Keeping with the theme of increasing quality vs price of products, there is this article by Bret Swanson at TechPolicyDaily.com that calculates that the capabilities of an iPhone would have cost, $3.5 million in 1991.
Of course,all the hodgepodge of components wouldn't fit in your pocket and, therefore, the value of the miniaturization isn't included in the $3.5 million figure.
Also of note, the article mentions that a gigabyte of hard drive storage cost $10,000 in 1991 and today costs only 4 cents.
Wednesday, February 05, 2014
Tuesday, February 04, 2014
Jagdish Bhagwhati and Gung-ho Global Finance
Jagdish Bhagwati is arguably the most prominent proponent of trade liberalization and globalization, and so he caused a bit of a stir when he came out against the complete liberalization of capital in 1998. In a Foreign Affairs essay entitled the "Capital Myth: The Difference between Trade in Widgets and Dollars" he criticized the push to liberalize financial markets and remove all restrictions on capital flows, something he would later call 'Gung-ho International Financial Capitalism.' [Bhagwati has made this essay, along with other writings on the subject, available in PDF form on his faculty website] Talking about the push for free international capital flows, he says:
This is a seductive idea: freeing up trade is good, why not also let capital move freely across borders? But the claims of enormous benefits from free capital mobility are not persuasive. Substantial gains have been asserted, not demonstrated, and most of the payoff can be obtained by direct equity investment. And even a richer IMF with attendant changes in its methods of operation will probably not rule out crises or reduce their costs significantly. The myth to the contrary has been created by what one might christen the Wall Street-Treasury complex, following in the footsteps of President Eisenhower, who had warned of the military- industrial complex. (Bhagwati, 1998)
With regard to the problems associated with unfettered capital mobility, Bhagwati argues that capital flows, especially short term credit, are more prone to (in Kindleberger's terms) panics and manias than trade in goods and services. That is, that financial investors, working with incomplete information and subject to herding influences, are more likely to overestimate the returns and stability of a nation capital market (which producing a mania of capital inflows) and/or to underestimate the strength of a market when confronted with adverse news (which produces a panic in the form of sudden and massive capital outflows).
Writing on this in The Defense of Globalization, Bhagwati contrasted the Mexican Peso crisis with the Asian financial crisis. He argued, while that the Mexican crisis exposed fundamental problems in the Mexican financial system that may have warranted reactions from investors, the same was not true of the Asian crisis. The fundamentals of the Asians were fairly strong in comparison to other nations. While problems such as cronyism existed, these problems were generally previously known to exist and there was nothing in the crisis that suggested they had suddenly become acute.
The problem in Asia in the 1990s, as Bhagwati (2004) sees it was that Asian banks were using short term capital inflows to finance long term domestic loans. When the short term inflows suddenly turned into outflows, there was simply not enough cash (in foreign currency) to cover the outflow even though the long term loans were generally sound. Note that, in such a case, it makes sense for a lender of last resort to loan banks money to cover the short term outflows based on the strength of the long term loans. In fact, in the case of a panic, one can make money doing so (think Old Man Potter backing the bank during the panic in It's A Wonderful Life).
However, unlike the US, where the Federal Reserve can print all the dollars it wants and act as lender of last resort, the central banks of the Asian countries could not do so to the same extent as they print domestic currency, not dollars. So, once their supply of foriegn reserves was expended, central banks and their governments had to beg the dollars they could from the IMF and other countries. More importantly, they had to implement severe macroeconomic measures, notably raising interest rates and selling assets. These measures rippled through their economies undercutting its fundamental strength. Businesses, which carried debt and depended on access to credit to operate, were decimated (and those, formerly sound, long term longs to them were no longer quite so sound). Owners of assets were forced to sell to foreign purchasers at greatly reduced prices.
In general, Bhagwati argues that the gains of financial liberalization, in terms of economic growth, are questionable. Many other countries, such as China, have grown without open capital markets (though this is eerily similar to claims by opponents of trade liberalization). Furthermore, if there are benefits, the results can be achieved by opening markets to foreign direct investment, which is inherently longer term and less mobile in nature, and, therefore, not as susceptible to panics.
In the end, Bhagwati attributes much of the push for unfettered financial flows to interest groups in the developed nations, particularly the financial sector in the US. This sector directly benefits from expansion of global credit markets and exerts great influence on the US government and the IMF. Bhagwati notes that US economists frequently move back and forth between the US financial sector and government positions. This elite network, along with the financial sector lobbying efforts, creates what he calls the Wall Street-Treasury Complex, whose effect describes as follows:.
This powerful network, which may aptly, if loosely, be called the Wall Street-Treasury complex, is unable to look much beyond the interest of Wall Street, which it equates with the good of the world. Thus the IMF has been relentlessly propelled toward embracing the goal of capital account convertibility. The Mexican bailout of 1994 was presented as necessary, which was true. But so too was the flip side, that the Wall Street investors had to be bailed out as well, which was not. Surely other policy instruments, such as a surcharge, could have been deployed simultaneously to punish Wall Street for its mistakes. Even in the current Asian crisis, particularly in South Korea, U.S. banks could all have been forced to the bargaining table, absorbing far larger losses than they did, but they were cushioned by the IMF acting virtually as a lender of first, rather than last, resort.
The last sentence suggests an argument that Bhagwati doesn't explicitly develop, i.e., that the IMF is not a good lender of last resort because of its motivation. The obvious the limiting factor on the IMF serving as lender of last resort is its limited supply of funds (remember that when the Federal Reserve acts as lender of last resort in the US, it theoretically has an infinite supply of dollars). Here, Bhagwati suggests that IMF is biased towards insulating foreign creditors from the downside of the crisis; whereas an ideal lender of last resort would focus on minimizing the crisis in total (especially its long term impact n the economy) and remain neutral with regard to the distribution of losses.
References:
Bhagwati, Jagdish. (1998, May 1). "The Capital Myth: The Difference between Trade in Widgets and Dollars." Foreign Affairs. Retrieved February 4, 2014, from http://www.foreignaffairs.com/articles/54010/jagdish-n-bhagwati/the-capital-myth-the-difference-between-trade-in-widgets-and-dol
Bhagwati, Jagdish. (2004) "Chapter 13: The Perils of Gung-ho International Financial Capitalism." In Defense of Globalization. New York, NY: Oxford University Press.
