it." That's right, I don't. Many in the tenured generation don't, and they'll be sitting on hiring committees for years to come.

If that's bad news, I'm sorry. But would it really be better if no one bothered to mention it? Shooting the messenger may make some feel better, but heeding the warning might help them get jobs.

Read the whole thing. My biggest disappointment in the piece is this section:

I stated that several committee members had reservations about hiring a blogger, which many respondents dismissed as irrational. I can't speak for every committee member's reasons, or every blogger's good judgment.

This revives the point that the issue is not the medium itself, but how it is used.

That's funny, because what what truly annoyed me in Tribble's initial essay were the motivations he assigned his committee members -- and the concern then was pretty much the medium itself:

The content of the blog may be less worrisome than the fact of the blog itself. Several committee members expressed concern that a blogger who joined our staff might air departmental dirty laundry (real or imagined) on the cyber clothesline for the world to see. Past good behavior is no guarantee against future lapses of professional decorum (emphasis added)

I'll just repeat what I said back in June, because it echoes Tribble's last few paragraphs:

To graduate students: I'd like to say that Ivan the Tribble is your classic piece of outlying data, but I can't. The default assumption you should make is that the academy has a lot of people who share the Tribble worldview of the blogosphere. I seriously doubt that any amount of reasoned discourse will alter this worldview. So think very, very, very carefully about the costs and benefits of blogging under one's own name.

For a more positive outlook, check out Henry Farrell and Brian Weatherson.

On Monday, I has assumed that Dahlia Lithwick was probably overreacting in her Slate appraisal of the first day of John Roberts' Supreme Court confirmation hearing day. After all, weren't the Senators getting some of their questions from the blogosphere?

Then I actually heard some of the hearings.

To be specific, it was Tom Coburn's spiel about looking at Roberts' body language -- "[Using] my observational capabilities as a physician to know that your answers have been honest and forthright as I watch the rest of your body respond to the stress that you're under." As Ann Althouse put it, "I'm under some stress over here, listening to this nonsense."

Admittedly, it's Tom "Schindler's List is obscene" Coburn, so you have to grade it on a curve. But still....

So I was all set to write a wildly satirical post about the bloviating capabilities of the Senate Judiciary Committee. But I don't think I could top what David Brooks wrote in his column today. Killer quote: "We're not here to argue among ourselves and ignore the nominee. We're here to deliver 30-minute speeches disguised as questions and ignore the nominee."

The title of this post was my lovely wife's reaction upon reading that the University of Chicago is one of the Seven Wonders of Chicago -- at least, according to readers of the Chicago Tribune

The other six are the Lakefront, Wrigley Field, the "L", the Sears Tower, the Water Tower, and the Museum of Science and Industry.

I explained to my wife that Northwestern is, technically, in Evanston. She continues to insist that they smoke it.

Virginia Postrel responds to my post about the value-added of think tanks:

Well, Dan, let me tell you the way of the world. For the most part, think tank donors (especially individuals, as opposed to foundations or corporations) are completely uninterested in original research and unable to evaluate its quality. On the whole, individuals give to think tanks for the same reason they give to religious organizations--to demonstrate commitment to a belief system and to support the people they believe will spread the word. They want to hear the same messages over and over and over again, and they financially reward those who give them what they want. While generally nice, generous people, donors are on the whole indifferent to originality, bored by wonky policy proposals, and annoyed by any think tank employee who challenges their political cathechisms. Boards of trustees tend to reward executives not for doing or supporting important work but for raising money.

Since you can't do the work without money anyway, think tankers who want to do good, significant work eventually either flee or give in to the system's preference for superficiality. Making the system even worse are media bookers who want predictable, preferably partisan views. Dan worries about op-eds. Op-eds are philosophy tomes compared to TV, and as Nicole Kidman aptly observed in To Die For, you're nobody in America if you're not on TV. That goes double for public policy circles.

Read the whole thing.

