UDADISI

Review: The WEIRDest People in the World by Joseph Henrich

2025-02-27T15:35:00.000-08:00

What made Western societies so different from the rest of the world? Henrich argues that a key factor was the Church’s Marriage and Family Program (MFP)—especially its ban on cousin marriage. This policy gradually weakened kin-based social structures, fostering individualism, economic competition, and impersonal markets. Over time, these cultural shifts laid the foundation for property rights, democratic institutions, and economic growth.

Henrich presents compelling evidence showing how regions with longer exposure to these norms developed stronger markets, higher literacy, and more analytical thinking.

This book clarified many historical puzzles:

Why some societies emphasize kin loyalty while others value individualism.

Why economic development took different paths in Europe, China, and the Middle East.

How culture shapes institutions and long-term prosperity.

A must-read for those interested in economics, anthropology, and cultural evolution. Have you read it? What are your thoughts?

Propensity Score Matching en R

2020-05-13T12:16:00.003-07:00

En este video:

*** Enfoque en la intuición *** 1. Vamos a usar datos en: library(MatchIt - ?matchit). El nombre de la base de datos es data(lalonde) - esta es una muestra. 2. Crear variables dummy. 3. Vamos a calcular propensity scores. 4. Vamos a hacer "match" (pareo) de observaciones usando el paquete "matchit" para encontrar match entre individuos que recibieron el tratamiento e individuos que no. En este caso el tratamiento es un programa de entrenamiento. 5. Vamos a ver los resultados usando dos gráficas: histograma y "jitter". 6. Vamos a comparar estadísticamente la variable de interés (outcome) etre el grupo "match control" y "match treatment". En este caso es la variable ingreso. 7. Vamos a evaluar el balance del metodo de match, con "Love graph." 8. Esto es solo una análisis breve y muy inicial. 9. Sigan mi canal Andres Marroquin. Recursos: Estudio reciente: https://publications.iadb.org/en/publication/11069/crime-and-erosion-trust-evidence-latin-america Podcast: https://www.methodology.psu.edu/news/543-podcast13/

Nuevo video: Gráfica de variables discretas en R

2020-05-09T12:35:00.002-07:00

Vean mi nuevo video sobre gráfica de variables discretas en R.

No se olviden de seguir mi canal en YouTube.

Nuevo video: Exploración de datos en R usando mtcars

2020-05-07T04:47:00.001-07:00

Buenos dias!

En este video hago una introducción básica al análisis de datos en "R." Temas:

Introducción RStudio, Mtcars, histograma, diagrama de dispersión, media, mediana, valor mínimo, valor máximo, nombre de variables, numero de filas

Nuevo Video: Mortalidad en Canada en R

2020-05-07T04:23:00.001-07:00

Buenos días!

En este video muestro cómo importar datos en el software "R." También cómo hacer una tabla y un histograma.

Update

2020-04-29T11:41:00.001-07:00

I have stopped posting in this blog. The reason is that my focus is currently on research.

Reading Frank H. Knight's "Risk, Uncertainty, and Profit"

2016-09-14T20:57:00.002-07:00

The true uncertainty in organized life is the uncertainty in an estimate of human capacity, which is always a capacity to meet uncertainty.

Frank Knight

It is the first time I read RUP. There are a few points I would like to make:

