Tyler Cowen

That is a paper from Amihai Glazer, here is the abstract:

A person may vote for a candidate to please citizens who prefer the same candidate, and to anger citizens who dislike the candidate. Such behavior is consistent with high turnout (though any one vote is unlikely to be decisive), with strategic voting, and with candidates adopting divergent positions.

That was circa 2008, and I am sure it was written before then, so it is time to raise the status of Amihai Glazer.  That is the same Glazer who coined Glazer’s Law, which is a rough rule of thumb for analyzing microeconomics puzzles — “It’s either taxes or fraud (or both!”).  That may be true for this election cycle as well.

This possibly gated but excellent nonetheless piece is from the FT, here is one excerpt:

A few weeks ago was typical. After some time off, my feed aggregator displayed 794 blog posts, 56 of them foolishly filed into the “must read” folder. Here lay a polemic blasting the FT for worrying about China’s debts; there a graph strewn post about US inflation expectations. Virtuoso “infovore” Tyler Cowen had dug up a fascinating passage on how China runs monetary policy. Another polymath, Brad DeLong (former Clinton staffer and tireless scourge of rightwing bunkum), had spent some minutes producing a few hundred words on “the intellectual role of the economist in public life”, throwing out references to pre-Christian philosopher Hermippos of Smyrna as a warm-up. Another writer, an anonymous retired trader with a bad back, explained how quantitative easing exposes central bankers as a bunch of bungling frauds. It felt like his fifth such post in a week.

And so on…

And yet in 10 years of trying to make sense of the economic world around me, I have found nothing as reliably good as the blogosphere.

And so on!  How can you not love an article that refers to an “omni-reading angel in the celestial library”?

There is a hat tip to Scott Sumner and a nice appreciation of Steve Randy Waldman as well.

That is the latest entry in the Conversations with Tyler series, here is the transcript, audio, and video.  Here is the overview:

Michael Orthofer, one of the world’s most prolific book reviewers, joins Tyler Cowen for a conversation on — what else? — books. Read to discover why Michael believes everyone should read more fiction, how we should choose books, why American popular literature is overrated, what he thinks about authors like Herman Melville, Fyoder Dostoevsky, Goethe, J.K. Rowling, Arno Schmidt, and many others, his recommendations for the best sites for readers, why studying literature at college was such a big disappointment, how much book covers matter, and why his opinion will never be the final word.

Here is one excerpt:

COWEN: Here’s another life hack which I totally reject, but it may just be because I’m an addict of sorts. You tell me why, for you, it’s wrong.

A lot of people say to me, “Well, I love fiction, but I’m never going to read new works because I can’t tell what’s really good. I’ll just wait 20 years and then look back on what was truly excellent from 20 years ago and read that 20 years later. In the meantime, now I’ll just read classics or things in other areas which are verified as being truly excellent.” Does that make sense?

ORTHOFER: I worry very much about people who rely on what gets that stamp of approval. Just because it has a cover review in the New York Times Book Review does not mean that that book really is, if we look at it from five or ten years down the road — that that book will still be a significant work. I find so much which is highly praised at any one point long‑term won’t be. Again, however — .

Another question:

COWEN: If we take American citizens, who are not necessarily the people who read you, but at the margin, we could give them more nonfiction, we could give them more travel, we could give them more fiction, or we could actually give them more of some really good TV, which of those things are we rooting for them to do more of, at the margin?

And this exchange:

COWEN: Bottom’s Dream. Most people have never heard of Arno Schmidt.

ORTHOFER: Regrettably, no.

COWEN: We have a chance now to read his masterwork. Some of his others are in English already. Tell us why we should care.

COWEN: But you giggled when you read Bottom’s Dream, right?

ORTHOFER: Yes.

COWEN: You giggled a lot.

ORTHOFER: The English edition, I think, is just under 1,500 pages.

COWEN: A mere pittance compared to Dream of the Red Chamber, right?

Do read the whole thing.

