Version Control

This is a nerdy post, relevant only for empirical researchers in social sciences. It may also be relevant for those whose job involves the creation of tons of computer files to finish one project, though.

Matthew Gentzkow and Jesse M. Shapiro of Chicago Booth advocate the use of version control in empirical research of social sciences (See chapter 3 of their writing entitled "Code and Data for the Social Sciences: A Practitioner’s Guide").

If you are new to the idea of version control, watch a series of videos from Software Carpentry.

The basic idea of Gentzkow and Shapiro is that social science empirical researchers should think of writing data analysis scripts as developing software to be released to the public. We need to allow other researchers to replicate our empirical findings. For this purpose, we should make public all the codes and datasets once you publish the paper. It's often the case, however, that by the time you publish the paper, your computer directories are cluttered with many files unnecessary to produce the final results. And cleaning them up often ends up the inability of replicating the final results that you have obtained for the paper to be published. Version control can avoid such a problem.

However, it seems to me that the main benefit of version control is something else: to track the evolution of your thoughts on each empirical research project.

We empirical researchers often face a situation like this:

"Well, I need to analyze this particular thing. I think I did it a few months ago. Which files did I write for this purpose? I cannot find them in my computer."

So you have to start from scratch. A massive waste of time.

The branching function of version control (a great illustration can be found on section 3.4 of Git Pro, written by Scott Chacon) helps us avoid this problem. Every time you try out a new way of analyzing the data, create a new branch (call it the test branch). Within the test branch, keep developing your code. If it turns out to be a bad idea, you can stop working on the test branch and go back to the "master" branch. This way, all the new files you wrote for the failed idea disappear from your working directory. All the clutters are cleaned away. However, these files are preserved behind the curtain. If you later find the failed idea to be actually a good one, you can recover all the files you created in the test branch. Then, you can merge all these files in the test branch with those in the master branch very easily.

There are several systems of version control out there. Git appears to be the best one for branching. (And this article confirms my impression.) However, Git itself is a Unix-based software. Its user interface is not particularly friendly unless you are  a computer programmer.

Among a wide range of visualization software for Git (see the partial list provided by the Git official website), I find Gitbox the most intuitive. It's like an iPhone. Without reading a manual, you can use it. It runs on Mac OS. For Windows, I don't know which one is the best.

The only problem with Gitbox is that it does not visualize branches. Perhaps it is a good idea to also use another graphical interface software for the purpose of visualizing branches only. But it seems to me that none of the available software is very good at visualizing branches.

There is one issue with Git per se. It's a "distributed" version control system. That is, you keep all the files in your local computer and, whenever appropriate, sync them with a remote server (a bit like Evernote). And all the previous versions of each file will be stored in your local computer. This is fine if you only write ascii files. It's not fine if you "version-control" binary files such as data and images. If you use Git, therefore, it's a good idea to version-control those scripts to run statistical software only. Data can be reproduced by running those "tracked" scripts each time.

As opposed to the distributed system, there is also a centralized version control system (such as Subversion), which keeps track of file histories on a remote server. (See this article for the comparison of centralized and distributed.) The drawback of the centralized version control is that branching takes time (because each time you create a new branch, you need to download every file from the remote server). If the main benefit of version control is branching, then the distributed system appears to be the way to go.

Another merit of using version control is to make collaboration easy. It's an effective tool to avoid different people edit different parts of the project, ending up lots of conflicts that cannot immediately be resolved. For collaborative use of version control, however, your coauthors also know about version control (which is totally new to anyone in social science) and agree on when to create a new branch and when to "commit" your works. (To commit means to record all the file changes you have made so that they can be tracked in the future.) Which doesn't seem to be easy.

I'm still learning about version control. One thing that I have to figure out is to use Dropbox for version control. Freshmob and Sam Doidge suggest how to do it.

Survival analysis

If you are a Stata user with lots of experiences of conducting statistical and econometric analysis but have never learned survival analysis before, An Introduction to Survival Analysis Using Stata, written by Mario A. Cleves, William W. Gould, and Roberto G. Gutierrez is the best way to go through a crash course of survival analysis on your own. I've never read any textbook of statistics or econometrics as easy to follow and practical as this one.

