Current Affairs

In my spare time I was reading some Huey Newton, and it struck me how contemporary his ideas were in some regards, in particular the risk of arbitrary violence at the hands of the police.  Here is an excerpt from Revolutionary Suicide:

As our forces built up, we doubled the patrols, then tripled them; we began to patrol everywhere — Oakland, Richmond, Berkeley, and San Francisco.  Most patrols were a part of our  normal movement around the community.  We kept them random, however, so that the police could not set a network to anticipate us.  They never knew when or where we were going to show up…The chief purpose of the patrols was to teach the community security against the police, and we did not need a regular schedule for that.  We knew that no particular area could be totally defended; only the community could effectively defend and eventually liberate itself.  Our aim simply was to teach them how to go about it.  We passed out our literature and ten-point program to the citizens who gathered, discussed community defense, and educated them about their rights concerning weapons.

By the way, Hillary Clinton worked as a young intern for the Huey Newton legal defense team (he was accused of shooting a policeman).

Me:

Some economic sectors are distributed everywhere, like every city has its dentist[s], and other sectors are quite clustered. Banking is pretty clustered — New York, London, Hong Kong. Tech has been evolving in a pretty clustered way; I don’t mean simple software support, which is more like dentistry, but big, grand projects — the next Google, the next Facebook, Uber. We see those come out of quite a small number of places, so Skype coming from Estonia is quite the exception. Even then, it was improved by people in the clusters.

I think any location, not just Canada, has to ask itself, ‘are we going to be one of those clusters or not’? And the correct answer may be ‘no’. It may also be the sector evolves so it’s less clustered and more like dentistry, and then everywhere including Canada would partake. But maybe the future is Canada will have a knowledge sector doing small-scale things like software design for local projects but not anything like its own Silicon Valley. I guess at this point that seems likely — that Canada will not be a huge innovative part of the knowledge economy.

That is from my interview with the excellent Eva Salinas, mostly about other topics, such as what a great egalitarian age we live in and also where the World Bank and IMF stand, among other issues.  A few of the comments make more sense if you know that the interviewer is Chilean and we were discussing Chile before the formal interview started.

Mood affiliation aside, these clauses do not constitute a significant reason to oppose the treaty, in my view.  Gary Hufbauer has a good discussion:

ISDS provisions enable a foreign investor to seek compensation in an amount determined by an impartial panel of arbitrators, if a host government expropriates its property, or regulates its business in an arbitrary or discriminatory manner. Such protections have been deemed necessary in agreements going back at least to a Germany-Pakistan accord in 1959, and they have successfully protected US investments overseas in many countries.

Often these ISDS provisions are part of bilateral investment treaties (BITs), of which more than 2,200 are now in force worldwide. The United States has 41 BITs with countries near and far, and is actively negotiating a BIT with China, aimed at strengthening the rights of investors in a country that has not always been fair. Starting with the North American Free Trade Agreement (NAFTA) in 1994, the United States has also included ISDS in the investment chapters in nearly all its free trade agreements (FTAs), now numbering 20. Given this rich history, Senator Warren should be able to cite actual examples of the multiple abuses that she claims have occurred. She has not done so, because she cannot. Senator Warren makes a big deal about the hypothetical outcome of the old Methanex case against California’s regulations on gasoline additives, but the case was decided against the Canadian corporation.

The record shows that, far from a record of multinational corporations trampling sovereign states, investors have won fewer than a third of the cases resolved by the ISDS process.1 Arbitration procedures were formalized in 1996, when the World Bank created the International Center for the Settlement of Investment Disputes (ICSID) as a neutral forum to handle ISDS claims. Similar fora are based in London, Paris, and Stockholm, but ICSID oversees the vast majority of claims. To date, ICSID has handled almost 500 cases.2 Of these, 36 percent were settled between the parties before going to arbitration. The arbitrators declined to hear 16 percent of claims for want of jurisdiction. They dismissed 19 percent of claims for lack of merit. Only in 29 percent of cases did the arbitrators uphold some or all of the business claims.

The full post is here.

ABC: The Treasury Department recently sold 44,000 one-dollar bills to one person — at a price of $5.95 apiece.

The bills weren’t even all that special — they weren’t very old, and they didn’t have any major flaws that made them valuable to collectors.

What they did have though, was four number eights in a row in their serial numbers — a sign of luck to many people of Asian descent.

And that’s made the bills popular. The Treasury’s Bureau of Engraving and Printing says it has sold over 70,000 such “prosperity notes” to thousands of people around the world — not including the huge sale to one individual.

Now that is a high rate of seigniorage. You can buy your own lucky bills from the Treasury. Westerners may prefer the 777 series. There is a discount for bulk orders, but you will still be paying more than a dollar for a dollar. That doesn’t feel lucky to me.

Hat tip: The Blacklist.

