Food and Drink

Split, Croatia bleg

by on July 30, 2015 at 2:02 am in Food and Drink, Travel, Travels | Permalink

What to do?  What to see and where to eat?  Our stay there will be brief, but thanks in advance for your assistance…

Does Fair Trade help poor workers? Probably not says Don Boudreaux in this excellent, short video from the Everyday Economics series at Marginal Revolution University.

As is well known, however, Don is a rabid, free-market economist with ideological blinders who has been captured by corporate interests. So let’s ignore what Don says and consider what William MacAskill, author of Doing Good Better (reviewed earlier this week) has to say. No one can fault MacAskill’s charitable bona-fides:

MacAskill’s own pledge is to donate everything he earns above about $35,000 per year, adjusted using standard economic measures for inflation and cost of living, to the organizations that he believes will do the most good. Since his bar is roughly at the UK median income—such that half the population earns more each year, and half the population earns less—he’s certainly not condemning himself to a life of hardship; rather, he is pre-committing to staying roughly in the middle of the national income distribution even as his earnings go up over time.

That said, his pledge means giving away 60 percent of his expected lifetime earnings.

When I ask him the inevitable questions about whether this isn’t rather a lot to sacrifice for one person, MacAskill shrugs modestly and smiles broadly. “Imagine you’re walking down the street and see a building on fire,” he says. “You run in, kick the door down—smoke billowing—you run in and save a young child. That would be a pretty amazing day in your life: That’s a day that would stay with you forever. Who wouldn’t want to have that experience? But the most effective charities can save a life for $4,000, so many of us are lucky enough that we can save a life every year through our donations. When you’re able to achieve so much at such low cost to yourself…why wouldn’t you do that? The only reason not to is that you’re stuck in the status quo, where giving away so much of your income seems a little bit odd.”

So what are MacAskill’s views on Fair Trade? Why they are the same as Don’s!

…when you buy fair-trade, you usually aren’t giving money to the poorest people in the world. Fairtrade standards are difficult to meet, which means that those in the poorest countries typically can’t afford to get Fairtrade certification. For example, the majority of fair-trade coffee production comes from comparatively rich countries like Mexico and Costa Rica, which are ten times richer than the very poorest countries like Ethiopia.

….In buying Fairtrade products, you’re at best giving very small amounts of money to people in comparatively well-off countries. You’d do considerably more good by buying cheaper goods and donating the money you save to one of the most cost-effective charities…

The Happy Meal Fallacy

by on July 20, 2015 at 7:25 am in Economics, Food and Drink, Law | Permalink

Some restaurants offer burgers without fries and a drink. These restaurants cater to low-income people who enjoy fries and drinks but can’t always afford them. To rectify this sad situation a presidential candidate proposes The Happy Meal Act. Under the Act, burgers must be sold with fries and a drink. “Burgers by themselves are not a complete, nutritious meal,” the politician argues, concluding with the uplifting campaign slogan, “Everyone deserves a Happy Meal!”

happy-mealBut will the Happy Meal Act make people happy? If burgers must come with fries and a drink, restaurants will increase the price of a “burger.” Even though everyone likes fries and a drink they may not like the added benefits by as much as the increase in the price of the meal. Indeed, this must the case since consumers could have bought the meal before the Act but chose not to. Requiring firms to sell benefits that customers value less than their cost makes both firms and customers worse off.

The Happy Meal Fallacy is fairly obvious when it comes to happy meals but now let’s consider the debate over the gig economy and the hiring of employees versus contractors. Employees are entitled to benefits that contractors are not. Thus the standard conclusion is that classifying workers as contractors “is great for employers but potentially terrible for workers.” Wrong. Employees get their wages with fries and a drink while contractors get wages only. Would a law requiring firms to provide all workers with fries and a drink help workers?

If firms are required to provide benefits to contractors they will lower the contractor wage. But how do we know the extra benefits aren’t worth the reduction in wages? If the extra benefits were worth more to workers than they cost firms, firms would have eagerly provided these benefits as a way of increasing profits. Firms can profit whenever buyers are willing to pay more for a product than its cost. Benefits are a product that workers buy from firms.

