Current Affairs

That is the excellent title they gave to my latest Bloomberg column.  The piece starts by offering a very simple theory of what statues are for, and then I shift to the perspective of a foreigner.  Here is one bit:

Or consider the debates in Macedonia. The city of Skopje went on a major statue-building binge several years ago, both as fiscal policy and to cement national identity. One of the resulting disputes is whether those statues should emphasize the country’s ancient Greek connections (e.g., Alexander the Great) or the Slavic heritage (e.g., Saints Cyril and Methodius). It’s a strange debate to an outsider, yet to many Macedonians and some of their Greek neighbors (who wish to claim Alexander as their own), it is one of the most fraught issues of the day.

Again, you won’t get too far on this one by debating the life and times of Alexander, whether he led aggressive or defensive wars, or by asking how many slaves he owned. It’s better to focus on which political faction you wish to see assume more authority in Macedonia, and then work backward to figure out your preferred statues.

Similarly, if Macedonians were asked to evaluate the relative moralities of historic American leaders, I hope they would consider a similar approach. I don’t find it so fruitful to debate how much Robert E. Lee does or does not have in common with George Washington  — arguably Washington was a traitor of sorts as well, against a relatively benign British ruler, and he fought against Native Americans and owned slaves. American treatment of Native Americans makes it hard to find many truly “good guys” from that period. Still, we can ask what role Washington statues play in today’s politics; few people are using them to lord over Native Americans.

And my conclusion:

So if you’re considering the worthiness of a particular statue, here are three pointers: Pretend you’re from some very distant foreign country and view the dispute through that more objective lens. Second, focus on the future, and third don’t be afraid to make some changes.

Do read the whole thing.

This city removed several Confederate monuments before dawn Wednesday in a stealth operation that highlights the growing backlash against such memorials across the country.

“I said I would move as quickly as I could, and I did,” Baltimore Mayor Catherine Pugh, a Democrat, said in an interview. “We didn’t need those kinds of symbols.”

Bravo, and let’s hope Old Town Alexandria — wihch frankly I have never liked — does the same with its prominent Lee statue.  But, posturing aside, the real import of this story has not yet been digested.  This statue removal was done suddenly, without democratic input for the final decision to proceed, and, as far as I can tell, without much in the way of leaks.  The mayor just did it.  Physically.  Overnight.  The importance of physical space, and how we shape and present it, must have been paramount in her mind.

That is what the end of complacency looks like.  It may just be a blip, but keep the nature of this episode in mind as you track subsequent news developments in this and other areas.

Here is the WSJ article.

PayPal, the popular online payment platform, announced late Tuesday night that it would bar users from accepting donations to promote hate, violence and intolerance after revelations that the company played a key role in raising money for a white supremacist rally that turned deadly.

The company, in a lengthy blog post, outlined its long-standing policy of not allowing its services to be used to accept payments or donations to organizations that advocate racist views. PayPal singled out the Ku Klux Klan, white supremacist groups or Nazi groups — all three of whom were involved in last weekend’s Charlottesville rally.

“Intolerance can take on a range of on-line and off-line forms, across a wide array of content and language,” the company wrote. “It is with this backdrop that PayPal strives to navigate the balance between freedom of expression and open dialogue — and the limiting and closing of sites that accept payments or raise funds to promote hate, violence and intolerance.”

Here is the full Wonkblog article by Tracy Jan.

So far I see the backlash to recent events as very much harming the noxious elements behind the Charlottesville protests.  I wonder how many businesses — including those who do not supply essential services to such groups (or maybe not any services at all) — will move to make similar announcements.  I feel the country has reached a tipping point where businesses will not find neutrality across extremist or fringe or possibly violent groups a profitable or acceptable attitude in the public eye.  I applaud this move from PayPal, as I don’t think we are close to a “slippery slope” point where it becomes problematic to decide who should be banned from PayPal services and who not.  Nonetheless I do wonder what it will look like when American business gets to the more difficult cases of judgment.  Sooner or later, the ideological computational burden placed on businesses will rise considerably, as Twitter and Facebook and YouTube discovered not long ago, and are still struggling to deal with.  It will be a kind of mandate placed on business, but put there by public opinion and social media, rather than government.  I’ve yet to see a good, data-based research paper on that topic, but it seems that boycotts and refusal to deal are headed back into the public limelight.

Here is the piece (pdf), here is the broader symposium, with other notable contributors, including Bill Easterly, Charles Kenny, and Brandon Fuller.  Here is one excerpt from my essay:

…we should keep in mind the strictures of Dani Rodrik that every country, or sometimes every region, is different. Nonetheless this reorientation of measures of progress would have some implications for policy analysis. In particular, high levels of inequality, inequality of opportunity, and relative income mobility would not be seen as problems per se.

