There is a new NBER working paper from Omar Al-Ubaydli and John A. List:
This is a review of the literature of field experimental studies of markets. The main results covered by the review are as follows: (1) Generally speaking, markets organize the efficient exchange of commodities; (2) There are some behavioral anomalies that impede efficient exchange; (3) Many behavioral anomalies disappear when traders are experienced.
This is the best survey article on these claims that I know.
2. “Great spirits” vs. “mediocre minds””.
3. One man’s plan to airlift rhinos to Australia.
4. Chinese Straussian takes on Zootopia.
6. Star Wars hyperinflation pending, maybe Abenomics should take a cue.
It’s time to apply or encourage your students to apply to the annual Public Choice Outreach Conference! This conference is a “crash course” in public choice with talks by Tyler Cowen, Robin Hanson, Bryan Caplan, Dan Houser, Johanna Mollerstrom and many others.
Graduate students and advanced undergraduates are eligible to apply. Students majoring in economics, history, international studies, law, philosophy political science, psychology, public administration, religious studies, and sociology have attended past conferences.
The conference is June 10-12 in Arlington VA, there are no fees, room and board are paid and some stipends are available.
You can find more information and an application here. Apply now!
Buttonwood presents a trilemma:
The issue may be another example of that common political problem; the trilemma, under which three options are available, but only two at most can be selected. In this case, it is a simple tax system; independent national tax policies; and the existence of multinational companies and investors.
Here is Megan McArdle:
What we’ve seen from the papers so far is not so much an indictment of global capitalism as an indictment of countries that have weak institutions and a lot of corruption. And for all the outrage in the United States, so far the message for us is pretty reassuring: We aren’t one of those countries.
Consider the big names that have shown up so far on the list. With the notable exception of Iceland, these are not countries I would describe as “capitalist”: Russia, Pakistan, Iraq, Ukraine, Egypt. They’re countries where kleptocratic government officials amass money not through commerce, but through quasi-legal extortion, or siphoning off the till. This is an activity that has gone on long before capitalism, and probably before there was money.
From a Ray Lopez email:
5. Panama Papers fallout will be: (1) a drive to reduce large denomination bills, (2) a drive to make a ‘paperless’ payment system, (3) a drive to eliminate tax loopholes, (4) a drive towards negative interest rates once paper is abolished
6. Xi of China is the biggest loser. He ran on an ‘anti-corruption’ ticket and his Politburo members will be pissed if they see he is corrupt, unless he winks and tells them they are immune from his anti-corruption offensive. In which case, to pay them off, Xi, needs to appropriate the assets of his enemies to give to his friends. So possibly it’s a “double down bet” for Xi: he either folds or has to double down, redoubling his anti-corruption campaign, so he can seize assets to pay off his cronies keeping him in power. We live in interesting times.
7. The net effect of Panama Papers, along with the FATCA issues above, is that criminals no longer will use law firms, and decent people hiding money as well, which means these services will be offered by more informal channels like from a single proprietor “fixer”. “Nick the Greek money launderer” will profit, big law firm will suffer.
Here is China in the Panama Papers.
There is a new model and NBER paper to come from Jesus Fernandez-Villaverde and Daniel Sanches (pdf, ungated), here is the abstract:
Can competition among privately issued fiat currencies such as Bitcoin or Ethereum work? Only sometimes. To show this, we build a model of competition among privately issued at currencies. We modify the current workhorse of monetary economics, the Lagos-Wright environment, by including entrepreneurs who can issue their own fiat currencies in order to maximize their utility. Otherwise, the model is standard. We show that there exists an equilibrium in which price stability is consistent with competing private monies, but also that there exists a continuum of equilibrium trajectories with the property that the value of private currencies monotonically converges to zero. These latter equilibria disappear, however, when we introduce productive capital. We also investigate the properties of hybrid monetary arrangements with private and government monies, of automata issuing money, and the role of network effects.
I would stress a few points. First, the world is going to have some form of currency competition whether one likes it or not. That is already the case today, so these are very real questions, not just thought games for libertarians.
Second, the Bitcoin and broader cryptocurrency experience indicate that the marginal cost of issuing a new private currency is well above zero, contra some of the literature from the 1970s, which viewed the enterprise in terms of printing money and paying only for the additional paper. Bitcoin can be interpreted as a commodity currency of sorts, where the relevant expenditures are on codebreaking and electricity, rather than digging up gold from the ground. Once it is focal enough, it might be able to provide some version of rough price stability in terms of its unit.
Third, if your government is halfway legitimate and not broke, its currency is likely to be a dominant winner in these forms of currency competition, especially to the extent that currency is supported by the fiscal authority. In this sense it is almost impossible to get away from a legitimate or even semi-legitimate government-issued currency.
Kasich supporters are in a league of their own. They have by far the best credit ratings, on average. Some 86% have “excellent” or “good” scores. No other candidate’s supporters even breaks 70%. Kasich’s supporters are half as likely to have bad or fair ratings as anyone else.