I’m passing through Baltimore on the train today (a talk at U. Penn and chatting with Ashok Rao), so I have license to do this.  Here goes:

1. Author: There is plenty to choose from here, including Poe, James Cain, Dashiell Hammett, Frank O’Hara, and H.L. Mencken.  I do not love F. Scott Fitzgerald as many do, same with Upton Sinclair, but they deserve mention.  I’ll opt for Poe, with Gold-Bug as my favorite story.  Hammett’s Red Harvest I also enjoy and have taught a few times, delicious incoherence.  Anne Tyler has a few good books, but stop reading after one or two of them.

2. Philosopher: John Rawls, though since we’re talking about Baltimore I feel I should call him Jack.

3. Painter: Morris Louis or Grace Hartigan?  I feel I can do better, help out people.

4. Popular music: Tori Amos grew up in Baltimore, I like her Little Earthquakes and various singles, live cuts, and cover versions, available only in scattered form as far as I know.  Is Dan Deacon popular?  Frank Zappa is a remarkable musical talent, but I don’t actually enjoy listening to him.

5. Jazz: Eubie Blake, there is also Bill Frisell and Billie Holiday.

6. Classical music: Philip Glass was born there, though I associate him with NYC.

7. Baseball: I still remember that old Orioles rotation with Cuellar, McNally, Palmer, and Dobson, all twenty-game winners in the same year.

8. Soviet spy: Alger Hiss.

9. Movie, set in: I don’t love Diner or Avalon, how about The Accidental Tourist, or Twelve Monkeys?  The first half of Silence of the Lambs is excellent.

For good measure toss in Thurgood Marshall, Tim Page, Babe Ruth, The Wire, Walters Art Museum, the underrated BSO, and Brooks Robinson.  Who or what else am I forgetting?

The bottom line: Lots for one city!  Let’s hope it gets better soon.

Which VPNs are working these days?  What other advice do you have for me, when it comes to accessing the internet?  Is accessing some sites easier with a Mac?  Can GMU email be accessed without a VPN?  WordPress?  MR?  Is there a difference between iPhones and iPads and laptops in these regards?

I thank you all in advance for your assistance.

Not for Greece, that is clear, rather for everyone else.  Given bank recapitalization, the introduction of the European Stability Mechanism, European QE, a more general flood of liquidity to European banks, and a burgeoning European economic recovery — by European standards that is — it seems Grexit stands a good chance of being a non-event at the global or even the European level.  After all, Greece is only a small sliver of EU gdp; a few years ago it was only two percent, now presumably it is less.  On top of that, most of the remaining Greek debt is to public sector institutions, not private banks, which ought to limit contagion effects.  Indeed, as Greek bond yields rise, these days the bond yields of the periphery nations do not rise in tandem; some in fact have been falling.

So what’s the problem?

I think 80-20 that Grexit would not become a major macroeconomic problem for other countries, with the possible exception of small Cyprus.  But where does that 20% come from?

If Greek deposit flight forces a form of Grexit, whether whole or partial (capital controls plus scrip?), there is a good chance that markets will in essence “ask” the ECB again just how firmly it stands behind the other troubled eurozone member nations, such as Portugal.  The danger is that the current “creative ambiguity” cannot be disturbed in a useful way.  It might be hard for the ECB to announce that it stands fully behind the other eurozone nations, and in effect promise to monetize any pending default.  The incentive for moral hazard would be too destructive, and besides governments such as that of Spain don’t want to encourage the anti-austerity opposition.  The ECB is therefore likely to make a public commitment less extreme than that.

But neither will “we don’t really stand behind these governments at all” do the trick.  That probably would induce contagion along some other parts of the periphery, maybe more.

The ECB therefore must choose some intermediate point to signal — “we are committed, but member nations still bear fiscal risk.”  In part that is why they have rearranged the ex ante guarantees to fall so firmly upon national central banks, a move which some have compared to turning the euro into a currency board system.  Ex post, of course, the ECB or EU still has the discretionary option of bailing out those central banks, if and when it chooses to do so.  And, following Grexit, they could credibly say “The EU would have bailed out Greece, had an agreement on structural adjustment been reached and previous commitments honored.”  That’s basically a repeat of previous messages and maybe it is good enough.  That is where the 80% comes from.

So which ingredients will shape the new (old) message?: an intelligent but constrained ECB with a highly restrictive charter, a Europe-dedicated and wishing to atone for Grexit but electorally cautious Germany, a bunch of periphery nations which basically want any and all guarantees reserved for themselves and not for opposition parties, and lots of other voices, all mixed into a more or less unprecedented shock surprise in modern financial history.

So will the ECB get the signal right? Did I say 80-20?  Can I change that to…um…70-30?

