Friday assorted links

by on November 17, 2017 at 11:23 am in Uncategorized | Permalink

1. “…broccoli, Brussels sprouts, cauliflower, kale, cabbage, and collard greens are all technically the same species, Brassica oleracea.” Link here.

2. “Our bland, featureless Midwest—on some level, it is a fantasy.

3. Does a study of Twitch.tv indicate net neutrality is a bad idea?

4. A dozen business lessons from Waffle House.

5. Tweetstorm on Cheesecake Factory design.

6. “Jones’ choice of hosiery proved most offensive, according to the editor. For the occasion, Jones had chosen a pair of tights — not in a neutral black or gray as is common in the halls of Vogue — but rather a pair covered with illustrated, cartoon foxes.”  Link here.

The Uber Tipping Equilibrium

by on November 17, 2017 at 7:50 am in Economics | Permalink

What is the effect of tipping on the take-home pay of Uber drivers? Economic theory offers a clear answer. Tipping has no effect on take home pay. The supply of Uber driver-hours is very elastic. Drivers can easily work more hours when the payment per ride increases and since every person with a decent car is a potential Uber driver it’s also easy for the number of drivers to expand when payments increase. As a good approximation, we can think of the supply of driver-hours as being perfectly elastic at a fixed market wage. What this means is that take home pay must stay constant even when tipping increases.

But how is the equilibrium maintained? One possibility is that as riders tip more, Uber can reduce fares so that the net hourly wage remains constant. Since take home pay doesn’t change we will have just as many drivers as before tipping. Under the tipping equilibrium the only change will be that instead of the riders paying Uber and then Uber paying the drivers, the riders will also pay something to the drivers directly and Uber will pay the drivers a little bit less. The drivers end up with the same take home pay.

But suppose that Uber doesn’t want to reduce fares or is somehow constrained from doing so. Does the model break down? Sorry, but the laws and supply and demand cannot be so easily ignored. If Uber holds fares constant, the higher net wage (tips plus fares) will attract more drivers but as the number of drivers increases their probability of finding a rider will fall. The drivers will earn more when driving but spend less time driving and more time idling. In other words, tipping will increase the “driving wage,” but reduce paid driving-time until the net hourly wage is pushed back down to the market wage.

At this point many readers will object that I am a horrible person and this is all theory using unrealistic “Econ 101” assumptions of perfectly competitive markets, rationality, full information etc etc. To which my response is that the first claim is plausible but irrelevant while the second is false. A new paper, Labor Market Equilibration: Evidence from Uber, from John Horton at NYU-Stern and Jonathan Hall and Daniel Knoepfle, two economists at Uber, looks at what happens when Uber increases base fares:

We find that when Uber raises the base fare
in a city, the driver hourly earnings rate rises immediately, but then begins
to decline shortly thereafter. After about 8 weeks, there is no detectable
difference in the average hourly earnings rate compared to before the fare
increase. With a higher fare, drivers earn more when driving passengers, and
so how do drivers make the same amount per hour? The main reason is that
driver utilization falls; drivers spend a smaller fraction of their working hours
on trips with paying passengers when fares are higher.

My conclusion is that increases in Uber fares are a very bad idea. Why? Increases in Uber fares–i.e. increases beyond those required to have enough drivers so that pick-up times are reasonably short–have two negative effects. First, and most obviously, higher fares increase the price to riders. Second, higher fares don’t result in higher driver earnings but do result in drivers wasting time.

The situation is very similar to the inefficient market for realtors. When realtors earn a fixed percentage of a home’s sales price, higher home prices encourage more entry into the realtor market. But we don’t need more realtors just because home prices have increased! When home prices are high, a realtor can earn enough selling a handful of homes a year to make it worthwhile to stay in the industry even though most of the realtor’s time is spent unproductively finding customers rather than actually helping customers to buy and sell homes. It would be better if commission rates fell when home prices rose but even after many years of online entry that typically doesn’t happen which is the mystery of realtor rent-seeking.

