Ari emails me:

On a completely different note, if I want to understand modern China what books, articles, etc. should I be reading? Do I start with a textbook? Historical scholarship? Fiction? Is Wikipedia the way to go?

Start by asking someone who understands modern China is my first response!  But since you have failed that test, here are a few pointers:

1. Unless your mental architecture is very different from mine, books about sequences of dynasties are mind-numbing and not readily absorbed.  So you first need some context to fit those pieces into.

2. Here is a wonderful syllabus on Chinese economic history, by Dr. Melanie Meng Xue.  Read it all.  I don’t find most books on China to be very useful.  They may be full of true claims, but the frequency of repetition, across books, tends to be very high.

3. Set up a Twitter/RSS feed to follow China today.  Here are seven excellent sources, more are listed at the end.  Set up a separate Twitter account to follow people who cover China, they are more interesting than those who write on U.S. domestic politics.  After all, this is mankind’s greatest story of the current day.

4. Find an “entry point” into China of independent intrinsic interest to you, be it basketball, artificial intelligence, Chinese opera, whatever.  Follow that area, and don’t bother trying to generalize.  Just have fun.

5. Subscribe to the email newsletter of Bill Bishop.

6. Alternate your interest between stories that make China seem quite normal and stories that imply China is pretty weird.  But what is the right balance of those?  Nobody knows!  Experiment, realizing you don’t have a useful feedback mechanism.  Here are a few China stories I have sampled recently:

The Chinese don’t want us to call it tofu any more.

Beijingers read on average an hour a day.

Chinese man repaints road markings to make his commute quicker.

P.F. Chang to open in Shanghai.  But marketed as an American bistro.

Xi Jinping presses military overhaul, and two generals disappear (NYT), an underreported series of stories, try this one too.

7. Travel to every part of China.  The country has the best food in the world (tied with India), is quite safe, has navigable infrastructure, and you can cross much of the country in a day by high-speed rail.  Outside of Beijing and Shanghai, you might find five-star hotels for less than $100 a night.  Go pre-equipped with multiple VPNs, and figure out the English-Chinese translation programs on your smart phone.  They come in handy and many Chinese are already quite familiar with them.  Learn some street signs, with quizzes.

8. Now go back and study all those dynasties.

Wednesday assorted links

by on December 13, 2017 at 2:05 pm in Uncategorized | Permalink

That is another truly splendid book by Navid Kermani.  Imagine deep and thoughtful essays on Goethe and Islam, Kleist and love, Shiite passion plays, Wagner and empathy, and why he doesn’t so much sympathize with King Lear, all from a George Steiner brand of polymath.  As I’ve mentioned before, Kermani is ethnically Persian but was born and grew up in Germany.  Imagine a devout Muslim absorbing and internalizing the best of German classical literary culture, including Lessing, Zweig, Benjamin, Mann, and much more.  He recreates a version of that tradition that otherwise would be inaccessible to us.  And might he now be Germany’s best and most important public intellectual?

I’d like to put forward a simple hypothesis.  Tune down the yappers.  Read and study Kermani, Michel Houllebecq, Bruno Maçães, Ross Douthat, and assorted others.  Once I wrote: “Remember people, the influential thinkers of the next generation will be the religious ones…whether you like it or not.”  This is what I meant, and I don’t even know if the second and third writers on my list believe in God.

Here is my previous post on Kermani.

…if a speaker marks a delay with “um,” that delay will be longer than if it had been marked by “uh.”  If “uh” is used, the delay that follows before resumption of fluent speech is roughly a quarter of a second; if “um” is used, the anticipated delay approaches three-quarters of a second.

In one case (um) the delay is inserted as “a deliberate signal”, in the other (uh) it is “an unavoidable effect of having processing problems.”

In male speech, either um or uh accounts for about one out of fifty words; for female speech it is only one out of seventy words.

One study found that over 40 percent of transitions — the switch in who is talking — have gaps of within a quarter-second of zero.  In another similar study, the two parties are talking at the same time only 3.8 percent of the time, and then usually not for very long.

So says N.J. Enfield, in his new book How We Talk: The Inner Workings of Conversation.