This is a seductive idea: freeing up trade is good, why not also let capital move freely across borders? But the claims of enormous benefits from free capital mobility are not persuasive. Substantial gains have been asserted, not demonstrated, and most of the payoff can be obtained by direct equity investment. And even a richer IMF with attendant changes in its methods of operation will probably not rule out crises or reduce their costs significantly. The myth to the contrary has been created by what one might christen the Wall Street-Treasury complex, following in the footsteps of President Eisenhower, who had warned of the military- industrial complex. (Bhagwati, 1998)
With regard to the problems associated with unfettered capital mobility, Bhagwati argues that capital flows, especially short term credit, are more prone to (in Kindleberger's terms) panics and manias than trade in goods and services. That is, that financial investors, working with incomplete information and subject to herding influences, are more likely to overestimate the returns and stability of a nation capital market (which producing a mania of capital inflows) and/or to underestimate the strength of a market when confronted with adverse news (which produces a panic in the form of sudden and massive capital outflows).
Writing on this in The Defense of Globalization, Bhagwati contrasted the Mexican Peso crisis with the Asian financial crisis. He argued, while that the Mexican crisis exposed fundamental problems in the Mexican financial system that may have warranted reactions from investors, the same was not true of the Asian crisis. The fundamentals of the Asians were fairly strong in comparison to other nations. While problems such as cronyism existed, these problems were generally previously known to exist and there was nothing in the crisis that suggested they had suddenly become acute.
The problem in Asia in the 1990s, as Bhagwati (2004) sees it was that Asian banks were using short term capital inflows to finance long term domestic loans. When the short term inflows suddenly turned into outflows, there was simply not enough cash (in foreign currency) to cover the outflow even though the long term loans were generally sound. Note that, in such a case, it makes sense for a lender of last resort to loan banks money to cover the short term outflows based on the strength of the long term loans. In fact, in the case of a panic, one can make money doing so (think Old Man Potter backing the bank during the panic in It's A Wonderful Life).
However, unlike the US, where the Federal Reserve can print all the dollars it wants and act as lender of last resort, the central banks of the Asian countries could not do so to the same extent as they print domestic currency, not dollars. So, once their supply of foriegn reserves was expended, central banks and their governments had to beg the dollars they could from the IMF and other countries. More importantly, they had to implement severe macroeconomic measures, notably raising interest rates and selling assets. These measures rippled through their economies undercutting its fundamental strength. Businesses, which carried debt and depended on access to credit to operate, were decimated (and those, formerly sound, long term longs to them were no longer quite so sound). Owners of assets were forced to sell to foreign purchasers at greatly reduced prices.
In general, Bhagwati argues that the gains of financial liberalization, in terms of economic growth, are questionable. Many other countries, such as China, have grown without open capital markets (though this is eerily similar to claims by opponents of trade liberalization). Furthermore, if there are benefits, the results can be achieved by opening markets to foreign direct investment, which is inherently longer term and less mobile in nature, and, therefore, not as susceptible to panics.
In the end, Bhagwati attributes much of the push for unfettered financial flows to interest groups in the developed nations, particularly the financial sector in the US. This sector directly benefits from expansion of global credit markets and exerts great influence on the US government and the IMF. Bhagwati notes that US economists frequently move back and forth between the US financial sector and government positions. This elite network, along with the financial sector lobbying efforts, creates what he calls the Wall Street-Treasury Complex, whose effect describes as follows:.
This powerful network, which may aptly, if loosely, be called the Wall Street-Treasury complex, is unable to look much beyond the interest of Wall Street, which it equates with the good of the world. Thus the IMF has been relentlessly propelled toward embracing the goal of capital account convertibility. The Mexican bailout of 1994 was presented as necessary, which was true. But so too was the flip side, that the Wall Street investors had to be bailed out as well, which was not. Surely other policy instruments, such as a surcharge, could have been deployed simultaneously to punish Wall Street for its mistakes. Even in the current Asian crisis, particularly in South Korea, U.S. banks could all have been forced to the bargaining table, absorbing far larger losses than they did, but they were cushioned by the IMF acting virtually as a lender of first, rather than last, resort.
The last sentence suggests an argument that Bhagwati doesn't explicitly develop, i.e., that the IMF is not a good lender of last resort because of its motivation. The obvious the limiting factor on the IMF serving as lender of last resort is its limited supply of funds (remember that when the Federal Reserve acts as lender of last resort in the US, it theoretically has an infinite supply of dollars). Here, Bhagwati suggests that IMF is biased towards insulating foreign creditors from the downside of the crisis; whereas an ideal lender of last resort would focus on minimizing the crisis in total (especially its long term impact n the economy) and remain neutral with regard to the distribution of losses.
References:
Bhagwati, Jagdish. (1998, May 1). "The Capital Myth: The Difference between Trade in Widgets and Dollars." Foreign Affairs. Retrieved February 4, 2014, from http://www.foreignaffairs.com/articles/54010/jagdish-n-bhagwati/the-capital-myth-the-difference-between-trade-in-widgets-and-dol
Bhagwati, Jagdish. (2004) "Chapter 13: The Perils of Gung-ho International Financial Capitalism." In Defense of Globalization. New York, NY: Oxford University Press.
Monday, February 03, 2014
Applying Selectorate Theory to Lampton's "How China is Ruled"
In the recent issue of Foreign Affairs, David Lampton analyzes the current challenges facing Chinese political leaders. He provides insights that are interesting in their own right we can tease some additional insights if we apply Bueno de Mesquita, Smith, Siverson, and Morrow's (BDM et al., 2003) Selectorate Theory to his analysis.