Uber is a great service for riders and it’s also great for people who need a source of flexible earnings. The fact that Uber drivers earn less than some people think is appropriate is a function of the wider job market and not of Uber policy. Indeed, Uber can’t increase take-home pay by raising fares and if we require them to do so we will simply hurt consumers and waste resources without improving the welfare of drivers.

The Berkshire Museum, yes.  They were going to sell 40 paintings at Sotheby’s, including two very special Norman Rockwells, but at the last minute a court decision halted the sale, claiming (with only thin justification) that the sale would violate the museum’s trusts.  That is the setting of my latest Bloomberg column, here is one bit:

The sad truth is that the people running the Berkshire Museum just don’t care that much about American art any more, at least not from an institutional point of view. Given that reality, it’s actually better if they are not entrusted with important artworks.

The court’s decision now means it will be hard to pull off the sale with fully clear rights to the titles, although the court’s judgment will be re-examined in December. Both the uncertainty and the surrounding negative publicity will scare off buyers and may spoil the market for a long time to come.

There is much more at the link.  The argument against selling, of course, is that in a world of frequent sales all museums will find it hard to make credibly binding commitments to their donors, who often do not want their donated works recycled in the marketplace.  But the equilibrium of zero selling is one that will destroy a great deal of value in the art world.  Note that this problem will become increasingly relevant as the clock ticks and the number and inappropriateness of past museum commitments piles up.  If nothing else, sooner or later insolvency sets in.  Rust never sleeps.  And so on.

Should churches really own all that land in the downturns of major American cities?

Greg Irving emails me:

Hello Prof. Cowen,

I wonder if you might be tempted to create a blog post, at your convenience, of Spanish language works, ideally read in the original, that have most impacted either a) your appreciation for some till then unknown nuance or beauty in the language or b) your knowledge of/appreciation for some aspect of life in general. Might you?

Quizás obviamente, soy alguien que va aprendiendo el idioma poco a poco sólo de interés y no de necesidad. Si usted se digna a crear una respuesta por este correo electrónico, o en su blog, me alegraría mucho. Gracias por todo el conocimiento que nos da en sus escritos y por leer mi nota.

My Spanish-language reading is slow, but these are the works I found it profitable to devote a great deal of time to.  They have influenced me significantly, and mostly I found the English-language version a poor substitute.  Here goes:

1. Jorge Luis Borges, Ficciones.  This was super-slow going, but it is one of my favorite books of all time, philosophical and conceptual and in Spanish deeply hilarious.  OK in English, but this book alone is almost reason enough to study Spanish.

2. Juan Rulfo, Pedro Paramo.  Imagine redoing parts of Dante, with more narrative, in rural Mexico and with lots of comedy.  The English-language version does not come close.

3. Julio Cortázar, Rayuela [Hopscotch].  One of my very favorite 20th century novels, again unsatisfying to me in English, I would not recommend that you try at all.  Also try his short stories, most of all Bestiario and Historias de cronopios y de famas.

4. Jose Donoso, El obsceno pájaro de la noche [The Obscene Bird of Night].  A masterpiece, quite neglected in the U.S., I found this one so hard I often had to juxtapose it with the English-language text to read it at all.

5. Gabriel Garcia Marquez, Noticia de un Secuestro [Notice of a Kidnapping], and Vivir para contarla [Living in Order to Tell It].  Oddly, I think his greatest works are the non-fiction.  But these are at least pretty good in English too, unlike what is listed above.

6. Pablo Neruda.  Non-Spanish readers certainly have heard of him, or maybe like him, but don’t really have a sense of how he is one of the very greatest poets of all time.  It is Canto General, a book-length narrative poem retelling of the story of the New World, that influenced me most, but I love all the classic Neruda poems.