Workers buy benefits from firms by offering to work at a lower wage. Firms are happy to sell benefits when workers will accept a wage reduction that covers the cost of the benefit. Thus, if workers value a benefit by more than its cost, there is a mutually profitable deal to be made. The firm will provide the benefit and wages will fall by more than the cost but by less than the value of the benefit. Both firms and workers will be better off. It’s implausible that firms and workers will overlook mutually profitable exchanges. Thus requiring firms to provide benefits with every job means requiring firms to sell benefits that workers value less than their cost and that makes both firms and workers worse off–just like requiring restaurants to sell burgers with fries and a drink makes firms and customers worse off.

If the cost of the benefits far exceed their value to workers, the firm will close. But even if the firm doesn’t close, firms and workers will both be worse off. The exact division of the burden will vary depending on particulars but the workers who value wages the highest and benefits the least will be the most burdened. Often these will be the lowest income workers.

The Happy Meal Fallacy can lead to very unhappy firms and workers.

Addendum: The theory of compensating differences in wages with benefits was pioneered by Adam Smith. See Matt Kahn for a short overview and Sherwin Rosen for a full treatment of the theory. Jonathan Gruber and Craig Olson offer empirical evidence. The MRU video, The Tradeoff Between Fun and Wages presents another application.

It is common for left-wing progressives to complain that conservatives serve up unflattering accounts of the unemployed and poor, such as by calling them “moochers” and the like.

But many versions of the standard Keynesian account, once we deconstruct them a bit, don’t paint such a flattering picture of the unemployed either.  In one Keynesian scenario, many of the unemployed have lacked jobs for years because they have sticky nominal wage demands.  Under one scenario, they could find jobs for $x an hour but won’t take the work.  If government policy could reflate the economy enough, those jobs in nominal terms would offer more and the unemployed would be in essence fooled into taking the offer.  The job would be paying the same in real terms, so the ex ante stubbornness is a big mistake, at least under this account of the matter.

Such a mistake is made throughout years of material suffering and psychological deprivation, including serious problems for one’s children.  Yet a mere nominal trick, by boosting pride just a bit, will move them back into a job.

It is of course a well-known stylized fact that, at least in America, unemployment rates for the poor and undereducated are much higher than for wealthier or better educated people.  So a general citation of “money illusion” won’t rescue the victims from the rather unflattering Keynesian portrait painted here.

Alternatively, the relevant mechanism may operate through the demand for labor, rather than the supply.  Perhaps low-skilled workers cannot be employed at lower wages because their resentment at the low wage would be so high that they would impose unacceptable morale costs on the organizations employing them.  In other words, insult them with a sub-par wage offer and they turn destructive toward the entire organization.  Companies of course prefer to keep these workers at arms’ length under this hypothesis.

If Charles Murray had come up with that hypothesis, he would have been savagely attacked for it.  Yet there is growing evidence, for instance from the work of Alan Blinder, that it is a major cause of wage stickiness.

Left-wing Keynesians are reluctant to acknowledge their own implicit unflattering treatment of the poor, which I should add came (in part) from snobby and elite British economists, including Keynes.  Often microfoundations are considered an embarrassing topic, and the emphasis is on “well, we know that wages are sticky,” with a desire not to look too closely under the hood, or to consider how those stories jive with other deeply held views, many of which try to raise the relative status of the poor and unemployed.

Bryan Caplan is consistent and is also happy to satisfy the publicity condition.  He believes in nominal stickiness as a driver of unemployment (under many circumstances) and he holds a relatively skeptical view of the decision-making capabilities of many (by no means all) of the poor.