Lampton provides a concise summary of his general argument as follows:
The fact is that China’s central government operates today in an environment fundamentally different, in three key ways, from the one that existed at the beginning of Deng’s tenure. First, individual Chinese leaders have become progressively weaker in relation to both one another and the rest of society. Second, Chinese society, as well as the economy and the bureaucracy, has fractured, multiplying the number of constituencies China’s leaders must respond to, or at least manage. Third, China’s leadership must now confront a population with more resources, in terms of money, talent, and information, than ever before. (Lampton, 2013)
With regard to the first difference between the Deng period and the current one, Lampton draws on Weber to argue that leaders have three sources of power: tradition, personal qualities (charisma) of the leader, and constitutional/legal norms. In Lampton's view, while Deng benefited from a mix of the Mao tradition and his own charisma, the foundations of legitimacy in China shifted as the selection criteria for leaders began to include age and term limits, performance, and opinion polling in the Communist Party. In his words, this has resulted in the following situation:
China, in other words, has gone from being ruled by strongmen with personal credibility to leaders who are constrained by collective decision-making, term limits and other norms, public opinion, and their own technocratic characters. As one senior Chinese diplomat put it to me in 2002, “Mao and Deng could decide; Jiang and the current leaders must consult.” (Lampton, 2013)
The second change in the Chinese political system that Lampton identifies is the fracturing of the society, economy, and bureaucracy into a larger set of competing interests. This has required the leadership to focus more on maintaining than transforming the system as they try to manage the competition between these interests, as he describes below:
Since Mao, however, China’s society and bureaucracy have fragmented, making it harder for Beijing to make decisions and implement policies. To deal with the challenge, the Chinese government, particularly since Deng, has developed an authoritarian yet responsive system that explicitly balances major geographic, functional, factional, and policy interests through representation at the highest levels of the CCP. Although the pathways for political self-expression remain limited, and elite decision-making opaque, China’s rulers now try to resolve, rather than crush, conflicts among competing interests, suppressing such conflicts only when they perceive them to be especially big threats. (Lampton, 2013)
Now, if we look at these two changes through the lens of Selectorate Theory, we might argue that the second change has largely driven the first one. What Lampton sees as the fracturing of the society, economy, and the bureaucracy might be interpreted as growth of the size of winning coalition (WC) needed to rule in the system. Given that Lampton describes the norms of leader selection as "incomplete, informal, and reversible," we can well imagine a situation in which social, economic, and bureaucratic development has produced the unintended effect of increasing the minimum number of people or interests in the Selectorate (i.e., the Chinese Communist Party or CCP) that a leader needs to include in his winning coalition.
If the WC is growing in size, than we would expect that the essential task of political survival (i.e., the provision of private benefits to members of the WC) would become complex and time consuming for leaders. This would especially be the case if the interests of the members of the WC became more heterogeneous as this would create more conflicts between the private interests of the WCS members and complicate the provision of private benefits to them.
In such a situation, it would not be surprising to see leaders who are more skilled at managing multiple constituencies and resolving conflicts to bubble to the top of the leadership selection process because these are the people who will be best at amassing a WC from among heterogeneous interests within the Selectorate and will be viewed as a credible supplier of private benefits among those interests. Also, in practice, Leaders will need to spend more time devoting themselves to providing benefits and resolving conflicts within the WC. Just as importantly, conflict resolution is more likely to be visible from the outside and the process of providing private benefits will be more notable. Therefore, the norms of selection and the perceptions of the leaders may be driven by changes in the size and characteristics of the WC.
Of course, the third difference between the current political situation and the one faced by Deng remains to be considered. Here, Lampton argues that the people, in the form of individuals and local governments, are gaining in resources, in terms of capital, human capital and information, vis-a-vis the national leaders. This has driven the government to become sensitive to public opinion and active monitor it through opinion polling. So, where, Mao sought to define public opinion and Deng only followed it where it accorded with his view, Lampton describes the current attitude as follows:
Today, in contrast, almost all Chinese leaders openly speak about the importance of public opinion, with the goal being to preempt problems. In August 2013, for instance, the state-run newspaper China Daily reminded readers that the National Development and Reform Commission had issued regulations requiring local officials to conduct risk assessments to determine the likelihood of popular disturbances in reaction to major construction projects and stated that such undertakings should be shut down temporarily if they generated “medium-level” opposition among citizens.(Lampton, 2013)
On the face of it, this concern with public opinion (to the extent that it is genuine) runs counter to the central story of Selectorate Theory. According to the theory, Leaders of nations with small Winning Coalitions will focus on providing private benefits to the members of the WC and generally disregard considerations of public benefit. They certainly will not compromise the provision of private benefits to WC members that one one expect to occur in a major construction project for the sake of people who are not in the WC. In, general, Leaders are not expected to be concerned with public benefits unless they are in a system with a WC so large that providing private benefits to the members of the WC is more expensive or difficult than providing public benefits to the society as a whole. So, unless the concern with public opinion is viewed as symbolic window dressing, it would appear that Chinese leadership is violating one of the rules of the Dictator's Handbook (BDM and Smith, 2011). Rule 5 to be precise.
While this might be the case, there might be something else going on. Consider that, according to Selectorate Theory, the endurance of leaders in Soviet style systems is based not only on having a small WC but also having a large Selectorate (i.e., the party). The size of the Selectorate is important because, even if members of the Selectorate aren't in the WC, they have nonetheless a chance of being in one and, therefore, are more likely to support the system in place. The CCP had a membership of 82.6 million in 2012 and added 17 million members between 2001 and 2012. (China Daily, Nov, 5 2012) While that accounts for only 6% of the country's population, the party has expanded 25% in size since 2001 and thus is including a larger portion of the population that has a shot of being in a WC. Of course, if the WC is growing, that only increases their hopes of being included.
However, the 82.6 million people's shot at being in a WC that will provide them with private benefits if the current system is successfully challenged by the 1.27 billion or so people in China who are not in the CCP. Therefore, one can imagine there being broad support for a rule that constrains the provision of private benefits to members of the WC when it causes noticeable public opposition. Of course, in practice, implementing the rule in a particular case would be problematic as it involves denying a private benefit to a member of the WC who might value receiving that benefit more than promoting the overall system's long term survival (especially if one considers that the delay or cancellation of any one project will make a very small difference in the system's long term prospects). So, there may be as much tension between elements of the CCP involved here as between the CCP and the population.
References:
Bueno de Mesquita, Bruce, Alastair Smith, Randolph Siverson, and James D. Morrow. (2003) The Logic of Political Survival. Cambridge, MA: The MIT Press.
Bueno de Mesquita, Bruce, Alastair Smith. (2011) The Dictator’s Handbook: Why bad Behavior Is Almost Always Good Politics. New York, NY: Public Affairs.
