Data Source

And self-published “indie” authors — in part because they get a much bigger cut of the revenue than authors working with conventional publishers do — are now making much more money from e-book sales, in aggregate, than authors at Big Five publishers.

And this:

The AAP also reported, though, that e-book revenue was down 11.3 percent in 2015 and unit sales down 9.7 percent. That’s where things get misleading. Yes, the established publishing companies that belong to the AAP are selling fewer e-books. But that does not mean fewer e-books are being sold. Of the top 10 books on Amazon’s Kindle bestseller list when I checked last week, only two (“The Light Between Oceans” and “The Girl on the Train,” both mass-market reissues of novels that have just been made into movies) were the products of major publishers. All the rest were genre novels (six romances, two thrillers) published either by the author or by an in-house Amazon imprint. Their prices ranged from 99 cents to $4.99.

That is from Justin Fox at Bloomberg.

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.

There should be a whole category of “results that aren’t true as stated but are interesting nonetheless.”  Here is a new paper by Daniel L. Bennett and Boris Nikolaev:

This article examines the relationship between economic freedom and happiness inequality for a large sample of countries. We find that economic freedom is negatively associated with happiness inequality and robust to several alternative measures of happiness inequality, including the standard deviation, mean absolute difference, coefficient of variation, and Gini coefficient. Among the economic freedom areas, legal system and sound money are negatively correlated with happiness inequality. Drawing on the Engerman-Sokoloff hypothesis, we use a measure of factor endowments as an instrument for economic freedom to provide a further robustness test, finding a negative association between economic freedom and happiness inequality.

Two points.  First, the influence of economic freedom often diminishes once you control for the quality of government in a particular locale.  This is perhaps more of an “all good things go together” result than any particular causal story.  Second, many of these results are mediated by the “hard money” component of economic freedom.  But hard money is not economic freedom per se, but rather it may be proxying for some successful cultural attitudes.

For the pointer I thank the excellent Kevin Lewis.  Also via Kevin, here is another published result you shouldn’t quite believe as stated: “…the combination of feeling tired and happy may enhance acceptance of atypical or unusual ideas, which could potentially help creative thought.”

New results on common ownership

by on September 3, 2016 at 11:27 am in Data Source, Economics | Permalink

If firms are commonly owned by the same mutual funds and pension funds, why should they compete with each other?  This question won’t quite die.  There is a new paper by Miguel Anton, Florian Ederer, Mireia Gine, and Martin C. Schmalz on this question, and they actually find some serious evidence that a lot of jointly owned firms don’t compete against each other so vigorously.

Standard corporate finance theories assume the absence of strategic product market interactions or that shareholders don’t diversify across industry rivals; the optimal incentive contract features pay-for-performance relative to industry peers. Empirical evidence, by contrast, indicates managers are rewarded for rivals’ performance as well as for their own. We propose common ownership of natural competitors by the same investors as an explanation. We show theoretically and empirically that executives are paid less for own performance and more for rivals’ performance when the industry is more commonly owned. The growth of common ownership also helps explain the increase in CEO pay over the past decades.

Here is a related paper on the same topic.  I still don’t believe it, but I can’t tell you what is wrong with these claims either…

Despite all of their adversities, Haitians had rather low crime rates.  Martinez and Lee’s 1985-95 study reported a homicide victimization rate of 16.7 for Haitians, which was lower than those for non-Hispanic whites and Latinos and far lower than the rate for American blacks.  In fact, the Haitian crime figures may be inflated, since over 54 percent of the suspected killers of murdered Haitians were African American.  In other words, the Haitian victimization rate is not an especially good indicator of Haitian offending, because, contrary to the usual situation, Haitians were the victims of an inordinate number of out-group killings.  They were believed to have been only 3.5 percent of the murder suspects at a time when they were 14 percent of Miami’s general population.

That is from Barry Latzer’s new and interesting The Rise and Fall of Violent Crime in America.

Maybe so, at least in some significant ways.  There is a new paper from Nature, by Oscar Venter et.al.  It strikes me as an oversimplification in some ways (carbon? what if there is a biodiversity “wall”?), but still many of the core points are valid and indeed empirically verifiable:

Human pressures on the environment are changing spatially and temporally, with profound implications for the planet’s biodiversity and human economies. Here we use recently available data on infrastructure, land cover and human access into natural areas to construct a globally standardized measure of the cumulative human footprint on the terrestrial environment at 1 km resolution from 1993 to 2009. We note that while the human population has increased by 23% and the world economy has grown 153%, the human footprint has increased by just 9%. Still, 75% the planet’s land surface is experiencing measurable human pressures. Moreover, pressures are perversely intense, widespread and rapidly intensifying in places with high biodiversity. Encouragingly, we discover decreases in environmental pressures in the wealthiest countries and those with strong control of corruption. Clearly the human footprint on Earth is changing, yet there are still opportunities for conservation gains.