Here is my short review of Michael’s big book on world literature: “If you measure book quality by the actual marginal product of the text, this is one of the best books written, ever.  Reading the manuscript in draft form induced me to a) write an enthusiastic blurb, and b) order about forty items through Amazon, mostly used of course.  The book is basically a comprehensive guide to what is valuable and interesting in recently translated world literature, a meta-book so to speak, with extensive coverage of most of the countries you might want.”  And here is Michael’s blog.  You can order Michael’s book here.

That is the counterintuitive take from my latest Bloomberg column.  Here is one part of the argument:

Perhaps the most overlooked point is that the supply of negative-yielding securities is not so large relative to total global wealth. A recent Credit Suisse estimate suggested that global wealth could reach $369 trillion by 2019, reflecting growth rates of perhaps 7 percent a year. Such numbers are typically inexact, because who can measure the value of all the land in China and the buildings in Uzbekistan? Nonetheless, this number is truly large and it has been growing rapidly. By comparison, the negative-yield securities seem like not such a big deal.

Maybe it’s time we started thinking of negative securities as the equivalent of fire or earthquake insurance for that wealth. If there is truly $300 trillion in global wealth, is it so crazy to think that investors would pay a premium to buy $10 trillion dollars’ worth of insurance?

Keep in mind that if you buy securities at a yield of negative 1 percent a year, and equities are yielding 4 percent on average, your insurance cost on the safer securities is roughly 5 percent of the upfront investment.  So on $10 trillion of safe securities, that is an insurance premium of roughly $500 billion — a relatively small chunk of the $300 or $400 trillion of total global wealth.  In percentage terms it is cheaper than the homeowner’s insurance many of us pay for every day.

Observers sometimes wonder why there are so many negative yields at a time when volatility indices are not always so high. But the key to the risk-protection insight is not that the world is more volatile, which may or may not be the case at a given point in time, but rather that the quantity of otherwise hard-to-insure global wealth is significantly higher than in times past. It is worth noting that in both China and India, standard insurance remains an underdeveloped sector.

Do read the whole thing.

Thank you all for making the first day of The Complacent Class such a success; pre-orders were strong and according to one standard metric it was the #1 best-selling book for Monday.

I am working to get you information on Kindle pre-order, as of now the pre-order extra book offer still stands.  I also am told that on UK Amazon you have to search for title, not by my name, for whatever reason.

In Germany, where I live, you get money back for plastic bottles (“Pfand”). Sometimes €0.25 per bottle. And yet, I collect them, without ever finding the time to cash them. I never outright throw them away, but leave them standing neatly close to public trash cans. They are gone in less than an hour.

German colleagues are horrified by my barbaric behavior. I tell them that someone will recycle them, and get the money. But they are actually are horrified that I am not willing to claim the money as everyone else does. I can explain that I would be working below minimum wage if I were to spend time and mental bandwidth returning bottles. But these reasons are no use against the dogma that pfand bottles should be returned. Man macht das nicht.

That is from Londenio.  And, not from the comments, here is a short piece on German economists:

So, my claim is that economists are only respected and accepted in the broader public discourse if they are like lawyers. And my conjecture is that this will remain so.

That is Rüdiger Bachmann: “Die hier geäußerten Meinungen sind nicht unbedingt die Sicht des Vereins für Socialpolitik.”

Tuesday assorted links

by on July 26, 2016 at 2:24 pm in Uncategorized | Permalink

That is my new Bloomberg View column, here are some excerpts:

Enter Richard von Glahn’s “The Economic History of China: From Antiquity to the Nineteenth Century,” a book likely to go down as one of the year’s best. Over the last 15 years, the economics profession has gone from a poor understanding of China’s economic history to knowing quite a bit. Von Glahn’s exhaustive but readable book is the best guide to this rapidly growing body of knowledge.

…a lot of autocratic Chinese regimes in history have proven stable even in periods of fairly slow economic growth. It can take them centuries to fall and be replaced, and even then a foreign invasion, like ones by the Mongols or Manchus, may be required.

From today’s media, one sometimes receives the impression that a Chinese growth rate below 4 or 6 percent could mean radical instability and a rapid fall of the government, but Chinese history does not show this pattern. That is hardly proof of how things will run in the future, but it should shift our expectations in the direction of greater Chinese political stability.