I have some tricks for doing this, which I have scrawled in the inner part of the margin of the manuscript.  Here is Matt Levine on Bitcoin:

I half-joked yesterday that “perhaps the cost of bitcoin storage — keeping your private key in a vault, worrying about hackers, etc. — is so high that arbitrageurs need to charge $1,000 for a month of it,” but maybe it’s the right explanation? Everything I read about bitcoin storage is utterly exhausting. “A private key printed out on a sheet of paper, cut into pieces, and distributed among family members who don’t know how to put it back together; an encrypted file loaded on a USB stick and buried in the backyard; a password committed only to memory;” a private key engraved on a metal plate and stored in a safe; a safe deposit box at a bank; an account at an exchange that gets hacked and loses its customers’ bitcoins. Buying bitcoin futures is a way to get exposure to bitcoin and avoid the bitcoin-storage problem: You never have to store bitcoins because you never own bitcoins; you just get paid dollars for the amount that bitcoin goes up. But the storage problem doesn’t go away; you just offload it to the arbitrageur who provides you the bitcoin exposure. Maybe the arbitrageur needs to charge you $1,000 to cover her storage costs. If you think these markets are efficient, then the gap between the futures and the spot is telling you how much — in out-of-pocket expenses, in theft risk, in psychic pain — it costs to store bitcoin.

Here is more from Matt:

If I told you that there was an asset that is an excellent store of value even in inflationary conditions, how much of your gold portfolio would you reallocate to that asset? One percent? Three percent? Fifty percent? All of it? Sure, whatever, if you believed me. But we are just assuming that bitcoin actually fulfills that function, in order to decide its valuation. Bitcoin has had a pretty good run, but so far it’s a short one; there’s no historical experience of bitcoin retaining its value in periods of global financial crisis or rich-world inflation or even just, you know, people not talking about bitcoin for a minute. So far the evidence that bitcoin is a good store of value consists of the fact that bitcoin’s price keeps going up. That is not bad evidence! But it is not a ton of evidence to build a store-of-value valuation around.

If Matt told me, I would allocate at least two percent.

Tuesday assorted links

by on December 12, 2017 at 2:59 pm in Uncategorized | Permalink

1. The Western elite from a Chinese perspective.

2. Podcast with NPR Planet Money.

3. Bershidsky on Bitcoin futures.

4. “The timing of the agreement also coincides with speculation that India, Japan, the US and Australia will soon formally reconvene the dormant Quadrilateral grouping first initiated in 2007 as a counterbalance to China’s rising dominance in Asia.”  Link here.

5. What causes the anti-Flynn effect?

6. Why does India lack state capacity?

7. The real story behind South Korean industrial policy.

That is a new paper by Aghion, Akcigit, Hyytinen, and Toivanen, here is one brief excerpt:

In particular we see that IQ is by far the main characteristic for the probability of becoming an inventor in terms of the share of variation it explains, followed by parental education.  These two groups of variables account for 66% and 16% of the overall variation captured by our model.  In contrast, IQ plays a relatively speaking much more minor role for becoming a medical doctor or a lawyer.  Parental education is the main explanatory variable for the probability of becoming a medical doctor or a lawyer (40% and 53%), with base controls and parental income also playing clearly more important roles than for inventors.

The paper offers many other points of value, and you will note the data are from Finland.

More than any other country, Switzerland’s ethos is centered around preparing for civilizational collapse.

All around Switzerland, for example, one can find thousands of water fountains fed by natural springs. Zurich is famous for its 1200 fountains, some of them quite beautiful and ornate, but it’s the multiple small, simple fountains in every Swiss village that really tell the story. Elegant, yes, but if and when central water systems are destroyed these fountains are a decentralized and robust system for providing everyone with drinkable water.

The Swiss political system is also decentralized. If the central government fails, the Swiss might not even notice. The mountains and valleys also mean that Swiss towns and villages are geographically independent yet linked in a spider-web of robust connections.

Despite being at peace since 1815, Switzerland is prepared for war. Swiss males (and perhaps females in the future) are required to serve in the military (those who cannot, pay a special tax) creating a robust reservoir of trained citizens ready to serve in an emergency.

The Swiss have been tunneling the Alps for hundreds of years creating innumerable secret hideaways for people and stores.

As a further example of how ridiculously well prepared the Swiss are for any and all threats, there are things like hidden hydroelectric dams built inside of unmarked mountains so that in the event of mass bombings, they’ll still have electricity from these secret facilities. And, remember, these are the things the Swiss government has let us know about. It is thought that there are probably more fortifications and hidden goodies scattered about the country’s landscape. (ital. added, AT)

In addition, to thousands of military bunkers permeating the Swiss mountains there are several hundred thousand private and public fallout shelters the largest of which can hold some 20,000 people. Some of the largest installations have been decommissioned and even turned into museums but there is little doubt that they could be rapidly re-purposed.. As the Swiss continue to improve their already fantastic railway system it’s standard practice to convert old railway tunnels to security shelters.

Buried deep alongside the hydroelectric dams, shelters and food stores, the Swiss also have libraries ready to reboot civilization:

“In another [underground bunker], detailed instructions on how to build devices for reading all known data storage formats, even older formats like floppy disks, are kept, so that if that knowledge is otherwise lost, future generations can still decode our data storage devices to access the data within correctly. Essentially, the researchers involved in this particular project have attempted to create a “Rosetta Stone” of data formats and are using a ridiculously secure Swiss bunker as the storage point for that knowledge.”