In a specifically Vietnamese context, there is good evidence that more trade with Vietnam will bring more FDI.  A more general political science study shows the same, namely that joining trade agreements boosts FDI and also growth.

Here is an argument (circa 2005) that Vietnam still has too much trade protection.  Here is a good general piece that trade boosts poverty reduction in poorer nations.  Here is supporting evidence specifically on rural Vietnam.

Those are just a few follow-ups on my earlier post on TPP and Vietnam.  By the way, here is Greg Mankiw showing that TPP is in fact a trade agreement.

I have read and heard many times that TPP will bring harsher intellectual property law than is appropriate for the poorer Asian countries, noting that over time we can expect more of them to join the agreement.  In general poorer countries often benefit from weaker IP enforcement, more copying, and lower prices.  This is standard stuff.

It is less commonly recognized by the critics, however, that tougher IP protection may induce more foreign direct investment.  Why for instance invest in a country which might subject your patents and copyrights to an undesired form of compulsory licensing?  Trade agreements are likely to rule out or restrict such risks.  There will be more cross-border licensing activity as well, if there is tougher IP enforcement.  A company might even set up an R&D facility in a upper-tier developing country.

Carsten Fink and Kwith E. Maskus have an entire volume on these questions, Intellectual Property and Development.  Here is one sample bit from their introduction (pdf):

IPRs are quite important for multinational firms making location decisions among middle-income countries with strong abilities to absorb and learn technology.

You will note however that the effect is not there for poorer countries.  But in general:

…stronger IPRs have a significantly positive effect on total trade.

And this:

The study’s findings support a positive role for IPRs in stimulating enterprise development and innovation in developing countries.

I would say the volume, and the surrounding literature, as a whole provides some positive support for how IP rights may boost economic development, though not overwhelming or unambiguous support.  And the literature does not support a “one size fits all” approach to IP law; in this sense TPP is far from ideal.  But still, the literature does find some very real development benefits when a country moves to tougher IP rights.

But here’s the thing: TPP opponents simply tell us that bad and too tight IP law will be foisted upon the world’s economies.  I see talk of Aaron Schwartz and Mickey Mouse extensions, but I don’t see enough of the critics weighing the costs and benefits, or for that matter even mentioning the possible benefits of extending IP regimes.  I think the benefits of this IP extension may well outweigh the costs, when it comes to the developing nations involved in TPP.  At the very least it seems to me up for grabs.  And I certainly don’t think that voting down TPP this time around is going to lead to a more favorable redo of the agreement, not on IP for sure.

So IP considerations are not weighing nearly as much against TPP as you might think.

Jeffrey Rothfeder has a very good piece on that question, here is one excerpt:

Somewhat surprisingly, cross-border capital flows are equally anemic. Despite the common perception that multinationals these days manufacture their products anywhere but the West, global foreign direct investment (which reflects the amount that companies earmark for doing business in other countries) has fallen to a mere 2 percent of global GDP from 4 percent before the recession.

Still, the most tangible metric that belies the Pollyannaish depictions of globalization is corporate financial performance, which is also a window into the fundamentals of local economies. Although most companies don’t separate out geographical earnings, revenue comparisons provide an apt picture — and few multinationals can boast big returns in global markets.

There is much more to the argument, do read the whole thing.

In a word, Vietnam.  Vietnam has about ninety million people and a relatively low per capita income, below by 2k by some measures.  It liberalized tariffs a good deal upon WTO accession, but since then has done some backsliding.  It has large numbers of state-owned enterprises, and its policies toward such enterprises could use more transparency and predictability, as indeed TPP would bring.  Most generally, Vietnam is not today a free country.  Bringing Vietnam into TPP would further ensure their attachment to a broadly liberal global trading order.  TPP also would bring free(r) labor unions to Vietnam.

Tuong Lai writes (see the first link above):

But Vietnam cannot play its significant geopolitical role until it fully develops economically and further liberalizes politically. And adopting the T.P.P.’s requirements — free trade unions, reduced state participation in the economy, greater transparency — will help Vietnam along that route.

Many potential TPP signers still have significant tariffs against Vietnamese textiles?  Here is Jack Sheehan:

Vietnam is set to gain the most from the TPP due to the potential for a greater share of the apparel and footwear market, particularly in the US and Japan.

In 2012, Vietnam exported almost $7bn (£4.2bn) worth of apparel to the US, which accounted for 34% of US apparel imports. Vietnam also exported $2.4bn worth of footwear.

The TPP will allow Vietnam to export apparel to the US at a 0% tariff rate, which will make Vietnamese exports even more competitive.

Here is an assessment from the Peterson Institute that Vietnam will be the biggest gainer from TPP.  Do you get that, progressives?  Poorest country = biggest gainer.  Isn’t that what we are looking for?  And if you are a deontologist, Vietnam is a country we have been especially unjust to in the past.