Kirsten Scharnberg and Mark Silva provide today's latest on New Orleans in the Chicago Tribune:

As military helicopters circled overhead and rescue teams combed New Orleans' flooded neighborhoods in search of remaining survivors, Mayor C. Ray Nagin stood in historic Jackson Square in the city's fabled French Quarter and announced that air and water testing conducted throughout the city by the Environmental Protection Agency had yielded much more optimistic results than expected.

Tests showed that at least four of the city's neighborhoods-- the French Quarter, the Central Business District, Uptown and Algiers--would soon be safe to occupy again. Those neighborhoods escaped much of the flooding that had covered 80 percent of the city.

"If I had to guess, I'd say by Monday we can open parts of the city," said Nagin, adding that such a move would be possible only if a written EPA report was as positive as a briefing he had received over the phone earlier in the day.

The city's death toll from the disaster jumped sharply Tuesday as body-recovery teams began finding some of the hidden victims that officials had been fearing....

Elsewhere in the New Orleans area, officials were sounding upbeat as they permitted more business owners into the city center to begin damage assessments and cleanup work, and contractors and utility workers swarmed the streets to reconnect power and water lines.

Nagin said he hoped many residents would be allowed to return to the city soon. Unlike officials in surrounding cities, who so far have allowed residents back in for only brief periods to assess damage and retrieve essential personal items, Nagin said residents of the cleared New Orleans neighborhoods would be allowed back permanently, with a curfew likely after nightfall.

All the neighborhoods that may be reopened are suffering from power outages, but energy officials were predicting power would be restored by next week. Nagin said water, too, would once again be running, though probably not yet safe to drink.

I hope in the ensuing days and weeks there are more stories containing this kind of good news.

The FT article in the previous post is based on the OECD's Education at a Glance 2005. Here's a link to the OECD's press release. The data on Korea's educational progress is truly astounding:

In recent years, some countries have shown spectacular improvements in schooling performance. In Korea, for example, a striking 97%, of people born in the 1970s have completed upper secondary education, putting Korea in top place for this age group ahead of Norway with 95% and Japan and the Slovak Republic with 94%. By comparison, only 32% of Koreans born in the 1940s have upper secondary qualifications.

And what about the U.S.? We're constantly fretting about the decline in our educational system -- does the OECD data support this anxiety?

Yes and no. If you rifle through the executive summary of Education at a Glance, you come away with three observations about the U.S. performance:

1) In science and math, the U.S. is ahead of only the really poor OECD countries -- Turkey, Mexico, etc. So yes, there is reason to worry.

2) The poor performance is not because of a downward trend -- in fact, if you look at chart A7.1 ("Differences in mean performance of eighth-grade students from 1995 to 2003"), you discover an interesting fact: the United States showed the greatest improvement in science and math scores of the sample -- including Korea.

3) The poor performance isn't because of a dearth of funds -- table B1.1 shows that, Switzerland excepted, the United States spends the most amount of money per student in the OECD. You get a similar result if the metric is education spending as a percentage of GDP. Indeed, the OECD comments:

Lower expenditure cannot automatically be equated with a lower quality of educational services. Australia, Belgium, the Czech Republic, Finland, Japan, Korea, the Netherlands and New-Zealand, which have moderate expenditure on education per student at the primary and lower secondary levels, are among the OECD countries with the highest levels of performance by 15-year-old students in mathematics.

Jon Boone writes in the Financial Times that the United States and United Kingdom have competitors in the global marketplace for university education:

The market share of lucrative international students enjoyed by British and US universities has dropped sharply as Australia, Japan and New Zealand become increasingly popular destinations, according to an international comparison of education systems published on Tuesday....

The Paris-based [OECD] reported that US market share fell 2 per cent between 2002-3 while the UK suffered the fastest decline among OECD members, falling from 16.2 per cent in 1998 to 13.5 per cent in 2003....

According to the report the international complexion of US campuses has changed strikingly in the years since September 11 2001. The country’s universities have seen decreases of between10-37 per cent of students from the Gulf states, North Africa and some Southeast Asia countries. The decline was partially compensated for by a 47 per cent increase in students from China and a 12 per cent increase in students from India.

UPDATE: Hello, Instapundit readers -- you might want to check out this post on U.S. education as well.