Other times, Chinese regimes can fall for what might at first appear to be relatively arbitrary reasons.  And the key point is this:

If there is a single common theme running through the many centuries covered by this book, it is the never-fully-successful quest of the Chinese state for revenue and fiscal stability. One reason China fell behind Western Europe in the 18th century is simply that the Chinese state spent less on creating valuable public goods and infrastructure.

In 1993, 15 years after it began making market-oriented reforms, the Chinese central government’s direct revenue was only 3 percent  of gross domestic product, with the usual caveat that no Chinese numbers should be taken as exact measures. Only in the last 10 years has that revenue share exceeded 10 percent of GDP; by comparison, in the U.S. in normal times that number sits in the range of 17 to 18 percent. For all the images Americans might have of China’s government as a communist behemoth, the country’s political order is better understood as still somewhat immature.

Do read the whole thing.  You can order Glahn’s book here, it is one of my favorites of the year so far.

Arbitrage!

by on July 26, 2016 at 3:35 am in Economics, Law, Television, Travel | Permalink

Man faces prison for scheme inspired by Seinfeld plot where he ‘brought 10,000 cans from out of state to take advantage of Michigan’s higher deposit rates’

That is the headline, here is the story via the excellent Mark Thorson.  For the under-informed amongst us:

In Michigan you can get 10c for every bottle you give back – whereas places such as New York will only give you 5c.
But it is illegal for someone to knowingly bring them from somewhere else in order to get cash.

I see a number of proposals for inducing less well informed voters to make better choices:

1. Educating them better.

2. Boosting the rate of sustainable economic growth, which tends to persuade people to support better policies.

3. “Buying” voters with one-off transfers, in the hope they will show more support for the better sides of the system.

4. Shaming voters away from making mistakes.

5. Actually giving them control over electoral outcomes, say by having the elites copy the voting choices of the less informed.

Most of us prefer the first two options, but they are relatively hard to accomplish.  What is striking is how much attention #3 gets relative to #4 and #5.

It all depends on the margin, but my view of human nature makes me relatively skeptical of #3.  It is either ignored, or viewed as a kind of insult, or it induces people to simply up their demands and expectations.  That is especially likely to happen for voters who express potentially “nasty” electoral preferences.  I think it is less of a problem for say how a single mother responds to food stamps for her kids, but of course we could debate that.  (By the way, if you are wondering, the main difference between Brazil and Denmark boils down to #2, not #3.)

I can’t recall anyone endorsing #5, yet of course the elites recommend an inverse version of #5 for the less informed voters, namely they should copy the elites.  Hmm.  The version of #3 we offer is actually more like “#3 but no way #5,” and I believe it is processed and understood as such, no matter how “under-informed” those voters may be.  They’re not under-informed about that!

#4 is under-discussed.  Take the less informed voters who voted for the better candidates in the 1960s.  Why did they do that?  Note that many of those people believed some pretty terrible things, including about race and about the suitability of George Wallace for higher office.  I believe shame is part of the answer — they did not want to feel the shame of deviating from the preferences the elites wanted them to express.

Perhaps it is hard to re-bottle that genie, but there are plenty of historical examples where shame cultures go away and then return, consider for instance the United States after the 1920s.

There is a literature on shame and voting behavior, though from what I can tell most of it concerns participation per se rather than the quality of electoral choice.  Here is one striking sentence:

Pride motivates compliance with voting norms only amongst high-propensity voters, while shame mobilizes both high- and low-propensity voters.

Hmm.

I believe in the last two years I have read at least five hundred times that elites should somehow do more for less informed voters, not only for efficiency or distribution reasons but also to improve the quality of our democracy.  The efficiency and distribution claims are at least defensible, maybe more, but the electoral claims are remarkably unsupported.  At the same time, shame barely comes up and I take that to be a reflection of the myopic nature of contemporary times.

Now, maybe elites think there is something wrong with shaming.  But when I watch what elites do, including but not only on Twitter, they spend a great deal of time and effort trying to shame each other.  If anything, that seems to drive them further apart and make a good solution less likely.