This is an incredibly good book to understand the origins of entrepreneurial profits. Profits are the reward for an entrepreneur's good judgement when she faces uncertainty. And uncertainty is a kind of risk that can not be measured.
The book starts with a methodological discussion and Knight indicates the importance of clarity for scientific endeavors. In particular Knight emphasizes that scientists should be transparent about explaining the assumptions of their models. By the way, for Knight there are no economic laws, only tendencies.
The exploration of assumptions is key for what Knight does in RUP. In particular he describes the perfectly competitive model and explains its assumptions. By doing that he concludes that in this model profits do not exist. However, in reality, profits do exist. And the reason is that in the real world information is not perfect and there are barriers to entry, among other factors -- there is uncertainty! By dissecting the assumptions of a theory (perfect competition) Knight creates a new theory (a theory of profits).
Once the assumption of perfect information (and others) is relaxed we see the emergence of uncertainty. Uncertainty as explained by Knight has different origins. One is the changing nature of the world, which is partially explained by unpredictable human behavior.
On the one hand, perfect competition is situated in a static world where there are no barriers to entry. Imperfect competition, on the other hand, is situated in a dynamic world. Profits do exist and are taken by entrepreneurs that exercise their good judgment when facing uncertainty. For Knight entrepreneurial good judgement cannot be precisely distinguished from good luck. An interesting topic to discuss is what exactly "good judgment" is, and to what extent good judgment can be taught.
Once one accepts the importance of good judgement it is easy to understand the implicit theory of the firm in RUP. For Knight entrepreneurs are specialized in maximizing good judgement and they create companies to do so. Entrepreneurs are also specialized in wealth creation. A related point here is that stockholders are the entrepreneurs in modern corporations.
Who is the entrepreneur? She has "skin in the game," and she is residual claimant of income after the prices of the factors of production (land, capital, and labor) have been imputed.
It is possible to reduce uncertainty, by grouping different events. Another way (although extreme) to do so is to stop progress.
Knight argues that human beings maximize wealth, not consumption. He also indicates that human beings are constantly looking to have "interesting" lives.
Knight was a pioneer of what we call now behavioral economics. He mentions that human beings do not necessary know what they want. Psychology is important and that opens the door for manipulation through marketing. He even mentions what would be known as the "winner's curse." For Knight preferences are not constant, and human beings are often trying to acquire better preferences.

There is much more in the RUP, and if you have not read it and are interested in entrepreneurship, market process, microeconomics, and risk RUP is a must. Besides, Frank Knight had a fascinating approach to social sciences. He was critical, skeptical, and a heretic in many ways.

Additional readings

These additional readings helped me understand the RUP better and to contextualize Frank Knight and his thinking - they are in no particular order:

Knight, Frank H. "Abstract Economics as Absolute Ethics." Ethics 76, no. 3 (1966): 163-77.

Knight, Frank H. "Anthropology and Economics." Journal of Political Economy 49, no. 2 (1941): 247-68.

Patinkin, Don. "Frank Knight as Teacher." The American Economic Review 63, no. 5 (1973): 787-810.

Leigh, Arthur H. "Frank H. Knight as Economic Theorist." Journal of Political Economy 82, no. 3 (1974): 578-86.

Economics Is Not All of Life

Kern, William S. "The Lemon Principle, Democratic Politics, and Frank Knight's First Law of Talk." Public Choice 59, no. 1 (1988): 83-87.

Frank H. Knight on the “Entrepreneur Function” in Modern Enterprise

Knight, Frank H. "Imperfect Competition." Journal of Marketing 3, no. 4 (1939): 360-66.

Frank H. Knight and the Chicago School

Langlois, R. N. and Cosgel, M. M. (1993), Frank Knight on Risk, Uncertainty, and the Firm: A New Interpretation. Economic Inquiry, 31: 456–465.

Knight, Frank H. "Laissez Faire: Pro and Con." Journal of Political Economy 75, no. 6 (1967): 782-95.

Wick, Warner. "Frank Knight, Philosopher at Large." Journal of Political Economy 81, no. 3 (1973): 513-15.

Raines, J. Patrick, and Jung Clarence R. "Knight on Religion and Ethics as Agents of Social Change: An Essay to Commemorate the Centennial of Frank H. Knight's Birth." The American Journal of Economics and Sociology 45, no. 4 (1986): 429-39.

Mitchell, Wesley C. The American Economic Review 12, no. 2 (1922): 274-75.

Knight, Frank H. "Profit and Entrepreneurial Functions." The Journal of Economic History 2 (1942): 126-32.

Stigler, George J. "Frank Knight as Teacher." Journal of Political Economy 81, no. 3 (1973): 518-20.

Schultz, T. W. "Frank Knight as Colleague." Journal of Political Economy 81, no. 3 (1973): 516-17.

Watkins, G. P. "Knight's Risk, Uncertainty and Profit." The Quarterly Journal of Economics 36, no. 4 (1922): 682-90.

Raines, J.P. and Jung, C.R. (2009) ‘Monopolies as “Mechanical Defects”: Frank H. Knight on Market Power’, History of Economics Society Bulletin, 10(2), pp. 135–143.

