Current Affairs

…a recent report by Yale University concluded the country is suffering the highest rate of homelessness in the developed world with 40,000 people, nearly 1 per cent of the population, living on the streets or in emergency housing or substandard shelters.

…“The big change in homelessness is the number of working families struggling to find homes and pay rent,” says Ms Rutledge, who adds the situation is the worst she has seen in her 13 years working in homeless services in Auckland. Nationwide, some 5,844 people were on the social housing waiting list in September, a 42 per cent increase on the same month two years ago.

This FT article indicates the country will respond by banning foreign purchases of Kiwi homes — I guess the country is too crowded to allow for an elastic supply response.

Most of the Tories are happy they found a semi-workable version of the deal.  They pay a big divorce bill to the EU, have a long transition period, opt for “regulatory standardization with the EU” for the whole UK, as enforced by the need to avoid a hard border in Ireland, and over the longer term end up with a customs union and free trade agreement of Norway-like nature.

In other words, they pay a lot of money, lose a seat at the table, and don’t significantly increase the policy autonomy of the country.  In the subsequent bargaining over the details, the EU still holds most of the cards.  Here are a few observations:

1. This represents an almost complete “fold” of the pro-Brexit stance, though like so many other political issues of the Anglo-American day it has become more about exerting one’s will over the opposition than achieving a very particular exit path or even outcome.  One group in British society has won quite a major victory in symbolic terms, namely it has been shown that the country has agreed to leave.

2. At this point, the chance of Brexit being reversed in the short term is very slim.  The anti-Brexit forces know that if this deal falls apart, they could end up with something much worse.  That said, the chances of a medium-term reversal may be higher.  Come the next election, it will still feel as if the UK is in the EU.  The transition period could be extended, and then extended again.  And then…

3. With the current deal, assuming it sticks, the chance of the UK itself unraveling is small.

4. The remaining pro-Brexit case is simply that the UK has limited its entanglement with the EU legal system and a possible future of full federal union.  That’s worth something, but still I am pro-Remain.

5. Real estate in Northern Ireland remains significantly undervalued.

6. the EU really has shown it has a fairly strong and indivisible commitment to the “Four Freedoms,” on migration much more than I would have expected.  You can debate whether this makes the rest of the union more or less stable over the longer term, but for sure it does one of those two things.

Here is a good piece on the Irish border issues.

India’s government has expanded a scheme offering payment incentives to Hindus who marry members of the country’s poorest and most oppressed caste, the Dalits.

A scheme introduced in 2013 offered 250,000 rupees (£2,900) to encourage Hindus from higher castes to marry members of the “untouchable” community, in the hope that it would help to remove the stigma of intercaste marriage and foster greater social cohesion.

To qualify, the annual income of the spouse from the high caste had to be less than 500,000 rupees (‎£5,800).

The government envisaged about 500 such marriages annually, but less than 100 have taken place each year.

On Wednesday, the Ministry of Social Justice and Empowerment announced it would scrap the income ceiling, and said all couples in which one spouse is from the Dalit caste would receive the cash incentive.

Here is the article, via Eric D., also read the last few paragraphs.

That is the topic of my latest Bloomberg column, here is the opening bit:

I’ve seen hundreds of articles on President Donald Trump and trade, but the real significance of the Trump economic revolution — for better or worse — is a focus on investment. There is no coordinating mastermind, but if you consider the intersection between what the Trumpian nationalists want and what a Republican Congress will deliver, it’s this: wanting to make the U.S. a new and dominant center for investment, including at the expense of other nations.

And:

In essence, a new kind of supply-side economics has been invented. The theory of the 1980s focused mainly on individuals, and lowering the tax rates they faced on labor income and capital gains. Cutting these rates was supposed to mobilize the power of those individuals, through more work or more investment. The idea today is that the real power of mobilization comes through corporate associations. Assuming the tax bill passes, that theory is about to get a major test.

