Tyler Cowen

“How can the Spanish or Italian prime minister tell voters that Greece has a lower interest burden than we have, but we still need to give them debt forgiveness?” said Mr Darvas.

That is from Ferdinando Giugliano at the FT, who is referring to the possibility that the Greek debt load might be sustainable.  Don’t focus on the debt to gdp ratio of 175 percent, consider that the interest rates are low and the term structure of the debt is long.  Here is your Greece fact of the day:

Mr Darvas calculates that total interest expenditure in 2014 [for Greece] was 2.6 per cent, only marginally above France’s 2.2 per cent.

Yet I do not find the Greek position to be sustainable.  As has been the case from the beginning, the real problem in the eurozone is in the politics, not the raw numbers of the economics.  It is worth noting that there are Maoist and Trotskyite factions in Syriza, so if we are going to moralize about the National Front in France, or other disreputable groups, let’s be a little more consistent here…

Assorted links

by on January 26, 2015 at 12:59 pm in Uncategorized | Permalink

1. Why has this battery lasted for 175 years?  (Didn’t they read Coase?)

2. Scott Sumner movie and book reviews.

3. Ogilvie and Carus, a long essay on institutions and economic growth.

4. Daniel Davies on Greek scenarios.  And Alan Krueger: “But did the fall in wages lead to a fall in export prices?

5. Interview with Peter Boettke.  And how D’Angelo managed Black Messiah.

Quite a bit.  There is a new NBER Working Paper on this topic by Hagedorn, Manovskii, and Mitman, showing (once again) that most supply curves slope upward, here is one key part from the abstract:

In levels, 1.8 million additional jobs were created in 2014 due to the benefit cut. Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized.

There is an ungated copy here (pdf).  Like the sequester, this is another area where the Keynesian analysts simply have not proven a good guide to understanding recent macroeconomic events.

When I visited Santa Monica in January it struck me how much it reminded me of…Arlington.  Arlington is now essentially a part of Northwest, at least Arlington above Route 50 or so.  Arlington and Santa Monica have never been more alike, or less distinctive.

Parts of east Falls Church will meld into Arlington, and south Arlington will become more like north Arlington.  Real estate prices east/north of a particular line are rising and west of that line are falling.  Fairfax is definitely west of that line.

The Tysons Corner remake will fail, Vienna is not the new Clarendon, and the Silver Line and the monstrously wide Rt.7 will form a new dividing line between parts of Virginia which resemble Santa Monica and parts which do not.

Incumbents aside, no one lives in Fairfax any more to commute into D.C.  Why would you?  The alternatives are getting better and Metro parking became too difficult some time ago.  Fairfax is not being transformed, although some parts are morphing into “the new Shirlington.”  Most of it will stay dumpy on the retail side.  Annandale will stay with Fairfax, whether it likes it or not.

For ten years now I have been predicting various Fairfax restaurants will close — casualties of too-high rents — and mostly I have been wrong.  The good Annandale restaurants are running strong too.  Annandale won’t look much better anytime soon, thank goodness for that.

“Northern Virginia” is becoming two different places, albeit slowly.

Each monastery had its own estates, and all the people farming on these estates paid taxes in money and goods.  One of the main tasks of the stewards was to increase this income; for instance, by lending grain back to the peasants at high interest rates, or selling goods at market.  Before the destruction of the monasteries in the 1960s, they owned as much as half of Tibet’s farmland.

The description however is referring to the 15th century.  Another interesting part of the book concerns how, during Tibet’s “Golden Age,” the Tibetans tried to impose their language and culture on the neighboring regions of China, and with some success.

That is all from Sam Van Schaik, Tibet: A History.

Assorted links

by on January 25, 2015 at 2:08 pm in Uncategorized | Permalink

1. “A small number of humans have virtually no constraints on their decision-making, and Reid is one of them.”  The post includes sixteen lessons learned, mostly I agree.

2. Why labor force participation is still so low.

3. Have we reached peak economist?  Here is a pouty (but interesting) response from a sociologist.

4. Naipaul and Theroux bury the hatchetSir Vidia’s Shadow is another of my all-time favorite books.

5. Why is India so crazy for world records?

6. Infrastructure quality and the subsidy trap (pdf), important piece, gated AER version hereCentral Park now and then, photos.