Furthermore, the frequent appearance of those concepts in political and also scholarly rhetoric would be seen as misleading and a distraction. The focus instead would be on expanding the absolute size of opportunities for the poor. To make this more concrete, consider a policy change which benefitted both the rich and the poor. Many of the equality metrics would have to struggle with such a policy, which might increase inequality in some manner, whereas the approach recommended in this paper could endorse it wholeheartedly.

It is interesting to note the recent visit of Thomas Piketty to South Africa. He called for a national minimum wage, greater worker participation in company boards, and land reform. Those are all attempts to provide equalizing measures across one dimension or another. Although some parts of those ideas may have merit, they do not seem overall focused on incentivizing wealth creation and opportunity. Piketty even stated: “I think it’s fair to say that black economic empowerment strategies, which were mostly based on voluntary market transactions […] were not that successful in spreading wealth.” It perhaps would have been more appropriate to note South Africa remains a highly regulated, highly legally privileged, and indeed mercantilist economy; the country ranked only number 72 on the 2015 Heritage Foundation Index of Economic Freedom. So perhaps empowerment based on voluntary market transactions has not yet really been tried.

The absolute opportunities approach also suggests a different emphasis for a topic such as land reform. Many arguments for land reform focus on the difference in the land holdings between the rich and the poor, yet perhaps those are not the relevant numbers. A better focus would be the following question: “by how much would receiving more land elevate the opportunities of the poor?” If indeed the answer to that question is optimistic, the case for land reform will be stronger.

Do read the whole thing.

President Donald Trump named Tomas Philipson, an economist at the University of Chicago who has specialized in health-care policy, to the three-member Council of Economic Advisers on Monday.

Mr. Philipson briefly served as an adviser to the Trump transition team last fall on health-care matters and was a senior economic adviser to the head of the Food and Drug Administration and the Centers for Medicare and Medicaid Services during the George W. Bush administration. Mr. Philipson is the co-founder of Precision Health Economics, a consultancy. He is professor of public policy at the University of Chicago’s Harris School of Public Policy and a director of the Health Economics Program at the university’s Becker Friedman Institute for economic research.

Mr. Trump’s nominee to lead the CEA, Kevin Hassett, hasn’t been confirmed by the Senate. His nomination cleared the Senate Banking Committee with only one lawmaker, Sen. Elizabeth Warren (D., Mass.), voting against him in June.

The two other members of the CEA aren’t subject to Senate confirmation and typically serve for around two years. Mr. Trump hasn’t announced the third member of the council, which has advised presidents for over seven decades on the economic impact of their policies.

That is from the WSJ.

The mostly male crowd that participated in Friday night’s tiki-torch-lit rally did not cover their faces, and they were widely photographed. A Twitter account, @YesYoureRacist, began posting photographs of participants and uncovering their identities. White was among the first it named. The account would soon identify students enrolled at the University of Nevada and Washington State University, leading both of the schools to issue statements condemning racism.

And:

A white nationalist who participated in the torch-lit march through the University of Virginia’s campus this weekend has lost his job at a Berkeley, Calif., hot dog restaurant after Twitter users posted his photo and place of employment. The employee, Cole White, was identified online after he was photographed among a shouting and torch-wielding mob during the march Friday night in Charlottesville.

Effective social monitoring, or dangerous slippery slope?  Or both?  Sometimes the undercover sleuths are wrong (NYT).  Many colleges are being asked to expel those students.

Here is the full article, via Michael Rosenwald.

That is the topic of my latest Bloomberg column.  Excerpt:

Virginia is the location of the Pentagon, and military and national intelligence establishment have been a cash cow for the state. That has boosted prosperity and minimized cyclical downturns, two factors that help alleviate racial and interethnic tensions, in turn raising upward mobility for immigrants. The state has also encouraged real estate growth and created a favorable environment for small and midsize businesses. For all the criticism of ugly strip malls, they are an ideal place for immigrants to start a new business.

The result has been a strong upper middle class rather than a playground for billionaires. That offers immigrants a good chance to move up the social and income ladders fairly quickly.

Almost 70 percent of Virginia immigrants have settled in Northern Virginia, very close to Washington and Maryland. The D.C. metropolitan area, due to the primacy of politics, has attracted migrants and temporary residents for a long time, including American-born citizens from other states. There is little stigma to being an outsider or new arrival.

When I first moved to Northern Virginia in 1980, it was common to see Confederate flags and to hear “good ol’ boys” talk with racist overtones. Today the region is a multicultural success, has some of the best schools in the country, and is renowned for its globe-spanning ethnic food.

Another big part of the Virginia economy has been the significant naval presence in the Norfolk area. In addition to creating lots of jobs, the U.S. military long has been one of the most successfully integrated and tolerant institutions in the country, setting a good workplace and cultural precedent.

