Current Affairs

In Africa this process seems not to work as well. According to one 2007 study of 90 developing countries, Africa is the only region where urbanisation is not correlated with poverty reduction. The World Bank says that African cities “cannot be characterised as economically dense, connected, and liveable. Instead, they are crowded, disconnected, and costly.”

I say the one big problem is premature deindustrialization:

What ties them [African cities] together, and sets them apart from cities elsewhere in the world, according to the Brookings Institution, an American think-tank, is that urbanisation has not been driven by increasing agricultural productivity or by industrialisation. Instead, African cities are centres of consumption, where the rents extracted from natural resources are spent by the rich. This means that they have grown while failing to install the infrastructure that makes cities elsewhere work.

That is from The Economist, the article is interesting throughout.

After Texas high school builds $60-million stadium, rival district plans one for nearly $70 million

Need I say more?  I will nonetheless:

In Frisco, which neighbors Allen and McKinney, the district will pay $30 million over several years to use the Dallas Cowboys’ new 12,000-seat practice field for high school football and soccer games, as well as graduation ceremonies.

Here is a nice bit of fiscal illusion:

In McKinney [one of the stadium-building districts], school taxes for property owners amount to $1.63 per $100 of assessed valuation. The tax rate had been higher in the recent past, but it fell 5 cents this year, partly because the district had dropped some old debt. Because of the 5-cent decrease, district officials repeatedly note, property owners will see their taxes go down, even as the new stadium goes up.

Jim Buchanan would be proud.  And it’s a good thing we have the public sector to protect us from negative-sum status-seeking games!

The original pointer is from Adam Minter.

Total outstanding mortgage loans rose more than 30 percent and new mortgage growth clocked in at 111 percent in the past year. Since June 2012, outstanding mortgage loans have grown at an annualized rate of 30 percent. Predictably, that’s pushed prices higher and higher.

In urban China, the average price per square foot of a home has risen to $171, compared to $132 in the U.S. In first-tier cities such as Beijing and Shenzhen, prices have increased by about 25 percent in the past year. A 100-city index compiled by SouFun Holdings Ltd. surged by a worrisome 14 percent in the last year. Developers are buying up land in some prime areas that would need to sell for $15,000 per square meter just to break even.

That is from Christopher Balding, there is more at the link.  Might as much as 70% of Chinese household wealth be in housing?  Here is some follow-up analysis.

Senior figures in the EU believe that Britain will give up on Brexit if they make negotiations as tough as possible, the Telegraph understands.

British officials are fighting to stop Europe adopting a no-compromise position in talks in the hope that the UK will change its mind about leaving the bloc.

This belief is fuelling the hardline message on issues like freedom of movement that have emerged from Berlin, Paris and Brussels in recent weeks.

More than five senior EU figures interviewed by the Telegraph this week expressed doubts that Britain would go through with Brexit when confronted by the “reality of the bureaucratic nightmare” and the “insane act of economic self-harm”, as they referred to Brexit.

One senior British official involved in the set up for the coming negotiations said the EU elite “seem to think the game is to make us change our minds”.

This stance has left officials fighting to explain to European leaders how “dangerous” a game they were playing, and how “unlikely” it was to succeed.

Here is the full story.  Speculative of course, but don’t forget this bit:

“Perhaps there was a time when this could not have got nasty,” said one source close to Mr Verhofstadt, “but when the Brexit minister calls the chief negotiator ‘Satan’ what response, really, does Britain expect?”

Do they really spell “fuelling” with two l’s?

I can think of a few candidate theories:

1. His views are the right views, more or less, and American voters recognized this.

2. A quite significant percentage of America is very directly racist.  I don’t mean statistical discrimination here, I mean “downright racist.”

3. Give Ray Fair (NYT) his Nobel Prize right here and now, economic conditions truly predict election results at the national level.

4. The “third term Party fatigue” effect is stronger in national elections than we had thought.

5. Hillary Clinton is a weaker candidate than many people had thought.  Maybe so, but that has to be unpacked a bit more.  I would try “the Democratic national establishment doesn’t understand why much of America trusts it so little, so it keeps on doing and saying unpopular things.  Those things include elevating some candidates and also encouraging them to take particular stances.”

6. As Robert D. Putnam suggested, ethnic diversity can lower the quality of governance, and this is one step along that path toward greater fractiousness.  This may blend into racism, but much of it is simply “fear of being in the losing coalition.”  The common claim that the electorate is more polarized than before fits into this.  You might try Ezra Klein’s podcast with Arlie Hochschild.