The most flattering macro theories toward the poor, undereducated, and unemployed are the complementarity, increasing returns, and RBC “the poor are maximizing given some bad constraints” approaches.  Insider-Outsider models make the unemployed victims of exclusion who don’t even get a chance, rather than potential troublemakers ready to sabotage an enterprise at a moment’s notice.  The same can be said for Scott Sumner’s “musical chairs” account.  As for schools of thought, the rational expectations theorists provide the most flattering picture of the poor, yet in the context of macroeconomics they are very frequently mocked for their unrealistic assumptions.  Search theory models of unemployment, which for instance I have tried to promote, also paint a not unfavorable picture of the jobless, but they too are not very popular in the New Old Keynesian economics.  If I were to generalize, and yes there are many exceptions, but still I would say that these more flattering pictures of the unemployed are more likely to be associated with or embraced by the political Right.

Consistency is hard to come by, and probably always will be.

Yunnan notes

by on July 18, 2015 at 12:48 am in Food and Drink, Travel, Travels | Permalink

yunnan

In the summer, up to half of a multi-course meal may consist of mushrooms, the best I have had.  Fried goat cheese is served, and the ham exceeds that of Spain in quality.  I had not thought that buckwheat flour pizza, dipped in fresh honey, would be a staple in Chinese food.  There is also flower soup of numerous kinds, corn dishes, pumpkin, and donkey.

Even the largest city in Yunnan — Kunming — has fresh air, a rarity in China.  The weather is perfect year round, and the faces have Burmese, Tibetan, Thai, and Mongolian features.  About one third of the population is explicitly classified as “ethnic minority,” and most of the others look like a blend with Han Chinese.

Dali, the second largest city, is nestled into a lake and mountains as a Swiss city might be.  You could explore the neighboring villages around the lake for months.  I recommend Xizhou, stay at Linden Centre.

The population is pro-American, not always the case in China, and the Flying Tigers, who flew bomber missions against Japan from Yunnan, are cited frequently, including in dinner toasts to visiting scholars.

Yunnan University has a significant program in cultural economics, and as my hosts I thank them for the invitation and for their extreme hospitality.

Yunnan is arguably the nicest province in China to visit, and one of the best trips in the world right now.  The quality of infrastructure and accommodations is good, but exoticism and surprise remain high, the perfect combination.  Go before it’s too late.

Yemen’s capital, Sanaa, may run out of economically viable water supplies by 2017 as available groundwater is unable to keep pace with the needs of a fast-growing population, experts warn.

Per capita water consumption is right now about two hundred cubic meters per year, compared to a scarcity threshold of 1700 cubic meters per year.

The cost of water has tripled in the last year, and the population of the city is expected to double within the next ten years.

There has been talk of moving the capital, as well as desalinating seawater on the coast and pumping it 2,000 metres uphill to Sanaa. But there are no concrete plans.

It may be too late for the removal of various water subsidies to make a difference, even assuming that were to happen.  In the meantime, there have been few positive developments and of course the war is a huge negative.

It would be tragic, and in modern times unprecedented, if and when a major city simply runs out of water, and that could happen in about two years’ time.  Here is further coverage.

Jaan, in Sinagpore

by on July 8, 2015 at 12:13 pm in Food and Drink, Travel | Permalink

Why should you seek out French food in Singapore?  Yet I did.  I would describe my meal as at the San Sebastian level for quality and presentation, and one of the best I’ve had in the last five years.  I also enjoyed the best view of any meal of comparable quality, looking out onto Marina Bay Sands and the Straits.

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In fact, Singapore rarely disappoints.  There is an all-vegetarian menu as well.

Green pea guacamole

by on July 1, 2015 at 7:25 pm in Food and Drink | Permalink

I’m seeing this idea slandered in my Twitter feed, so perhaps I should add to the rising critique of POTUS on this one:

The late chef Michael Roberts was the inventive Southern Californian who created a green pea guacamole. I was puzzled by the unusual yet pleasing quality of the green peas he used instead of avocado.  In this adaptation, I have combined avocado with peas for a refreshing, clean flavor.

That is from Diane Rossen Worthington, from WaPo 2012, with a full recipe at the link.  You can read much more about green pea guacamole here.