7. “Some of them are Sufi mystics.”  Are we back to having two Yemens?

Mostly, yes, although with some caveats (the headline of the piece doesn’t exactly capture this).  That is the topic of my latest column for The Upshot.  Here is one excerpt:

Niclas Berggren…and Therese Nilsson…have produced a fascinating series of papers on these questions, sometimes writing singly, sometimes together or with the collaboration of a variety of co-authors. Their most notable study is perhaps a paper they wrote together, “Does Economic Freedom Foster Tolerance?

…One of their most striking findings is that societies characterized by greater economic freedom and greater wealth do indeed exhibit greater tolerance toward gay people, a tendency suggesting that gay rights, including gay marriage, will spread globally as national economies liberalize and develop.

Some metrics of economic freedom count more than others:

This greater tolerance is strongly associated only with certain features of what has often been defined as economic freedom. For example, a smaller government, measured as a share of gross domestic product, is often included in so-called economic freedom indexes as an objective measure of freedom. But the data show that smaller government has a slight negative correlation with tolerance of gay people by heterosexuals. One implication is that many conservatives may be overly preoccupied with the size of government as a measure of how free societies actually are.

On the other hand, the data shows that when a society has impressive scores on property rights security and low inflation — two other components of economic freedom indexes — these characteristics are strongly and positively correlated with tolerance of gays. It’s possible that low inflation, and the behavior of a central bank, are stand-ins for the general trustworthiness of a nation’s government and broader institutions, and such trustworthiness helps foster tolerance.

The results for race are not nearly as strong, namely both freedom and prosperity are less clearly associated with higher levels of racial tolerance, although the correlation is still a positive one.

And there is this:

We are often told that education is an important remedy, yet it does not register as a meaningful factor in the cross-country data in this paper. Higher levels of education simply have not correlated significantly with higher levels of tolerance across countries.

Do read the whole thing.

Kerin Hope from the FT reports:

A reluctance to pay taxes was much criticised by Greece’s creditors as one reason why the country needed a big international bailout. Now many Greeks are again avoiding the taxman as they bet the radical left Syriza party will quickly loosen fiscal policy if it comes to power in Sunday’s general election.

A finance ministry official confirmed on Friday that state revenues had collapsed this month. “It’s normal for the tax take to decline during an election campaign but this time it’s more noticeable,” the official said, avoiding any specific figures on the projected shortfall.

However, two private sector economists forecast the shortfall could exceed €1.5bn, or more than 40 per cent of projected revenues for January.

File under “In case you had not been paying attention…”  And here is Antonio Fatás with a Grexit scenario.  That is still not what most people expect, however.

Assorted links

by on January 24, 2015 at 2:36 pm in Uncategorized | Permalink

1. Baby name markets in everything.  And kippa made out of hair.  For Europe.

2. Will the Coase theorem apply to Greece?  And prominent economists send the FT a letter on Greece.

3. The strangest, yet still credible ranking of the greatest albums ever, except it is not credible.  Or is it?

4. How scalable is the block chain?

5. Some of the Borjas results are maybe not so robust.  And “After a deal, British chocolates won’t cross the pond.”

6. Memoirs of a germaphobe: “Why do I have to touch the screen to choose a payment method?”  This short article is also a lesson in behavioral economics and nudge.

“Let’s Play Two”

by on January 24, 2015 at 11:07 am in Film, Food and Drink, Sports, Uncategorized | Permalink

Very sadly Ernie Banks — the baseball player for you foreigners out there — has passed away.

Oddly, I have taken to quoting him lately.  If you are going out to eat with a small group, I recommend two stops.  No, don’t eat any more food than usual, but distribute your meal across two restaurants.  Have a few appetizers in one, and then leave and move on to another.  (This is easiest to do in Eden Center, with its wide selection of small-dish Vietnamese eateries, but other methods will work.)  Of course you must sequence your meals properly, the Greek eggplant must become before the Sichuan noodles, not vice versa.

This approach will improve the conversation at your table, if only by breaking up the original seating plan.  It also makes you more aware and more appreciative of what you are eating.

If you are going out to a movie, see two.  There is a fixed cost of attending, whether in terms of the traffic, the babysitter, or simply the will to spend time away from Facebook.  “Let’s Play Two.”

