Tyler Cowen

President-elect Donald Trump criticized a cornerstone of House Republicans’ corporate-tax plan, which they had pitched as an alternative to his proposed import tariffs, creating another point of contention between the incoming president and congressional allies.

The measure, known as border adjustment, would tax imports and exempt exports as part of a broader plan to encourage companies to locate jobs and production in the U.S. But Mr. Trump, in his first comments on the subject, called it “too complicated.”

“Anytime I hear border adjustment, I don’t love it,” Mr. Trump said in an interview with The Wall Street Journal on Friday. “Because usually it means we’re going to get adjusted into a bad deal. That’s what happens.”

Here is the WSJ piece.  I am not suggesting, however, that I favor his preferred alternative or for that matter most of his other policy ideas.  By the way, here is Trump on heroes.  A willingness to think things through from scratch is in some ways admirable, but dangerous in matters of foreign policy and nuclear weapons, where predictability is at a premium.

And see some related remarks from Conor Sen.

Most estimates of the impact of parental leave entitlement on female labor market outcomes range from negligible to weakly positive. There is stronger evidence that spending on early education and childcare increases labor force participation of women and reduces gender gaps.

That is from a new NBER paper by Claudia Olivetti and Barbara Petrongolo.  A different new paper, by Hope Corman, Dhaval Dave, Ariel Kalil, and Nancy E. Reichman, offers these results:

We find that welfare reform led to reduced youth arrests for minor crimes, by 7-9 %, with similar estimates for males and females, but that it did not affect youth arrests for serious crimes. The results from this study add to the scant literature on the effects of maternal employment on adolescent behavior by exploiting a large-scale social experiment that is still in effect to this day, and provide some support for the widely-embraced argument that welfare reform would discourage undesirable social behavior, not only of mothers, but also of the next generation.

Overall I still consider Clinton-era welfare reform to be underrated.

Monday assorted links

by on January 16, 2017 at 10:08 am in Uncategorized | Permalink

1. Good take on La La Land and nostalgia.

2. Does it work when the coach yells at the ref?

3. Why is the barter market for lovers so imperfect?  My view is that women compartmentalize this kind of thing better than men do, for the most part, at least above age 30.

4. “Could flashing the “peace” sign in photos lead to fingerprint data being stolen?”

5. So maybe hard Brexit it is?

6. The debate over whether it was just subprime.

7. “But the concrete Pantheon? One of the reasons it has survived for so long is because the solid concrete structure is absolutely useless for any other purpose.” Link here.

8. Some economics for Martin Luther King Day.

I would call the disappearance of Ringling Brothers a civilizational advance, except I am not sure we are living in a time that merits this phrase.  In any case, I found this 2013 article on circus economics interesting:

Gibson and Petrov travel with Ringling’s “gold unit” through smaller markets like Chattanooga, where the intimate one-ring circus seems more supportable than the the three-ring spectacle that tours big cities.

Gibson describes the economic impact on Chattanooga: 40 of the 120 circus employees stay at a local hotel; 24 travel in RVs that are parked in a nearby field.

Each day, truckloads of hay and produce are hauled to McKenzie Arena to feed the animals. The circus vet banned peanuts from the elephants’ diet for being too fatty but allows them an occasional loaf of unsliced bread or some marshmallows for treats. On performance days, a local caterer feeds the human employees, or they buy their meals in restaurants or grocery stores.

The circus carries its own washing machines and dryers, computers and props. It has a free day care center with two teachers for employees to use and a free, fully staffed school for K-12 students.

The gold unit hits 42 cities in an average year, which means 46 to 48 weeks on the road. Gibson said a lot of circus employees visit Ruby Falls and the Tennessee Aquarium when they get to Chattanooga.

But the schedule does not leave much time for socializing outside of the circus. Many performers are third- or fourth-generation Ringling employees who marry other Ringling staffers and raise their kids on the road. Petrov and his wife, Victoria, have a 17-year-old son who grew up attending the traveling school.