Lampton, David M. How China Is Ruled. (2013, December 16). Foreign Affairs. Retrieved February 3, 2014, from http://www.foreignaffairs.com/articles/140344/david-m-lampton/how-china-is-ruled?nocache=1
Lampton provides a concise summary of his general argument as follows:
The fact is that China’s central government operates today in an environment fundamentally different, in three key ways, from the one that existed at the beginning of Deng’s tenure. First, individual Chinese leaders have become progressively weaker in relation to both one another and the rest of society. Second, Chinese society, as well as the economy and the bureaucracy, has fractured, multiplying the number of constituencies China’s leaders must respond to, or at least manage. Third, China’s leadership must now confront a population with more resources, in terms of money, talent, and information, than ever before. (Lampton, 2013)
With regard to the first difference between the Deng period and the current one, Lampton draws on Weber to argue that leaders have three sources of power: tradition, personal qualities (charisma) of the leader, and constitutional/legal norms. In Lampton's view, while Deng benefited from a mix of the Mao tradition and his own charisma, the foundations of legitimacy in China shifted as the selection criteria for leaders began to include age and term limits, performance, and opinion polling in the Communist Party. In his words, this has resulted in the following situation:
China, in other words, has gone from being ruled by strongmen with personal credibility to leaders who are constrained by collective decision-making, term limits and other norms, public opinion, and their own technocratic characters. As one senior Chinese diplomat put it to me in 2002, “Mao and Deng could decide; Jiang and the current leaders must consult.” (Lampton, 2013)
The second change in the Chinese political system that Lampton identifies is the fracturing of the society, economy, and bureaucracy into a larger set of competing interests. This has required the leadership to focus more on maintaining than transforming the system as they try to manage the competition between these interests, as he describes below:
Since Mao, however, China’s society and bureaucracy have fragmented, making it harder for Beijing to make decisions and implement policies. To deal with the challenge, the Chinese government, particularly since Deng, has developed an authoritarian yet responsive system that explicitly balances major geographic, functional, factional, and policy interests through representation at the highest levels of the CCP. Although the pathways for political self-expression remain limited, and elite decision-making opaque, China’s rulers now try to resolve, rather than crush, conflicts among competing interests, suppressing such conflicts only when they perceive them to be especially big threats. (Lampton, 2013)
Now, if we look at these two changes through the lens of Selectorate Theory, we might argue that the second change has largely driven the first one. What Lampton sees as the fracturing of the society, economy, and the bureaucracy might be interpreted as growth of the size of winning coalition (WC) needed to rule in the system. Given that Lampton describes the norms of leader selection as "incomplete, informal, and reversible," we can well imagine a situation in which social, economic, and bureaucratic development has produced the unintended effect of increasing the minimum number of people or interests in the Selectorate (i.e., the Chinese Communist Party or CCP) that a leader needs to include in his winning coalition.
If the WC is growing in size, than we would expect that the essential task of political survival (i.e., the provision of private benefits to members of the WC) would become complex and time consuming for leaders. This would especially be the case if the interests of the members of the WC became more heterogeneous as this would create more conflicts between the private interests of the WCS members and complicate the provision of private benefits to them.
In such a situation, it would not be surprising to see leaders who are more skilled at managing multiple constituencies and resolving conflicts to bubble to the top of the leadership selection process because these are the people who will be best at amassing a WC from among heterogeneous interests within the Selectorate and will be viewed as a credible supplier of private benefits among those interests. Also, in practice, Leaders will need to spend more time devoting themselves to providing benefits and resolving conflicts within the WC. Just as importantly, conflict resolution is more likely to be visible from the outside and the process of providing private benefits will be more notable. Therefore, the norms of selection and the perceptions of the leaders may be driven by changes in the size and characteristics of the WC.
Of course, the third difference between the current political situation and the one faced by Deng remains to be considered. Here, Lampton argues that the people, in the form of individuals and local governments, are gaining in resources, in terms of capital, human capital and information, vis-a-vis the national leaders. This has driven the government to become sensitive to public opinion and active monitor it through opinion polling. So, where, Mao sought to define public opinion and Deng only followed it where it accorded with his view, Lampton describes the current attitude as follows:
Today, in contrast, almost all Chinese leaders openly speak about the importance of public opinion, with the goal being to preempt problems. In August 2013, for instance, the state-run newspaper China Daily reminded readers that the National Development and Reform Commission had issued regulations requiring local officials to conduct risk assessments to determine the likelihood of popular disturbances in reaction to major construction projects and stated that such undertakings should be shut down temporarily if they generated “medium-level” opposition among citizens.(Lampton, 2013)
On the face of it, this concern with public opinion (to the extent that it is genuine) runs counter to the central story of Selectorate Theory. According to the theory, Leaders of nations with small Winning Coalitions will focus on providing private benefits to the members of the WC and generally disregard considerations of public benefit. They certainly will not compromise the provision of private benefits to WC members that one one expect to occur in a major construction project for the sake of people who are not in the WC. In, general, Leaders are not expected to be concerned with public benefits unless they are in a system with a WC so large that providing private benefits to the members of the WC is more expensive or difficult than providing public benefits to the society as a whole. So, unless the concern with public opinion is viewed as symbolic window dressing, it would appear that Chinese leadership is violating one of the rules of the Dictator's Handbook (BDM and Smith, 2011). Rule 5 to be precise.
While this might be the case, there might be something else going on. Consider that, according to Selectorate Theory, the endurance of leaders in Soviet style systems is based not only on having a small WC but also having a large Selectorate (i.e., the party). The size of the Selectorate is important because, even if members of the Selectorate aren't in the WC, they have nonetheless a chance of being in one and, therefore, are more likely to support the system in place. The CCP had a membership of 82.6 million in 2012 and added 17 million members between 2001 and 2012. (China Daily, Nov, 5 2012) While that accounts for only 6% of the country's population, the party has expanded 25% in size since 2001 and thus is including a larger portion of the population that has a shot of being in a WC. Of course, if the WC is growing, that only increases their hopes of being included.
However, the 82.6 million people's shot at being in a WC that will provide them with private benefits if the current system is successfully challenged by the 1.27 billion or so people in China who are not in the CCP. Therefore, one can imagine there being broad support for a rule that constrains the provision of private benefits to members of the WC when it causes noticeable public opposition. Of course, in practice, implementing the rule in a particular case would be problematic as it involves denying a private benefit to a member of the WC who might value receiving that benefit more than promoting the overall system's long term survival (especially if one considers that the delay or cancellation of any one project will make a very small difference in the system's long term prospects). So, there may be as much tension between elements of the CCP involved here as between the CCP and the population.
References:
Bueno de Mesquita, Bruce, Alastair Smith, Randolph Siverson, and James D. Morrow. (2003) The Logic of Political Survival. Cambridge, MA: The MIT Press.
Bueno de Mesquita, Bruce, Alastair Smith. (2011) The Dictator’s Handbook: Why bad Behavior Is Almost Always Good Politics. New York, NY: Public Affairs.
Lampton, David M. How China Is Ruled. (2013, December 16). Foreign Affairs. Retrieved February 3, 2014, from http://www.foreignaffairs.com/articles/140344/david-m-lampton/how-china-is-ruled?nocache=1
Selectorate Theory
In the Logic of Political Survival, Bruce Bueno de Mesquita, Alastair Smith, Randolph Siverson, and Jim Morrow (hereafter BDM et.al.) (2003) provide a formal model of a
polity to examine how political leaders make policies to ensure their political
survival. Their Selectorate Theory, as it has come to be known, yielded so many interesting results and provided such a rich assortment of insights that BDM and Smith went on to write The Dictators' Handbook: Why Bad Behavior is Almost Always Good Politics in which they informally summarize the model and apply it to an informal analysis of many phenomena.
