Spain, February 23, 1981.

The footage below (Spanish) was shot the night of the 22nd of February, 1981, at the Congreso de Diputados (Lower House of the Spanish Parliament):



The video features Lt. Col. Antonio Tejero (Guardia Civil - Spanish national militarized police) interrupting the proceedings, gun in hand and shooting at the ceiling.

Simultaneously, in Valencia, the commander of the Third Military Region, general Jaime Miláns del Bosch, rose up in arms, deploying troops and armoured vehicles, declaring military law and outlawing strikes and public demonstrations.

The attempted coup d'etat was finally aborted in the early hours of the 23rd of February, due to lack of active military support and through the intervention of S.M., King Juan Carlos I.

El País, 23-02-1981 [1]

Antecedents

The last European fascist dictator, Francisco Franco Bahamonde, died in 1975, after over 3 decades in power.

Franco (second right) and Himmler (second left). 1940. [2]

The first democratically elected post-Franco government (1977), headed by Adolfo Suárez, of the centre-right UCD (Spanish acronym for Democratic Centre Union), endeavoured to work in amiable terms with the francoist extreme right (People's Alliance, AP), social democrats (Spanish Socialist Worker's Party, PSOE), and smaller, mostly regional, parties with parliamentarian representation.

Suárez himself started his political career during Franco's long period, as secretary general of the francoist National Movement (sole legal party).

As a consequence of the Atoche 1977 murder of 4 trade unionists, by ultra francoist elements, the Suárez government was forced to legalize the still underground Communist Party.

This, compounded by the economic crisis Spain was going through, led extreme conservative elements in the Armed Forces to plot a coup d'etat.

The first such attempt (Operation Galaxia), in 1978, headed by Lt. Col. Tejero, was put down and its leader, tried and convicted, was sentenced to 7 months and one day in jail.

At his release, Lt. Col. Tejero was reinstated and started plotting again.

Aftermath

After the 23-F failure, Tejero and Miláns del Bosch were tried and convicted for their participation in the attempted putsch. The only civilian co conspirator and participant in the coup tried and convicted was Juan García Carrés (former leader of the sole francoist legal union, the Sindicato Vertical).

Adolfo Suárez was succeeded as Presidente del Gobierno (Prime Minister) by Leopoldo Calvo-Sotelo, who had been solicitor for the francoist Cortes (token Parliament, under Franco).

The Congreso de Diputados session interrupted by Lt. Col. Tejero was in the process of ratifying Calvo-Sotelo as Prime Minister.

So far, the failed 23-F coup d'etat is the last putsch attempt in Western Europe.


SOURCES: 

Video footage: YouTube.
[1] El País. "Golpe de Estado: El País con la Constitución", 23-02-2011.
[2] Wikipedia/Deutsches Bundesarchiv (German Federal Archive), Bild 183-L15327 / CC-BY-SA

Economists and (Ugly) Models

Well, you know what they say: economists do it with models.

But, no. This is not about Cindy Crawford-like miracles of human genetics (or, if that floats your boat, hunks like ___________; help me out here: fill in the blanks) and little, ugly, nerdish, boring, old men.

No, I'm talking about economic models of the simple variety, which recently appear to have become quite popular in the economic blogosphere and media.

Greg Mankiw (Harvard) proposed one:

"You have a driveway covered in snow and would be willing to pay $40 to have it shoveled. The boy next door can do it in two hours, or he can spend that time playing on his Xbox, an activity he values at $20."

Uwe E. Reinhardt (Princeton), who, as Mankiw, also likes that model, summarizes its conclusion thus:

"So if you pay him $30 to shovel your driveway, you will both be better off by $10. (...) As far as economists are concerned, how can anyone argue with that?"

Don't look at me: I can't argue with that! The conclusion follows from the premises, however unrealistic.

Reinhardt goes one step further, adding competition to the example, presumably to make it more realistic:

"Another boy from the neighborhood comes along and offers to shovel your driveway for $10. (...) You pay him $15. Now you are very much better off [my comment: precisely $25 better off], and that other boy gains, too, because he would have done the job for $10 [my comment: so he's better off by $5]."

As Reinhardt explains, now the first boy is not happy; but the second boy is.

Again, I don't object. However, now I feel a lot less sanguine about the whole thing: following that logic one concludes that the neighborhood kids will be accepting $20.01 $0.01 to do the job. And, believe it or not, one can still say that everybody is still better off!

I am not sure what Reinhardt had in mind with his extension: however, it argues the not surprising point that competition among workers reduces their wages, which is not considered in Mankiw's version.

What seems curious to me is that one could build an obvious variation yielding entirely different outcomes.

Let's modify the example: Anthony and Benjamin need their driveways cleared. Anthony is willing to pay $40 for that; Benjamin, $50. Anthony and Benjamin are, let's say, economics professors and hate shovelling snow.

