Digital Non-Cash

by on October 24, 2014 at 7:29 am in Current Affairs, Economics | Permalink

In the United States we are using advanced technology like fingerprint scans to pay for goods. In Venezuela they are using advanced technology like fingerprint scans to ration goods. Here is the WSJ:

Amid worsening shortages, Venezuela recently reached a milestone of dubious distinction: It has joined the ranks of North Korea and Cuba in rationing food for its citizens.

…Under the system in place here, basic price-controlled items—including milk, rice, coffee, toothpaste, chicken and detergent—are rationed, with the fingerprinting machine used to ensure that a shopper doesn’t return over and over to stock up.

The stark contrast between our advanced technology and our primitive ethics has often been noted. Our advanced technology also stands in stark contrast to our primitive economics. Sadly, the problem is not only in Venezuela. Here is the WSJ (!) “explaining” the shortages:

Venezuela is turning to rationing because of shortages caused by what economists call a toxic mix of unproductive local industry—hamstrung by nationalizations and government intervention—and a complex currency regime that is unable to provide the dollars importers need to pay for basics.

No, no, no, a thousand times no! (And I very much doubt that is what the economists told the reporter.) Nationalizations, the currency regime, unproductive industry, Venezuela has many problems but shortages are caused by price controls.

Check out this wonderful photograph and the face of the customer.

Venezuela

A party can deviate only so far from its core voters:

Cutting federal health and retirement spending has long been at the top of the GOP agenda. But with Republicans in striking distance of winning the Senate, they are suddenly blasting the idea of trimming Social Security benefits.

The latest attack came in Georgia, where the National Republican Campaign Committee posted an ad last week accusing Rep. John Barrow (D) of “leaving Georgia seniors behind” by supporting “a plan that would raise the retirement age to 69 while cutting Social Security benefits.”

Crossroads GPS, the conservative nonprofit group founded by GOP strategist Karl Rove, has run similar ads against North Carolina Sen. Kay Hagan (D), Arkansas Sen. Mark Pryor (D) and Rep. Scott Peters (D-Calif.). Crossroads accused Hagan of supporting a “controversial plan” that “raises the retirement age.”

There is more here, from Lori Montgomery.

Matt Yglesias on publishing and ebooks

by on October 24, 2014 at 1:04 am in Books, Economics | Permalink

It is undeniably true that Amazon has a very large share of the market for e-books. What is not true is that Amazon faces a lack of competition in the digital book market. Barnes & Noble — a company that knows something about books — sells e-books, and does so in partnership with a small outfit called Microsoft. Apple sells e-books and so does Google.

These are not obscure companies. It is not inconvenient for customers to access their products. And since these are companies that are actually much bigger and more profitable than Amazon, there is absolutely no way Jeff Bezos can drive them out of business with predatory pricing.

Amazon’s e-book product is much more popular than its rivals because Amazon got there first, and the competition has not succeeded in producing anything better. But consumers who prefer to buy a digital book from a non-Amazon outlet have several easy options available, and thus a book publisher who chooses to eschew Amazon will not actually be unable to reach customers.

There is more here, a good rant.

Heilman, the expert in Hasidic succession, told me that one reason so many dynastic fights emerged in the past decade is that the grand rabbis are living longer, sometimes too long to have the vigor to conclusively determine whom their successors will be or so long that their increasingly entrenched institutional court refuses to cede power.  In Hasidic Europe before World War II, a contender to the throne unhappy with a chosen successor could set up his seat in a neighboring village, Heilman said.  But since the war, with the consolidation of Hasidim into relatively few sects, each sect’s brand name has been enshrined so that successors want to become, say, the Satmar Rebbe, not the Kiryas Joel Rebbe.

That is from the new Joseph Berger book, The Pious Ones: The World of Hasidim and Their Battles with America.