Strikingly, the tax bill and the trade policies of the Trump administration can be viewed as having a similar underlying philosophy, whether entirely intended or not. One of the president’s first official acts was to withdrawal from the Trans-Pacific Partnership. Although I favored that agreement, as did most other economists, it’s worth considering what the most intelligent nationalist case against the TPP looks like. It’s not about trade, because the deal wouldn’t have affected tariff rates faced by Americans very much (exports of beef to Japan aside). Rather, the TPP would have given American certification to Vietnam, Malaysia and eventually other emerging economies as stable repositories of foreign investment from multinationals. That could in turn draw investment away from the U.S.

Do read the whole thing, it is my favorite recent piece by me.

Here are my selected bits and pieces from a longer list:

“Artificial intelligence systems pretending to be female are often subjected to the same sorts of online harassment as women.” [Jacqueline Feldman]

Swintec is a company in New Jersey that sells up to 5,000 typewriters a year to prisoners in the US. Their typewriters have clear plastic covers so inmates can’t hide anything inside. Transparent TVs, CD players and Walkmen are also available. [Daniel A Gross]

In the UK, marriages between couples over 65 have risen 46% over the last decade. [Cassie Werber]

A cryptocurrency mining company called Genesis Mining is growing so fast that they rent Boeing 747s to ship graphics cards to their Bitcoin mines in Iceland. [Joon Ian Wong]

Dana Lewis from Alabama built herself an artificial pancreas from off-the-shelf parts. Her design is open source, so people with diabetes can hack together solutions more quickly than drug companies. [Lee Roop]

In August, Virginia Tech built a fake driverless van — with the driver hidden inside the seat — to see how other drivers would react. Their reaction: “This is one of the strangest things I’ve ever seen.” [Adam Tuss] (Fluxx have also been experimenting with fake autonomous vehicles in Cambridge)

Women are eight times more likely to ask Google if their husband is gay than if he is an alcoholic. [Sean Illing]

Men travelling first class tend to weigh more than those in economy, while for women the reverse is true. [Lucy Hooker]

Facebook employs a dozen people to delete abuse and spam from Mark Zuckerberg’s Facebook page. [Sarah Frier]

Pro tip: Ask your current customers “What nearly stopped you buying from us?” [Karl Blanks]

Here is the full list, Tom has an excellent algorithm for building the list.

President Nicolas Maduro said on Sunday that Venezuela will launch a cryptocurrency to combat what the leftist leader says is a financial “blockade” against the crisis-hit nation spurred by U.S. sanctions.

Maduro said the OPEC member’s new currency, “petro,” will be backed by natural resources reserves although he did not provide details on the logistics of its roll-out.

Here is the link, no additional text, believe what you wish!  For the pointer I thank M.  Do any of you have a more detailed Spanish-language source?

That is the topic of my latest Bloomberg column, here is the closing bit:

Perhaps it’s not always an appetizing thought, but in many contexts wealth aids liberty, and the freedom to keep one’s wealth can limit political degeneration.

There are many possible outcomes here, and it is also possible that offshore finance can make tyranny worse.  But it seems to me opinion has turned against these institutions, without much serious consideration of the political economy issues.  By the way:

The top five countries on this list, [offshore wealth] measured as a percentage of GDP, are United Arab Emirates, Venezuela, Saudi Arabia, Russia and Argentina, based on estimates from 2007.

Worth a ponder.

The North Korean defector

by on November 28, 2017 at 3:04 pm in Current Affairs, Medicine | Permalink

Lee said he had never seen such an extreme case of parasitic infection. The soldier had worms not seen in South Korea since the 1970s, but they appeared to be somewhat common north of the border. In a 2014 study, South Korean doctors sampled 17 females who escaped North Korea and found that seven of them were infected with parasitic worms, according to the BBC. They also had higher rates of diseases such as hepatitis B and tuberculosis.