In the model, the polity consists of three nested and variable
groups as well as national leaders and potential challengers for the
leadership. The actors and groups of
actors are defined in detail below:
- The Leadership: This is the individual or group of individuals that have the authority to raise taxes and spend money, either for private gain or for the general welfare of the polity. In a dictatorship or absolutist monarchy, this might be one person. In other more collective forms of government, it may be a group of people holding various high level position. As a rough approximation for the case of the US, they suggest it might include the President, Speaker of the House and Senate Majority leader. (BDM et. Al., 2003, p. 38-39)
- Challengers: This is the individual or group of individuals that is attempting to depose the incumbent leadership within the “norms” or rules of transition as they exist within the current system. The model assumes that the challenger’s goal is to gain control over policy regarding taxation and spending. The assumption that the challenger is doing so through the norm or rules of the system does not imply that such a transition will be orderly or non-violent as the system’s norms may include coups d’états and executions as accepted means of gaining control. (BDM et. Al., 2003, p 39)
- Residents: These are the all the members of the polity or the population that comprises it. They may or may not be members of the Selectorate discussed below. Those who are not are the disenfranchised in the political system. The proportion of the residents that are included/excluded for the Selectorate provides a means of scaling political systems. (BDM et. Al., 2003 p 39-41)
- Nominal Selectorate (the interchangables): This is the set of Residents who possess characteristics that, by the government’s rules, qualify them to select the leadership. These qualifying characteristics are defined by governments in varying ways across time and polities, and typically have included aspects of personal origin (birthplace, lineage), special proficiency (skills, beliefs, knowledge), wealth, and gender and/or age. (BDM et, al., 2003, p 43). Some characteristics may be naturally occurring or they may be subject to political manipulation (i.e., created, transferred or assigned to people). The ability to participate in the selection of the leadership also constitutes a necessary condition for seeking private benefits distributed by the Leadership. The most important aspect of being part of the Nominal Selectorate is the opportunity to become part of a Winning Coalition, discussed below (BDM, et. al., 2003, p 42). People who are a member of the selectorate but do not have significant influence over the selection of the leader are referred to as interchangeables (BDM and Smith, 2001, p 5)
- Real Selectorate (the influentials): This is the subset of the Nominal Selectorate who actually choose the actually choose the leadership. These people are referred to as the influentials (BDM and Smith, 2001, p 5)
- Winning Coalition (the essentials): This is the subset of the Selectorate that endows the leadership with sufficient political power over the remainder of the Selectorate and the Residents not included in the Selectorate. A Winning Coalition must be of some minimal size to provide a sufficiency of power to the Leadership and what exactly constitutes a winning coalition is idiosyncratic to a political system. In general terms, a Winning Coalition must have at least a majority of the resources used in political competition (be they votes, wealth or armed forces) possessed by the Selectorate. If the relevant resources are evenly distributed across the Selectorate, this will equate to having the support of more than half the Selectorate. However, if the resources are unevenly distributed, the support of a minority of relatively better endowed members will be sufficient. This group of people is referred to as the essentials (BDM and Smith, 2011, p 5)
It is
important to note that the minimum size of the winning coalition is also an
important characteristic of political systems. Democracies require large
winning coalitions, numbering into the millions, while autocracies require much
smaller ones, numbering in the thousands.
Through a
formal game theoretic model of political competition, BDM et al derive five
rules for political survival that are informally summarized in BDM and Smith
(2011):
Rule 1: Keep your
winning coalition as small as possible. A small coalition
allows a leader to rely on very few people to stay in power. Fewer essentials
equals more control and contributes to more discretion over expenditures. (BDM and Smith, 2011, p 17)
Rule 2: Keep your
nominal selectorate as large as possible. Maintain a large
selectorate of interchangeables and you can easily replace any troublemakers in
your coalition, influentials and essential alike. After all, a large selectorate
permits a big supply of substitute supporters to put the essentials on notice
that they should be loyal and well behaved or else face being replaced. (BDM and Smith, 2011, p 17-18)
Rule 3: Control the flow
of revenue. It’s always better for a ruler to
determine who eats than it is to have a larger pie from which the people can
feed themselves. The most effective cash flow for leaders is one that makes
lots of people poor and redistributes money to keep select people– their
supporters – wealthy.
(BDM and Smith, 2011, p 18)
Rule 4: Pay your key
supporters just enough to keep them loyal. Remember, your backers
would rather be you than be
dependent on you. Your big advantage over them is that you know where the money
is and they don’t. Give your coalition just enough so they don’t shop around
for someone to replace you and not a penny more. (BDM and Smith, 2011, p 18)
Rule 5: Don’t take money
out of your supporter’s pockets to make the people’s lives better off.
The flip side of rule 4 is not to be too cheap toward your coalition of
supporters. If you’re good to the people at the expense of your coalition, it
won’t be long before your “friends” will be gunning for you. Effective policy
for the masses doesn’t necessarily produce loyalty among essentials, and it’s
darn expensive to boot.
(BDM and Smith, 2011, p 18)
In addition
to the above rules, BDM at al (2003) find that the Leadership’s choice of
providing private benefits to the winning coalition or public goods to the
country is driven by the size of the winning coalition. Roughly speaking, leaders
can effectively bribe thousands (perhaps tens of thousands) of essentials but
not millions. Therefore, when faced with the need to gain support of a large
winning coalition, as is the case in most democracies, leaders find it
necessary to do so through the provision of public goods or good policy.
References:
Bueno de
Mesquita, Bruce, Alastair Smith, Randolph Siverson, and James D. Morrow. (2003)
The Logic of Political Survival.
Cambridge, MA: The MIT Press.
Bueno de
Mesquita, Bruce, Alastair Smith. (2011) The
Dictator’s Handbook: Why bad Behavior Is Almost Always Good Politics. New
York, NY: Public Affairs.
Sunday, February 02, 2014
The Renminbi and the Role of the Dollar: Greenback vs Redback
The last post talked about currency manipulation and the renminbi, but what about the idea of the renminbi as a challenger to the dollar's role as global reserves currency. In other words, is the redback (as the renminbi is sometimes called) a threat to the greenback's global dominance.