Maybe it was just a poorly run business, but might there be a more systemic read on the troubles of Ringling?  The company itself cited declining attendance and high operating costs as factors, but of course that can be made more specific.  Here are a few options:

1. It is now cheaper to bring people to spectacular events than to have the spectacular events travel around.  Maybe it makes more sense to build something more permanent into Las Vegas or Orlando.  Cirque Soleil is experiencing economic problems as well.  But note that “Monster Jam, Disney on Ice and Marvel Live,” among other endeavors, still will be up and running.

2. Kids get enough drama through social media.

3. Circus jobs stink, and it is increasingly hard to attract and retain the talent.  Might there be a visa/immigration issue as well?

4. Circuses are mostly boring, and some of the highlights can be watched, in one form or another, on YouTube.  Even as a kid I was bored by the circus I saw at Madison Square Garden, relative say to watching Fischer vs. Spassky on TV.  What’s the actual drama in a circus?

David Burge offers marketing comments: “Ringling Bros was mid-market brand killed by upscale competors like Cirque de Soleil, downscale knockoffs like Washington DC”

5. Fewer circus animals, including fewer or no elephants (none for Ringling since May 2016), hurts circus demand by a significant amount.

6. I don’t know if contemporary circuses still degrade women, the disabled, and other groups, but of course the contemporary world won’t sit still for that any more, not in any sphere of life.

Those are just speculations, what other factors might be operating?

That is a request from Christina, a loyal MR reader.  It sounds like a huge question, and maybe it is, but my answer is pretty simple, which is not to say the problem is simple to solve.

Let’s say you are in Germany.  People engage in rule-following behavior, and they become quite emotionally stressed if you suggest you might break the rules in especially inappropriate ways.

Alternatively, in Naples there is more garbage in the streets, and flexibility and rigidity across a very different set of social variables.  I call that a difference in “culture,” and I am ready to accept culture as an ill-defined, question-begging term.

Now, how do differences of culture — however defined — interact with traditional economic mechanisms involving prices, incomes, and simple comparative statics?  Are those competing explanations, namely cultural vs. economic?  Ought they to dovetail nicely in some kind of broader explanation?  Or might the cultural factors in some manner be “reduced” to questions of more traditional economics?  Some combination of the above?  Something else altogether?  And, from among these and other options, what principles of differentiation rule how “culture” and “economics” will be related in a particular problem?

That to me is the most important unsolved problem in economics and indeed in social science more broadly.

feynman

Sunday assorted links

by on January 15, 2017 at 11:50 am in Uncategorized | Permalink

1. Why is California so closely connected with melancholy?  Here is a smart, critical review of La La Land, but I think it misses the point: the movie is a critique and indeed subtle reflection of what is (supposedly) an all-pervasive mediocrity of contemporary life and art.  Setting the opening musical number in a traffic jam plays up the contrast with the older, “more glorious” musicals quite deliberately.  At the same time, the movie questions whether the past was ever so glorious after all.

2. Librarians report on what is the strangest thing they have found in a library book.

3. Might Peter Thiel run for governor of California?

4. An Arkansas city won’t let them live in a $1500 trailer, minimum legal value there is $7500.

5. Trump, Strauss, and Bingham’s “The Verdict of the People.”  And would you leave Parliament to run the V&A?

What I’ve been reading

by on January 15, 2017 at 12:34 am in Books, Uncategorized | Permalink

1. Ousmane Oumar Kane, Beyond Timbuktu: An Intellectual History of Muslim West Africa.  This excellent book clarified many aspects of West African and also Nigerian history for me, most of all how it connects to the earlier North African civilizations.

2. Sheelah Kolhatkar, Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street.  I cannot vouch for the contents and allegations, which focus on Steven A. Cohen and his hedge fund career, but this is a highly engaging and better researched than usual look at the legal case against him.