Economics changes the world

An example of how economics (more specifically, behavioral economics) changes the world can be found at a gym in Boston. (HT: Greg Mankiw)

A useful tool for those academics who use Mac OS X

These days, all the published academic papers are assigned the DOI identifier. If you type this number after "http://dx.doi.org/" in your browser address bar, you can directly access to the webpage from which you can download the paper.

It's annoying that you need to type "http://dx.doi.org/" every time, however. If you are an Apple user, there is an excellent solution. Check this out.

Icelandic volcano ash

Academics in Europe are also victims of Icelandic volcano ash. Our workplace was supposed to be hosting a couple of leading economists from the US from today until early next week, but they canceled the visit to Stockholm. My colleague visiting from Italy told me his home university has had lots of cancellation of seminar talks as speakers cannot fly to Italy. Another colleague is currently stranded in East Asia where he presented his research.

Inviting researchers from universities abroad is an essential part of academic life, to keep up with the latest advances in research. The volcano in Iceland interrupts us from doing this.

Mankiw's advice for choosing a graduate program

5. Is the location of the school a fun place to live?  Grad school is a long haul, typically 4 to 6 years, which is a significant fraction of your life.  Being a PhD student is hard work, but it should not be a miserable existence.

6. Is the university overall a good place?  It is always more fun being part of a great institution.  Even if the economics department is perfect, if it is an island in a sea of mediocrity, being there will be less satisfying.

Quoted from Greg Mankiw's Blog (March 14, 2010)

What is an interesting paper in economics?

According to Steve Levitt, it is a paper that
A) teaches some important facts,
B) has a clever idea,
C) is believable, and
D) makes the world a better place.

Quantile Regression

Caution: If you are not an economist (or a social scientist of quantitative type), please skip this post.

Read Deaton (1997) (pages 80-83) to review the merit of running quantile regression.

1. Uncover the heteroskedasticity in the error term.

2. Figure out the shape of the conditional distribution (such as income conditional on age).

3. Obtain a more efficient estimator than OLS when the error term does not follow the normal distribution.

There is a concise survey of quantile regression in economics: Roger Koenker and Kevin F. Hallock (2001).

For an instrumental variables estimation of quantile regression, see Chernozhukov and Hansen (2005). For a method to estimate the the impact of a regressor on the unconditional distribution of the dependent variable, see Firpo, Fortin, and Lemieux (2007).

Day of an Assistant Professor (51)

Work on the climate change project with my colleagues.

Attend a seminar talk by Peter Nilsson, who finds that those Swedes born to young women during a temporary policy-driven increase in alcohol availability back in 1967 drop out of school more likely and earn less today. His careful analysis rules out many competing hypotheses, suggesting that the exposure to alcohol in utero negatively affects the cognitive skill. Check out his paper if interested.

Continue working on the the climate change project with my colleagues until late in the evening.

A source of great research ideas in economics

I've decided to get this blog back in operation. But each post will be brief.

Reading Chris Blattman's blog for the first time in weeks reminds me of an important tip for applied economists. Hal Varian says, "Look for ideas in the world, not in the journals." Ray Fisman says, "I always tell graduate students that if they want innovative thesis ideas, to read the newspaper, not the economics literature. ... You usually don’t get exciting new research ideas while reading Econometrica."

I almost forgot this important tip. At least, when you think about building a model, the kind of assumptions you want to make should be what you have learned from world events, not from academic papers in economics.

And this reminder seems to have an immediate impact on my research today.

How to Write a Press Release of Your Empirical Economics Research

Based on my analysis of a successful example of RES Media Briefings. (Her research was featured in many major UK newspapers.)

1. The first paragraph begins with a general sentence on the main finding of the research, followed by another sentence repeating the same finding but in a more specific way. The first paragraph must be self-contained: "if you took away all the paragraphs except the first, the press release should still make sense." (Romesh Vaitilingam, RES Media Consultant)

2. The second paragraph states additional important findings.

3. The third paragraph introduces a bit of details on the data used (e.g. what survey is used, who answers the survey, when the survey is conducted, how many respondents the survey obtain) and what you actually investigate. But do not describe these too precisely. Keep the paragraph short.