El Capitalismo del Centavo

2016-08-12T12:58:00.000-07:00

Este extraordinary libro es un clásico y fue publicado en español en 1964. Es un estudio detallado de la economía de Panajachel, Sololá, Guatemala. Está basado en el trabajo de campo que el prestigioso antropólogo Sol Tax hizo en la comunidad en los años 30s. En ese tiempo la población de Panajachel no superaba los 2,000 habitantes.

El autor afirma que la economía de los indígenas de Panajachel puede caracterizarse como “una economía monetaria organizada con las casas individuales como unidades de producción y de consumo, con un mercado fuertemente desarrollado, el cual tiende a ser perfectamente competitivo” p. 51

Sol Tax atribuye la pobreza del pueblo a la falta de tecnología. Es muy posible que las condiciones de vida en los alrededores de Panajachel no hayan cambiado mucho en el tiempo transcurrido desde la investigación de Tax. Creo que este libro es de los más importantes en el área económica que se escribió sobre Guatemala en el siglo 20. De mucho interés para economistas, historiadores, y antropólogos.

What is language? / Qué es el lenguaje?

2015-10-06T20:17:00.000-07:00

…is not a protocol legislated by an authority but rather a wiki that pools the contributions of millions of writers and speakers, who ceaselessly bend the language to their needs and who inexorably age, die, and get replaced by their children, who adapt the language in their turn. (p. 3)

That is from the excellent book: The Sense of Style by Steven Pinker.

===

…no es un protocolo legislado por una autoridad sino un wiki que incorpora las contribuciones de millones de escritores y hablantes, quienes sin parar moldean el lenguaje a sus necesidades y quienes inexorablemente embejecen, mueren, y son sustituidos por sus hijos, quienes también adaptan el lenguaje. (p. 3)

Del excelente libro: The Sense of Style por Steven Pinker.

Tyler's conversation with Dani Rodrik

2015-10-03T14:40:00.001-07:00

This is the video of Tyler's conversation with Dani Rodrik:

A few points:

Tyler's conversations are excellent.
I was not convinced by the "fundamental" difference between agriculture and manufacturing as Rodrik put it.
Even though Tyler pushed the issue of culture, Rodrik does not see it as an important explanation for economic development generally, and for adoption of manufacturing in particular. (Sachs is not persuaded about culture either, but Zingales is).
About Vietnam: Rodrik: "I think you see the same about why is it that Vietnam has developed in the way that it has after it opened up its economy. I think if Vietnam was located in Latin America or Central America, I don’t think it would have been half the miracle that it was." Hard to make something with this statement. If Vietnam were in Central America it would not be Vietnam any more. In any case, does it imply that if Guatemala were in South East Asia, it would be an economic miracle given an opening of its economy?
What should change in graduate school education in economics? Both, Rodrik and Sachs shared deep concerns about the use of math for its own sake in the profession. Sachs recommended a new approach in the method of development economics, as I understood it, something akin to what anthropologists do. Rodrik indicated that spending a year in a developing country would help a lot to think abut a relevant research agenda. I agree with both . . . I would add more years to the economic development experience. The basic message is to get closer to real world problems.

===

Hay tres puntos fundamentales, me parece, en esta entrevista que Tyler Cowen le hace a Dani Rodrik:

La economia de países como Turquia no se han modernizado porque enfrentan dos limitantes principales, una de estructura y otra de agencia. Esto significa que existen condiciones iniciales (las interpreto como históricas, geográficas, etc). La otra es agencia, es decir el liderazgo que puede promover reformas exitosas y otras fallidas.
La educación económica, principalmente a nivel de postgrado debe redefinirse en el sentido que es deseable una aproximación del estudiante a problemas reales. La matematización de la economía per-se puede distraer el cometido principal del economista, que es resolver, o contribuir a resolver problemas sociales urgentes.
Rodrik parece poner mas peso a restricciones políticas y estructurales de la economía, y no tanto al factor cultura.

La transcripción de la entrevista, en ingles, esta aquí.