The second is that Donald Trump supporters are the least likely to have “good” scores. Only half of them do (49.8%), slightly behind Hillary Clinton supporters (50.7%) and Sanders supporters (51%) and well behind the supporters of the other Republicans. Trump supporters are also far more likely to have “bad” scores than supporters of the other Republican candidates.
Here is the Brett Arends article, via George Chen.
1. The economics of Hamilton (the show).
2. In my own way, I too feel as if I have attended the University of Northern New Jersey (NYT).
3. “Touching a Robot’s ‘Intimate Parts’ Makes People Uncomfortable.”
4. A criticism of economics which I mostly don’t agree with.
5. “If you were in the middle of an asteroid belt, you probably wouldn’t see any asteroids at all.” (NYT)
6. Questions about breaking up the big banks.
7. What the contested convention odds tell us.
But it’s very unlikely that fiscal stimulus would ever come to the rescue, at least in the sort of quantity that would be needed. Japan’s national debt soared in the 1990s and 2000s, and yet their NGDP actually fell over two decades (1993-2013)—the worst performance by NGDP for a developed country in world history. If even Japan’s huge deficits were not enough to boost AD at all, just imagine getting a future GOP Congress to do what it takes. In my view we need a conversation about changing the Fed’s target, to a new target which makes the zero bound much less of a problem—something like NGDPLT.
That is from Scott Sumner, and I very much agree.
I have a simple rule of thumb. If a discussion of Japanese fiscal policy notes that unemployment now is about 3.3%, it might be an interesting discussion. Otherwise, it is just assuming that lots of aggregate supply can be pulled forth…out of nothing. Not to mention they still need to pay all of that debt back.
By the way, here are some rumors that the BOJ may indeed move to a form of ngdp targeting. And (same link, by the excellent David Keohane) here is from a report from Jeffries:
Currently, the Bank of Japan is buying just over Y80 trillion of JGBs per annum or the equivalent of three times to the rate of JGB issuance. The BoJ is approaching a shortage of JGBs for the central bank to buy, as commercial banks, pension and insurance funds have run down their holdings. Indeed, an IMF working paper that we quoted in the Japan 2016 outlook ‘Portfolio rebalancing in Japan: Constraints and Implications for Quantitative Easing’ that given the collateral needs of banks and the asset-liability management constraints of insurers there is a natural limit to JGB purchases.
The next step, according to this analysis, is to get/keep rates down low, convert the current debt stock into perpetual zero coupon bonds, and then have outright debt monetization by the Bank of Japan, all at low rates of inflation of course. This may not stimulate output much, but perhaps it will stave off eventual bankruptcy.
A splendid book, here is Kate Kellaway at The Guardian:
There are two things this book requires. First, it is best read aloud – it comes thrillingly to life – it sounds tremendous. Second, it repays close reading. Studying it is to listen in on a poet with perfect pitch. Getting the diction right – so that the ancient is neither modern nor archaic – is the challenge. And Heaney shows that plain words are stormproofed. It is about more than George Orwell’s tired prescription: “Never use a long word where a short one will do.” It is about how plain language, like plain speaking, has integrity. And it is weight-bearing. It carries. When he introduces uncommon, eye-catching (sometimes longer) words – scaresome, asperging, hotbloods – they stand out but work harder against their plain backgrounds. Take the sighting of the golden bough. The word “refulgent” is strikingly charged, surrounded by “clear”, “green-leafed” and “cold”. Refulgent breaks Orwell’s rule and stands out like the golden branch itself. Or consider the description of Aeneas’s father, Anchises: “A man in old age, worn out, not meant for duress.” “Duress” is the pleasing surprise here (so much better than everyday “hardship”) seizing attention while “old age” and “worn out” do their unobtrusive work.
I will reread it shortly, you can buy it here.
There is a new NBER paper on this topic, by Victoria Y. Fan, Dean T. Jamison, and Lawrence H. Summers, here is the abstract:
Estimates of the long-term annual cost of global warming lie in the range of 0.2-2% of global income. This high cost has generated widespread political concern and commitment as manifested in the Paris agreements of December, 2015. Analyses in this paper suggest that the expected annual cost of pandemic influenza falls in the same range as does that of climate change although toward the low end. In any given year a small likelihood exists that the world will again suffer a very severe flu pandemic akin to the one of 1918. Even a moderately severe pandemic, of which at least 6 have occurred since 1700, could lead to 2 million or more excess deaths. World Bank and other work has assessed the probable income loss from a severe pandemic at 4-5% of global GNI. The economics literature points to a very high intrinsic value of mortality risk, a value that GNI fails to capture. In this paper we use findings from that literature to generate an estimate of pandemic cost that is inclusive of both income loss and the cost of elevated mortality. We present results on an expected annual basis using reasonable (although highly uncertain) estimates of the annual probabilities of pandemics in two bands of severity. We find:
1. Expected pandemic deaths exceed 700,000 per year worldwide with an associated annual mortality cost of estimated at $490 billion. We use published figures to estimate expected income loss at $80 billion per year and hence the inclusive cost to be $570 billion per year or 0.7% of global income (range: 0.4-1.0%).