4. Then restate the main finding with details including the magnitude of the effect, for whom the effect is larger, etc.

5. Restate the additional important findings mentioned in the second paragraph. Introduce some less important (but still interesting) findings.

6. Mention some theoretical arguments explaining the results, if any.

7. Mention the methodological innovation (ie. identification strategy) in an accessible way.

8. Conclude with a couple of policy implications of your findings.

Also see Mankiw's writing guideline.

Mankiw's Advice for New Junior Faculty

I learn that Greg Mankiw, probably the most popular economist blogger, advises new assistant professors NOT to start a blog:

Avoid activities that will distract you from research. Whatever you do, do not start a blog. That will only establish your lack of seriousness as a scholar. ("Advice For New Junior Faculty," Feb 24, 2007)

What if a new assistant professor has already started a blog?



I know, I know this is a stupid question.

So the bottom line is ...




Econoclasm's days are numbered (as my days in London are).

On the Job Market

Now I'm officially on the job market* this academic year (see this).

*If you want to know what the academic job market for economics PhD students is like, have a look at Cawley (2004) and House, Weir, and Fafchamps (2002).

This means I'm going to be (and I have already been) ridiculously busy in the next several months, perhaps until next March.

Therefore, I won't be able to update this blog until I get a job or until I decide to challenge again next year.

Having said that, I have kept, and I will keep, writing down what happens to me everyday, because, to the best of my knowledge, none of economics PhD job market candidates in the past have made public their personal experience of academic job hunting in detail, which I believe creates inefficiency every year in terms of the time allocation decision faced by job market candidates. But I don't make it public at this moment as it takes time to edit my writing and as I don't know what can be public and what cannot until the whole process is over.

Anyway, if you visit this blog from time to time, please stop doing it at least until next March. I won't update this blog. Until then, wish me luck.

Tim's advice

Meeting with Tim at his BOE office.

He starts telling me about the procedural stuff on the job market process: where to apply, how to post references, booking a hotel room in Chicago (where preliminary interviews are going to be held) NOW, etc.

I ask him why he thinks my paper is good enough to be on the job market. I don't think so because findings in my paper are not convincing enough. I cannot rule out the possibility that infant mortality drops before democratization.

But Tim says, "What the market looks for is a person who investigates an issue intelligently. You don't need a news-headline result." Then he cites two examples. One is his own work on property rights in Ghana. This paper is celebrated not because of his result (he couldn't find a positive effect of property rights on investment in the end), but due to the fact that he thinks hard about how property rights affect investment and provides a framework to analyze it (so that other researchers can use it). Another example is Angus Deaton's work on estimating demand functions. It ends up finding that the linear demand function does not work with data. But his work is well-respected because of his invention of how to estimate demand functions.

This is something all the PhD students should know.

He advises me to get the job market paper ready by 15th-20th November. The formal package of application isn't very important. For example, some top school does not open it. They contact job placement officers at each school and ask for sending the job application packet of the candidates they are interested in. This will happen after Thanksgiving (Last Thursday of November).

In terms of where to apply, he says, "A good place to be an assistant professor is those with lots of other junior faculty members with similar interest. So you can collaborate with them. Senior professors are important in terms of giving good advice. But nothing more than that."

The final piece of advice: try to book a seminar presentation with different audience (ie. outside LSE).

Modernism and Economics

To the best of my knowledge, nobody has ever tried to associate modernism with economics. When you talk about modernism, it's usually about architecture and furniture.

Visiting V&A yesterday was not just to see the Jameel Gallery but also not to miss its Modernism exhibition (which ended today - you can download the panel text that succinctly explains the evolution and different aspects of modernism).

It was educational in many ways. I understand why buildings in socialist countries are extremely modernist (ie. made of concrete and purely geometric) - the origin of modernism is intrinsically linked with socialism. I understand what modernism did to Europe is what aid agencies try to do to developing countries today - allowing ordinary people to enjoy hygienic, healthy life. The chair invented by Dutch architect Mart Stam - the two-leg cantilever chair - must have been an inspiration for the iconic Panton Chair, designed by Verner Panton in the late 1960s.