I have the impression that consumers “do fewer doubleheaders” than when I was growing up, I am not sure why.  Perhaps we have grown too impatient.

Banks’s obituary described him as “an unconquerable optimist whose sunny disposition never dimmed in 19 seasons with the perennially stumbling Chicago Cubs…”

Here are other quotations from Ernie Banks.  He said “The only way to prove you are a good sport is to lose.”

Here is some media coverage of a recent Facebook study of its economic impact in terms of revenue and jobs.  Facebook claims it added $227 billion to the global economy, but they approached the question the wrong way.

The correct method is to treat jobs as a cost of Facebook, not a benefit, admittedly that is not how politics works nor is it how corporate PR works.  We should measure the benefits directly by consumer time use studies, much as Austan Goolsbee and Peter J. Klenow did in their paper on the internet (pdf).

My question today is this: what is the most accurate one line back-of-the-envelope estimate you can come up with for the gross benefits of Facebook, not bothering to subtract for the costs of running the site?  Here is one (hypothetical and illustrative) example, for America only:

100 million regular users, one hour a day, time valued at $10 an hour, and multiply for $365 billion a year.

You will notice this method implicitly captures the value and disvalue of the ads on Facebook.  The better and more useful the ads are, the more time people will spend on the site.

I don’t devote time to Facebook (I can thank MR for that), so surely you can do better than I in building a plausible one-line estimate.  Please leave your answer in the comments.

Jinfeng Luo and Yi Wen from the St. Louis Fed have a new working paper (pdf), “Institutions Do Not Rule: Reassessing the Driving Forces of Economic Development”:

We use cross-country data and instrumental variables widely used in the literature to show that (i) institutions (such as property rights and the rule of law) do not explain industrialization and (ii) agrarian countries and industrial countries have entirely different determinants for income levels.

In particular, geography, rather than institutions, explains the income differences among agrarian countries, while institutions appear to matter only for income variations in industrial economies.  Moreover, we find it is the stage of economic development (or the absence/presence of industrialization) that explains a country’s quality of institutions rather than vice versa.

The finding that institutions do not explain industrialization but are instead explained by industrialization lends support to the well-received view among prominent economic historians — that institutional changes in 17th and 18th century England did not cause the Industrial Revolution.

I am reminded of a puzzle which I think was first posed by Jeff Sachs.  Go back to 1960 and choose any measure of institutional quality you want.  Then see how well it predicts cross-national growth since then.  And that is doing the exercise knowing how the answer comes out!

Assorted links

by on January 23, 2015 at 12:47 pm in Uncategorized | Permalink

1. Scott Sumner on Keynesian excuses.

2. Alan Krueger working for Uber.  And dating average is over.  And rendering Tyler Cowen obsolete.

3. Newspapers are still deep in a financial hole.

4. Divorce machine gun markets in everything.  And Croatia wants to peg to the Swiss franc (!) for mortgage protection.

5. Department of Uh-Oh: more competition leads to higher antibiotic prescription rates.

6. Matthew Slaughter is now Dean of Dartmouth business school.

7. The legal system that is German.  They got the ruling right, I say.

8. Paul Krugman’s estimate: “So, Draghi’s big announcement seems to have raised expected European inflation by one-fifth of a percentage point.”  Alternatively, Daniel Davies on why QE might prove effective.

9. “If everything is clean, then he will be impressed.”

As part of a publicity stunt, author James Patterson is giving away 1,000 self-destructing digital advance copies of his latest novel, Private Vegas. If you score one, you have 24 hours to finish the entire book before the text vanishes forever. And if that’s just not risky enough, Patterson is selling a real self-destructing copy (for a whopping $294,038) that includes a dedicated bomb squad, among other creature comforts. There are likely much better ways to spend six digits in record time, but it’ll probably be the most exciting reading experience you ever have — no matter how good the story might be.

There is more here, via Kurt Busboom.  Much better than my advice, it would seem.

Read the recent testimony of Robert E. Hall (pdf):

Most of the decline in participation occurred among teenagers and young adults. The fi nding that these e ffects tend to be larger in more prosperous families points strongly away from much of a role for rising influence of benefi t programs, because these programs, especially food stamps, are only available to families with incomes well below the median.
So what is going on here?  Could it be “culture”?  Hall cites, suggestively, time use surveys showing that sleep and personal consumption of video are up strongly.