===

Venezuela: Without Liberals, There Is No Liberalism

2015-09-30T07:16:00.000-07:00

The Venezuelan economy evolved from a growth miracle (1920–1957) to a growth disaster (1960 to the present). This paper describes the institutional collapse behind this reversal of fortunes. To cast light on Venezuela’s U-turn we provide a brief historical account, and we discuss the role played by educational organizations, the media and culture, and political and entrepreneurial elites in the destruction of liberal institutions. We also describe the most prominent liberal reactions to the pervasive institutional decay endured by the country. Finally, a major lesson emerges from this case study: illiberal mindsets coupled with the absence of leadership bring dire consequences for the people’s standard of living.

That is the abstract of a new article by Hugo J. Faria and Leonor Filardo in the new number of Econ Journal Watch.

There is also this article on classical liberalism in Guatemala.

Legalizing cocaine: Uno de los elementos que puede conducir a reducir el conflicto en Colombia.

2015-09-03T09:51:00.000-07:00

La guerra puede terminar con una victoria, pero los conflictos sociales, culturales y de clases acaban realmente cuando la gente está cansada. Y ojalá que Colombia esté en ese punto. Ahora, hay elementos de ese conflicto que no son de Colombia, que no son su culpa. Si la cocaína, por ejemplo, fuese legal, este conflicto no habría existido. El combustible de la guerra es el uso de la cocaína afuera. Y cuando se tiene ese ‘petróleo’, es muy difícil. Si las Farc tienen plata, si pueden comprar armas, si se pueden esconder en las montañas, es muy duro. Para mí, lo que se tiene que hacer es matar el negocio de la cocaína. Después, bueno, no puedo hablar por Colombia, pero me parece que una nueva generación tiene que llevar a cabo un cambio social para que todos los colombianos puedan tener esperanza en el futuro, que puede ser brillante.

Otras preguntas están en esta entrevista hecha al antropólogo y botánico.

Los altos costos de la corrupción

2015-08-29T13:58:00.000-07:00

Los guatemaltecos conocen bien las consecuencias de la corrupción, ya que las viven día a día. No hace falta recordarlas. Lo nuevo es que en las últimas semanas se han dado manifestaciones históricamente trascendentales contra la corrupción.

Podemos sin embargo listar algunas consecuencias de la corrupción que sobresalen de una muy breve evaluación de literatura económica sobre este tema:

Gobiernos corruptos gastan menos en educación ya que destinan fondos a actividades donde es mas fácil extraer rentas.
Un incremento en el nivel de corrupción baja el crecimiento de los ingresos de los mas pobres.
La corrupción reduce el crecimiento económico a través de una reducción en la inversión.
La corrupción aumenta la desigualdad económica.
La corrupción afecta el crecimiento económico al aumentar la inestabilidad política.
La corrupción se alimenta del proteccionismo, y tiende a perpetuarlo.
La corrupción aumenta los déficits fiscales, distorsiona incentivos, reduce la protección de derechos de propiedad, y reduce la legitimidad de la economía de mercado y la democracia.
La corrupción reduce el nivel de confianza y capital social.
Etc.

La corrupción se alimenta de si misma.

Entrepreneurship, Development, and Economic Policy in Haiti

2015-02-13T04:15:00.003-08:00

This chapter describes the current situation of entrepreneurship in Haiti and the main obstacles entrepreneurs face in that country. It looks at entrepreneurship from a comparative-economics perspective (stressing quantitative variables) and from an anthropological perspective (stressing qualitative research). The chapter presents some case studies from the city of Jérémie and offers policy recommendations.

The draft is here.

Innovation and Economic Progress in the Ancient World

2015-01-23T10:00:00.000-08:00

In the topic of the economic history of Greece and Rome, there is this interesting paper: "Technical Innovation and Economic Progress in the Ancient World" [gated] the paper was written by M. I. Finley. He makes a very interesting argument about innovation, or better, the lack of it. A piece:

... Tocqueville, whose 1831 notebooks are filled with the theme that 'slavery is even more prejudicial to the masters than to the slaves', because, as a leading Louisville merchant said to him, "it deprives us of the energy and spirit of enterprise that characterizes the States that have no slaves." Greek and Roman slavery functioned in a different context, to be sure, both internally and externally, and comparisons must be made with caution and reserve. But this particular one seems to me to be valid and necessary. (p. 44-5) . . .