ANOTHER UPDATE: Hmmm.... maybe the decline in foreign student enrollment is because the American academy in general -- and the University of Chicago in particular -- is staffed by nutjobs.

Megan McArdle, "The poor really are different," Asymmetrical Information, September 9, 2005:

If poor people did just four things, the poverty rate would be a fraction of what it currently is. Those four things are:

1) Finish high school
2) Get married before having children
3) Have no more than two children
4) Work full time

These are things that 99% of middle class people take as due course.

George Will, "A Poverty of Thought," Washington Post, September 13, 2005.

[T]hree not-at-all recondite rules for avoiding poverty: Graduate from high school, don't have a baby until you are married, don't marry while you are a teenager. Among people who obey those rules, poverty is minimal.

What's interesting is that McArdle and Will end up at somewhat different places with the same basic starting point.

Other reads relevant to this conversation for today: Jon Hilsenrath's Wall Street Journal piece on what economists think about rebuilding New Orleans. Money quote from urban economist Ed Glaeser: "Given just how much, on a per capita basis, it would take to rebuild New Orleans to its former glory, lots of residents would be much [better off] with $10,000 and a bus ticket to Houston."

Then there are these Washington Post poll numbers:

Attitudes toward Bush and the government's overall response to Hurricane Katrina fracture along clear racial lines. Nearly three in four whites doubted the federal government would have responded more quickly to those trapped in New Orleans if they had been wealthier and white rather than poorer and black, the poll found. But an equal share of blacks disagreed, saying help would have come sooner if the victims had been more affluent whites.

More than six in 10 blacks -- 63 percent -- said the problems with the hurricane relief effort are an indication of continuing racial inequity in this country, a view rejected by more than seven in 10 whites, according to the poll.

Tyler Cowen links to this informative Daniel Gross article in the New York Times about possible explanations for the relatively weak job growth the economy has experienced over the past few years:

Mystified economists have pointed to various possible culprits: outsourcing, competition from China, high health care costs and lower work-force participation, to name a few. But there's one force that so far has managed to avoid blame for the sluggish pace of job growth: Enron.

Until now. In 2000 and 2001, as the bull market imploded, there was a spike in accounting problems - a mix of outright fraud, earnings manipulation and more benign restatements necessitated by changes in business conditions. Clearly, investors were burned by earnings restatements at Enron and WorldCom, and at hundreds of smaller and less infamous companies. "Nobody had actually explored the real consequences of earnings management, as opposed to the financial ones," says Thomas Philippon, assistant professor of economics at New York University's Stern School of Business.

Gross then summarizes an NBER working paper by Philippon and his colleague Simi Kedia. Their abstract:

We study the consequences of earnings management for the allocation of resources among firms, and we argue that fraudulent accounting has important economic consequences.... We first show that periods of high stock market valuations are systematically followed by large increases in reported frauds. We then show that, during periods of suspicious accounting, insiders sell their stocks, while misreporting firms hire and invest like the firms whose income they are trying to match. When they are caught, they shed labor and capital and improve their true productivity. In the aggregate, our model seems able to account for the recent period of jobless and investment-less growth.

I agree with Tyler: "It is too early to evaluate this research, and let us not get carried away by monocausal theories, but today I felt I learned something."

This week marks my third blogging anniversary. [Three years??!! So when do you plan on going back to just pointless, incessant barking?--ed]

And, by a freakish coincidence, I have two articles on the web today. In either case, I doubt I would have been approached were it not for the blog.

The first, in honor of the United Nations' 2005 World Summit (and, gee, those preparations are going swimmingly) is a review in the Wall Street Journal of Pedro Sanjuan's The UN Gang: A Memoir of Incompetence, Corruption, Espionage, Anti-Semitism and Islamic Extremism at the UN Secretariat . My varnished opinion:

In 1984, Vice President George H.W. Bush nominated Mr. Sanjuan to be the director of political affairs in the U.N. Secretariat, the massive administrative core of the institution. Mr. Sanjuan's real job was to spy on the Soviet spies working for the secretary-general. This was not an easy task: "I was one against 274 of them at the time of my arrival." "The UN Gang" is Mr. Sanjuan's memoir of his U.N. experience. It does not present a pretty picture of the United Nations -- or, by the end of the book, of the author himself....