What was just as curious were the raw corn kernels found in Oh’s [the defector’s] stomach, which shocked many South Koreas. North Korean soldiers typically have a higher ranking on the food-rationing list, so it was alarming that the soldier had been eating uncooked corn.

Some reports claim that North Korean soldiers have been ordered to steal corn from farmers to fend off hunger.

Here is further information.

That is the topic of my latest Bloomberg column.  Here is one excerpt:

An additional reason for skepticism stems from the nature of crypto assets. The word “cryptocurrency” is far more common than “crypto asset,” but it’s a misleading term. Bitcoin, for instance, is used only rarely in retail transactions, and for all its success it isn’t becoming more important as a medium of exchange. Bitcoin thus isn’t much of a currency in the literal sense of that term. There is a version of bitcoin, Bitcoin Cash, that changed the initial rules to be better suited as an exchange medium, but it isn’t nearly as popular.

If you think of these assets as “cryptocurrencies,” central bank involvement will seem natural, because of course central banks do manage currencies. Instead, this new class of assets is better conceptualized as ledger systems, designed to create agreement about some states of the world without the final judgment of a centralized authority, which use a crypto asset to pay participants for maintaining the flow and accuracy of information. Arguably these innovations come closer to being substitutes for corporations and legal systems than for currencies.

Put in those terms, an active (rather than merely supervisory) role for central banks in crypto assets is suddenly far from obvious. Consider other financial innovations: Does anyone suggest that central banks should run their own versions of ETFs or high-frequency trading? Is there a need for central banks to start managing the development of accounting and governance systems?

Central banks are too conservative anyway, which of course is how they should be.  Don’t forget:

…consider a simple question: Would any central bank have had the inspiration or taken the risk of initiating the bitcoin protocol in the first place?

Keep in mind, I’ve favored net neutrality for most of my history as a blogger.  You really could change my mind back to that stance.  Here is what you should do:

1. Cite event study analysis showing changes in net neutrality will have significant and possibly significantly negative effects.

2. Discuss models of natural monopoly, and how those market structures may or may not distort product choice under a variety of institutional settings.

3. Start with a framework or analysis such as that of Joshua Gans and Michael Katz, and improve upon it or otherwise modify it.  Here is their abstract:

We correct and extend the results of Gans (2015) regarding the effects of net neutrality regulation on equilibrium outcomes in settings where a content provider sells its services to consumers for a fee. We examine both pricing and investment effects. We extend the earlier paper’s result that weak forms of net neutrality are ineffective and also show that even a strong form of net neutrality may be ineffective. In addition, we demonstrate that, when strong net neutrality does affect the equilibrium outcome, it may harm efficiency by distorting both ISP and content provider investment and service-quality choices.

Tell me, using something like their framework, why you think the relative preponderance of costs and benefits lies in one direction rather than another.

Consider Litan and Singer from the Progressive Policy Institute, they favor case-by-case adjudication, tell me why they are wrong.

Or read this piece by Nobel Laureate Vernon Smith, regulatory experts Bob Crandall, Alfred Kahn, and Bob Hahn, numerous internet experts, etc.:

In the authors’ shared opinion, the economic evidence does not support the regulations proposed in the Commission’s Notice of Proposed Rulemaking Regarding Preserving the Open Internet and Broadband Industry Practices (the “NPRM”). To the contrary, the economic evidence provides no support for the existence of market failure sufficient to warrant ex ante regulation of the type proposed by the Commission, and strongly suggests that the regulations, if adopted, would reduce consumer welfare in both the short and long run. To the extent the types of conduct addressed in the NPRM may, in isolated circumstances, have the potential to harm competition or consumers, the Commission and other regulatory bodies have the ability to deter or prohibit such conduct on a case-by-case basis, through the application of existing doctrines and procedures.

4. Consider and evaluate other forms of empirical evidence, preferably not just the anecdotal.

5. Don’t let emotionally laden words do the work of the argument for you.

6. Offer a rational, non-emotive discussion of why pre-2015 was such a bad starting point for the future, and why so few users seemed to mind or notice as the regulations switched several times.