3. Mark R. Patterson, Google, Yelp, LIBOR, and the Control of Information.  Data fraud, data fraud, data fraud, welcome to 2016 yes you should be reading more books on this topic.

4. Kevin Vallier, Liberal Politics and Public Faith: Beyond Separation, “…public reason liberalism, properly understood, realizes foundational liberal values while according religion a prominent and powerful role in public life.  I claim that, in theory and practice, public reason liberalism is far friendlier to religion in public life than both its proponents and opponents believe.”  There is a Straussian reading of this book too.

5. Aurelian Craiutu, Faces of Moderation: The Art of Balance in an Age of Extremes.  A much-needed perspective these days, from a very thoughtful scholar.

6. Gary Taubes, The Case Against Sugar.  My intuitions agree with this argument, plus jelly donuts don’t taste that good anyway.

Austrian hermit edition:

An Austrian town is looking to employ someone to live in a hermitage that has no heating nor running water in what appears to be one of the worst jobs in the world.

Saalfelden in the state of Salzburg is looking for a candidate to move into a 350-year-old building, that is built into a cliff-face, to meet and greet Christian pilgrims who frequent the site’s chapel for prayer and self reflection.

Local resident Alois Moser and Saalfelden’s mayor Erich Rohrmoser, will select the new hermit and have told a radio station the traits they are looking for in their new employee.

Moser told state broadcaster ORF that they want ‘a self-sufficient person who is at peace with their self, and willing to talk to people, but not to impose’.

He also said the successful candidate should have a Christian outlook and be ready to greet visiting pilgrims and locals who make their way up the steep cliff face to the house.

The chosen candidate will be selected more on the basis of personality than training and professional experience but will need to be prepared to live without a computer and television, job specifications say.

The parish have stressed the position, which runs from April to November each year, is unpaid despite the sacrifices one would have to make when accepting the post.

Although it appears to be an unattractive proposition the role was has been widely coveted in the past.

Here is the full story, via the excellent Mark Thorson.

I especially enjoyed the part about his interior decorating, this segment was fun too:

Hart’s appetite for complex contract negotiations has also served him well at home. He and his wife embarked on a major renovation of their house several years ago, adding new rooms to the ground floor and expanding the kitchen and backyard. Though he admits that his wife spearheaded the design, which included an open kitchen and new sitting room just off the main entrance, Hart says he negotiated the contract with the builders. “You learn right away that nothing will be completed when they say it will,” he adds with a wry smile. “So there are lessons that even I can learn.”

Here is the full FT story.  Here is The Economist covering Rita Goldberg’s second-generation Holocaust memoir; she is Hart’s wife.

A philosophically-minded MR reader writes to me:

Tenure ought to be an occasion to explore radically new intellectual paths, ones not pre-approved by one’s field and ones that could, perhaps, do something to bridge the chasm between academic and non-academic intellectual life–and yet as a matter of fact what seems to happen is that people either stop working altogether or continue barreling down the groove they wore themselves into to get tenure.  (You mentioned this issue in a post last year: http://marginalrevolution.com/marginalrevolution/2016/06/does-tenure-encourage-risk-taking.html)  But I want to hear more.

So: why does this happen, how can we prevent it at the University/ departmental level, and, most of all, how can we prevent it at the personal level?  (Keeping in mind that most of us are not cognitively capable of processing information at the speed to go your route!)   The idea that we are incentivized to keep working by the prospect of being promoted to full Professor seems silly, given the increased administrative responsibilities.

Related problem: as one moves up the tenure hierarchy, the administrative responsibilities tend to fall disproportionately on fewer and fewer people,  b/c there are lots of deadbeats. I repeatedly see the few responsible people overwhelmed with administrative tasks which they refuse to delegate to those they know will not take them seriously.  (And I observe these responsible people are disproportionately women, even in a field–like mine–that is disproportionately male.)