2. For moderately severe pandemics about 40% of inclusive cost results from income loss. For severe pandemics this fraction declines to 12%: the intrinsic cost of elevated mortality becomes completely dominant.
3. The estimates of mortality cost as a % of GNI range from around 1.6% in lower-middle income countries down to 0.3% in high-income countries, mostly as a result of much higher pandemic death rates in lower-income environments.
4. The distribution of pandemic severity has an exceptionally fat tail: about 95% of the expected cost results from pandemics that would be expected to kill over 7 million people worldwide.
In other words, in expected value terms an influenza pandemic is a big problem indeed. But since, unlike global warming, it does not fit conveniently into the usual social status battles which define our politics, it receives far less attention.
I remember a very interesting debate that my father was involved in, where there was a water beetle that can’t travel very far and can’t fly. You have these in the north coast of Australia, and in millions of years, they haven’t been able to travel from one stream to another. And it came up that in the north coast of New Guinea, you have the same water beetle, with slight variations. The only way that could have happened was if New Guinea came off Australia and turned around, that the north coast of New Guinea used to be attached to the coast of Australia. It was very interesting seeing the reaction of the geologists to this argument, which was that ‘beetles can’t move continents.’ They refused to look at the evidence.
That is Geoffrey Hinton, being interviewed by Adrian Lee, mostly about AI and Go, interesting throughout.
For the pointer I thank Michelle Dawson.
1. How judges change their behavior to court Supreme Court nominations.
2. Finland contributes to the drone wars.
3. Markets in everything would YOU ride the death simulator culture that is China.
4. The coffee shop wars of Seoul.
5. Why aren’t there more Americans in the Panama Papers? And Henry’s primer on tax havens. And Cass Sunstein on the same. There is some evidence this kind of tax evasion is declining (NYT).
6. Benjamin Kunkel’s tweet: “Clinton’s achievement: liberals who once complained abt Citizens United now insist it’s a slur to suggest big donors influence politicians.” Here is Paul Krugman: “Clinton, who has said that coal is on its way out, is a tool of the fossil-fuel industry because some people who work in that industry gave her money? Wow.”
7. More interesting data on taxis, Uber, and Lyft in NYC.
I will be doing an AMA on Quora on Thursday. Questions and votes are populating now.
Here are some previous sessions with economists Jon Levin, Austan Goolsbee and Susan Athey. Lots of others, including Noam Chomsky, Bob Metcalfe and Gillian Anderson.
A San Francisco start-up aiming to offer an Ivy League-level education at half the cost of elite US colleges has accepted a smaller fraction of its applicants than Harvard or Yale in its third year of operation.
Minerva, whose students move between California, Berlin, Buenos Aires, Seoul, Bangalore, Istanbul and London while studying a largely online curriculum, will announce this week that it received more than 16,000 applications from 50 countries for 306 places, for an acceptance rate of just 1.9 per cent.
…With no sports teams, libraries or other overheads that contribute to the prestige of traditional universities but inflate costs, Minerva charges about $28,000 a year for tuition, room, board and other fees, offering scholarships through a non-profit arm. That compares to an estimated annual cost of $64,000 to attend Princeton.
…Its students are split into small groups for live interactive seminars, which are taught through a proprietary online platform that tracks their participation. They move together from one city to the next every six months, living in rented residence halls.
Here is the full FT story.
It has been suggested to me that perhaps North Dakota is the most obscure state in the Union. Maybe so! Let’s take a look:
1. Author: William Gass would be a possible pick, but I do not enjoy his work. Same with Louis L’Amour.
2. Humorist: Chuck Klosterman.
3. Sociologist of religion: Rodney Stark.
4. Painter: Clifford Styll is the obvious pick, except I don’t much like his work. If you were wondering, he dominates so many rooms in American museums because of restrictions placed on grants of his paintings from the artist’s own collection. I suspect some curators have come to resent this, but often the grants were made propitiously near the peak of Styll’s reputation. I suppose I’ll opt for James Rosenquist, although I am not a huge fan of his work either.
5. Evening television bandleader and toastmaster: Lawrence Welk. I can’t even think of a clear runner-up, with or without bubbles; this video will show you why he was a favorite of so many.
6. Movie and TV show, set in: Fargo duh. Otherwise it is Man in the Wilderness, which was the original and in some ways superior source material for The Revenant.
7. Actress: Angie Dickinson comes to mind, Dressed to Kill is a good movie.
8. gdp per capita — That can set many things right, although 2016 may not be as good as was 2014.
The bottom line: Hm..but yet we must consider Delaware and Rhode Island!