The concept underlying deep in modernism is an extreme distrust in anything human. This is well reflected in Oskar Schlemmer's dance The Triadic Ballet. Dancers in this ballet wear geometrically-shaped costumes (like this) which deprive the wearer's body of freedom to move. Even though this is a ballet, the variety of body movement is severely restricted - one of them simply keeps jumping and that is. This kind of extremism in modernism created a reaction such as Chaplin's Modern Times.

So the exhibition helped me synthesize different bits and bits of my knowledge.

Then I came to think that perhaps the general equilibrium theory (or so-called the Invisible Hand) and macroeconomic theory before the Lucas Critique are a manifestation of modernism in economics. The fundamental idea of the general equilibrium theory is that even if everyone behaves selfishly, the market disseminates information on everyone else's behaviour through change in prices of goods, leading to the efficient allocation of resources. Macroeconomics before the Lucas Critique saw a macroeconomy as a machine - that's why William Phillips created this to demonstrate the circular flow of income in an economy. Yes, it's machine - one of the keywords representing modernism. This view on macroeconomics certainly led to the idea of central planning economy. If it's a machine, the government can run it. (See this article appearing in The Economist a couple of weeks ago for the evolution of macroeconomics during the last century.)

But, as we now all know, this is too simplistic a view on economics. The Lucas Critique along with the rise of game theory in economics has overcome the deficiency of "modernism in economics".

Some people critical of economics still think that economics is a manifestation of modernism. That's no longer the case. Such critics can be said to be part of the anti-modernism camp - which has long been out of date.

Gary Becker at Lunch with the FT

This weekend's FT magazine features Nobel laureate economist Gary Becker in its "Lunch with the FT" section. Tim Harford, probably one of the best non-economist columnists (or the one and only?) understanding economics well, is a host.

There are several interesting episodes in this article.

... 40 years ago, when [Gary Becker] was running late to examine a doctoral student[,] [w]ith no time to find a free space, he quickly weighed the cost of paying for parking against the risks of being fined for parking illegally. By the time he arrived at the examination, the then-unfashionable idea that criminals would respond to the risks and costs of punishment was taking shape in his mind. The unfortunate student was immediately asked to discuss.

Frank Knight, a founder of the so-called Chicago school of economics, persuaded a journal editor not to publish Becker's early paper on the incentives behind how democracies reach decisions.

Becker's PhD thesis was on discrimination - how to measure it and what effects it might have on the wealth of both the discriminators and their victims. It was thought to be no fit subject for an economist, and the Chicago faculty persuaded a sociologist with little interest in Becker to oversee his work. Becker later struggled to publish his book, The Economics of Discrimination.

Before he was 30, Becker presented to the American Economic Association his then- new idea of "human capital" (that people would invest in their own education as they might invest in shares, mindful of the rate of return). He recalls that the response was "absolutely outraged".

"There was a sea change. I began to notice it in the 1970s and 1980s. A lot of the younger people coming out of Harvard, MIT and Stanford were very interested in what I was doing, even though their faculty were mainly - not entirely - opposed to the sort of stuff I was doing."

Finally, this is probably why I like Tim Harford:

... non-economists accuse him of reducing emotional decisions to monetary ones. I suggest to him that this is a straightforward misunderstanding and most people have not realised that economics is not the study of money. "You're absolutely right[," says Becker.]

Tokyo 2006 Interlude 1: A development economics conference in Tokyo without Japanese scholars

I'm not sure if this is all right to make public. But I guess the blame should go to Japanese bureaucrats most of whom probably don't bother reading a blog in English. So let it go.