The ancient world had only two solutions to the disequilibrium brought about by a serious increase in population. One was to reduce the population by sending it out. The other was to bring in additional means, in the form of booty and tribute from conquests. Both are stop-gaps, not solutions, and therefore proof of an incapacity to raise productivity sufficiently, or, indeed, significantly. For a relatively brief time Rome offered the illusion of an escape from this dilemma. Having acquired large, sparsely occupied areas, she proceeded to a rapid internal colonization (in Spain and Gaul, for example). The illusion came to an end in the first century. Some historians think that there followed a stable equilibrium, Gibbon's golden age of the Antonines, but it is unnecessary to debate the question. Barbarian pressures now began to place new demands on the empire. That challenge the economy and the political organization could not meet in the west. (p. 45).

The paper was written in 1965.

Microeconomics Syllabus, Spring 2015 (undergrad)

2015-01-02T07:43:00.001-08:00

It is here.

Economic History Syllabus. Spring 2015

2014-12-26T07:34:00.001-08:00

It is here.

Economic history links two cultures -- the economists' and the historians', and this mix creates a field that explains the past to understand the present. In this class we will study the work of economic historians to answer questions such as: How was the institutional structure of pre-modern societies? How did the creation of clocks and the measurement of time lead to industrialization? Why did the industrial revolution happen in England? Why does China economic prosperity is not an event of the present only? How did slave trade work and which were the forces that stopped it? And, in general, what were the historical roots of innovation, entrepreneurship, and prosperity?

Economical writing (or, "Think Hemingway") in Scientometrics

2014-12-24T08:03:00.000-08:00

Scientometrics published the paper.

Salant (J Polit Econ 77(4):545–558, 1969) complained that on many occasions he found the writing of his fellow economists “nearly incomprehensible,” and made suggestions to improve economists’ writing skills (and, by extension, those of natural and social scientists in general). Among other things, he argued that good writers tend to use shorter words. We call this “the Salant hypothesis,” and use standard statistical techniques to test this claim by comparing the average length of words used by Nobel laureates in their banquet speeches. We find that Literature laureates tend to use shorter words than laureates in other disciplines, and the difference is statistically significant. These results support Salant’s idea that words should be used efficiently. This includes using short words instead of longer ones whenever possible. In short, good writing is also “economical writing.”

A draft is here.

Merry Christmas!

In the Shadow of the Banyan

2014-12-18T11:42:00.002-08:00

In the Shadow of the Banyan by Vaddey Ratner is a great novel. A girl and her family witness and go through the Cambodian genocide, at the end of the 1970s. The book reads as if riding a roller-coaster. It describes horrible atrocities followed by lovely family scenes of poetry and hope. The story is quite touching and the accounts of Cambodian culture and myths are riveting.

Does Local Community Control of Police make a Difference? Some Preliminary Findings

2014-10-23T19:10:00.001-07:00

Our findings strongly suggest that in the area studied, small police forces under local community control are more effective than a large, citywide-controlled police department in meeting citizen demands for police protection (Ostrom and Whitaker 1973: 196).

¿Por qué no hay tortillas en el bufé de Sarita?

2014-09-14T09:05:00.001-07:00

Ayer fui con mi esposa a desayunar a Sarita. El bufé es muy bueno, y creo que es uno de los mas baratos en el mercado en ese segmento. Pero, sorpresa, no hay nadie torteando, y no hay tortillas. Lo que obviamente despierta la curiosidad de todo guatemalteco. Ronald Coase hubiera preguntado directamente . . . y asunto arreglado. Pero un economista común y corriente empieza a elucubrar. Quizá la respuesta es mas sencilla, pero esta es mi hipótesis:

Si ofrecieran tortillas quizá la mara pediría los desayunos a la carta, que son más baratos—el precio puede ser menos de Q. 30, y comerlos con tortillas, lo que mejora significativamente la experiencia culinaria. Esto implicaría que quizá algunos clientes preferirían los desayunos individuales al bufé (cuyo precio es Q. 64), y esto podría reducir las ganancias del establecimiento. En otras palabras, las tortillas mejorarían la relación precio/calidad a favor de los desayunos a la carta.