7. Don’t let politics make you afraid to use your best argument, namely that anti-NN types typically develop more faith in an assortment of government regulators in this setting than they might express in a number of other contexts.  That said, don’t just use this point to attack them, live with and consistently apply whatever judgment of the regulators you decide is appropriate.

If you are wondering why I have changed my mind, it is a mix of new evidence coming in, experience over the 2014-present period, relative assessment of the arguments on each side moving against NN proponets, and the natural logic of the embedded trade-offs, whereby net neutrality typically works in a short enough short run but over enough time more pricing is needed.  Of course it is a judgment call as to when the extra pricing should kick in.

Here is what will make your arguments less persuasive to me:

1. Respond to discussions of other natural monopoly sectors and their properties by saying “the internet isn’t like that, you don’t understand the internet.”  If someone uses the water sector to make a general point about tying and natural monopoly, commit internet error #7 by responding: “the internet isn’t like water!  You don’t understand the internet!”

2. Lodge moral complaints against the cable companies or against commercial incentives more generally, or complain about the “ideology” of others.  Mention the word “Trump” or criticize the Trump administration for its failings.  Call the recent decision “anti-democratic.”

3. Cite nightmare or dystopian scenarios that are clearly illegal under other current laws and regulations.  Cite dystopian scenarios that would contradict profit-maximizing behavior on the part of the involved companies.  Assume that no future evolution of regulation could solve or address any of the problems that might arise from the recent switch.  Mention Portugal as a scare scenario, without explaining that full internet packages still are for sale there, albeit without the discounts for the partial packages.

Are you up to the challenge?

If I read say this Tim Wu Op-Ed, I think it is underwhelming, even given its newspaper setting, and the last two paragraphs are content-less, poorly done emotive manipulation.  Senpai 3:16 is himself too polemic and exaggerated, but he does make some good points against this piece, see his Twitter stream.

Net neutrality defenders, as of now you have lost this battle.  I’d like to hear more.

That is the title and topic of my latest Bloomberg column.

I will be having a Conversation with him December 4th, by the way, you can register here.  His forthcoming book is spectacular, but we will talk about everything under (and above) the sun, what should I ask him?

1. The situation with North Korea has moved to one of open confrontation.  That said, there are stronger commercial sanctions on North Korea than before, and the attitude of the Chinese does seem to have shifted toward recognizing North Korea as a problem needing to be solved.  For the time being, both the missile tests and the jawboning have stopped, for unknown reasons.  Note that the South Korean and Japanese markets remain high, of course the U.S. market is strong too.

2. Trump has spent a great deal of time with Prime Minister Abe, the real “pivot toward Asia.”  Abe is being treated like the most important leader of the free world — is that crazy?  Merkel is now teetering.

3. The Trump administration has recognized and encouraged a much more explicit semi-military alliance between America and India, also part of the pivot.  China-India relations could be the world’s number one issue moving forward.

4. The apparent “green light” from the Trump administration probably raised the likelihood and extremity of the Saudi purge/coup.  I give this a 20% chance of working out well, though with a big upside if it does.  Whether you like it or not, so far it appears to me this is Trump’s most important initiative.

Just to interject, much of your assessment of the Trump administration should depend on #1-4, and I am worried that is hardly ever the case for those I see around me.  While I do not view the current administration as “good executors” on foreign policy, the remaining variance on #1-4 is still very high and it is not all on the down side.

5. The Trump administration seems to think that keeping production clusters within this nation’s borders is of higher value than shaping the next generation of the world’s trade architecture.  I don’t think they will get much in return for this supposed trade-off, but there you go.

6. I am seeing deeply biased assessments of tax reform, from both sides.  I don’t favor raising the deficit by $1.5 trillion (or possibly more), I do favor cutting corporate rates and targeting some of the most egregious deductions.  I am disappointed that there is not more celebration of the very good features of the plan on the table, that said big changes in the proposed legislation still are needed.