Part of the reason I went back to Tokyo this time was to attend an academic conference held in Tokyo on 1st and 2nd April 2006 - "Institutional Development, Market Integration and Growth" organized by EBRD with CEPR and BREAD. In case you are not familiar with these three acronyms, EBRD is an international organization that lends money at an interest rate lower than the market one for economic and social development in former socialist countries in Europe and Central Asia - in other words, the East European version of the World Bank. CEPR is a London-based research network of leading European economists - an European equivalent (to my understanding) of NBER in the United States. BREAD, probably the least known among the three, is also a research network of leading development economists - anyone interested in development economics keeps an eye on what BREAD is doing.

A weird thing was that it was when the deadline for paper submission had passed that development economists based in Tokyo learned about this conference. This sounded like all those leading development economists in BREAD ignore Japanese development economists.

I got upset by this as I knew several Japanese development economists. Fortunately, I also know Tim, the President of BREAD. So I talked to him about this, and he quickly agreed to invite Tokyo-based development economists to the conference and told me to make a list of them.

So I made a list with help from those in Tokyo and sent it to the conference organizer at EBRD. Of course, I included my own name in the list. :) This prompted me to go to Tokyo.

Anyway, what I learned from this was that it wasn't that BREAD ignored Japanese researchers, as it's clear from Tim's quick response. What mattered seem to be two things - the lack of connection among Japanese development economists with leading development economists in the United States (and at the LSE) and the probable laziness of Japanese bureaucrats at the Ministry of Finance.

The first thing is an unfortunate truth - no Japanese development economist has published papers in the leading academic journals of economics in the past two decades. No one, after getting a PhD in economics, has got a tenure position at the leading universities in North America and Europe. (I'm not talking about all the Japanese economists here - there are Japanese professors of economics with tenure at leading universities in the U.S. But none of them are development economists.) This has a side-effect, by the way - any Japanese youngsters interested in development economics find it quite difficult to get accepted at the PhD program in the top 10 economics departments in the United States (except for University of Chicago). This is because what is necessary for getting into top 10 universities is at least one recommendation letter from a well-known economist.

But this disadvantage could have been overcome if information on the conference had flown from the Ministry of Finance in Japan, which funded this conference (that's why this conference was held in Tokyo), to development economists in Tokyo. Weirdly enough, this didn't happen.

The following is my speculation. I'm not sure if this is true. But basically, Japanese development economists have connection with officials in the Ministry of Foreign Affairs (MOFA). If it was the MOFA that funded the conference, I suspect this wouldn't have happened. But officials at the Ministry of Finance only have connections with macroeconomists and public or financial economists. This is understandable because the Ministry of Finance has nothing to do with development assistance and hence development economics.

Nevertheless, the Japanese counterpart for international development assistance agencies such as the EBRD is usually from the Ministry of Finance just because - I suspect - it has something to do with money. Japanese official development assistance has long been controlled by as many as four different ministries - the Ministries of Finance, Foreign Affairs, International Trade and Industry (now renamed as Ministry of Economy, Trade, and Industry), and the Economic Planning Agency (now absorbed into the Cabinet Office). There is no independent agency in charge like the USAID. It is well-known (at least in Japan) that Japanese bureaucrats don't cooperate across different ministries - information doesn't flow across ministries and they basically fight each other about the area of issues in charge.

So the story should have been like this: the EBRD, which wanted to have a chance to absorb the knowledge accumulated in development economics - that's what its Chief Economist Erik Berglof told us at the end of the conference - looked for the funding source and approached the Japanese government. The counterpart in the Ministry of Finance in Japan said yes on condition that the conference must be held in Tokyo. But those at the Ministry of Finance didn't know any development economist in Japan and didn't even try to ask someone in the Ministry of Foreign Affairs for help.

Or maybe those bureaucrats didn't bother doing something good to economists in Japan. Economists are generally not respected at all in Japan. Unlike the United States or quite a few developing countries, economists rarely get an official position in the government. Something equivalent to the appointment of Ben Bernanke as Fed Chairman is unthinkable in Japan. If you get a PhD in economics, you won't find any job in the public sector in Japan.

Correct me if you're one of those Japanese bureaucrats who were in charge of the conference and if my speculation is wrong.