Charlie, their young neighbour, is willing to do it for $20.

As in Mankiw's scenario, after talking to Anthony, Charlie agrees to do the job for $30.

However, seeing this, Benjamin calls Charlie: "Psst, boy! Over here! I'll pay you $40 to clear my driveway".

Clearly, Charlie is ecstatic (20 bucks ahead, not bad!) and Benjamin is happy, too. Anthony, on the other hand, is not so happy: he's gotta grab the shovel.

This result, diametrically opposed to the Mankiw/Reinhardt's example, isn't surprising either: bosses' competition for labour increases wages.

What's the difference between this situation and the Mankiw/Reinhardt one? In the latter the kids were made to compete against each other to get the job; in the former, it's the economics professors who compete to get the worker.

The first point I'm trying to make is this: Mankiw's example is frankly misleading. By ignoring competition, it doesn't show the kids are really better off with trade.

With Reinhardt's more realistic modification this becomes clear: $0.01 above the monetary equivalent of doing nothing either Mankiw's equivalence worth of playing Xbox ($20), or above $0,  is not an improvement (See Update 22/02/2011).

However, in both cases the economics professors are not only measurably better off, but the worse off the kids are, the better off the professors.

Now with my second point: things don't need to be like that. In my modification, Charlie was measurably better off. In other words, the choice between the 3 set of outcomes is not determined by the example and is arbitrary.

The third and final point I will make is this: as employers (and in this case, economics professors), Anthony and Benjamin have not only the knowledge and incentives to steer the situation away from one where they compete against each other to hire Charlie; they also have the political means to do that.

Let me put it this way: they could talk to Daniel (Charlie's non-democratically elected and mean stepfather) and convince him that he could live quite comfortably by making his stepchildren (the whole 1.3 billion of them) work for a few cents each, which they'll pay Daniel, in exchange for living in Daniel's house.

And that's precisely what Anthony (or is it Benjamin?) does here:

Peter Tasker. Rising wages will burst China’s bubble. Financial Times. 10/01/2011. Requires subscription. Registration required.



UPDATE:

21/02/2011. Oopsie, I had forgotten the last link.

22/02/2011. Actually, my logic above is flawed and I noticed the mistake today.

Mankiw established that the first boy had an alternative use for his time (playing with the Xbox); that alternative use was worth the same as $20 for that boy.

But Reinhardt did not establish anything similar for his neighborhood kids; that's why the second boy was happy to work for $10!

On that assumption, the Mankiw/Reinhardt scenario leads not to a top payment of $20.01 (as I wrongly stated above), but to $0.01.

It appears the Financial Times also has a free registration option, for limited access.

So as to leave my mistake on record, I struck through the mistaken text, and added the corrected version, with a reference to this update.

Dodgy Scholarship

Recently, a "behavioural economics" paper, by Beaulier and Caplan, has caused some stir around the economic blogosphere; see here, here and here.

Understandably so:

"Critics often argue that government poverty programs perversely make the poor worse off by encouraging (...) 'social pathologies.' (...) The current paper argues that (...) existing empirical evidence suggests that the poor deviate from the rational actor model to an unusually large degree."

These "social pathologies" make "government poverty programs" counterproductive.

According to Beaulier and Caplan, the following is a list of general deviations, present in superlative degree among the poor:

1. Judgmental biases (including self-serving bias -the tendency to see themselves as better than they really are- and biased risk estimates -which might explain why the poor have a penchant for crime-, all of which could be explained by lower IQ).
2. Self-control problems (a set of anomalies superficially similar, but in some unexplained way distinct from laziness and short-sightedness).

Although several of the links above are critical of the paper, the most comprehensive criticism I could find, by James Kwak, states (before undertaking the analysis of unstated alternative explanations to the "social pathologies" mentioned in the paper):

"But what Caplan and Beaulier really mean to say is this: (...) the poor are more irrational than 'normal' people."

It strikes me that James's criticism, however valid and demolishing, should have gone farther in the opening questions. By jumping straight into the alternative explanations, James overlooked some fatal flaws in the Beaulier/Caplan paper.

For starters, the paper is a survey of 74 articles and books on the subject of cognition and social consequences. One would expect that, given the subject matter, many of the works cited came from the psychological scholarly literature, social psychology or sociology.

Not so. Only 4 papers cited were published in psychology or social sciences journals, plus one remarkable book.

"The Bell Curve", by Herrnstein and Murray, is the book. To the best of my knowledge, Herrnstein is the main exception to this "psychological" partial omission.

And this predilection for Herrnstein shows in the text: the argument around the importance of IQ is highly dependent on this work (with 8 references or direct quotations). Further, as seen above, lower IQ is advanced by Beaulier and Caplan as cause of judgmental biases (and indirectly of anomalies like criminality among the poor).