7. America is not ready for a woman president.  Or maybe it has to be a different kind of woman president, noting that Hillary, while she has passed through many filters, has not passed through the “truly popular with normal voters filter” in the same way that say Thatcher and Merkel did.  And no, New York isn’t normal, sorry people.

8. The Democrats have plenty of policy proposals, but only the Republicans are running on ideas.  And very often an idea beats no idea, even if the idea on the table is a bad one.

I don’t agree with #1, and while #4 sounds like a plausible part of the story to me, as a truly major explanation I find it hard to square with Obama’s continuing popularity.  #3 kicks in but as a dominant force, it seems hard to elevate when median household income just grew at 5.2%, inflation is low, there is no major war, gas prices are low, and asset prices are high.

On #2, I see #5 as a more convincing statement of related ideas, while admitting #2 is a factor.  How well the Democrats do in the Senate might give us some bead on the relative import of #5.

Overall I am seeing a lot of room for #5 and #6 and #7 and #8.  Presumably 5, 6, and 8 are hard for many Democrats to admit, and I genuinely wonder how their thoughts run in the quiet of their homes.  Some are plugging hard for an extreme version of #2, but, as long as we are considering matters of prejudice, I find the gender bias of #7 easier to swallow.  We did after all just elect Obama for two terms in a row, and we have never ever had a woman president or even a serious contender before.

If, I wish to stress that word if.  But that he is still in the running, and making it close, is reason enough to ponder these questions.

The Wi-Fi kiosks were designed to replace phone booths and allow users to consult maps, maybe check the weather or charge their phones. But they have also attracted people who linger for hours, sometimes drinking and doing drugs and, sometimes, boldly watching pornography on the sidewalks.

Now, yielding to complaints, the operators of the kiosks, LinkNYC network, are shutting off their internet browsers.

That is from Patrick McGheehan at the NYT.

Mexico fact of the day

by on September 15, 2016 at 12:28 am in Current Affairs, Economics | Permalink

Thus far, the only part of the currency universe that has responded consistently to the Trump phenomenon is the Mexican peso.

Not surprisingly, given the threat his policies pose to Mexican trade, Mr Trump’s poll fortunes have been inversely correlated to those of the peso. “That could stretch to a wider group of trade-sensitive currencies,” says Mr Juckes.

The peso has fallen almost 8 per cent against the dollar in the last six months, making it the worst-performing emerging market currency.

That is from Roger Blitz at the FT.  Some of that movement of course may have come from the humiliation of the incumbent government, rather than the prospect of a Trump presidency per se.

And as the U.S. election becomes a tighter race, American equity prices do not seem massively perturbed.  The worry from last week seemed to be more about Fed tightening than anything else.

That is my latest Bloomberg column.  I perform some back of the envelope calculations to estimate very roughly that:

Nonetheless imports are almost 30 percent of British GDP, which you can take as one possible measure of what eventually might be spent on the outputs of foreign nations. So plausibly, in the long run that 30 percent becomes 10 percent more expensive because of the weaker British currency. Thirty percent of 12 trillion [national wealth] is 3.6 trillion, and the 10-percent value decline from that figure is 360 billion pounds, or about 5,625 pounds per capita. a pretty steep price for the Brexit vote.

To put that 360 billion pounds in context, that is about 19 percent of 2015 British GDP, much costlier than a typical recession. The bigger loss, however, is less psychologically painful because it is spread out over many years, basically the rate at which the British will spend down their wealth. And if you view the country as a wealth-generating mechanism for the future, in fact the actual costs will be higher because hitherto-unproduced wealth will be worth less too, although those costs are more distant yet.

This isn’t any kind of formal international trade model, with a full set of measurements and moving variables. It’s just a simple way of showing that the costs of Brexit can be high without a recession. It is quite possible and indeed likely that various adjustments, including a move away from foreign imports, would lower these costs. On the other side of the ledger, Brexit could help create a negative political and economic momentum that is not captured here either. Nonetheless this is a gross approximation of the first-order hit to British wealth.

Please let me stress again: I am not saying that is “the right number.”  It is rather a simple exercise to show Brexit can have significant backloaded costs, without necessarily bringing a recession today.  My conclusion is this:

The notion of a recession is actually a narrow way of thinking about economic cost, and it focuses attention too much on short-run, highly visible, and painful burdens. I worry that the spreading out of Brexit costs over time will lead the British people to feel invulnerable, to demand too much from their politicians, and to limit their ties with the EU too much and too quickly.