Economics of Terrorism

On 22nd, 23rd, and 24th February, Alan Krueger, known to economists as a leading labour economist coming up with innovative (and sometimes controversial) empirical research strategies or known to the general public as a New York Times columnist (the list of his columns), came to LSE and gave this year's Lionel Robbins Memorial Lectures. The topic was - lo and behold - terrorism.

Professor Krueger began his lecture by explaining why economics can investigate terrorism. His answer: it's an application of occupational choice theory. :)

The recurring theme of the three-day lecture series was that poverty DOES NOT matter to terrorism. After the 9/11, the world's political figures all say that one of the important strategies to combat international terrorism is to tackle poverty. But there is NO evidence for supporting such a claim.

The first lecture focuses on micro evidence for causes of terrorism. First, public opinion polls conducted in Islamic countries suggest that poor people are just as likely to justify terrorism as rich people are. If anything, MORE educated people tend to support terrorist acts. Surveys of actual terrorists reveal that they are richer and more educated than the general public, except for the IRA in which terrorists were poor and uneducated. Prof. Krueger provides possible explanations for this anomaly: for Northern Ireland, rich people could leave for the United States easily. Also the Northern Ireland case is more like a civil war, for which recent economic analysis shows that poverty matters.

A possible theoretical explanation for why richer and more educated people become terrorists is as follows. From the supply side, well-off people are drawn to extreme views because information acquisition cost is low. Poor people are unable to learn anything. From the demand side, a terrorist group wants to recruit smart people because it requires high-skilled labour to conduct terrorism and the cost of failure is substantial (if members are arrested, the group as a whole will not survive).

It's not that lack of education matters. It is the content of education that matters.

The second lecture focuses on macro evidence for causes of terrorism. Using the US government data (the reliability of which, though, is severely limited as pointed out in this New York Times column in 2004), the countries of origin of international terrorism are by no means poor while the countries of target tend to be rich. What's correlated with countries of origin is the lack of civil liberty. Investigating nationalities of foreign insurgents in Iraq captured during April to October 2005 yields similar results. They are not coming from poor countries but from countries without civil rights.

The last lecture then focuses on consequences of terrorism. There are two views on economic consequences of terrorism: terrorism having a large effect versus terrorism having a small effect. Evidence seems to suggest that terrorism has a significant impact on the economy if it is repeated for a long period while it has a negligible effect if it is temporary. Abadie and Gardeazabal (2003) convincingly show that terrorism in the Basque region of Spain reduced the region's GDP by 10 percent. Another study (I forgot the author's name - if you know this study, let me know), on the other hand, shows that terrorist attacks against listed companies in the U.S. during 1975 to 2002 (excluding the 9/11 as an attack against airline companies) reduced the stock values of targeted companies just by 0.064 percent of the US GDP per year.

I couldn't follow the lecture part on psychological consequence of terrorism...

If you're interested, here's the list of papers on which the lectures were based upon (on Prof. Krueger's website).

Who's an "engineer" in the economic policy sphere?

Today's EOPP Happy Hour was really enlightening. (For those who do not know what EOPP is, EOPP is a research group consisting of professors and PhD students of economics at LSE interested (mainly) in development economics and political economy.)

The topic was "What defines economics?" But the discussion flew into the issue of the relationship of economics with policy-makers.

We had Professor Paul Gertler from UC Berkeley as a guest. And he made a couple of revealing remarks.

In addition to academic works, he's been doing policy advice works in developing countries like Mexico, Argentina, Uganda, Kenya, etc. When he talked to politicians in these countries about what development policy should be undertaken, their first response was

"Does it get me into trouble?"

When he said no, then the next response was

"Does it make me look smart?"

When he said yes, then the third response was

"Does it make the public better off?"

He also told us that the reason for why conditional cash transfer schemes (CCTs) like Oportunidades (formerly known as PROGRESA) in Mexico and Bolsa Familia in Brazil, where poor households receive cash from the goverment conditional upon sending kids to school etc., is more acceptable for policy-makers than, say, simply providing education to all kids for free. The empirical evidence shows that CCTs are by no means more cost-efficient. But politicians love it because parents will vote for them if they implement CCTs (parents get cash!). Providing free education, on the other hand, does not directly benefit those with voting rights.