Apparently the institutionalization of small-scale food foraging is part of the new food chain for restaurant supply, and it has become an “intensely secret” and “ultracompetitive” world:

FreshDirect, the online grocery-delivery service, offers packs of foraged lambsquarters for $4.99 each. Chef David Waltuck, who’s bought ingredients from foragers at his New York restaurants since the ’70s, says the picking operations have gotten more sophisticated to keep up with the market. “Foragers sell to purveyors now,” he says. “It became more of a business. Back in the early days, there was nothing like that.”

With the explosion in popularity, though, the foragers themselves have had to become even more protective of their wares. “You’re looking at limited resources,” says Matt Parker, a West Coast–based purveyor of foraged ingredients who works with a small network of gatherers and sells to restaurants such as Spago and Gjelina. “Foragers live and die by the seasons and what’s available, so of course they are protective of their spots — that’s how they make a living.” Parker sustains a roster of “seven to nine guys, depending on how reliable they want to be,” but none will reveal their “honey grounds” to him. Waltuck adds, “They might take you out with them, but they’ll blindfold you.” Indeed, when another prominent New York chef offered to send me out with his preferred forager in Jersey’s Delaware Water Gap, he agreed to do so only if I’d wear a pillowcase over my head for the entire car ride. Eventually, the forager got cold feet and reneged on the deal altogether.

That is from Edna Ishayik, via MR reader Jeremy Yamada.

It’s possible that there’s an economic impetus behind it. “The price of land is going up, which pushes up the value of each table,” said Cowen. “That makes moving people along more important.”

A similar trend, after all, sees many restaurants hoping that diners don’t order dessert, because the course isn’t terribly profitable and it encourages people to linger.

But maybe waiters are clearing individual plates because they believe that’s what customers want. I have heard as much from servers and restaurateurs.

Yet I have heard many people complain about this policy.  It’s almost as if the staff labor is unwilling to let their idle time go unused, perhaps for fearing of signaling shirking.  And so they must do something, which means taking your things away.  What other motives could there be?  My biggest pet peeve actually is when they pour more of your drink into your ice than a Hotelling rule would suggest for an optimal pace of temperature equalization.

That is from Roberto A. Ferdman.

Addendum: Kevin Drum comments.

Henceforth you will be tipped a rupee to pee at the right spot! The Ahmedabad Municipal Corporation (AMC) is toying with a new idea of paying people money if they visit the nearest public toilets.

This idea was first implemented in Darechowk in Katmandu in Nepal and had worked well.

In Ahmedabad, the AMC will implement the scheme in 67 nuisance spots in the city with a public toilet nearby. Once successful, the scheme will be implemented across all public toilets in the city.

The full article is here, and for the pointer I thank Mark Thorson.

In praise of Porto

by on June 14, 2015 at 2:36 am in Food and Drink, Travel, Travels | Permalink

Porto is Portugal’s second largest city, but when you turn the corner you never know what is coming: a Baroque or even Romanesque church, wondrous blue tiles, a rotted out building, a coffee and pastry shop, port warehouses and embankments, or a steeply plunging street.  If a store displays the sign “Novidades,” that is an indication they don’t have any.  Porto is (not) the only European city with six bridges.  My conference was held in a very fine Rem Koolhaas venue.

Magellan lived and studied here, and J.K. Rowling’s Porto stint shaped parts of Harry Potter.  Libreria Lello is perhaps the most striking bookshop in Europe.

This politically incorrect shop sign would have been taken down a while ago elsewhere in Europe; it is a reflection of the city’s remnant status.  The modern parts of town, along the ocean, remind me of California.  But the English language section of a used book store will have the titles which were British bestsellers in the 1920s.  A 1970s tribute store is called “Spock,” and its sign outlines the Starship Enterprise.

Eat the tripe and white beans at Flor de Congregados, or for fancy try DOP restaurant, worthy of a Michelin star or two but not priced to boot.  Peer into the apartments which open out onto the streets of the old town, due to the lack of air conditioning, and check out their crumbling wallpaper and tightly packed collections of icons.  Here are ten things to like about Porto.

If you took the brain of Maria Popova, and turned it into a Mediterraneo-Atlantic city, loaded with debt, you would have Porto.  Definitely recommended.