I don’t find it so profitable to read 17th century Cervantes in Spanish, though the defect is likely mine.  The Savage Detectives and One Hundred Years of Solitude I find as good in English as in Spanish; Marquez himself suggested that was true for this work.  Vargas Llosa is “good enough” in English, except perhaps for the inscrutable Conversation in the Cathedral, which I cannot follow in either language.  Javier Marías I find “good enough” in English.  The Goytisolo brothers are often too hard for me, not fun in English but I can’t quite manage the Spanish, perhaps in my dotage.  Fuentes has never clicked for me, period.  Hombres de maíz, by Asturias, is especially good in Spanish and pretty much neglected in the English-speaking world.

What else?

It is in the new issue of the Times Literary Supplement (a wonderful periodical of course), right now this link is ungated, for how long I do not know.  I thought the book was very well-written and especially impressively researched.  But on the side of economics and conceptual framework, I found it too biased.  Here is one excerpt from my review:

In a book with almost 400 pages of text, it is striking that government fraud is not seriously discussed, with the exception of the critical take on the Comstock movement, under which the Post Office took up a moral crusade against mail fraud, directed by the evangelical Anthony Comstock. Yet if consumers are so impetuous and ill-informed as to be frequent victims of business fraud, might not voters and even activist citizens be prone to similar manipulations? Balleisen mentions that such a view was held by the nineteenth-century Spencerian Edward Youmans, but he doesn’t do much more than mock it and then move on. Yet arguably the biggest fraud of the early part of the twentieth century was the selling of the First World War to the American public on mostly false pretences. Progressives led this sales pitch, through spokesmen such as Herbert Croly, and of course the President Woodrow Wilson, telling the American people that war was a noble cause that would revitalize the nation and save the world.

In Balleisen’s narrative, however, the Progressives show up only as critics of fraud.

And is corporate fraud really going up these days?:

Take lives lost in the workplace. An employer more or less promises that a job is relatively safe, and if it turns out to be dangerous that may reflect a kind of fraud or at the very least a major disappointment. Yet jobs in America have never been as safe as today, and furthermore the rate at which job safety increases does not seem to have been affected by the creation of the Occupational Safety and Hazard Administration (OSHA). Or what about food poisoning, which you also might take as a sign of a fraudulent transaction? Again, overall, the opportunity to buy truly transparently safe food supplies seems greater than ever before, notwithstanding the fact that more consumers are voluntarily taking chances with sushi, non-pasteurized cheeses and home-made raw milk. The nice thing about mortality statistics is that a death pretty much always reflects a disappointment with the transaction, but for most metrics (opioid markets being one significant exception) mortality is down over the past few decades.

Do read the whole thing.

Thursday assorted links

by on November 16, 2017 at 11:14 am in Uncategorized | Permalink

Hacking the Nazis

by on November 16, 2017 at 8:50 am in History, Web/Tech | Permalink

Some resisters fought the Nazis in the streets while others fought them from within by hacking some of the world’s first information technology systems. Ava Ex Machina has a fascinating post discussing some of these unheralded hackers. Here is one:

René Carmille — was a punch card computer expert and comptroller general of the French Army, who later would head up the Demographics Department of the French National Statistics Service. As quickly as IBM worked with the Nazis to enable them to use their punch card computer systems to update census data to find and round up Jewish citizens, Rene and his team of double-agents worked just as fast to manipulate their data to undermine their efforts.

The IEEE newspaper, The Institute, describes Carmille as being an early ethical hacker: “Over the course of two years, Carmille and his group purposely delayed the process by mishandling the punch cards. He also hacked his own machines, reprogramming them so that they’d never punch information from Column 11 [which indicated religion] onto any census card.” His work to identify and build in this exploit saved thousands of Jews from being rounded up and deported to death camps.

Rene was arrested in Lyon in 1944. He was interrogated for two days by Klaus Barbie, a cruel and brutal SS and Gestapo officer called “the Butcher of Lyon,” but he still did not break under torture. Rene was caught by the Nazis and sent to the Dachau concentration camp, where he died in 1945.

Hat tip: Tim Harford.