For the pointer I thank Charles C. Mann.

The more some people go, the more other people want to go too.  It is something to share and talk about.  From the latest JPE, by
Duncan Sheppard Gilchrist (Wealthfront) and Emily Glassberg Sands (Coursera), here is the abstract:

We exploit the randomness of weather and the relationship between weather and moviegoing to quantify social spillovers in movie consumption. Instrumenting for early viewership with plausibly exogenous weather shocks captured in LASSO-chosen instruments, we find that shocks to opening weekend viewership are doubled over the following five weekends. Our estimated momentum arises almost exclusively at the local level, and we find no evidence that it varies with either ex post movie quality or the precision of ex ante information about movie quality, suggesting that the observed momentum is driven in part by a preference for shared experience, and not only by social learning.

Here are ungated copies, note it is fitting this research comes in part from Coursera.  Also from the new JPE, if a Spanish region has a disproportionate share of lottery winners, it is more likely to opt for the incumbent.

That is my latest Bloomberg column, here is one bit:

…new evidence on mutual fund managers suggests that the managers from poorer backgrounds beat the performance of wealthier peers. And it’s not a small effect: Managers from families in the bottom quintile of wealth appear to outperform those from families in the top quintile by 2.16 percent a year, in risk-adjusted terms.

That is one result from a new study by Oleg Chuprinin of University of New South Wales Business School and Denis Sosyura at the University of Michigan Business School.

Why might that be?:

Most individuals from less wealthy backgrounds don’t get to be mutual fund managers at all, and so as an entire class they do underperform. But if they do become fund managers, that may indicate superior smarts and hustle and eventually higher returns. Those from wealthier families, in contrast, maybe had to work less hard and be less smart to get those posts, and that may be reflected in their subsequent performance.

This hypothesis is supported by several features of the data.  For instance, the managers from wealthier families had a higher dispersion of returns. In other words, some of them did very, very well but others were lemons. That distribution is a classic sign of a relatively loose quality filter, and on strictly meritocratic grounds some of those managers probably didn’t deserve to be there.

Along those lines, the data show also that the fund managers from the wealthier families were more likely to receive promotions when their returns were subpar. The returns of the managers from the poorer families were much more tightly bunched, which is consistent with the notion that they passed through much tougher quality filters.

There are some relevant caveats, however, so do read the whole thing.

Perhaps less than you might think.  There is a new paper by Mario L. Chacon and Jeff I. Jensen:

We use the Southern secession movement of 1860-1861 to study how elites in democracy enact their preferred policies. Most states used specially convened conventions to determine whether or not to secede from the Union. We argue that although the delegates of these conventions were popularly elected, the electoral rules favored slaveholders. Using an original dataset of representation in each convention, we first demonstrate that slave-intensive districts were systematically overrepresented. Slaveholders were also spatially concentrated and could thereby obtain local pluralities in favor of secession more easily. As a result of these electoral biases, less than 10% of the electorate was sufficient to elect a majority of delegates in four of the six original Confederate states. We also show how delegates representing slave-intensive counties were more likely to support secession. These factors explain the disproportionate influence of slaveholders during the crisis and why secessionists strategically chose conventions over statewide referenda.

Not entirely unlike the first American secession!

For the pointer I thank the excellent Kevin Lewis.

When it comes to contingent government pension liabilities as a percentage of gdp, Poland appears to be above 350%.

France, Denmark, and Germany are next in line, with figures well over 300%.  For purposes of comparison, the United States is considered to have a serious pension problem but the corresponding number is only slightly above 100%.

Here is the John Authers and Robin Wiggelsworth FT story.  Australia seems to be doing best.

One reason for this high Polish sum is that the Polish government has semi-nationalized a lot of the private sector pension liabilities.  In 2014, this procedure (FT) did not receive much discussion:

As part of an overhaul of the country’s pension system, Warsaw will next week transfer from privately-managed funds to the state 150bn zlotys (€36bn) of Polish government bonds and government-backed securities, which will then be cancelled.

I believe this idea will reenter the broader policy debate sooner or later.

Via Adam Ozimek, here is one recent (still unfinished) paper, by Kurmann, McEntarfer, and Spletzer:

Using administrative worker‐firm linked data for the United States, we examine the extent and consequences of nominal wage and earnings rigidities for U.S. firms. We find less evidence of downward wage rigidity in the administrative data than has been documented in previous studies based on self‐reported earnings from surveys. In our data, only 13 percent of workers who remain with the same firm (job stayers) experience zero change in their nominal hourly wage within a year, and over 20 percent of job stayers experience a reduction in their nominal hourly wage. The lower incidence of downward wage rigidity in the administrative data is likely a function of our broader earnings concept, which includes all monetary compensation paid to the worker (e.g. overtime pay, bonuses), whereas the previous literature has almost exclusively focused on the base rate of pay. When we examine firm labor cost adjustments on both the hours and wage margins, we find that firms have substantially more flexibility in adjusting hours downward than wages. As a result, the distribution of changes in nominal earnings is less asymmetric than the wage change distribution, with only about 6 percent of job stayers experiencing no change in nominal annual earnings, and over 25 percent of workers experiencing a reduction in nominal annual earnings. During the recent Great Recession, this earnings change distribution became almost completely symmetric and the proportion of job stayers experiencing a decline in annual earnings rose markedly to about 40 percent. Finally, we exploit the worker‐firm link in our data to show that it is mostly smaller establishments that show evidence of asymmetry in their earnings change distribution. For these smaller establishments, we find that indicators of downward wage rigidity are systematically associated with higher job destruction rates.

Here is another recent paper, this one from the NBER.  It shows that real estate agents, who have flexible, commission-based wages, do have smaller employment fluctuations than sticky-wage construction workers.  But that difference is only by about 10 to 20 percent.

Here is my previous post on sticky wages: Basu and House show that real wages vary a great deal through changes in expected career paths.  Here is Alex’s 2014 post on half the men having new jobs since the recession.

Are your views on sticky nominal wages and the minimum wage consistent?

And how are nominal wages sticky for the unemployed?

Perhaps most significantly, high nominal demand economies such as Jamaica and Brazil (yes there are still a few left!) still appear capable of generating quite high rates of unemployment.

This link is now about two weeks old, but I’m on my way to Denmark and you’re going to get whatever I am thinking about, like it or not:

The first big idea is that Denmark is not a nation of Horatio Algersens. Its high social mobility is not the result of an economy that is uniquely good at helping poor children earn middle-class salaries. Instead, it is a country much like the U.S., where the children of poor parents who don’t go to college are also unlikely to attend college or earn a high wage. Social mobility in Denmark and the U.S. seem to be remarkably similar when looking exclusively at wages—that is, before including taxes and transfers.

It is only after accounting for Denmark’s high taxes on the rich and large transfers to the poor that its social mobility looks so much better than the U.S.’s. America’s (relatively conservative) economic philosophy is that, with low taxes and little regulation, the market is an open savannah where the most talent will win out. But Denmark’s economic philosophy seems to be that the market is an unfortunate socioeconomic lottery system, and so the country compensates the poor with generous transfers paid by high taxes on the rich.

The second big idea in the paper is that Denmark’s large investment in public education pays off in higher cognitive skills among low-income children, but not in higher-education mobility—i.e., the odds that a child of a non-college grad will go on to finish college.

That is from Derek Thompson.  Here is his source:

…this Danish Dream is a “Scandinavian Fantasy,” according to a new paper by Rasmus Landersø at the Rockwool Foundation Research Unit in Copenhagen and James J. Heckman at the University of Chicago. Low-income Danish kids are not much more likely to earn a middle-class wage than their American counterparts. What’s more, the children of non-college graduates in Denmark are about as unlikely to attend college as their American counterparts.

Both the paper and the article are recommended.

Actuality, the Faroe Islands have a crude birth rate higher than that of Denmark, Sweden, or Norway. Their fertility rate of 2.37 is higher than anywhere else in the White world:

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2127rank.html

That is from Jason Bayz.

While only 25% of the Swiss population hiked regularly in 2000, today the figure is 44%.

That is from Dina Pomeranz, original source here.

That is one question I consider in my latest Bloomberg column, here is one excerpt:

Nima Sanandaji, a Swedish policy analyst and president of European Centre for Entrepreneurship and Policy Reform, has recently published a book called “Debunking Utopia: Exposing the Myth of Nordic Socialism.” And while the title may be overstated, his best facts and figures are persuasive.

For instance, Danish-Americans have a measured living standard about 55 percent higher than the Danes in Denmark. Swedish-Americans have a living standard 53 percent higher than the Swedes, and Finnish-Americans have a living standard 59 percent higher than those back in Finland. Only for Norway is the gap a small one, because of the extreme oil wealth of Norway, but even there the living standard of American Norwegians measures as 3 percent higher than in Norway. And that comparison is based on numbers from 2013, when the price of oil was higher, so probably that gap has widened.

Of the Nordic groups, Danish-Americans have the highest per capita income, clocking in at $70,925. That compares to an U.S. per capita income of $52,592, again the numbers being from 2013. Sanandaji also notes that Nordic-Americans have lower poverty rates and about half the unemployment rate of their relatives across the Atlantic.

It is difficult, after seeing those figures, to conclude that the U.S. ought to be copying the policies of the Nordic nations wholesale.

There is more to the piece, and I will note that I see a Land of Twitter where many Danes have read only that part of the piece.   I close with this:

How’s this for a simple rule: Open borders for the residents of any democratic country with more generous transfer payments than Uncle Sam’s.

Do read the whole thing.  You can buy the Sanandaji book here.