It also helps that Virginia’s immigrants are a mix of nationalities, with no one dominant ethnic group. That has encouraged broad-based assimilation, and prevented any single, easily identifiable group from being a source of social tensions.

Do read the whole thing.

The Economist has a lengthy and very informative article on this, here is one bit:

Another candidate to be the first ZEDE is a public-private partnership with Canadian investors to create an “energy district” in Olancho department, where wood would be harvested for fuel. The ZEDE itself would be confined at first to a 1.6 square km (0.6 square mile) patch, which will be occupied by a power station. But it could eventually expand to an area covering 8% of Honduras’s territory and including 380,000 people. HOI, a Christian NGO based in the United States, is to provide health care and education from the outset in this “area of influence”.

…Even now, just how ZEDEs will work is a matter of argument among their supporters. The law places effective control in the hands of investors and a “technical secretary” who will administer each zone (and must be a Honduran citizen). They are answerable to an independent “commission for best practices” (CAMP). Civil and criminal cases will be adjudicated by special ZEDE courts, though it is not clear whether each zone will have its own or whether they will join a single parallel system. They could employ foreign judges to hear civil and criminal cases, just as Honduran football teams hire foreign players, suggests Mr Díaz. A “tribunal of individual rights”, guided by international conventions, will protect residents. Its decisions can be appealed to international courts.

But this governance structure is not settled; participants do not agree on what has been decided or even on who is part of it. The original CAMP, appointed by Mr Lobo, had 21 members, including Grover Norquist, an American anti-tax campaigner, Richard Rahn, then of the libertarian Cato Institute in Washington, DC, and Mark Klugmann, a former speechwriter for Ronald Reagan. This body met just once, in March 2015, on the resort island of Roatán.

In short, the prognosis is still unclear, which I take to be bad news.  In any case, there is much more at the link.

If the probability of nuclear war just went up why isn’t the stock market down? The stock market also didn’t fall during the Cuban Missile Crisis, as Lars Christensen points out:

If indeed we were on the brink of a nuclear exchange, one would certainly have expected the stock market to drop like a stone. Nothing of the sort happened. Instead, the S&P500 was little changed during the 13-day standoff between the United States and the Soviet Union.

Lars argues that the market must have figured out that MAD was a brilliant policy and thus the nuclear risk wasn’t anywhere near as large as most people thought (and nuclear war didn’t happen so the markets were right, right?)

Historian Arthur M. Schlesinger Jr., who was in the White House at the time, thought the Cuban Missile Crisis was the “most dangerous moment in human history.” None of the participants thought it was a yawn. I am inclined to accept their judgment. So why didn’t the market drop like a stone? It’s not so obvious that the apocalypse is priced into the stock market.

Let’s remember why markets are good at forecasting events. If you think IBM’s dividends are going to fall then you sell IBM stock and the fall in price signals the future event. But what do you do with the proceeds from the sale of IBM stock? You buy some other asset. Since IBM is only a small share of the market there are lots of other assets to buy.

If you think a nuclear war is likely, and you sell your stocks, what do you buy? It’s pointless to buy other assets like bonds–the bond markets probably won’t exist. You could buy land but who will enforce your property right? Even cash might be useless following a nuclear war. Maybe some gold coins and canned goods would be useful but you may not be around to enjoy them.

If the apocalypse really is coming your best bet is to cash out and spend it all now. But really how much fun would that be? Sure, you could have a great week of hookers and coke but I suspect a lot of people might prefer the cheaper option of a walk in the forest.

If the apocalypse were coming, I would have a second helping of chocolate cake and maybe a third helping but utility diminishes. Since utility diminishes you get a lot less enjoyment by consuming all your wealth now than by spreading it over a lifetime.

Diminishing marginal utility means that the optimal strategy to meet the apocalypse is very costly. Suppose you expect IBM dividends to fall and so you sell your IBM stock and use the proceeds to buy something else. If IBM dividends don’t fall, you haven’t lost much. But if you expect a nuclear war, cash out and blow it all, then you’ve lost a lifetime of consumption in return for a momentary buzz.

The bottom line is that selling stock doesn’t really help you to deal with a nuclear war or even to improve your life much before the nuclear war happens. The problem isn’t markets. An information market could still be used to produce information about the probability of a nuclear war it’s just that I wouldn’t necessarily expect that probability to correlate with the broader markets. Since any actions you might take in the broader markets are fruitless or very high cost, knowing that the probability of a nuclear war has increased is mostly useless information. You might as well ignore useless information and proceed to buy and sell stock as if the information didn’t exist.

You can’t short the apocalypse. As a result, I am not much comforted by the fact that markets appear steady in the face of apocalyptic risk.

That is my latest column for Bloomberg, here is one bit from it:

In other words, a country can experience hundreds of years of bad events, but if it succeeds in attaching itself to a benevolent, moderately competent protector, it still can have a fantastic future of peace and prosperity, even if it does not stand on the global cutting edge.