Do read the whole thing.  And here is a good Francesco Guerrera piece on Brexit from Politico.

gdpgrowth

If the multiplier were large, more economic growth would beget yet more growth, but is that what you see for the post-2014 period?

You can think of this as another sign that aggregate demand policy has reached its limits.  Advocates of large multipliers write as if government-sponsored economic activity will bring forth more activity yet.  But “economic activity” – whether government-sponsored or not — has not been having a multiplicative effect since 2014 or arguably earlier yet.

I call this “The Multiplier for Me, but Not for Thee.”  Favored policies are supposed to have large multipliers, but as for the growth we actually get, what kind of multiplier is that bringing?  That’s not a question to be asked too many times because the answer will disappoint.

Here is one of my bits:

Cowen: Now, let me make a bit of a separate point, but this is an important one. I think we would agree that activist fiscal policy isn’t massively popular with American voters. The attitude of “let’s just try some, it might work out,” or “it’s fine to waste resources, if we boost demand” contributes to that unpopularity. Support for fiscal stimulus is pretty scarce. Let’s save it up for the really important times. Taxpayers do in fact think that government is always ready to spend on its own priorities rather than the priorities of the taxpayers — let’s not make that more true than it has to be.

Here is the full (edited) dialogue.

I hadn’t known Ed “Let’s take the con out of econometrics” Leamer was the VP on the Larry Kotlikoff ticket.

The quality, and popularity, of Sully raises anew the question of why Hollywood doesn’t make more such movies.  Which is the scarce input?  The script?  Yet virtually every Clint Eastwood movie seems to come up with a good script.  I suspect “a recognized auteur with bargaining clout” is what is scarce.

Insects are not so scarce, but the marketing is tough:

Aketta grows its crickets in the United States and fills orders on a first come, first serve basis with weekly harvests. The company sells cricket flour and whole-roasted crickets. Flour is made from 100% milled crickets and has a “deep, earthy, umami flavor with hints of raw cocoa.” Sold in small batches of 1 to 1.5 lbs. Order online.

Here are many more insect food sources, but the claim is that the most innovative insect-selling start-ups are in Europe.

This story has scary good photos:

The Bund reached the height of its prominence on February 20, 1939, when some 20,000 members held a “Pro-America Rally” in Madison Square Garden.

Inside, jackbooted Nazi supporters filled the aisles while speakers ranted against President “Frank D. Rosenfeld” and his “Jew Deal.”

Outside, some 80,000 anti-Nazi demonstrators furiously protested the event, clashing with police and attempting to gain entry to the arena and shut it down.

The Bund called George Washington “the first fascist.”

Chileans remain upset at their semi-privatized pension system (NYT), and I say that is now the country to sell short.

Susan Athey will discuss machine learning, government and policy analysis in her keynote on Monday morning (Sept. 12) at Artificial Intelligence: The Economic and Policy Implications a mini-conference sponsored by the Technology Policy Institute at the National Press Club in Washington, DC. I will then moderate one of two panels featuring computer scientists and AI experts. More information and reservations here. Should be fun.

Barack Obama’s campaign adopted data but Hillary Clinton’s campaign has been molded by data from birth. Politico has the remarkable story:

Staff in Clinton’s analytics department sit under a sign that hangs from the ceiling with the words “statistically significant” printed on it. And overnight, in some of the few hours that headquarters isn’t whirring with activity, the team’s computers run 400,000 simulations of the fall campaign in what amounts to a massive stress-test of the possibilities on Nov. 8.

…“I have never seen a campaign that’s more driven by the analytics,” [one] strategist said. It’s not as if Kriegel’s data has ever turned around Clinton’s campaign plane; it’s that her plane almost never takes off without Kriegel’s data charting its path in the first place.

…Among the pioneering areas Kriegel’s analytics team has studied, according to people familiar with the operation, is gauging not just whom to talk to, how to talk to them and what to say — but when to say it. Is the best time to contact a voter, say, 90 days before the election? 60 days? One week? The night before? It is a question Obama’s team realized was crucial to mobilizing voters in 2012 but had never been truly analyzed. With a full calendar of competitive primaries, Kreigel and his team had plenty of chances to run rigorous, control-group experiments to ferret out answers to such questions earlier this year.

Here is one fascinating bit on the algorithms that were used to estimate delegate flippability in the primary:

First, the campaign ranked every congressional district by the probability that campaigning there could “flip” a delegate into Clinton’s column. Because every district has a different number of delegates allocated proportionally (in Ohio, for instance, 12 districts had 4 delegates each while one had 17), this involved polling and modeling Clinton’s expected support level, gauging the persuadability of voters in a particular area and then seeing how close Clinton was to a threshold that would tip another delegate in her direction. (At the most basic level, for instance, districts with an even number of delegates, say 4, are far less favorable terrain, as she and Bernie Sanders were likely split them 2-2 unless one of them achieved 75 percent of the vote.)