"The Bell Curve" has been subject of intense controversy since its publication in 1994, to the extreme that by 1996 the American Psychological Association was forced to publish a non-research paper, rather pedagogical in nature and addressed to the general public "Intelligence: Knowns and Unknowns", at its flagship journal, American Psychologist:

"Concepts of 'intelligence' are attempts to clarify and organize this complex set of phenomena. Although considerable clarity has been achieved in some areas, no such conceptualization has yet answered all the important questions and none commands universal assent. Indeed, when two dozen prominent theorists were recently asked to define intelligence, they gave two dozen somewhat different definitions".

Obviously, where two dozen prominent psychologists failed, it's entirely reasonable to expect two economists turned into amateur psychologists to succeed in defining intelligence, to deal with its effects, to propose social policy, and all that with next to no base in psychology! Bravo!

I will not dwell any deeper in "The Bell Curve" and its infamous "genetic factors", except to say that Beaulier and Caplan (that astutely avoided mentioning them in the text) must explain how they see those genetic factors in their "theory": are they referring to poor blacks only, or all poor people regardless of race? What about wealthy blacks and poor whites?

As I grow weary of this crap (which, as James Kwak said, is indeed offensive), let me quickly deal with two additional observations, related to James's comment that these anomalies were detected studying university students:

First additional observation

I know of at least two instances of biased perception affecting equally the poor and the wealthy (and one of them should be well-known to Caplan):

"Income plays little role; if anything, the wealthy think less like economists, not more." Bryan Caplan. "What Makes People Think Like Economists?"

"Eveyone thinks they are middle-class."

If all these anomalies have a biological base, why on earth will these two equally affect both tails of the distribution, while those mentioned by Beaulier and Caplan affect one tail only?

Second additional observation

The self-perception bias identified by Kruger and Dunning and mentioned by Beaulier and Caplan as self-serving bias (the tendency to see oneself as better than one really is) not only was first identified by studying university students, but also has generated interest in the field of management science (which seems also overlooked by Beaulier and Caplan). And managers are usually not poor:

Some bosses live in a fool's paradise
Self-delusion rife among managers

I wonder if a similar study will ever be conducted on economics professors.

The Magpie squawks!

Commenting on "Credit Where Credit is Due (II)", a regular from another site (a micro-blogging one) said:

"Magpie - Squawk once if you are being held captive by a journo and being forced to say those words."

It took some more reading to understand what my friend (let's call him Z) meant. Basically the idea is that the "mateship" levy, intended to partially fund the disaster relief measures, is not needed: the additional spending should be funded via budget deficit.

Z certainly has a point there.

For one, public debt in Australia is ridiculously low. Given the amounts set for relief, the Federal Government could simply add to the debt, without any spending cuts, and without any ill effect.

In fact, the Federal Government could probably fund much larger relief measures with no inflationary pressures, according to some local chartalism proponents (chartalism or MMT is a Post-Keynesian school of economics, and I believe Z is a chartalist).

Another reader (let's call him A) wrote to me that "the f%@*%g mining industry should be made to pay, they broke it, they fix it". That idea, I believe, is somewhat related to Bob Brown's proposal. I also think the mining industry is the most likely culprit for the damages and almost surely the ultimate beneficiary of the relief measures, so it would make sense for them to pay.

Bottom line, from very different perspectives, both commentators agree that the levy is a bad idea.

I agree with those criticisms. Further, I'd say one would be justified to conclude the whole idea is no more than window-dressing, designed to:

1. Show that the Labor Government helps those affected,
2. Keep Labor's "fiscal conservative" image intact, and
3. Avoid touching any powerful interests.

However, that's not why the whole thing has been criticized by mainstream media, journalists, politicians and economists.

It has been criticized because:

1. Australians should freely decide how to help,
2. It should be funded entirely through spending cuts elsewhere,
3. It shows that there is "plenty of fat to cut", and
4. The mining industry is the best thing to happen to Australia since the invention of sandwich bread. (These 4 objections were formulated in the last episode of ABC's Question and Answer, 07-02-2011, here).

And that is naked, shameless ideological bias.

As I see it, Mr. Gittins rightly addressed those 4 criticisms, and for that reason I find it fair to praise him.

True, he did not address the criticisms my friends and correspondents made (or those that yours truly would have added). Still, it's a step, maybe a little vacillating, in the right direction.

Lastly: Guys your comments are welcome here. If they are good, well-thought objections, as they were, I promise (cross my heart and wish to die), I'll be good and behave myself.

Or else, I can always reply, as I did to Z:

"Instead of simply 'squawk, squawk' I'll try a crow's call: 'aw, aw, aw, aaah'!"