The Economist gave the standard arguments (albeit in the kind of depth somewhat unique to the Economist) one normally hears back in 2011. Specifically, that being the issuer of the world's reserve currency was a boon to the US (often called the exorbitant privilege) and that China was fed up with relying on the dollar. However, it also discussed the traditional counter-argument that being the issuer of the reserve currency is a curse because it puts a nation in the Triffen dilemma. That is, it encourages the issuer to put more money in circulation, which in turn undermines confidence in its currency. (Of course, the Triffen dilemma applied to the Bretton Woods System in which the US had to maintain a fixed exchange rate with gold while everyone else was able to adjust the value of their currency to the dollar, but I'll let that slide.)
Barry Eichenberger laid out the in-depth argument for the demise of the dollar as the reserve currency in "Why the Dollar's Reign Is Near an End" He argues that the US dollar's role as reserve currency is founded on 3 pillars: the depth of US dollar securities in the market, the fact the dollar is the world's safe haven, and the lack of viable alternatives. However, the rise of the Euro and the Yuan will provide rivals for the dollar while economic crises and rising debt in the US will undermine the perception of dollar as a safe haven. This will lead to multiple reserve currencies being adopted instead of reliance upon the dollar alone.
Michael Pettis disagreed with the view that the RMB could play the role of reserve currency. His original blog post was lost when it was hacked by Business Insider summarized his argument. First, unless China starts running a current account deficit, there will be no way for the world to acquire renminbi. Second, people are suspicious of China's financial system which is in need of significant liberalization and reform. Third, major countries such as Russia, India, South Korea, and Vietnam are also suspicious of China for political and security reasons. Finally, Pettis argues that the international trade in RMB is overstated as most of the trade is in the form of swaps between the People's Bank of China (PBoC) and other central banks as opposed to private financial transactions.
Pettis also argued that having the dollar as reserve currency represents an Exorbitant Burden in a Foreign Policy article. He argues that having the dollar as reserve currency contributes to the US current account deficit and that the US would be better off if another reserve currency was in place. Pettis argues that developing the IMF;s Special Drawing Rights (SDRs) into a truly international currency would be the best alternative.
The Economist gave the standard arguments (albeit in the kind of depth somewhat unique to the Economist) one normally hears back in 2011. Specifically, that being the issuer of the world's reserve currency was a boon to the US (often called the exorbitant privilege) and that China was fed up with relying on the dollar. However, it also discussed the traditional counter-argument that being the issuer of the reserve currency is a curse because it puts a nation in the Triffen dilemma. That is, it encourages the issuer to put more money in circulation, which in turn undermines confidence in its currency. (Of course, the Triffen dilemma applied to the Bretton Woods System in which the US had to maintain a fixed exchange rate with gold while everyone else was able to adjust the value of their currency to the dollar, but I'll let that slide.)
Barry Eichenberger laid out the in-depth argument for the demise of the dollar as the reserve currency in "Why the Dollar's Reign Is Near an End" He argues that the US dollar's role as reserve currency is founded on 3 pillars: the depth of US dollar securities in the market, the fact the dollar is the world's safe haven, and the lack of viable alternatives. However, the rise of the Euro and the Yuan will provide rivals for the dollar while economic crises and rising debt in the US will undermine the perception of dollar as a safe haven. This will lead to multiple reserve currencies being adopted instead of reliance upon the dollar alone.
Michael Pettis disagreed with the view that the RMB could play the role of reserve currency. His original blog post was lost when it was hacked by Business Insider summarized his argument. First, unless China starts running a current account deficit, there will be no way for the world to acquire renminbi. Second, people are suspicious of China's financial system which is in need of significant liberalization and reform. Third, major countries such as Russia, India, South Korea, and Vietnam are also suspicious of China for political and security reasons. Finally, Pettis argues that the international trade in RMB is overstated as most of the trade is in the form of swaps between the People's Bank of China (PBoC) and other central banks as opposed to private financial transactions.
Pettis also argued that having the dollar as reserve currency represents an Exorbitant Burden in a Foreign Policy article. He argues that having the dollar as reserve currency contributes to the US current account deficit and that the US would be better off if another reserve currency was in place. Pettis argues that developing the IMF;s Special Drawing Rights (SDRs) into a truly international currency would be the best alternative.
The Renminbi and Charges of Currency Manipulation
However, in 2012, arguments that China was manipulating its currency and costing the US jobs were a central part of Mitt Romney's failed presidential campaign (though, perhaps, far from the cause of his failure). Here are three points of view on this, mostly circa 2012.
The Case Against China: Peter Navarro laid out the argument for China as currency manipulator in China’s Currency Manipulation: A Policy Debate in a 2012 World Affairs article. Navarro makes the claim that:
Most economists estimate the Chinese yuan is grossly undervalued by anywhere from twenty-five to forty percent—and only propagandists like the China Daily and hired guns for China profiteers like Goldman Sachs and Morgan Stanley claim otherwise.
As will be seen below, this claim may be greatly exaggerated or at least out of date by 2012. However, the rapid appreciation of the renminbi vs the dollar since China abandoned its peg in 2005 ( interrupted only by a 2-year plateau during the US recession), suggests that the currency was undervalued for much of the first decade of this century. Navarro argues that this undervaluation had a negative effect on the US economy:
China’s unfair trade practices have indeed taken a very heavy toll on the American economy. Consider that for the second half of the twentieth century, the US gross domestic product grew at a healthy rate of about 3.5 percent annually. Since China joined the WTO in 2001, however, that rate has fallen to an average of only 1.6 percent. While the loss of almost two percentage points of GDP growth a year may not seem like much, it translates into a failure to create two million jobs a year and cumulatively more than twenty million jobs lost to slow growth since 2001. Not coincidentally, that’s almost the exact number of jobs America now needs to get its people fully back to work.
Note, however, that the evidence here is based on a simplistic before and after China joined the WTO comparison and ignores the fact that the decade following China's entry into the WTO included the largest recession in the US since the Great Depression. In fact, if we actually look at the actual Federal Reserve data in the form of the below graph of the annual percent change from one year ago of US real GDP, we see a less clear cut story.
The graph shows that, prior to the 1990s the US economy rode a roller coaster (albeit with a high ride in the 1960s) before enjoying fairly stable growth in the 2.5-5% range during the 90s. Since 2001, things have not been as good but the two recessions in that time have obvious effects. Indeed, the full magnitude of the Great Recession is on full display here as the graph dips lower in 2009 than at any other time.
Note, the US economy got back into the 2.5-5% growth band between the recessions, precisely when China's currency manipulation was at its peak. Unfortunately the economy has achieved growth rates comfortable within that range despite the fact the renminbi has resumed appreciating against the dollar.