Then the following discussion led us to the idea that there needs to be "engineers" in the economic policy sphere, a metaphor suggested by Tan. Engineers are those who know natural science and apply it to real situations. Likewise, we need someone who knows economics and knows how to implement it to reality.

The following is the point made by Professor Mark Schankerman. Economists are good at finding WHAT the efficient outcome is. A good example is free trade. But economists are bad at finding HOW the efficient outcome can be achieved. That's why politicians often don't like the free trade policy, for example. In the process of implementing free trade, there will be those who lose from free trade. Politicans cannot ignore such people. Finding what the efficient policy is is like what scientists do in natural science. But finding how it is achieved in reality is a different job. In the case of natural science, engineers undertake such a job. What about social science?

Who can be an "engineer" in the economic policy sphere? Time was over at this point. I wonder if this is a journalist who understands economics well. Or maybe this is what political economists or political scientists (the distinction is very blurred these days) are all about.

The Virtue of Economics

Here's why I love economics.

During the last month, I was trying to explain the difference in agricultural policies between East Asian and Sub-Sahara African dictators: East Asians have promoted agricultural growth while Africans have screwed it up. We have seen this difference despite their similarities in terms of per capita income in the early 1960s, the political trajectory until the early 1990s (both regions were ruled by more or less non-democratic governments), and the motivation to promote industrial development on the part of the government.

My intuitive reasoning was this: a non-democratic government faces a trade-off between maximizing tax revenues and preventing citizens from undertaking insurgencies. Taxing both agricultural and non-agricultural sectors in a similar fashion allows the government to collect as large tax revenues as possible. On the other hand, this leads to citizens in the agricultural sector identifying themselves with those in the non-agricultural sector, and vice versa, in their relationship with the government. Therefore, citizens as a whole have a high incentive to threaten the government with insurgencies in order to demand less taxes.

Taxing two sectors in a different way, on the other hand, certainly reduces the amount of tax revenues but reduces the insurgency incentives for citizens as well. This is because citizens in the less heavily taxed sector do not identify themselves with those in the more heavily taxed sector, and therefore do not cooperate with them if heavily taxed citizens decide to take up arms against the government. This makes an insurgency more costly for the heavily taxed citizens. If the government follows this strategy, it wants to tax agriculture more heavily because taxable incomes are larger in the agricultural sector, at least, in the early stage of economic development (as was the case in the early 1960s for both East Asia and Sub-Sahara Africa).

The differential taxation is more desirable for the government if the loss of tax revenues due to this tax strategy is small. This is the case if there is a huge difference in taxable incomes between the two sectors. In many African countries, agriculture provides far more taxable incomes than non-agriculture as soil and climate conditions allow them to produce export cash crops such as cocoa and coffee. This leads to African dictators severely taxing agriculture while favouring industries. In East Asia, however, agriculture does not yield particularly high incomes relative to the other sector in the economy. This makes East Asian dictators to treat both agriculture and non-agriculture in a similar way (ie. promoting productivity growth by not destroying production incentives due to heavy taxation).

That was my speculation. Based on this idea, I worked on building a model showing this logic in a mathematically rigorous way. It turned out, however, that the above reasoning had a flaw in it. A mathematical model allowed me to realize that if agriculture is far more profitable than non-agriculture, then citizens in the non-agricultural sector are never willing to oust the government even if they are taxed as heavily as those in agriculture. This is because their gain from toppling the government (the amount of incomes taxed away) is small (their taxable income is small by assumption) while the cost of insurgency is independent of the size of taxable incomes. In this situation, therefore, only citizens in the agricultural sector have an incentive for insurgencies. Removing the tax burdens on non-agricultural citizens does not weaken insurgency incentives for agricultural citizens (they need to oust the government on their own anyway), only to reduce the amount of tax revenues. Therefore, the government never chooses the differential taxation as its optimal policy.

I couldn't have noticed this logical flaw if I hadn't tried to build a mathematical model. Your intuition can tell a lie while mathematics never does. This is why I love the way economists engage in theoretical analysis.

This love affair does not mean that I make progress in my research, though.