Yes, I am familiar with the IP and tech criticisms of TPP, and I agree with many of them.  But if you add those costs up, in utilitarian terms I doubt if they amount to more than a fraction of the potential benefit for the ninety million people of Vietnam.  TPP is more of a “no brainer” than a close call.

Most generally, one of the big dangers today is “The Great Unraveling of Globalization.”  Is the passing or the striking down of TPP more likely to contribute to that trend?  People, you are allowed only three guesses on that one.

Getting a speeding ticket is not a feel-good moment for anyone. But consider Reima Kuisla, a Finnish businessman.

He was recently fined 54,024 euros (about $58,000) for traveling a modest, if illegal, 64 miles per hour in a 50 m.p.h. zone. And no, the 54,024 euros did not turn out to be a typo, or a mistake of any kind.

Mr. Kuisla is a millionaire, and in Finland the fines for more serious speeding infractions are calculated according to income. The thinking here is that if it stings for the little guy, it should sting for the big guy, too.

…The fines are calculated based on half an offender’s daily net income, with some consideration for the number of children under his or her roof and a deduction deemed to be enough to cover basic living expenses, currently 255 euros per month.

Then, that figure is multiplied by the number of days of income the offender should lose, according to the severity of the offense.

Mr. Kuisla, a betting man who parlayed his winnings into a real estate empire, was clocked speeding near the Seinajoki airport. Given the speed he was going, Mr. Kuisla was assessed eight days. His fine was then calculated from his 2013 income, 6,559,742 euros, or more than $7 million at current exchange rates.

The full story is here, and in a much earlier MR post I argue against the practice.  Wealthier people have a higher value of time, and it is probably efficient to allow them to speed more.

It is now available, notice the new subtitle The Economic Malaise at a Technological Plateau: Problems of the United States and Oppotunities for China.

I will be doing some book promotion in China in May, and soon I will have a few questions for you all.

ChinaTGS

Claims about embryos

by on April 24, 2015 at 12:29 am in Current Affairs, Philosophy, Science | Permalink

A pressing question, said Rudolf Jaenisch, an M.I.T. biology professor, is why anyone would want to edit the genes of human embryos in order to prevent disease. Even in the most severe cases, involving diseases like Huntington’s in which a single copy of a mutated gene inherited from either parent is enough to cause the disease with 100 percent certainty, editing poses ethical problems. Because of the way genes are distributed in embryos, when one parent has the gene, only half of the parent’s embryos will inherit it. With gene editing, the cutting and pasting has to start immediately, in a fertilized egg, before it is possible to know if an embryo has the Huntington’s gene. That means half the embryos that were edited would have been normal — their DNA would have been forever altered for no reason. “It is unacceptable to mutate normal embryos,” Dr. Jaenisch said. “For me, that means there is no application.”

If I were grading an undergraduate philosophy class, I am not sure Dr. Jaenisch would exceed a C minus with that answer (the source article is here).  Besides I have never known a normal embryo.  Then there is the all too obvious question as to why it should be acceptable to abort embryos, but not to modify or mutate them.  Oops.

The better arguments are surely the slippery slope worries that embryo tinkering will change the nature and future of humanity in dangerous ways, perhaps producing too much conformity, too much zero-sum competition (“buy the Harvard splice”), too much discrimination against various “types,” too much induced family loyalty, legal discouragement of rebellious genes, excess advantages for elites, too many decisions which too explicitly lower the social status of some groups of people, and perhaps ultimately too much drift from the world we know (and love?).

Those are my worries.  Whether or not they are valid, they would seem to merit at least a C+.  But many commentators wish to ensure these issues are not actually argued.  Will this prove the new face of anti-scientific, anti-philosophical thinking?  Check out the closing quotation from Professor Daley at Harvard, and his use of the word “deranged.”

A lot of parents will strongly desire some future version of this product, and I believe a number of countries are going to be willing to proceed with such innovations, if and when they become possible.  They’ll also be willing to live with the costs of the failures in the meantime.  So I don’t think the strategy of shutting down debate is going to fare so well in this case.

Do read the whole thing.  Excerpt:

There has been no sign of a reversal of the decline in labour’s share of total income and no body of research that supports the idea that it will. Productivity growth is definitely under way, at rates similar to those in the 1970s and 1980s, but well below the rates of the 1950s, 1960s, and 1990s. In particular, there is no sign that a burst of productivity growth will make up for the complete stall in productivity growth around the crisis, as Figure 3 shows.

Most importantly, there is no sign suggesting a departure from the decline in labour-force participation shown in Figure 6. Some commentators have declared a turnaround in participation based on recent monthly data, but Figure 9 suggests this is wishful thinking. Participation has declined along a straight line during the period of improving conditions in the labour market, suggesting a complete disconnect between participation and the state of the labour market.

Excellent throughout.