Economics

Only a shred of evidence, but a shred nonetheless:

Kurt Gray, a co-author at the University of North Carolina at Chapel Hill, and his colleagues investigated thousands of shoe purchases made by women who move to different cities, showing that women adopt the local trends when moving to wealthier cities but ignore them when moving to lower socioeconomic (SES) cities.

“In other words, women want to look like the rich girls, and different from the poor girls,” said Gray, an assistant professor of psychology in UNC College of Arts and Sciences.

…Because fashion choices are hard to quantify, they used a straightforward number: the size of high heels [for luxury purchases].

Source here, paper here.  Perhaps this eventually becomes a theory of fashion cycles, if the rich women feel, after a while, that too many other women are copying them.  By the way, the researchers seem to believe that comparable mechanisms apply to men too, albeit not for high heels necessarily.

For the pointer I thank Charles Klingman and also Samir Varma.

Relying on diversity measures computed at the apartment block level under conditions of exogenous allocation of public housing in France, this paper identifies the effects of ethnic diversity on social relationships and housing quality. Housing Survey data reveal that diversity induces social anomie. Through the channel of anomie, diversity accounts for the inability of residents to sanction others for vandalism and to act collectively to demand proper building maintenance. However, anomie also lowers opportunities for violent confrontations, which are not related to diversity.

A sentence from the conclusion explains that last bit more clearly: “…fractionalization has no effect on public safety, diversity being associated with social anomie within the housing blocks rather than violent confrontations among neighbors — helped as well by an increase in municipal policing in municipalities of high diversity.”

The paper also offers a useful but brief survey of what we know about ethnic diversity and social capital.  Here is an earlier ungated copy (pdf).

Here is the latest:

Google is sufficiently confident about its technology that its staff have discussed launching a fully autonomous taxi service in Mountain View as soon as next year, according to people familiar with the company’s thinking. The service may initially be restricted to Google employees, which might get around any legal and regulatory issues. Google has already run some tests with employees who are trained drivers.

I enjoyed this bit too:

Yet real life brings surprises no-one can anticipate. Last year, a Google car rounded a corner to find a woman in an electric wheelchair chasing a duck with a broom in the middle of the road. “We’d never tested the car against a woman and a duck,” Mr Urmson says, “and it was able to understand this was unusual, slow down, let that thing play out and then get on its way.”

Here is the Tim Bradshaw FT piece, and for the pointer I thank Michael Gibson.  And Ted Craig sends me this:

General Motors Co. and Lyft Inc. will begin testing a fleet of self-driving Chevrolet Bolt electric taxis on public roads within a year, a move central to the companies’ joint efforts to challenge Silicon Valley giants in the battle to reshape the auto industry.

And here is Viv, which is supposed to be better than Siri.  And here:

A robot is being designed to compete with 12th graders during the college entrance examination in 2017 and get a score qualifying it to enter first-class universities in China, according to Huaxi Metropolis Daily.

The robot will not be connected to the internet.  And from the world of photography, here are robot portraits.  And yet more from the FT:

US researchers have developed what they say is the world’s first surgical robot that can outperform human surgeons when operating autonomously on soft tissues such as intestines, paving the way for clinical trials.

Or this:

Airbus is working with French and Japanese researchers to develop humanoid robots able to work alongside humans on its assembly lines and inside aircraft, in what would be a step change in the use of industrial robotics.

That is a lot of robot news for a day and a half.

This new NBER paper by John Komlos is of real interest, and it documents the “average is over” idea of the dwindling of middle class fortunes:

We estimate growth rates of real incomes in the U.S. by quintiles using the Congressional Budget Office’s (CBO) post-tax, post-transfer data as basis for the period 1979-2011. We improve upon them by including only the present value of earnings that will accrue in retirement and excluding items included in the CBO income estimates such as “corporate taxes borne by labor” that do not increase either current purchasing power or utility. We estimate a high and a low growth rate using two price indexes, the CPI and the Personal Consumption Expenditure index. The major consistent findings include what in the colloquial is referred to as the “hollowing out” of the middle class. According to these estimates, the income of the middle class 2nd and 3rd quintiles increased at a rate of between 0.1% and 0.7% per annum, i.e., barely distinguishable from zero. Even that meager rate was achieved only through substantial transfer payments. In contrast, the income of the top 1% grew at an astronomical rate of between 3.4% and 3.9% per annum during the 32-year period, reaching an average annual value of $918,000, up from $281,000 in 1979 (in 2011 dollars). Hence, the post-tax, post-transfer income of the 1% relative to the 1st quintile increased from a factor of 21 in 1979 to a factor of 51 in 2011. However, income of no other group increased substantially relative to that of the lowest quintile. Oddly, the income of even those in the 96-99 percentiles increased only from a multiple of 8.1 to a multiple of 11.3. We next estimate growth in welfare assuming diminishing marginal utility of income. A logarithmic utility function yields a growth in welfare for the middle class of roughly 0.01% to 0.07% per annum, which is indistinguishable from zero. With interdependent utility functions only the welfare of the 5th quintile experienced meaningful growth while those of the first four quintiles tend to be either negligible or even negative.

energy

That is from TMFHousel, via @pmarca.