On his Web site, Mr. Sanjuan states that he has a "penchant for the bizarre and the absurd." That phrase perfectly summarizes the U.N. -- and "The UN Gang."

My unvarnished opinion -- after reading this book, it's hard not to come to the conclusion that there's something a little bit loopy about Mr. Sanjuan.

Remember when Robert Reich published his memoir Locked in the Cabinet, and then Jonathan Rauch discovered that Reich had either made up or exaggerated certain events and quotes? Reich’s defense was that this was how he viewed the events at the time. The UN Gang suffers from the same defect.

Let's put it this way -- if I was a lawyer trying to indict the UN, there is no way in hell I would call Sanjuan as a reliable witness.

If you think I'm exaggerating, either buy the book or check out Sanjuan's web site (the quote from the review comes from this page) and draw your own psychological profile about Sanjuan's world view.

One last little irony about The UN Gang. Sanjuan continually (and justifiably) lambasts the UN Secretariat for being a hothouse of nepotism. All well and good -- but his editor at Doubleday was Adam Bellow, the accomplished author of... In Praise of Nepotism (though, to be fair, after reading this precis, Bellow would probably classify the UN as an example of "old nepotism" and not the "new nepotism" that is the subject of Bellow's praise).

The second piece is a companion essay to WNET's Wide Angle documentary on how offshore outsourcing is affecting Indian society, entitled "1-800-INDIA" -- which will be aired this evening. I was asked to provide a background briefing -- entitled "Offshore Outsourcing: Perceptions and Misperceptions."

Go check them out!!

There's another international relations blogger out there -- R.J. Rummel, one of the godfathers of quantitative research in international relations. Rummel is also a persistent and oft-published voice arguing for the monadic version of the democratic peace -- in other words, it's not merely that democracies don't fight each other, but that democracies are generally less war-prone than other states. [How much evidence is there for this version of the democratic peace?--ed. Rummel -- as well as Paul Huth -- have generated some interesting findings, but it's not the majority position of the field, and there are a lot of studies out there arguing that Rummel is wrong.]

Rummel is also a libertarian and therefore one would expect him to be sympathetic to Cato's latest study on economic freedom and conflict. However, he is far from keen on the study -- go check out his scathing assessment of the Cato report. He closes with this assessment of Cato: "After reviewing the one study on what I know something about and finding it so poor, it provokes a questioning of their other studies in areas I know less about."

Without signing on to all of Rummel's critique, it opens the door to a larger question about the value-added of think tanks. This past Friday I was at a meeting in DC on how academics can better transmit foreign policy-relevant ideas to those in the government. One obvious transmission belt is think tanks -- the experts who staff these institutions can consume academic research and then generate more policy-specific research based in part on that more abstract research.

However, several participants enmeshed in the think tank culture argued that this wasn't the direction thik tanks were going. Instead, several of them -- and Heritage, Cato and the Center for American Progress were the leading examples -- had switched their focus from churning out deep policy proposals in favor of op-eds. Indeed, the staffing at many think tanks had shifted, with the communications and PR sides receiving a much larger share of the pie relative to the policy wonks.

Anyone who knows anything about organizations recognizes that all bureaucracies like to use quantifiable metrics, and surely op-eds would be one example. And it would be insane to argue that think tanks should forswear the op-ed. But the overall point was that the cost of this change in direction for think tanks was fewer in-depth monographs or books, and more output devoted to the 24-hour news cycle. Some would like this trend to accelerate -- one of Matt Yglesias' themes is that think tanks need to blog more.

There was no real discussion about whether this is something that can or should be fixed -- so I'll leave that to the commenters.

UPDATE: Yglesias e-mails the following:

For the record, what I had in mind was that blogging would be a good substitute for all the op-ed writing and press release releasing that think thanks do, not hoping that more blogging would crowd out more in-depth research.

On the general subject, my unsupported assertion would be that the shift in the wonk/hack balance isn't endogenous to the think tanks themselves but reflects the development of more disciplined political parties in congress. America's historically weak party system opened up an unusual amount of space for policy entrepreneurship that's being killed off as the congressional leadership has grown in importance.