Autor Luisfi, Wikimedia Commons

La hipótesis es entonces que en los lugares donde hay gente torteando no hay bufé y viceversa. Es decir, las tortillas y el bufés son productos substitutos. Y pensando en algunos lugares esto parece ser cierto. Por ejemplo en los restaurantes de Tecpán hay tortillas pero no hay bufé. Como corolario, en los lugares que solo ofrecen bufé (no hay carta), en ellos sí podría uno encontrar tortillas.

Este es mi grano de arena en este intenso debate de gran importancia nacional.

Slaves or Mercenaries: Milton Friedman and the Institution of the All-Volunteer Military

2014-09-08T05:28:00.000-07:00

From an essay by John D. Singleton:

Milton Friedman was the leading public proponent for an all-volunteer military. This chapter traces his influence upon the national debate over conscription, which culminated in Friedman’s service on the Gates Commission. Friedman’s argument relied on economic reasoning and appeal to cost-benefit analysis. Central was his conjecture that the social cost of the draft, which imposed an “implicit tax” on draftees, exceeded that of the all-volunteer military. This was supported by the work of Walter Oi. Friedman’s position attracted support both within the conservative movement and from across the political landscape, allowing Friedman to form coalitions with prominent individuals otherwise in disagreement with his politics. With the social context ripened by the draft and the Vietnam War, Friedman’s argument echoed in influential circles, reaching policymakers in Washington and Martin Anderson on the Nixon advising team. The successful institution of the all-volunteer armed force reflected Friedman’s intellectual entrepreneurship.

Preferences for redistribution

2014-09-05T18:14:00.000-07:00

From a paper by Adam Okulicz-Kozaryn:

I study the preferences for redistribution in Eastern Europe. After the collapse of communism c. 1990, preferences for redistribution did not decrease by 2000, and if anything, they increased. One explanation is the so-called “public values effect”: individual beliefs shape preferences for redistribution. East Europeans continue to believe that it is the responsibility of the state to provide for the poor, and hence, they prefer redistribution. Income and expected income also affect preferences for redistribution but to a lesser degree than relative income and income history. The ‘winners’ of the transition, i.e., those who are better off after the collapse of communism, prefer less redistribution.

From the conclusions in a draft:

. . . One would expect to see more "free market thinking," that is, less support for government intervention and more support for individual enterprise. After all, that's what East Europeans were striving for during the decades under the communist regime. p. 9.

Th draft and other interesting papers by Adam are here.

Teaching Children to Save: What Is the Best Strategy for Lifetime Savings?

2014-09-03T15:32:00.000-07:00

This paper, by Alessandro Bucciol & Marcella Veronesi, recently came out in the Journal of Economic Psychology. The abstract.

We study the effect of alternative parental teaching strategies on the propensity to save and the amount saved during adulthood. Using a panel dataset from the Dutch DNB Household Survey we find that parental teaching to save increases the likelihood that an adult will save by 16%, and the saving amount by about 30%. The best strategy involves a combination of different methods (giving pocket money, controlling money usage, and giving advice about saving and budgeting). The effect of parental financial socialization is persistent with age, but decays at elder age for the propensity to save.

A draft is here.

Modern Macroeconomics: Its Origins, Development and Current State

2014-08-31T10:17:00.000-07:00

I am rereading the book Modern Macroeconomics: Its Origins, Development and Current State (2005) by Brian Snowdon and Howard R. Vane.

A few points:

This is one of the first, and few, macroeconomics books that dedicated a chapter to Austrian economics.
More than a macroeconomics textbook, I see it as a history of macroeconomic analysis (in the Schumpeter way). It starts with the classical approach, then with the orthodox Keynesian model, then the IS-LM model for an open economy, monetarism and son on.
The history of macroeconomics analysis is a history of revolutions and counterrevolutions. There are as well schools of thought that developed parallel to the "mainstream."
There is some chronological overleaping as well, for example the Mundell-Fleming model was developed by the time the monetarism revolution was starting in the early 1960s.
The history of macroeconomic analysis is fascinating and the book makes it clear that it is an evolving field, and very likely what is in vogue today might well not be discuss in a few years - some current theories will be incorporated into the "mainstream," but not necessarily.