European countries that refuse to share the burden of high immigration will face a financial charge of about €250,000 per refugee, according to Brussels’ plans to overhaul the bloc’s asylum rules.

The punitive financial pay-off clause is one of the most contentious parts of the European Commission’s proposed revision of the so-called Dublin asylum regulation, due to be revealed on Wednesday…

According to four people familiar with the proposal, this contribution was set at €250,000 per asylum seeker in Monday’s commission draft. But those involved in the talks say it may well be adjusted in deliberations over coming days.

“The size of the contribution may change but the idea is to make it appear like a sanction,” said one official who has seen the proposal. Another diplomat said in any event the price of refusing to host a refugee would be “hundreds of thousands of euros”.

Here is the full FT piece.  Elsewhere on the pricing front, there is talk that at some point Uber will move away from surge pricing.

This is often forgotten:

One traditional way of measuring nations’ power relative to each other is to compare their gross domestic product. By this measure, Russia gained economically on all of its competitors as well as on the world as a whole in 1999-2015.

And this:

The GINC measures national power as the geometric mean of the following ratios:

  • TPR = total population of country ratio;
  • UPR = urban population of country ratio;
  • ISR = steel production of country ratio;
  • ECR = primary energy consumption ratio;
  • MER = military expenditure ratio;
  • MPR = military personnel ratio.

The GINC shows Russia’s power rising by 6.53 per cent in 1999-2014, while the power of the US, UK, France, Germany and Italy declined 13.14 per cent, 24.42 per cent, 24.23 per cent, 29.92 per cent and 27.29 per cent respectively in 2014 compared with 1999.

That is from Simon Saradzhyan writing for the FT.

JR, a loyal MR reader, writes to me:

Your loyal readers, such as myself, know of your love for mormons. This made me curious whether you think the tithing requirement in mormonism have have the same incentive effects as a tax.

On one view, people will only bother giving if they are actually pleased about being able to contribute to church so the tithing is a form of consumption, not a tax.

On another view the tithing is a price you pay to maintain social status in your group. You may be able to cheat a little, but not too much on the requirement before the church notices that you are not paying a sum that corresponds to your apparent income. In that case one would expect it to act more like a tax.

Finally one can speculate that even if one has internalized the requirement to pay the tithe, and really, truly believes it, it might still act as a tax. One might feel it like a duty to pay, but feel any guilt over not maximizing ones income in order to pay more.

What is your take? There are many religions with tithing requirements including Islam so it ought to be of general economic interest to figure out its effects.

I would model tithing as similar to paying a tax, except that a) the act of payment itself yields utility, and b) there may be a kink at the level of the suggested tithe.  For instance you know that if you pay ten percent, you are respected within the church community.  Paying eleven percent does not get you proportionately more respect, however.  In such a model, tax incidence theory changes.  It would matter which side of the market a tax is levied upon, to give one concrete example.  You don’t just care about “how much the church gets,” you also care about “how much you give to the church,” and with the kink  you’ll try to stay at ten percent whether the supply side or demand side of a donation is taxed.  Thus if there is a tax on the demand side you will give more, but not if your contribution is taxed on the side of the church.

This kind of tithing motives also weakens the crowding out of donations if the government subsidizes the church, for instance.  You’ll stick at ten percent even if the church coffers are overflowing from the subsidy.  Or tax subsidies to giving may not push many people over ten percent, because ten percent suffices to earn most of the respect on tap.

Having been named as Mr Nakamoto once, unconvincingly, Mr Wright has a steep hill to climb to convince the world that he is indeed bitcoin’s founder. Evaluating his claim involves the application of a multi-step paternity test. First comes the factual evidence: can Mr Wright prove that he is in possession of cryptographic keys that only Mr Nakamoto should have? Second, does he have convincing explanations for the holes in the story which came to light when he was first outed in December? Third, does he possess the technical knowledge which would have enabled him to develop a system as complex and clever as bitcoin? And fourth, to what extent does he fit the image that people have of Mr Nakamoto; in particular, what do those software developers who have collaborated online with the founder of bitcoin think of Mr Wright’s claim?

Here is a very good Economist article, I say p = 0.415.  There is some legitimate evidence and some serious endorsers, but the whole thing still doesn’t smell right to me.  You?

Update from my iPad: uh-oh, http://www.economist.com/news/briefings/21698066-onus-on-craig-wright-provide-better-evidence-satoshi-nakamoto?fsrc=scn/tw/te/bl/ed/craigwrightsclaimsunderfire

For music, at least:

The simultaneous advent of streaming music and the vinyl renaissance has led to some very interesting recording industry statistics over the past few months. Last month, the RIAA reported that vinyl revenues outpaced sales from streaming services, despite actual streams vastly outnumbering physical vinyl sold. Now, Nielsen has released data revealing that, for the first time ever, old music (the “catalog,” defined as music more than 18 months old) outsold new releases in 2015.