As China holds its annual "Internet summit" today, it's worth reflecting that last week Reporters Without Borders broke a story revealing that Yahoo! provided information to China's government that helped them to identify and detain a dissident reporter (link via Rebecca McKinnon).

In today's Chicago Tribune, Evan Osnos provides a recap of what's happened, including Yahoo!'s response:

Yahoo Inc. co-founder Jerry Yang acknowledged over the weekend that his company gave Chinese authorities identifying e-mail information about reporter Shi Tao, who was sentenced to 10 years in prison for messaging a U.S. Web site about a Communist Party directive. Speaking Saturday at an Internet conference in this eastern city, Yang said his company was legally ordered to cooperate.

"To be doing business in China, or anywhere else in the world, we have to comply with local law," Yang said.

But Yahoo's handling of the case, first detailed last week by media-rights advocate Reporters Without Borders, has emerged as a showcase of the debate among Internet executives, China analysts and human-rights advocates over tech firms' obligations in the world's largest communist country.

"This would be a difficult problem for virtually any company," said Jonathan Zittrain, who holds the chair in Internet governance and regulation at Oxford University. "It is one thing to give a regime the steel, another to give it bullets, and another to be the executioner--and each company must draw their own line."

At issue is not only whether U.S. businesses should disclose e-mail information, but also whether they should provide technology that helps authorities filter Web logs, chat rooms and search engines for terms such as "democracy" or "human rights."

In recent months, Microsoft and Google have come under scrutiny for agreeing to ban sensitive political talk from their Web sites in China, while Cisco Systems has been criticized for providing equipment that can automatically block certain words and pages.

The controversy is rooted in the broadening battle over China's nearly 100 million Internet users, a market second only to the United States'. U.S. businesses are moving fast. In the largest foreign investment ever in a Chinese tech company, Yahoo agreed last month to pay $1 billion for a 40-percent share of e-commerce firm Alibaba. Likewise, Google, eBay and Amazon have spent millions for shares in Chinese companies.

China poses a particular dilemma for Internet companies founded in the name of democratizing the world's access to information. They now find themselves in the awkward position of cooperating with China's network of thousands of official Web-watchers--a censorship system described by the non-profit OpenNet Initiative as the "most sophisticated effort of its kind in the world."

But tech executives echo a common argument: The benefits of expanding the Internet into China outweigh the concessions.

McKinnon argues that Yahoo! did have a choice:

Yahoo! had a choice. It chose to provide an e-mail service hosted on servers based inside China, making itself subject to Chinese legal jurisdiction. It didn't have to do that. It could have provided a service hosted offshore only. If Shi Tao's email account had been hosted on servers outside of China, Yahoo! wouldn't have been legally obligated to hand over his information.

Well, this New York Times story by David Barboza suggests that Yahoo! did tie its hands when it agreed to invest in Alibaba.com, because "as part of the deal, Yahoo even agreed to hand over its Yahoo China operations" to Alibaba.

The larger problem is that this falls under the "China contradicting the liberal paradigm" [And don't forget Singapore!!--ed.] I've said before that after weighing the scales the liberal side still wins in the long run -- but everyone should check out Bruce Bueno de Mesquita and George Down's essay "Development and Democracy" in the latest issue of Foreign Affairs. They argue that, "savvy autocrats have learned how to cut the cord between growth and freedom, enjoying the benefits of the former without the risks of the latter."

Developing....

No, I'm just kidding. But as much of the blogosphere is focused on the New York Times autopsy of what went wrong with Katrina. However, for sheer weirdness, Tina Susman's account in Newsday has better anecdotes. Consider this snippet, for example:

When troops arrived in numbers large enough to fan out across the city, their roles at times seemed questionable. Some adopted a warlike demeanor, adding to tensions among the rattled population.