That so-called “flippability score” was then layered atop which media markets covered which seats. If a media market touched multiple districts with high “flippability” scores, it shot up the rankings. Then the algorithm took in pricing information, and what television programs it predicted the most “flippable” voters would be watching, to determine what to buy.

The irony? More questions are being asked, more data is being collected and more randomized experiments are being run in the effort to win the presidency than will ever be used to choose policy by the presidency. Sad.

Why stick with that NGO when global markets beckon?:

In the northwest corner of Phnom Penh’s Boeng Keng Kang market, a new stall is creating a buzz among shoppers.

Its occupant is a 28-year-old former U.S. Peace Corps volunteer who offers tarot-card readings in Khmer. And customers say her predictions are on point.

With strings of fake leaves hanging from the ceiling, colorful paper butterflies affixed to one wall, and a sign that reads “Mantis Magic,” the booth—which has been open for two weeks—stands out from the neighboring hairdressers and food stalls.

“I didn’t have a job, I needed something to do and I wanted to help people through my spiritual work. I was getting messages to do this, so I just followed my gut,” said Eileen, who speaks conversational Khmer and asked to be identified only by her first name so that her mother in the U.S. would not find out about her new trade.

Originally from New York, Eileen said she graduated from West Virginia University with degrees in gender studies and criminal investigations before relocating to Cambodia nearly five years ago with the Peace Corps.

After spending two years writing grant proposals for a local NGO while pursuing a master’s degree in development at the Royal University of Phnom Penh, she grew restless and earlier this year decided to pursue a passion for mysticism she had cultivated since the age of 10.

A Cambodian friend helped her lease the market stall two weeks ago, Eileen said. She said she had met with unexpected financial success, earning about $450 since opening while charging 10,000 riel (about $2.50) per session.

Here is the full story, by Maria Paulo Brito and Ouch Sony, it has other interesting points, and for the pointer I thank Dustin Palmer.

And, via Kaushal Desai, here is a 16-year-old British girl who earned £48,000 helping Chinese parents name their babies.

Somehow — I can’t imagine why — this financial matter has fallen down the memory hole as of late.  Here are a few paragraphs from Wikipedia:

In 1978 and 1979, lawyer and First Lady of Arkansas Hillary Rodham engaged in a series of trades of cattle futures contracts. Her initial $1,000 investment had generated nearly $100,000 when she stopped trading after ten months…

Various publications sought to analyze the likelihood of Rodham’s successful results. The editor of the Journal of Futures Markets said in April 1994, “This is like buying ice skates one day and entering the Olympics a day later. She took some extraordinary risks.”[3] USA Today concluded in April 1994 after a four-week study that “Hillary Rodham Clinton had some special treatment while winning a small fortune in commodities.”[9] According to The Washington Post‘s May 1994 analysis, “while Clinton’s account was wildly successful to an outsider, it was small compared to what others were making in the cattle futures market in the 1978–79 period.” However, the Post’s comparison was of absolute profits, not the percentage rate of return.[14] In a Fall 1994 paper for the Journal of Economics and Finance, economists from the University of North Florida and Auburn University investigated the odds of gaining a hundred-fold return in the cattle futures market during the period in question. Using a model that was stated to give the hypothetical investor the benefit of the doubt, they concluded that the odds of such a return happening were at best 1 in 31 trillion.[15]

Financial writer Edward Chancellor noted in 1999 that Clinton made her money by betting “on the short side at a time when cattle prices doubled.”[16] Bloomberg News columnist Caroline Baum and hedge fund manager Victor Niederhoffer published a detailed 1995 analysis in National Review that found typical patterns and behaviors in commodities trading not met and concluded that her explanations for her results were highly implausible.[17] Possibilities were raised that broker actions such as front running of trades, or a long straddle with the winning positions thereof assigned to a favored client, had taken place.[14][17]

That said, I fully grant such matters are not closely correlated with ultimate political performance.  But I am seeing so, so much apologia, selective event citation, and wishful thinking these days…

What is also interesting is that this is another case where — relative to actual legal priorities — one can correctly suggest that an actual prosecution was not warranted.

Please do note I regard it as my first priority to try to understand and also explain the (rather dire) situation we are in, rather than to put maximum thumb weight on the outcome I would most like to see happen.