It might have been a better situation when the elites, acting with some joint collective force, directed more of their energies to shaming the less elite voters than to shaming each other.

And with that claim I am seeking to shame…the elites.

We should give more thought as to how we can get the advantages of shame cultures, without also taking on all of their disadvantages.  Is it good or bad that shame, like many other aspects of American life, seems to be more income-segregated than before?

Chinese scientists are on the verge of being first in the world to inject people with cells modified using the CRISPR–Cas9 gene-editing technique.

A team led by Lu You, an oncologist at Sichuan University’s West China Hospital in Chengdu, plans to start testing such cells in people with lung cancer next month. The clinical trial received ethical approval from the hospital’s review board on 6 July.

…The Chinese trial will enroll patients who have metastatic non-small cell lung cancer and for whom chemotherapy, radiation therapy and other treatments have failed. “Treatment options are very limited,” says Lu. “This technique is of great promise in bringing benefits to patients, especially the cancer patients whom we treat every day.”

On this one, they’re ahead of us.  There is much more information at the link, including a discussion of where the U.S. is at and also the FDA.

China’s “augmented fiscal deficit” (i.e. off-budget items included) has climbed to nearly 15% of GDP

deficit

That is from Goldman Sachs, via Simon Rabinowitz.

Monday assorted links

by on July 25, 2016 at 5:40 pm in Uncategorized | Permalink

That is my next book, now finished, due out February 2017 from St. Martin’s Press.  You can pre-order it from Amazon or Barnes&Noble.  Recommended!

Very little of the content of this book has appeared on Marginal Revolution.  It contains my thoughts on the death of American restlessness, what is happening with segregation by race and income, how we have become a nation of “matchers,” why crime rates will move up, the ultimate sociological roots of the economic great stagnation, why Steven Pinker is probably wrong about world peace, what we can learn from the riots and violence of the 1960s, why the bureaucratization of protest matters, marijuana vs. cocaine vs. heroin, in which significant way gdp statistics really do under-measure productivity, the importance of cyclical theories of history, and what Tocqueville got right and wrong about America.

And much more!  Most of all it is about why the future will be a scary place.

I also am making a special offer for those who pre-order the work.  Just send me an email to tcowen@gmu.edu (or my gmail), and tell me you have pre-ordered The Complacent Class, and I’ll send you a free copy of another work by me — about 45,000 words — on the foundations of a free society.

I have been revising this second one for over fifteen years, and it is called Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals.  It is finally ready.

You will receive links to an on-line version with images, a pdf with images, and a plain vanilla pdf for Kindle.

In that work, I outline a true and objectively valid case for a free and prosperous society, and consider the importance of economic growth for political philosophy, how and why the political spectrum should be reconfigured, how we should think about existential risk, what is right and wrong in Parfit and Nozick and Singer and effective altruism, how to get around the Arrow Impossibility Theorem, to what extent individual rights can be absolute, how much to discount the future, when redistribution is justified, whether we must be agnostic about the distant future, and most of all why we need to “think big.”

These are my final thoughts on those topics.  And to be fair, this is likely to come out someday as a more traditional book, but that will not happen soon as I have not shopped it around to any publisher.  So if you pre-order The Complacent Class, you’ll get what is an advance and also free copy of Stubborn Attachments.

Are you feeling down because of the political conventions?  Or maybe you’re feeling down because of me?  This is exactly the bracing and optimistic tonic you need.  These two works, taken as a whole, cover where we are at and also where we need to go.

Addendum: If you are a member of the media and would like to receive a review copy of THE COMPLACENT CLASS (St. Martin’s Press; On-sale: February 28, 2017), please contact Gabrielle Gantz: gabrielle.gantz@stmartins.com; or 646-307-5698.

Three new books on Europe

by on July 24, 2016 at 9:32 pm in Books, Economics, History | Permalink

Markus K. Brunnermeier, Harold James, and Jean-Pierre Landau, The Euro and the Battle of Ideas.

Larry Elliott and Dan Atkinson, Europe Isn’t Working.

Philipp Ther, Europe Since 1989.

All three appear to be useful…