The Case Against China Currency Critics: Edward Lazear argues that Chinese 'Currency Manipulation' Is Not the Problem in a 2013 WSJ Op-Ed. [If thwarted by the WSJ's paywall, summaries of Lazear's Op-ed can be found here and here.]
Lazear compares the yuan-dollar exchange rate with China's exports to the US and Europe from 1995 to 2011. He notes that Chinese exports have steadily increased throughout this period except for a downturn during the Great Recession. However, during this period, the renminbi dropped in value as it rode the US dollars depreciation until the 8 to 1 peg was removed in 2005. As noted above, the reminbi has increased in value since then but imports have continued to trend upwards.
More importantly, the trend in exports to Europe does not differ from the trend in exports to the US, indeed they are nearly identical. This holds even during the period in which the exchange rate was pegged at 8 yuan to the dollar and the renminbi was depreciating against the Euro but not against the dollar. In this period, exports to Europe increased by 35% while exports to the US increased by 32%. Lazear argues that the differences in the exchange rate might explain the difference between 35% and 32% growth but the bulk of the growth in both categories is determined by other factors.
Lazear concludes that, while China certainly was manipulating its currency, this manipulation was not the source of its export growth or disappointing job and wage growth in the US.
The Case Against Currency Manipulation, but China Not-So-Much Anymore: In 2012, Joseph Gagnon examined currency manipulation across nations in a policy brief for the Peterson Institute, Combating Widespread Currency Manipulation (PB12-19). Gagnon defines a currency manipulation as follows:
In his brief, Gagnon finds that 20 nations engage in "egregious" currency manipulation in one of four generala categories:
(1) longstanding advanced economies such as Japan and Switzerland;
(2) newly industrialized economies such as Israel, Singapore, and Taiwan;
(3) developing Asian economies such as China, Malaysia, and Thailand; and
(4) oil exporters such as Algeria, Russia, and Saudi Arabia. (Gagnon, 2012, p 2)
Most of this manipulation takes to form of purchases of foreign currency aimed at lowering the value of the home currency in order to run a current account surplus (i.e., a trade surplus). Gagnon estimates that the total effect of these 20 nations may be as larges a $1.5 trillion per year and that this may have pushed the US current account down an average of 4% of US GDP.
Gagnon provides a table showing the nations he identified as the most egregious manipulators, along with several indicators of manipulation. The list below shows these nations rank ordered by the first indicator in Gagnon's table, 2011 Foreign Reserves as % of GDP.
Nation 2011 Foreign Reserves as % of GDP
Libya 271
Hong Kong 121
Algeria 97
Saudi Arabia 94
Singapore 93
Taiwan 83
Thailand 49
Malaysia 48
China 45
Switzerland 44
Bolivia 40
Philippines 32
Israel 31
Angola 28
Korea 27
Russia 25
Denmark 24
Japan 21
Azerbaijan 17
Argentina 9
Source: Gagnon, 2012, Table 1
It is interesting to note the broad range of nations and the large number of Asian nations that show up on it. It should also be pointed out that China, in ninth position, is middle of the pack, between Malaysia and Switzerland. It should also be pointed out that foreign reserves can accumulate over time and reflect past as well as current policy.
While China is in the middle of the pack in the above list (which is scaled to GDP), it stands at the top when the absolute size of foreign reserves are measured. In a blog post, Gagnon provided this ranking of currency manipulators and China stands head and shoulders above everyone else (with only Japan coming close).
However, though China tops the list because of the size of its reserves, Gagnon notes "...although China tops this list, its reserves have been relatively stable over the past 12 months [July 2011-July 2012], suggesting a marked change in its behavior." So, while China may be holding larges reserves of dollars acquired from past manipulation, it is no longer adding much to this pile, which suggests that it has changed its ways. More specifically, that the renminbi had appreciated enough by mid 2011 to approach its equilibrium value.
Indeed, in September 2012 Ganon was joined by C Fred Berstein in an Op-Ed to the Financial Times in which they argued argued for measures against nations practicing currency manipulation but noted that China "...has not been the major perpetrator of late." They identified the major culprits as follows:
Three distinct groups are now involved. First are other Asian countries, including Japan, Singapore, Taiwan, Korea, Hong Kong, Thailand, and Malaysia. Second are major oil exporters including the United Arab Emirates, Russia, Norway, Saudi Arabia, Kuwait, and Algeria. Third are rich countries near to the euro area, most notably Switzerland but also Denmark and Israel.
Note, however, that the evidence here is based on a simplistic before and after China joined the WTO comparison and ignores the fact that the decade following China's entry into the WTO included the largest recession in the US since the Great Depression. In fact, if we actually look at the actual Federal Reserve data in the form of the below graph of the annual percent change from one year ago of US real GDP, we see a less clear cut story.
The graph shows that, prior to the 1990s the US economy rode a roller coaster (albeit with a high ride in the 1960s) before enjoying fairly stable growth in the 2.5-5% range during the 90s. Since 2001, things have not been as good but the two recessions in that time have obvious effects. Indeed, the full magnitude of the Great Recession is on full display here as the graph dips lower in 2009 than at any other time.
Note, the US economy got back into the 2.5-5% growth band between the recessions, precisely when China's currency manipulation was at its peak. Unfortunately the economy has achieved growth rates comfortable within that range despite the fact the renminbi has resumed appreciating against the dollar.
The Case Against China Currency Critics: Edward Lazear argues that Chinese 'Currency Manipulation' Is Not the Problem in a 2013 WSJ Op-Ed. [If thwarted by the WSJ's paywall, summaries of Lazear's Op-ed can be found here and here.]
Lazear compares the yuan-dollar exchange rate with China's exports to the US and Europe from 1995 to 2011. He notes that Chinese exports have steadily increased throughout this period except for a downturn during the Great Recession. However, during this period, the renminbi dropped in value as it rode the US dollars depreciation until the 8 to 1 peg was removed in 2005. As noted above, the reminbi has increased in value since then but imports have continued to trend upwards.
More importantly, the trend in exports to Europe does not differ from the trend in exports to the US, indeed they are nearly identical. This holds even during the period in which the exchange rate was pegged at 8 yuan to the dollar and the renminbi was depreciating against the Euro but not against the dollar. In this period, exports to Europe increased by 35% while exports to the US increased by 32%. Lazear argues that the differences in the exchange rate might explain the difference between 35% and 32% growth but the bulk of the growth in both categories is determined by other factors.
Lazear concludes that, while China certainly was manipulating its currency, this manipulation was not the source of its export growth or disappointing job and wage growth in the US.