It’s important to note that Nielsen’s numbers here don’t include streaming numbers, but that in itself is telling of current trends: an easy-to-draw hypothesis from these stats is that new music exists primarily in the streaming realm, rather than in album downloads or physical copies. And as 2016 has progressed and seen such things as Kanye’s The Life of Pablo shenanigans, exclusive streaming rights, like Rihanna and Beyoncé with Tidal and Drake with Apple Music, and the fact that the Beatles dominated Spotify in their first 100 days on the service, streaming music’s hold on the future seems to be growing tighter.

And note this:

Pink Floyd’s Dark Side of the Moon was the third-best-selling vinyl record of 2015.

I suspect you are not surprised to hear that Prince is dominating the Billboard 200 right now.

The pointer is from Ted Gioia.

I will be doing a Conversation with Tyler with him, June 15, late afternoon, Washington D.C., location to be announced.

So what should I ask?  I already know which is his favorite novel…and plan to ask about that…and of course we will cover his new forthcoming book The World According to Star Wars.

Two papers suggest numeracy improves financial outcomes and can be taught.

Numeracy and Wealth: We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences, beliefs about future income, financial knowledge, need for cognition or seeking financial advice. Conditional on socio-demographic characteristics, our estimates suggest that on average a one-point increase in the numeracy score (11-point scale) of the respondent is associated with 5 percent more personal wealth.

High School Curriculum and Financial Outcomes: Financial literacy and cognitive capabilities are convincingly linked to the quality of financial decision-making. Yet, there is little evidence that education intended to improve financial decision-making is successful. Using plausibly exogenous variation in exposure to state-mandated personal finance and mathematics high school courses, affecting millions of students, this paper answers the question “Can high school graduation requirements impact financial outcomes?” The answer is yes, although not via traditional personal finance courses, which we find have no effect on financial outcomes. Instead, we find additional mathematics training leads to greater financial market participation, investment income, and better credit management, including fewer foreclosures.

True or false? A new nuclear power station in the south-west of the UK will be the most expensive object on Earth. That’s the claim about the proposed plant at Hinkley Point in Somerset – but has anything else ever cost so much to build?

“Hinkley is set to be the most expensive object on Earth… best guesses say Hinkley could pass £24bn ($35bn),” said the environmental charity Greenpeace last month as it launched a petition against the project.

…Even if you stick with the expense of construction alone, though, the price is still high – the main contractor, EDF, puts it at £18bn ($26bn).

Here is the story, via Tim Harford.  Being good Austrians, let’s put cost of production aside and focus on potential market value.  Might there be an object which would auction for at least this much, if it were put on the market?  If so, which one?  The Mona Lisa?  A pyramid?  How about St. Peters?  Worth more or less than a nuclear power plant?  The Grand Mosque in Mecca?  The Great Wall of China?

Going back to cost of production, the article also mentions:

But these are all exceeded by the $54bn (£37bn) Gorgon liquefied natural gas plant built by Chevron in Australia.

And (not on earth):

The International Space Station. Price tag: 100bn euros (£77.6bn, or $110bn).

Trading volumes of the most-traded steel rebar contract in Shanghai hit a record 1.3bn tonnes today, or enough to build the Sydney Harbour Bridge 24,621 times.

If skyscrapers are the preferred metric, fret not: trades today were also equivalent to approximately 41,401 Burj Khalifas.

…One could construct around 178,082 Eiffel Towers with the above-mentioned volume of steel rebar traded today in Shanghai.

Here is the FT story.  Hat tip goes to the ever-excellent Christopher Balding.

Here is the AEA account, opening bit:

Yuliy Sannikov is a theorist who has developed new methods for analyzing continuous time dynamic games using stochastic calculus methods. His work has not only broken new ground in methodology, it has had a substantial influence on applied theory. He has significantly altered the toolbox available for studying dynamic games, and as a result of his contributions, new areas of economic inquiry have become tractable for rigorous theoretical analysis. The areas of application include the design of securities, contract theory, macroeconomics with financial frictions, market microstructure, and collusion.

Here is excellent coverage from A Fine Theorem, here is part of the opening bit:

The JBC has, in recent years, been tilted quite heavily toward applied empirical microeconomics, but the prize for Sannikov breaks that streak in striking fashion. Sannikov, it can be fairly said, is a mathematical genius and a high theorist of the first order. He is one of a very small number of people to win three gold medals at the International Math Olympiad – perhaps only Gabriel Carroll, another excellent young theorist, has an equally impressive mathematical background in his youth.

Sannikov is at Princeton…congratulations to him and them!