“A Perfect Fit,” by Isaac Asimov

by on November 16, 2017 at 2:03 am in Books, Law, Web/Tech | Permalink

Gold said, “You underwent due process in great detail, and there was no reasonable doubt that you were guilty–”

“Even so!  Look!  We live in a computerized world.  I can’t do a thing anywhere — I can’t get information — I can’t be fed — I can’t amuse myself — I can’t pay for anything, or check on anything, or just plain do anything — without using a computer.  And I have been adjusted, as you surely know, so that I am incapable of looking at a computer without hurting my eyes, or touching one without blistering my fingers.  I can’t even handle my cash card or even think of using it without nausea.”

Gold said, “Yes, I know all that.  I also know you have been given ample funds for the duration of yoiur punishment, and that the general public has been asked to sympathize and be helpful.  I believe they do this.”

“I don’t want that.  I don’t want their help and their pity.  I don’t want to be a helpless child in a world of adults.  I don’t want to be an illiterate in a world of people who can read.  Help me end the punishment.  It’s been almost a month of hell.  I can’t go through eleven more.”

That is from the short story “A Perfect Fit,” from 1981, reproduced in the volume The Winds of Change and other stories.  I’ve been rereading some Asimov lately, in preparation for my chat with Andy Weir, and much of it has held up remarkably well.

Samuel Bazzi, Martin Fiszbein, and Mesay Gebresilasse have a new NBER working paper on that theme, here is the abstract:

In a classic 1893 essay, Frederick Jackson Turner argued that the American frontier promoted individualism. We revisit the Frontier Thesis and examine its relevance at the subnational level. Using Census data and GIS techniques, we track the frontier throughout the 1790-1890 period and construct a novel, county-level measure of historical frontier experience. We document skewed sex ratios and other distinctive demographics of frontier locations, as well as their greater individualism (proxied by infrequent children names). Many decades after the closing of the frontier, counties with longer historical frontier experience exhibit more prevalent individualism and opposition to redistribution and regulation. We take several steps towards a causal interpretation, including an instrumental variables approach that exploits variation in the speed of westward expansion induced by national immigration inflows. Using linked historical Census data, we identify mechanisms giving rise to a persistent frontier culture. Selective migration contributed to greater individualism, and frontier conditions may have further shaped behavior and values. We provide evidence suggesting that rugged individualism may be rooted in its adaptive advantage on the frontier and the opportunities for upward mobility through effort.

I am very much a proponent of this line of reasoning.

Acclaimed legal scholar, Harvard Professor, and New York Times bestselling author Cass R. Sunstein brings together a compelling collection of essays by our nation’s brightest minds across the political spectrum—including Eric Posner, Tyler Cowen, Noah Feldman, Jack Goldsmith, and Martha Minow—who ponder the question: Can authoritarianism take hold here?

With the election of Donald J. Trump, many people on both the left and right feared that America’s 240-year-old grand experiment in democracy was coming to an end, and that Sinclair Lewis’ satirical novel, It Can’t Happen Here, written during the dark days of the 1930s, could finally be coming true.

Is the democratic freedom that the United States symbolizes really secure? Can authoritarianism happen in America? Sunstein queried a number of the nation’s leading thinkers. In Can It Happen Here? he gathers together their diverse perspectives on these timely questions and more.

In this thought-provoking collection of essays, these distinguished thinkers and theorists explore the lessons of history, how democracies crumble, how propaganda works, and the role of the media, courts, elections, and “fake news” in the modern political landscape—and what the future of the United States may hold.

Due out in March, pre-order here.  The book also has Jon Elster, Timur Kuran, and Jonathan Haidt, dare I call it self-recommending?

Here is the transcript and podcast, I enjoyed this chat very much.  Here is part of the opening summary:

Sujatha Gidla was an untouchable in India, but moved to the United States at the age of 26 and is now the first Indian woman to be employed as a conductor on the New York City Subway. In her memoir Ants Among Elephants, she explores the antiquities of her mother, her uncles, and other members of her family against modern India’s landscape.