And:

If Macedonia doesn’t make it into the EU, it is not difficult to envision a future where the country ends up being picked apart by a variety of pressures from Russia, Serbia, Bulgaria, Albania and Greece, in some unknown combination. Keep in mind that an independent Macedonian nation has existed for only a few decades over the course of many centuries, and so its continuing existence cannot be taken for granted.

And:

But when it comes to economic development, don’t just look at demographics or economic policy. Ponder the hegemon.

I wish to thank J. and P. for conversations that spurred some of these thoughts.

ICE’s hope is that this privately developed software will help go far beyond matters of legality to matters of the heart. The system must “determine and evaluate an applicant’s probability of becoming a positively contributing member of society, as well as their ability to contribute to national interests” and predict “whether an applicant intends to commit criminal or terrorist acts after entering the United States.” Using software to this end is certainly in line with Trump’s campaign rhetoric — during a rally in Phoenix, he described how “extreme vetting” would make sure the U.S. only accepts “the right people,” using “ideological certification to make sure that those we are admitting to our country share our values and love our people.”

That is from The Intercept, by Sam Biddle and Spencer Woodman.  Here is Wikipedia on China’s proposed social credit score system, currently in experimental form.  What would Patrick McGoohan say?

Thanks to a little-noticed auction sale, a South Bay couple are the proud owners of one of the most exclusive streets in San Francisco — and they’re looking for ways to make their purchase pay.

Tina Lam and Michael Cheng snatched up Presidio Terrace — the block-long, private oval street lined by 35 megamillion-dollar mansions — for $90,000 and change in a city-run auction stemming from an unpaid tax bill. They outlasted several other bidders.

Now they’re looking to cash in — maybe by charging the residents of those mansions to park on their own private street.

Here is the full story, via Mike Tamada and Elmar Nubbemeyer.

On Tuesday, Cuba’s government said it would suspend the issuance of permits for a range of occupations and ventures, including restaurants and renting out rooms in private homes.

The suspension included the growing field of private teachers, as well as street vendors of agricultural products, dressmakers and the relatively recent profession of real-estate broker.

The announcement did not say when the issuing of permits would resume and said that enterprises already in operation could continue.

Cuban President Raul Castro expanded an opening of the economy to private-sector employment in 200 categories of business in 2010. It later also legalized nonagricultural cooperatives.

The government has said nearly 570,000 people are employed in the enterprises, which include hundreds of restaurants and guest houses.

The latest moves have created fears that Cuba is putting the brakes on plans to reform its centrally planned economy, though officials said the country is not going back on its economic opening.

Here is more, via the excellent Mark Thorson.  Here are related stories, and here is my earlier bearish Bloomberg column on Cuba.

Recently Macedonia signed a “good relations” treaty with Bulgaria, so Macedonia cannot be said to have bad relations with all of its neighboring countries; they get along OK with Kosovo too.  Israel is another possible candidate, although it could be argued that de facto relations with Egypt are not so bad.  How about Palestine?  Qatar is a country surrounded by hostile powers, and for the time being they win this designation.

Belarus is on increasingly bad terms with Russia, but Russia has quite a few adjoining countries, and I am not sure if all of those relations are so bad.  China has frosty relations with many neighbors, although with Russia you would call it mixed and “not yet negative.” And relations with “the Stans” are not terrible.  They don’t like North Korea so much any more, even if they won’t topple it.

I think of Chile as bordering on a hostile Bolivia, but relations with Argentina are acceptable, even if Porteños look down on the Chileans for being provincial.

Africa?

Then there are countries with only one neighbor, such as how Haiti and the Dominican Republic rather uncomfortably share the island of Hispaniola.  Relations across Central America seem to have improved considerably.

Which countries are the other contenders for this honorary designation?

That is the topic of my latest Bloomberg column, basically I defend Apple.  Here is one excerpt:

Those remarks are unfair to Apple, which in difficult circumstances probably did the right thing. China has already shown Facebook Inc. and Google parent Alphabet Inc. that it is willing to do without their services. How would it help the world to have Apple join that list, either partially or in full? I don’t approve of Chinese censorship, but the VPNs are in fact illegal. It hardly seems unreasonable for a major company to follow the laws of the country it is operating in, even if those laws are unjust or imprudent.

Go back to the banned status of Bloomberg View in China, which is also a ban on some of my writings. (My educational videos are also blocked because they are on YouTube.) Does that mean I should stop having my books translated into Chinese, or that I should refuse to speak at Chinese universities, on the grounds that they do not present all of my written product? No, hardly anyone behaves that way, nor should they. I prefer to try to communicate with the Chinese — including listening to and learning from them — as much as I plausibly can.

There is much more at the link.