Assorted links

by on October 23, 2014 at 12:22 pm in Uncategorized | Permalink

1. Chess piece survival rates.

2. How much do driverless cars depend on extensive and periodically revised mapping?

3. The French economy in eight charts.

4. How musical taste correlates with SAT scores.

5. Feeding McNuggets to food critics.

6. Robots vs. Ebola?

A Real Life Milgram Experiment

by on October 23, 2014 at 7:30 am in Education, Film, Science | Permalink

This amazing video, introduced by Philip Zimbardo, discusses a real world Milgram “experiment” in which people obeyed an authority figure to an astounding degree, even when the authority figure was just on the telephone.

The video comes from the Heroic Imagination Project which hopes to use the results of social psychology to help people to take effective action in challenging situations. More videos on obedience to authority, including from Milgram’s experiment, can be found in the resource section along with other social psychology videos and other interesting materials.

Here is one more, this time a little lighter, an experiment in which people find themselves unexpectedly married:

From The Daily Beast:

Greg and Jill Henderson, founders of Hendo, have developed a real hoverboard. Yes, the flying skateboard that millions of moviegoers have wished were real since Back to the Future Part II premiered back in 1989 may become the must-have Christmas gift for 2015. Using “hover engines” that create frictionless magnetic fields, the hoverboard only appears to hover an inch or two off a metallic floor. It’s not exactly ready for, or usable on, concrete but everything has to start somewhere.

There is more here.  It needs something like a copper sheet below it.  There are different accounts here, with varying degrees of enthusiasm or lack thereof, I found this one useful.  Still, this is more progress than we were seeing a year ago.

China fact of the day

by on October 23, 2014 at 6:38 am in Current Affairs, Economics | Permalink

In 2002 Chinese investors spent just $2.7bn on acquisitions and greenfield projects abroad but by 2013 the total had increased 40-fold to $108bn.

From Jamil Anderlini at the FT, there is more here.

Let’s assume books — at the margin of course — bring some external social value, perhaps by stimulating ideas production or by improving the quality of voting and citizenship.  If that were the case, at which margin should we look for this external benefit?  I can think of a few possibilities:

1. More books should be produced.  Yet this hardly seems plausible, as there are so many books produced right now and most of them are largely ignored.  In any case, Amazon clearly makes a larger number of books readily accessible, although its lower prices may discourage the number of books longer run.

2. Better books should be produced.  Arguably this is true by definition, but it is not a useful means of evaluating most proposed changes to the book market.  That said, Amazon creates an open forum for useful reviews.  That may improve long-run book quality, or at least lead to a more useful matching of readers with books.

3. Books should be cheaper and thus purchased and read more often.  Maybe so, but public libraries give books away for free — great books too — and their shelves are not stripped bare.  So making commercial books cheaper will get us only so far.  If all books were completely free, reading would go up by only so much, because time and attention would remain scarce.  In any case, with reference to the recent debates, Amazon does in fact make books cheaper.

4. Books should be more vivid in the minds of readers.  People would read more if the books meant more to them and that is a more effective lever than simply making books cheaper.  You will note of course that “buzz” can make books more vivid, and so Piketty’s Capital became a vivid book for a large number of people.  They bought it, though most of them did not read past page 26.  So even making books more vivid will not necessarily bring about the desired end of additional interested readership.  That said, Amazon does create various lists to try to boost the buzz around books, and Amazon tries to raise the relative status of reading and book-buying more generally.

It is in fact not so easy to specify how we might reap significant additional social benefits from the current book market.  The real externality, if there is one, lies in improving the humans not the books.

In the meantime, Amazon, in its current configuration, seems to be producing some marginal social benefits.

Venezuela estimate of the day

by on October 22, 2014 at 5:29 pm in Current Affairs, Economics | Permalink

Venezuela loses $728MM for each 1$ the oil price drops. Assuming oil @ $104 in 2014 and $96 in 2015 Vzla’s $ deficit in 2015 will be $27.8bn

That is from Moisés Naim on Twitter.  Here is more on the same topic.