Our conversation considered the nature and persistence of caste, gender issues in India, her time as a revolutionary, New York City lifestyle and neighborhoods and dining, religion, living in America versus living in India, Bob Dylan and Dalit music, American identity politics, the nature of Marxism, Halldor Laxness, and why she left her job at the Bank of New York to become a New York City subway conductor, among other topics.

Here is one sequence:

GIDLA: Actually, the only relation I have with my family members is political views.

[laughter]

GIDLA: If we have to connect on familial links, we will always be fighting and killing each other. All that we talk about with my mother is politics and untouchability and caste and Modi and things like that.

It’s the same thing with my sister also. This is where we connect. Otherwise, we are like enemies. My brother, we’re completely alienated from each other, firstly because he goes to church now. We never used to go to church before. He’s into this Iacocca. Is there a name . . . ?

COWEN: Iacocca?

GIDLA: Yeah.

COWEN: Lee Iacocca?

GIDLA: Yeah.

COWEN: The former Chrysler chairman?

GIDLA: Yeah. He reads that kind of books.

COWEN: Management books.

GIDLA: He’s into that kind of stuff.

COWEN: You don’t?

GIDLA: No.

GIDLA: He read Freakonomics and he liked it. I don’t relate to that stuff.

And this toward the end:

COWEN: Your most touching memory of your mother?

GIDLA: I don’t know. When I was arrested, she was very worried. She said, “I wish I could take you back into my womb.”

Strongly recommended.  I was pleased to see that Publisher’s Weekly named Sujatha Gidla’s book as one of the ten best of 2017, you can order it here.

Here’s the second chapter of our mini-series on business cycle theories: The Monetarists. For the real econ aficionados, today’s video features an un-credited cameo. A free Game of Theories t-shirt to the first person to identify the cameo in the comments.

Wednesday assorted links

by on November 15, 2017 at 2:40 am in Uncategorized | Permalink

1. Who’s sitting next to you on the subway?

2. New results on the returns to education.

3. Meet the people who listen to podcasts at super speed.

4. Those with a college degree gain more from freer trade, but not actually by that much.

5. “Consistent with the reduced form results, the model estimates imply that labor supply factors are responsible for nearly the entire rise of in-and-outs, while changes in labor demand have contributed little…”  Link hereAnd “Our estimates suggest that the decline in product reallocation through these margins has contributed greatly to the slow growth experienced after the Great Recession.”

6. Absent-mindedness as dominance behavior.

7. MIE Hyderabad spot-a-beggar.

Gifts of the Immigrants, Woes of the Natives: Lessons from the Age of Mass Migration (2017). JOB MARKET PAPER
Abstract: In this paper, I show that political opposition to immigration can arise even when immigrants bring significant economic prosperity to receiving areas. I exploit exogenous variation in European immigration to US cities between 1910 and 1930 induced by World War I and the Immigration Acts of the 1920s, and instrument immigrants’ location decision relying on pre-existing settlement patterns. Immigration increased natives’ employment and occupational standing, and fostered industrial production and capital utilization. However, it lowered tax rates, public spending, and the pro-immigration party’s (i.e., Democrats) vote share. The inflow of immigrants was also associated with the election of more conservative representatives, and with rising support for anti-immigration legislation. I provide evidence that political backlash was increasing in the cultural distance between immigrants and natives, suggesting that diversity might be economically beneficial but politically hard to manage.

That is from Marco Tabellini, job market candidate at MIT.

…sons crowd out human capital acquisition by daughters.  If all daughters of self-employed men experienced the “sisters-only” level of transmission, the overall gender gap in self-employment would be reduced by nearly 20 percent.

That is from Elizabeth Mishkin, on the job market from Harvard.

While we are on related topics:

I establish that women in U.S. counties with heavier casualties were more active in starting new businesses after the war [WWII] ended and this difference persists to this day. I also find that single women were more likely to start new businesses than war widows. Evidence in favor of the marriage market channel suggests that reducing opportunity cost is more effective in encouraging women to start new businesses than merely providing financial subsidies.

That is from Patrick Luo, also on the job market from Harvard.