I have a few suggestions, all feasible but only a few are practical:

1. All schools should copy the committee obligations policy of the school, within their quality tier, that has the fewest committee assignments for faculty.  Yes this can be done.

2. I don’t know how to operationalize this one, but on average give women half the committee assignments that men have.  That still won’t equalize the total work burden (women on average work harder per committee assignment), but it is a start.

3. Study your lecture preparation, and experiment with cutting parts of it out.  See if that matters.

4. Each year take at least one trip to a place you didn’t think you wanted to visit.

5. Go to some Liberty Fund conferences.

6. Refuse to have colleague lunches based around local politics, politics, small talk, sports (unless of the analytic variety), and campus gossip.  Just don’t do it.  Also avoid lunches with too many people attending.

7. Of the five or so smartest people you hang out with (family aside), try to ensure that no more than half of them are in your department.

8. Change the ratio of foreign-to-domestic TV shows you watch, in favor of the foreign.

9. Hang at least one piece of non-cheery art on your wall that will remind yourself of an ever-pending death.  Change its angle every now and then, or better yet change the picture, so you don’t get too used to it and stop noticing it altogether.  If need be, supplement this with Brahms’s German Requiem.

10. Write a periodic blog post, if only a secret and non-published one.  If you don’t find this process is going well, ask yourself what is wrong.

11. Worry if no one thinks you are crazy.  Supplement this with actually being crazy.

12. What else?

Saturday assorted links

by on January 14, 2017 at 12:33 am in Uncategorized | Permalink

1. How is the Nigerian anti-corruption campaign going?

2. This four-year-old girl knows how to read books fast and with superior comprehension.

3. Bernie Madoff dominates the hot chocolate market in prison.

4. What happens when algorithms design a concert hall?

5. David Brooks on markets in health care (NYT).

6. “As superlow rates reduce loan revenue, a Japanese lender branches out into farming, pinball, broadcasting, rice cultivation and blueberry jam; ‘If you’re going to go to the bank, it should be fun’”, WSJ link here.  And Basil Halperin on market monetarism.

7. “The ‘Krispy Kreme Familia’ and the black market doughnuts of Juarez.”

Bruce Caldwell emails me:

The Center for the History of Political Economy at Duke University will be hosting another Summer Institute on the History of Economics this summer from June 4 – 16, 2017. The program is designed for students in graduate programs in economics, though students in graduate school in other fields as well as newly minted PhD’s will also be considered. Students will be competitively selected and successful applicants will receive free housing and reading materials. The deadline for applying is March 3. Travel stipends for those coming from afar will be considered on a case by case basis.

We are very excited about this year’s two week program, which has a somewhat different format from other years. The first week Bruce Caldwell will be the sole lecturer, and will present a mini-history of economic thought class, providing both content and tips on how to set up such a course. The second week is thematic. Steve Medema will present a history of the concept of market failure, and Kevin Hoover will present a history of macroeconomics. Applicants may sigh up for either week, or both. More information on the Summer Institute is available at our website, http://hope.econ.duke.edu/

Friday assorted links

by on January 13, 2017 at 12:25 pm in Uncategorized | Permalink

1. Do lenders of last resort really make financial systems that much safer?  And the bullfighting economist and Federal Reserve governor.

2. Disney negotiating with Carrie Fisher’s estate for more Princess Leia.

3. Seoul opens a bookstore with no employees and no prices.

4. “Virginia man spends $1,000 to deliver 300,000 pennies to Lebanon DMV.”  (The penny, and wheelbarrow, as rent-seeking behavior…):

Still, Stafford had one final act planned. After collecting the hundreds of rolls of pennies he needed, he hired 11 people to help him break open the paper rolls with hammers Tuesday night. It took four hours and he paid each person $10 per hour, costing him $440.

Stafford also purchased five wheelbarrows to deliver the pennies. The wheelbarrows cost $400, and he wasn’t going to dump the coins on the DMV’s floor, so he left the wheelbarrows there, bringing his expenses to $840.