On Friday, a group of heavily armed Federal Reserve police officers, rifles on their shoulders, made their way down St. Charles Avenue, the one in the rear spinning around and stalking backward as if on a commando mission. They took up combat positions as they moved toward the Federal Reserve building to install the flag, even though their nearest companions were stray dogs, journalists and pigeons. (emphasis added)

Bizarre as it sounds, this job description does in fact mention that, "Federal Reserve Police Officers may also serve on our emergency response or emergency medical teams."

Anyway, read both accounts and then see if anyone deserves to be removed from -- or added to -- Belle Waring's list of shame.

Both the exit polls and the early returns suggest that Japanese PM Junichiro Koizumi has won a handy victory in parliamentry elections -- reversing a decade-long decline in the fortunes of the ruling Liberal Democratic Party and paving the way for privatization of the postal savings system, which has been a corrupt albatross on the Japanese economy.

From a U.S. perspective, this is a huge win. A staunch U.S. ally has been re-elected, and if Koizumi's proposed reforms are implemented, then Japanese growth could finally escape its 15-year doldrums. Since Japan is a natural market for U.S. exports, a growing Japanese economy would be a very good thing.

Some reporters will credit Koizumi's charismatic leadership as the key to victory.

I choose to credit the lipstick ninjas.

The following is excerpted from Erica L. Groshen, Bart Hobijn, and Margaret M. McConnell, "U.S. Jobs Gained and Lost through Trade: A Net Measure" in the August 2005 edition of the Federal Reserve Bank of New York’s Current Issues in Economics and Finance:

In the aftermath of the 2001 recession, the perception has grown that vast numbers of U.S. services jobs are being relocated to India, China, and other developing countries. Anecdotes abound of companies using overseas call centers, computer programmers, help desk workers, and accountants while closing down whole departments here. The alleged surge in relocations after 2001 coincided for some years with a sluggish job recovery, prompting many to conclude that the “offshoring” of jobs accounted for much of the persistent weakness in the U.S. labor market. While concerns about job relocations were fueled by the slow job growth during the recovery, the belief that U.S. workers are losing jobs to foreign competition has a much longer history: Indeed, the current concerns echo those voiced in many earlier periods about the impact of international trade on domestic workers.

In this edition of Current Issues, we explore the relationship between trade and job creation in the United States....

[W]e find no evidence to support the claims that a surge in offshoring played a large role in the jobless recovery. Jobs embodied in net imports did not grow at an accelerated pace after the 2001 recession. In fact, the increase in U.S. jobs sent abroad has averaged about 30,000 per month since 2001—a deceleration from the monthly average increase of 45,000 jobs during the period from 1997 to 2001.

More broadly, our results show no clear or necessary relationship between a pickup in jobs lost to trade and weakness in the U.S. labor market. A case in point is the 1997-2001 acceleration in offshoring, which occurred when U.S. payrolls were expanding steadily.

This is the part I found of particular interest:

[One common] assumption is that sectors that are heavily or increasingly exposed to trade suffered disproportionate job losses during the recession and recovery. To test this assumption, we examine job growth rates in this period relative to growth rates during the 1990s expansion for both trade-sensitive and trade-insensitive industries. Starting with goods-producing industries, we find that manufacturing—one of the sectors most exposed to trade—did indeed lose a disproportionate share of jobs during the downturn and subsequent recovery. However, mining and natural resources, another heavily traded industry, performed better in this period than in the preceding expansion, while the nontraded construction industry experienced disproportionate job losses.

Turning to services, we find that the results are even more mixed. Business services—an industry in which outsourcing is believed to have taken a large toll on domestic jobs—saw above-average job losses during the recession and recovery. However, finance, insurance, wholesale trade, and management and engineering jobs did relatively well, despite often-voiced concerns about outsourcing. Moreover, a number of services industries that are not exposed to trade incurred above-average employment losses; the leisure and hospitality trades, for example, do not transfer jobs to overseas workers but still experienced heavy payroll shortfalls relative to the preceding period.

The absence of any consistent pattern in the fortunes of individual industries suggests that while trade-related competition may have driven job losses in some sectors, layoffs in many other sectors occurred for reasons unrelated to trade. Indeed, in a number of industries, forces such as technological change, investment overhangs, and changing consumption behavior are much more likely to have caused job losses.