7. In terms of regulatory reform (WSJ), the administration has done better than my most optimistic scenario.  In their worst area, carbon, progress on solar and electric cars is bigger good news than the bad policy news.  And for all practical purposes, the carbon policy of Trump is not much different from that of say Angela Merkel.

8. The suburbs are rebelling against the Republican Party.  There is a decent chance the Republicans will lose the House in 2018, as well as numerous governorships.  Soon we may get a window of a very different Trump, plus more investigations.

9. Various people connected to Trump will be nabbed for crimes and perjuries.

10. Trump has personally “gone after” many political and social norms, but it is not yet clear if they will end up weaker or stronger as a result.  His “grab them…” tape for instance seems, in the final analysis, to have empowered a major rebellion in the opposite direction.  #10 is a major reason why many commentators hate Trump as a person and president, and I can understand that response, but I am myself more focused on what the final outcomes will be and there we do not know.

11. The cultural and intellectual force of liberalism — broadly defined — has been greatly weakened by a mix of Trump and Trump-related forces.  I find this tragic and a major source of despair.

12. I do not favor “a decline in the dignity of the presidency” in the manner we are seeing, but I find many of these criticisms are stand-ins for not liking the substance of what is happening.  I don’t think we know what are the costs (or benefits) are from this transformation of the presidential image.  I could readily imagine those costs are high, but as a sociological matter I am seeing “the dignity of the office of the president has been insulted” as a stand-in for “my dignity has been insulted.”

13. The quality of discourse continues to decline.

The Berkshire Museum, yes.  They were going to sell 40 paintings at Sotheby’s, including two very special Norman Rockwells, but at the last minute a court decision halted the sale, claiming (with only thin justification) that the sale would violate the museum’s trusts.  That is the setting of my latest Bloomberg column, here is one bit:

The sad truth is that the people running the Berkshire Museum just don’t care that much about American art any more, at least not from an institutional point of view. Given that reality, it’s actually better if they are not entrusted with important artworks.

The court’s decision now means it will be hard to pull off the sale with fully clear rights to the titles, although the court’s judgment will be re-examined in December. Both the uncertainty and the surrounding negative publicity will scare off buyers and may spoil the market for a long time to come.

There is much more at the link.  The argument against selling, of course, is that in a world of frequent sales all museums will find it hard to make credibly binding commitments to their donors, who often do not want their donated works recycled in the marketplace.  But the equilibrium of zero selling is one that will destroy a great deal of value in the art world.  Note that this problem will become increasingly relevant as the clock ticks and the number and inappropriateness of past museum commitments piles up.  If nothing else, sooner or later insolvency sets in.  Rust never sleeps.  And so on.

Should churches really own all that land in the downturns of major American cities?

Acclaimed legal scholar, Harvard Professor, and New York Times bestselling author Cass R. Sunstein brings together a compelling collection of essays by our nation’s brightest minds across the political spectrum—including Eric Posner, Tyler Cowen, Noah Feldman, Jack Goldsmith, and Martha Minow—who ponder the question: Can authoritarianism take hold here?

With the election of Donald J. Trump, many people on both the left and right feared that America’s 240-year-old grand experiment in democracy was coming to an end, and that Sinclair Lewis’ satirical novel, It Can’t Happen Here, written during the dark days of the 1930s, could finally be coming true.

Is the democratic freedom that the United States symbolizes really secure? Can authoritarianism happen in America? Sunstein queried a number of the nation’s leading thinkers. In Can It Happen Here? he gathers together their diverse perspectives on these timely questions and more.

In this thought-provoking collection of essays, these distinguished thinkers and theorists explore the lessons of history, how democracies crumble, how propaganda works, and the role of the media, courts, elections, and “fake news” in the modern political landscape—and what the future of the United States may hold.

Due out in March, pre-order here.  The book also has Jon Elster, Timur Kuran, and Jonathan Haidt, dare I call it self-recommending?