Current Affairs

The economy here is just fine by most traditional measures.  And yet:

Virginia has an unemployment rate of 5.1 per cent but average hourly wages in the year to May 2014 declined by 0.1 per cent.

That is from a probably gated piece, by James Politi, surveying the U.S. labor market more broadly.

Many people in Russia are putting their own spin on recent events:

Did you know Malaysia Air Flight 17 was full of corpses when it took off from Amsterdam? Did you know that, for some darkly inexplicable reason, on July 17, MH17 moved off the standard flight path that it had taken every time before, and moved north, toward rebel-held areas outside Donetsk? Or that the dispatchers summoned the plane lower just before the crash? Or that the plane had been recently re-insured? Or that the Ukrainian army has air defense systems in the area? Or that it was the result of the Ukrainian military mistaking MH 17 for Putin’s presidential plane, which looks strangely similar?

Did you know that the crash of MH17 was all part of an American conspiracy to provoke a big war with Russia?

There is more here from Julia Ioffe.

Bolivia fact of the day

by on July 20, 2014 at 7:29 am in Current Affairs, Economics | Permalink

One of the most surprising developments is the way that Bolivia has amassed foreign currency, salting away a rainy-day fund of about $14 billion, equal to more than half of its gross domestic product, or 17 months of imports, that can help it get through economic hard times.

According to the monetary fund, Bolivia has the highest ratio in the world of international reserves to the size of its economy, having recently surpassed China in that regard.

There is more here.  What do you recommend as good to read on the economy of Bolivia?  Please let me know in the comments.  I am going there in late August.

To enlist in the People’s Liberation Army (PLA), potential recruits have to take tests. To make sure their sons and daughters pass, families pay up. At one recruitment office in the eastern Chinese province of Jiangxi, this year’s going rate, depending on your guanxi, or connections, is as much as 99,000 yuan ($16,000), says Wang, a recruitment officer in the province who asked that his full name not be used because he isn’t authorized to speak publicly. Limited openings, plus a high failure rate on the fitness exam, push parents to buy spots for their children during the annual enlistment drive that runs through September. Success offers a stable job and, for some, an escape from rural poverty.

The price varies, Wang says. His old army friends “asked me what the current price tag is, and I said ‘around 80,000 to 90,000 yuan for you guys.’ If your guanxi was really strong, it’d cost you around 50,000 to 60,000 yuan; if it was just so-so, you would have to spend 100,000 yuan at least.”

So how formidable a fighting force are they?  There is more here.

The excellent Brendan J. Nyhan directs my attention to this forthcoming paper by Anna Getmansky and Thomas Zeitzoff (pdf):

How does the threat of becoming a victim of terrorism affect voting behavior? Localities in southern Israel have been exposed to rocket attacks from the Gaza Strip since 2001. Relying on variation across time and space in the range of rockets, we identify the effect of this threat on voting in Israeli elections. We first show that the evolution of the rockets’ range leads to exogenous variation in the threat of terrorism. We then compare voting in national elections within and outside the rockets’ range. Our results suggest that right-wing vote-share is 2 to 6 percentage points higher in localities that are within the range– a substantively significant effect. Unlike previous studies that explore the role of actual exposure to terrorism on political preferences and behavior, we show that the mere threat of an attack affects voting.

Here is a related post from Monkey Cage.

Facts about Latino children

by on July 17, 2014 at 6:12 am in Current Affairs, Law | Permalink

Accepting 60,000 children in a population of 317.2 million — less than two hundred-tenths of 1 percent (.02 percent) of our population — would hardly be straining our resources.

Despite the vast differences in wealth and resources between our country and those of Lebanon, Jordan and even Iran, which currently has one of the world’s largest refugee populations, the end-of-the-world scenarios proffered by some ring of hyperbole.

At a time when we were a more generous, caring nation, we brought 14,000 children into the United States from Cuba under Operation Peter Pan. In 1966, we flew 266,000 Cuban men, women and children into the United States from the Port of Camarioca. At the time, those 266,000 Cubans represented .14 percent of our population, seven times the number of migrants we are talking about today.

That is from Ira Kurzban, via Timothy Ogden.

China sentences to ponder

by on July 16, 2014 at 10:45 am in Current Affairs, Economics | Permalink

With credit at 200% of GDP and average financing costs of roughly 7%, Chinese borrowers now need to generate cash-flow growth of 14% to cover their interest payments without eroding their profitability or being forced to borrow yet more.

From Free Exchange blog, there is more here.

Peter Orszag: We have had incredibly good news over the past three to five years. If I’d been told when I was director of either CBO or OMB that we would have a 12-month period when Medicare spending was basically flat in nominal terms — and therefore on an inflation-adjusted, per-beneficiary basis, significantly negative — I would have thought impossible and yet that’s exactly what we’re living through.

If this continues, it’s massive — everything you think you know about the nation’s long-term fiscal gap would be wrong.

That is from Vox, there is more here.  Note that since Medicare spending is slowing down too, this phenomenon probably is not just from slow economic growth.  From Wonkblog (don’t get confused) here is further commentary, arguing the fiscal gap still will be a problem.

