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plata o plomo

Summary:
SIlver or lead was something Pablo Escobar liked to say. It means do what I want and I will give you money (plata) if you don’t I will use lead to kill someone close to you. I just noticed that it is the Spanish translation of a debate the US should have about the apparent failure of the Great Society (Johnson;s expansion of the New Deal). In the conventional analysis the hero is Clinton (if one is a moderate Democrat) Reagan (as always, if one is a Republican). The story is that over generous social welfare caused people to treat the safety net as a hammock with very serious long-term consequences. The evidence for this is the dramatic increase in violent crime, drug abuse and teenage pregnancy which began in the 60s and continued until around

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SIlver or lead was something Pablo Escobar liked to say. It means do what I want and I will give you money (plata) if you don’t I will use lead to kill someone close to you. I just noticed that it is the Spanish translation of a debate the US should have about the apparent failure of the Great Society (Johnson;s expansion of the New Deal).

In the conventional analysis the hero is Clinton (if one is a moderate Democrat) Reagan (as always, if one is a Republican). The story is that over generous social welfare caused people to treat the safety net as a hammock with very serious long-term consequences. The evidence for this is the dramatic increase in violent crime, drug abuse and teenage pregnancy which began in the 60s and continued until around 1992 (note that the raw data makes trouble for Republicans, as usual given the extreme liberal bias of facts). In this story, the problem was plata — too much money given to people in trouble reducing incentives to avoid getting in trouble. This hypothesis is undermined by modern econometrics (natural experiments) which suggests long term benefits of SNAP (aka food stamps and Medicaid.

Another hypsthesis (tirelessly promoted by Kevin Drum) is that the problen was lead — in particular lead 20 years earlier. The claim is that exposure to lead in very early childhood causes problems with judgement and self control in the always problematic late teens and early 20s. Sorry too many links for the lazy (seriously lead poisoned) Robert Waldmann to look up.

The source of the new lead was leaded gasoline and the hypothesis fits the fact that the trouble came 20 years after the post WWII boom with a huge increase in automobile ownership.

The Plomo hypothesis suggests that the true here is Richard Nixon who signed the clean air act which lead to the adoption of catalytic converters which are destroyed by lead. For that reason, leaded gasoline was abandoned. This suggests that crime should peak later in Europe. I promise that I predicted that violent crime was about to peak in the UK 20 years after they required catalytic converters in new cars. This prediction is extraordinary as it was correct (unlike the very vast majority of my predictions).

I say plomo not plata. This is imortant because the alleged failure of the Great Society allegedly due to inevitable uninted side effects very much affects the policy debate. If it was just an unfortunate coincidence then the case against social welfare is very much weakened.

Robert Waldmann
Robert J. Waldmann is a Professor of Economics at Univeristy of Rome “Tor Vergata” and received his PhD in Economics from Harvard University. Robert runs his personal blog and is an active contributor to Angrybear.

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