Michela Giorcelli and Petra Moser have a new paper, the abstract is this:

This paper exploits variation in the adoption of copyright laws within Italy – as a result of Napoleon’s military campaign – to examine the effects of copyrights on creativity. To measure variation in the quantity and quality of creative output, we have collected detailed data on 2,598 operas that premiered across eight states within Italy between 1770 and 1900. These data indicate that the adoption of copyrights led to a significant increase in the number of new operas premiered per state and year. Moreover, we find that the number of high-quality operas also increased – measured both by their contemporary popularity and by the longevity of operas. By comparison, evidence for a significant effect of copyright extensions is substantially more limited. Data on composers’ places of birth indicate that the adoption of copyrights triggered a shift in patterns of composers’ migration, and helped attract a large number of new composers to states that offered copyrights.

For the pointer I thank the excellent Kevin Lewis.

Assorted links

by on October 22, 2014 at 11:59 am in Uncategorized | Permalink

1. How much of financial fluctuations is behavioral? (pdf)

2. Moral licensing and portfolio effects.

3. Silly markets in everything.

4. Does feeling young and acting young make you young again? (speculative)

5. The English are now grumpy over their own rights in the UK.

There is a new paper from Andrew M. Francis and Hugo M. Mialon:

In this paper, we evaluate the association between wedding spending and marriage duration using data from a survey of over 3,000 ever-married persons in the United States. Controlling for a number of demographic and relationship characteristics, we find evidence that marriage duration is inversely associated with spending on the engagement ring and wedding ceremony.

What is the mechanism?  Are signal-requiring and financial commitment-requiring marriages more likely to be fragile?  Or, to put forward a politically incorrect interpretation, do the high expenditures indicate the wife has too much bargaining power in the relationship?  That hardly seems like a plausible explanation.  By the way, weddings with a large number of attendees are likely to last longer, as are weddings accompanied by honeymoons.  Those correlations are easier to understand.

This piece is by a factor of more than five the most frequently downloaded SSRN paper over the last two months.

What I’ve been reading

by on October 22, 2014 at 1:59 am in Books | Permalink

1. Doris Kearns, The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism.  This Pulitzer-Prize winning book is compulsively readable and is most valuable on how the Roosevelt and Taft administrations fit together in American history.  I wish it had more detail on economic issues.

2. Walter Isaacson, The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution.  At first I was bored but the book picks up and is then interesting throughout, most of all I enjoyed the portrait of Bill Gates.  It is a good overview of how some of the main pieces of today’s information technology world fell into place, starting with the invention of the computer and running up through the end of the 1990s.

3. Russ Roberts, How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness.  The best and most readable introduction to Adam Smith’s Theory of Moral Sentiments.

4. Mark Metzler, Capital as Will and Imagination: Schumpeter’s Guide to the Postwar Japanese Miracle.  More interesting on Japanese economic history, and in particular postwar economic planning, than on Schumpeter.

5. Jan Swafford, Beethoven: Anguish and Triumph.  A consistently excellent and engaging treatment of a figure you cannot read too many books about.  It does not seem like a book of 1000+ pages.  The funny thing is, this book does not come close to exhausting Beethoven, in fact it barely scratches the surface.  It’s as good as the classic Maynard Solomon biography.

From the comments, on secular stagnation

by on October 21, 2014 at 2:38 pm in Economics | Permalink

B.B. writes:

In “National Income and the Price Level,” Martin Bailey discussed the issues of the liquidity trap and secular stagnation.

He observed that at a zero real interest rate, it would be profitable to level the Rocky Mountains and fill in the Gulf of Mexico. The land created would have a rate of return over zero. Also, replacing all steel with stainless steel would pay off.

The examples get to the problem. If someone wanted to level a mountain and fill in the Gulf, it would take a decade to get EPA approval, if it ever came. At negative real interest rates, there are plenty of profitable investments. Maybe in the medical sector, or energy, or finance, or banking, or education, or transportation….where government approval can block the investment for a decade. Secular stagnation is feasible in a world of heavy regulations and taxes, regardless of technological opportunities or the productivity of capital. Keystone Pipeline, anyone?

In a regulated state, easy Fed policy might boost the stock market and lower bond yields without boosting investment much at all. Sound familiar?