“The voices in Israel go from, ‘Let’s create some friction with Hamas, to show we’re serious,’ to the idea of taking back the Gaza Strip,” says Ya’akov Amidror, a retired general who was until recently Netanyahu’s national security adviser. “And democratic systems are craziest ones in the international arena, because the leadership has to take into consideration all of these ideas.”

There is more here, mostly on what kind of future Hamas will have if any, interesting throughout.

The Finnish capital has announced plans to transform its existing public transport network into a comprehensive, point-to-point “mobility on demand” system by 2025 – one that, in theory, would be so good nobody would have any reason to own a car.

Helsinki aims to transcend conventional public transport by allowing people to purchase mobility in real time, straight from their smartphones. The hope is to furnish riders with an array of options so cheap, flexible and well-coordinated that it becomes competitive with private car ownership not merely on cost, but on convenience and ease of use.

Subscribers would specify an origin and a destination, and perhaps a few preferences. The app would then function as both journey planner and universal payment platform, knitting everything from driverless cars and nimble little buses to shared bikes and ferries into a single, supple mesh of mobility. Imagine the popular transit planner Citymapper fused to a cycle hire service and a taxi app such as Uber, with only one payment required, and the whole thing run as a public utility, and you begin to understand the scale of ambition here.

The story is here, via s.  Here is a further and very different installment in The Culture that is Finland, nice visual on the igloos.  Or try this Finland Bitcoin link, blockchain-by-air.

One of the arguments for reauthorizing the Ex-Im Bank is that the EU subsidizes Airbus in an increasing returns to scale industry, and so therefore we need to do the same for Boeing.  Boeing is by far the largest beneficiary from the Bank.

Yet the Pentagon spends a lot of money on Boeing already, basically ensuring the company will operate at quite a large scale.  I cannot find formal figures on how much the European Union spends on military contracts with the Airbus Group, but it is highly likely to be much less than what the Pentagon spends on Boeing, given the differences in defense spending across the two regions.

In other words, through military spending we are already doing what strategic trade policy (ostensibly) dictates.  General Electric, which is number two on that list of Ex-Im beneficiaries, is also a significant Pentagon contractor, as is number three Bechtel of course.

By the way, did you know that the standard models dictate an export tax rather than an export subsidy if the duopolistic firms operate as Bertrand rather than Nash competitors?  See Eaton and Grossman (1986), or this Flam and Helpman piece (pdf) or Cheng (1988).  I am not suggesting that Bertrand competition is exactly the right assumption here, rather the point is that strategic trade models are not very robust in their policy implications.

“This study finds total marijuana demand to be much larger than previously estimated,” Colorado’s study concluded.

And this, which I think suggests the laws in other states are binding for many consumers:

Colorado concluded that visitors account for 44 percent of recreational marijuana retail sales in the Denver area. In the mountains and other vacation spots, visitors to Colorado account for 90 percent of recreational dispensary traffic.

And this, which sounds tautologous, but is not:

“Heavy users consume marijuana much more often, and more intensely, than other consumers,” the study concluded.

Overall heavy users seem to account for about seventy percent of total demand.  Here is some detail:

Colorado’s market numbers bore out survey estimates that most marijuana is consumed by heavy daily users. For example, survey authors estimated that a third of all Colorado’s pot consumers use the drug less than once a month. But that group accounts for just 0.3 percent of the total market, analysts concluded.

The full story is here, the study itself is here.  For the pointer I thank C., who I believe is not part of that seventy percent of market demand.

WHEN do individual pieces of data become a trend? In the past few days, we have seen a surprise 1.3% monthly slump in British factory output, a 1.8% decline in German industrial production, a 1.7% decline in France, and a 1.2% drop in Italy. No one can blame the weather for these numbers, as they did for first-quarter US GDP.

European stocks have been weaker, although a cumulative 2.6% drop is hardly a sign of panic.

That is from Buttonwood.  The Espirito Santo debt problem in Portugal is probably not a major event in its own terms, but slotted into this overall picture it is worrying nonetheless.  Is this what the end of QE looks like?  Or is this turn in events caused by something else?

Haaretz reports that some of the current rockets have a range of 150 km, which is longer than most of what has been fired in the past.  So here is my question: when do those rockets become sufficiently powerful and numerous that they can close down Tel Aviv Airport, which is of course the main route in and out of Israel, especially for well-off people.  If that can happen, is this not like a housing bubble game, where things can go very sour very quickly?  And in the meantime, will the Israel government attempt “lower the mean, increase the variance” strategies, if only to forestall what is to them an obviously unacceptable outcome, namely that Hamas can could close Tel Aviv airport at will?  Are we already at the point of seeing such mean-reducing strategies?  If not, how much worse will things be when we get there?

In March 1917, the EEF [Egyptian Expeditionary Force, from Great Britain] launched offensive operations in southern Palestine.

That is from the new and noteworthy book by Kristian Coates Unrichsen, The First World War in the Middle East.  I wouldn’t say it is a fun book, but it is clear, well-written, and very good background reading on a number of today’s crises.