He also paid $165 for the three lawsuits, which means he spent $1,005 to get 10 phone numbers and the satisfaction of delivering 300,000 pennies.

Via Annie Lowrey.

5. Maybe the AIIB is better after all:

William Faulkner’s novels in particular stuck with Mr. Jin, now the president of China’s Asian Infrastructure Investment Bank, a major force in the country’s rush to secure a leading role in the world’s financial architecture. An underlined copy of “Absalom, Absalom!” is on his office bookshelves, along with Shakespeare and the Bible. He said he found inspiration in Faulkner’s complex human relationships.

NYT link here.

In my latest Bloomberg column I consider William F. Buckley’s old conundrum:

William F. Buckley famously said he would rather be ruled by the first 2,000 people listed in the Boston telephone directory than by the faculty of Harvard University.

Here is part of my take:

For better or worse, direct rule by Buckley’s 2,000 American citizens probably would mean a slower pace of immigration, less emphasis on free trade, more law and order politics, and a blunter form of nationalism in foreign policy.

Those don’t match my policy preferences (I am more of a globalist, and also a professional academic), but I fear what the Harvard faculty could bring. I can imagine an America closer to Bernie Sanders’s vision, with single-payer health insurance, levels of taxation exceeding 50 percent of GDP, levels of immigration unsustainable with a large welfare state, too many aggressive attempts to legislate equal treatment for various groups, excessive fondness for a universal basic income, and too many humanitarian interventions abroad.

Don’t forget:

It’s a good rule of governance that policy cannot race too far ahead of the citizenry, and I don’t view faculty as a class of people well-suited for that kind of humility.

But for the Fed and the EPA, among other areas, I very much want Harvard.  My conclusion is this:

The real issue here isn’t intellectuals versus populism writ large. There is a time and place for populist sentiment, but an excess can be counterproductive on its own terms. As expertise is pushed out the door, the citizenry itself gets a bad name, precisely when we most need it to step up to the plate and demand some excellence.

Do read the whole thing.

I should note that on this topic I have been very much influenced by my colleague David Levy and also his work with Sandra J. Peart, see for instance their newly arrived book Escape from Democracy: The Role of Experts and the Public in Economic Policy.

Martin Feldstein had a recent piece in the WSJ that defended the idea of a border tax adjustment, which would be a part of the proposed corporate tax reform. He points out that if imports were no longer deductible, and exports received a subsidy, then the border adjustment would not distort trade. Rather the effect would be exactly offset by a 25% appreciation of the dollar. I certainly understand that this would be true of a perfect across-the-board border tax system. But is that what we will have?

1. Will the subsidy apply to service exports? (Recall that services are a huge strength of the US trade sector.) Let’s take Disney World, which makes lots of money exporting services to European, Canadian, Asian and Latin American tourists visiting Orlando. Exactly how will Disney determine the amount of export subsidy it gets? Do they ask each tourist what country they are from, every time they buy a Coke? That seems far fetched—what am I missing? If Disney doesn’t get the export subsidy, then the 25% dollar appreciation would hammer them, and indeed the entire US service export sector.

2. What about all those corporate earnings that are supposed to be repatriated? (And future earnings as well.) If the dollar appreciates by 25%, then doesn’t this hurt multinationals? Or am I missing something?

Update: It just occurred to me that corporate cash stuffed overseas is probably held in dollars. But future overseas earnings may still be in local currency.

Keep in mind that the prediction of 25% dollar appreciation is from the supporters of the plan, like Martin Feldstein. If you did this sort of adjustment without any dollar appreciation, the impact would be devastating on companies like Walmart. Given the Fed’s 2% inflation target, how could they pass along a (effective) 25% tariff on almost everything they sell?

There are other points of value at the link.  I agree with Scott’s most general claim that the case for this tax has not yet been made.