Switzerland is famous for being the place to store wealth in times of crisis and that remains true today with a few twists. The old-rich store their gold in heavily guarded Swiss banks, the nouveau-riche store their bitcoins in Swiss underground bunkers built to withstand cyber- and nuclear attack:

It’s no surprise that Nassim Taleb likes Switzerland because this is a country that has made itself anti-fragile in order to survive the black swans of civilizational collapse.

Hat tip: Maxwell.

That is the title of my latest Bloomberg column.  Rather than giving you the main argument, let’s instead cut to the end:

The real story of bitcoin is a heartening one of community. Less than 10 years ago, the bitcoin asset was worth virtually nothing, but a small group of people believed in it and worked tirelessly to promote it, and now the whole world is watching. It’s a tale at least as old as Christ and the Apostles. Maybe the bitcoin believers are as much of a miracle story as that of the brilliant inventor Satoshi.

The thing is, I don’t always believe in miracle stories of community, not in these days of declining governance and possibly fraying social order. Yet I’ve become emotionally involved in tracking the bitcoin price, perhaps because I realize that if one such miracle of “ex nihilo” creation can be sustained, others are on the way. I don’t think bitcoin is a bubble, but every morning I wake up doubting.

More broadly the piece considers what should be the appropriate price for Bitcoin.

Where?, I hear you asking.  No, that is the title of a new book by Karl Sigmund and the subtitle is The Vienna Circle and the Epic Quest for the Foundations of Science.  I enjoyed this book very much, though I don’t recommend it as a balanced introduction to its chosen topic.  I liked it best for its whims and interstices:

1. The mathematician Richard von Mises (brother of economist Ludwig) was a patron of Rilke, and he established a foundation for the sole purpose of supporting Robert Musil.

2. Carl Menger was planning on writing a philosophical treatise, and one which would have had a “Vienna Circle” anti-metaphysical slant.

3. Arguably Karl Popper learned the most from a polymathic cabinetmaker he was apprenticed to in his youth.

4. Friedrich Wieser had supported Mussolini, but a young Oskar Morgenstern, in his diary, complained that Wieser was too liberal.

5. Morgenstern later became a confirmed liberal, and he also remarked a few times that game theory was for the social sciences completing the research program of Kurt Gödel.

6. Karl Popper complained that Wittgenstein threatened him, in a lecture, with a poker.  It is not obvious this was the case.

7. I came away from my read wanting to sample more Ernst Mach, more Moritz Schlick, and thinking Otto Neurath was perhaps badly underrated.

Note that most of the book is more serious than this, and less concerned with economists, much more with math and science and some psychoanalysis and positivism too.

Monday assorted links

by on December 11, 2017 at 2:46 pm in Uncategorized | Permalink

Almost certainly not:

While shareholders have strong incentives to limit value-destroying perquisite consumption, it is challenging to identify such perquisites. Many corporate assets that enable forms of perquisite consumption also provide operational benefits. Corporate jets represent a potent example. We find business-related flights increase firm performance. Our results also highlight the channels through which jet use can either enhance or destroy firm value. Consistent with the benefits of information gathering and monitoring, firms with soft and complex information that is difficult to transmit remotely are more likely to fly to company subsidiaries and plants, and these flights positively affect firm value. In contrast, among firms with weak governance structures where flights are more likely motivated by agency factors, jet use is more likely to be value-decreasing. The ability to differentiate has important implications in today’s activism environment.

The full piece is by Lian Fen Lee, Michelle Lowry, and Susan Shu, via the excellent Kevin Lewis.

…we find that the between-state migration rate for individuals in occupations with state-specific licensing exam requirements is 36 percent lower relative to members of other occupations. Members of licensed occupations with national licensing exams show no evidence of limited interstate migration.

That is from Janna E. Johnson and Morris E. Kleiner in the NBER working paper series.  Here are ungated copies.

…a recent report by Yale University concluded the country is suffering the highest rate of homelessness in the developed world with 40,000 people, nearly 1 per cent of the population, living on the streets or in emergency housing or substandard shelters.

…“The big change in homelessness is the number of working families struggling to find homes and pay rent,” says Ms Rutledge, who adds the situation is the worst she has seen in her 13 years working in homeless services in Auckland. Nationwide, some 5,844 people were on the social housing waiting list in September, a 42 per cent increase on the same month two years ago.

This FT article indicates the country will respond by banning foreign purchases of Kiwi homes — I guess the country is too crowded to allow for an elastic supply response.