The Case Against Currency Manipulation, but China Not-So-Much Anymore: In 2012, Joseph Gagnon examined currency manipulation across nations in a policy brief for the Peterson Institute, Combating Widespread Currency Manipulation (PB12-19). Gagnon defines a currency manipulation as follows:
Currency manipulation occurs when a government
buys or sells foreign currency to push the exchange
rate of its currency away from its equilibrium value or
to prevent the exchange rate from moving toward its
equilibrium value. (Gagnon, 2012, p. 1)
In his brief, Gagnon finds that 20 nations engage in "egregious" currency manipulation in one of four generala categories:
(1) longstanding advanced economies such as Japan and Switzerland;
(2) newly industrialized economies such as Israel, Singapore, and Taiwan;
(3) developing Asian economies such as China, Malaysia, and Thailand; and
(4) oil exporters such as Algeria, Russia, and Saudi Arabia. (Gagnon, 2012, p 2)
Most of this manipulation takes to form of purchases of foreign currency aimed at lowering the value of the home currency in order to run a current account surplus (i.e., a trade surplus). Gagnon estimates that the total effect of these 20 nations may be as larges a $1.5 trillion per year and that this may have pushed the US current account down an average of 4% of US GDP.
Gagnon provides a table showing the nations he identified as the most egregious manipulators, along with several indicators of manipulation. The list below shows these nations rank ordered by the first indicator in Gagnon's table, 2011 Foreign Reserves as % of GDP.
Nation 2011 Foreign Reserves as % of GDP
Libya 271
Hong Kong 121
Algeria 97
Saudi Arabia 94
Singapore 93
Taiwan 83
Thailand 49
Malaysia 48
China 45
Switzerland 44
Bolivia 40
Philippines 32
Israel 31
Angola 28
Korea 27
Russia 25
Denmark 24
Japan 21
Azerbaijan 17
Argentina 9
Source: Gagnon, 2012, Table 1
It is interesting to note the broad range of nations and the large number of Asian nations that show up on it. It should also be pointed out that China, in ninth position, is middle of the pack, between Malaysia and Switzerland. It should also be pointed out that foreign reserves can accumulate over time and reflect past as well as current policy.
While China is in the middle of the pack in the above list (which is scaled to GDP), it stands at the top when the absolute size of foreign reserves are measured. In a blog post, Gagnon provided this ranking of currency manipulators and China stands head and shoulders above everyone else (with only Japan coming close).
However, though China tops the list because of the size of its reserves, Gagnon notes "...although China tops this list, its reserves have been relatively stable over the past 12 months [July 2011-July 2012], suggesting a marked change in its behavior." So, while China may be holding larges reserves of dollars acquired from past manipulation, it is no longer adding much to this pile, which suggests that it has changed its ways. More specifically, that the renminbi had appreciated enough by mid 2011 to approach its equilibrium value.
Indeed, in September 2012 Ganon was joined by C Fred Berstein in an Op-Ed to the Financial Times in which they argued argued for measures against nations practicing currency manipulation but noted that China "...has not been the major perpetrator of late." They identified the major culprits as follows:
Three distinct groups are now involved. First are other Asian countries, including Japan, Singapore, Taiwan, Korea, Hong Kong, Thailand, and Malaysia. Second are major oil exporters including the United Arab Emirates, Russia, Norway, Saudi Arabia, Kuwait, and Algeria. Third are rich countries near to the euro area, most notably Switzerland but also Denmark and Israel.
So, if the US were to let nationality blind currency manipulation seeking missiles, they would by pass China for a mixed bag of nations, which would include many staunch allies and trading partners.
Saturday, February 01, 2014
"World Energy Outlook" Report and "Energy Outlook" on Potential US Crude Exports
- By 2035, the US will be self sufficient in energy, China will be the world's largest importer of oil and India will be the largest importer of coal.
- Though the current gaps will narrow, large regional differences in natural gas prices will remain. This will drive differing levels of economic growth.
- The innovations of ultra-deep underwater drilling and of fracking to extract Light Tight Oil (LTO) from shale has significantly increased the amount of oil that can be produced but demand is expected to grow more. IEA predicts a price (in 2012 dollars) of $128/barrel in 2035.
- Despite growth of non-OPEC oil production, oil production will remain centered in the Middle East, especially after the mid-2020s.
- Renewable energy sources will account for half the increase in power generation to 2035.
- Carbon emissions will continue to grow above international target levels.
So, while somethings are expected to change (the US becoming a net producer and China becoming the largest importer), somethings are not (the price of oil trending up and the Middle East dominating production).
BTW- If you haven't seen a graph of US oil production lately, you need to see this one provided by Mark Perry. The rise in US oil production since 2010 is startling and has reversed all the declines since 1988.
BTW- If you haven't seen a graph of US oil production lately, you need to see this one provided by Mark Perry. The rise in US oil production since 2010 is startling and has reversed all the declines since 1988.
Energy Outlook on US Export Ban: With the US now the world's largest producer of oil and expected to eventually produce more crude than it uses, the question arises of whether the US should export crude oil. This would not be much of a question (but rather one deserving a "D'uh!" response) if the US did not have a statutory ban on the export of US crude oil dating back to the days (hysteria) of the Arab Oil Embargo.
Geoffrey Styles discusses the pros and cons of US crude oil exports on his Energy Outlook blog (not to be confused with the Energy Outlook Report). In Styles view, the argument is dominated by considerations of crude oil quality (Light Tight Oil that the US will be producing in abundance is not ideal for US refineries) and US domestic economic considerations (particularly producing the lowest possible domestic price for oil based fuel).
As far as quality is concerned, the quality of LTO is actually too good for most US refineries which have complex machinery designed to refine lower quality oil (crude from Canada's tar sands comes to mind). LTO is much better suited to less complex refineries, such as those found in foreign countries. Therefore, producers could make $5-10 more per barrel selling it outside the US. Sending LTO overseas would encourage refineries to continue refining the lower quality crude (which appears to represent a US competitive advantage in the industry) and exporting petroleum products (which even today represent on of the US' top 10 exports).
Styles doesn't seem enthused about the con arguments which center on hopes of lowering the domestic price of oil based fuels and notions of energy security. Both arguments are undercut by the global nature of oil and petroleum products. Indeed, it seems likely that, even if export restrictions on crude oil exports lead to lower crude oil prices in the US, the export of gasoline, diesel, and heating oil would prevent a decrease in consumer fuels prices. In such a case, the crude export ban would simply lower the profits of LTO producers, and increase profits of refiners while at the same time producing less value added in the US economy than if there was no ban.
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