James Surowiecki writes:

Of seventeen hundred stocks on the Shenzhen Exchange, only four have fallen this year, and more than a hundred have seen their shares rise more than five hundred per cent. The Shenzhen Index as a whole has doubled since January, and is up more than two hundred per cent in the past year. The action on China’s other major stock exchanges—in Shanghai and Hong Kong—hasn’t been quite as torrid, but they’ve had their share of extraordinary winners. The Shanghai Composite Index has risen a hundred and forty per cent since this time last year. In Hong Kong, Jicheng Umbrella Holdings (which makes, yes, umbrellas) went public in February: its shares are up almost seventeen hundred per cent.

Tyrone, Tyler’s evil twin, says buy, buy buy!  Borrow to buy, and then borrow to borrow!  Tyrone has read so many people in the last week calling the Chinese stock market a bubble, so the contrarian in him thinks you simply need to take the plunge as soon as possible.

Direct foreign investment has been allowed only as of late 2014:

The Shanghai-Hong Kong Stock Connect program will allow all investors to buy shares on the Shanghai Stock Exchange, while also permitting wealthy investors in mainland China to buy stocks listed in Hong Kong. The move allows investors access to companies with an overall market value of roughly $2 trillion.

“We think it is very significant. We plan to participate,” said Gary Greenberg, head of emerging markets at Hermes Investment Management in London, which managed $46.9 billion in assets as of June 30.

That’s a lot of foreign capital to push up the value of Ma and Pa Tofu, and indeed that flood of capital will validate your early investment.  And who amongst us is not tempted to diversify just a wee bit into the world’s second largest economy, indeed the very largest by PPP measures?  Surely the coming tidal wave of foreign liquidity will push aside all present minor worries.

On the domestic front, Chinese savings are currently real-estate intensive, and over time those funds be shifting into equities, especially as Chinese graduate students carry the lessons of Mehra and Prescott back home.  As prices fluctuate, the market is assessing how significant these effects will be, just as it once did with subprime.

Besides, the market went up 4.6% on Monday alone, and that is at a time when Chinese manufacturing seems to be slowing.  The Chinese government itself proclaimed the stock market to be “healthy,” and indeed many different parts of the government, including the media, have seconded this verdict.  Why bet against all of them?

Did you not know that the Chinese debt-equity ratio is too high?  Well, higher equity prices will help lower that ratio, as the government intends; new stock issues are being used to buy back corporate debt, some of it dollar-denominated.

If nothing else, return back to some patriotic context.  Was it not a good idea to buy American stocks when our country had a per capita gdp of 6-7k, and headed up?  With a 20-30 year time horizon, was it not a good idea to buy American stocks even in 1929?

To be sure, the forthcoming liquidity-based, foreign investor-driven price movements imply a non-horizontal demand curve for those stocks, and thus violate the stricter forms of EMH.  But who said a demand curve should be perfectly flat anyway?  Weren’t the Marxists referring to perfectly flat demand curves when they said competitive capitalism is the absolute loss of freedom?  And hasn’t China been moving away from Marxism?  Q.E.D.  So Tyrone says it is time to borrow to buy.  Someone out there — maybe even you — won’t regret it.

Agreement has been reached on the controversial wage agreement for members of four Icelandic unions. This means that major strike action will be called off.

The Icelandic Union of Commercial and Office Workers (VR), the Commercial Federation of Iceland (LÍV), Flóabandalagið and Stéttarfélag Vesturlands have agreed to a final version of the agreement and the characteristic aroma of waffles has filled the negotiation venue.

Making waffles is a traditional Icelandic way of marking and celebrating the successful conclusion of negotiation of this type.

The story is here, good photo of political leadership.  Note that some of the unions were asking for fifty percent pay hikes and threatening strikes, I believe they did not get everything they were asking for.  Yet not all is well and one can only hope that more waffling is in order:

Wage disputes remain ongoing with the Icelandic Nurse’s Association, the Icelandic Association of Academics (BHM) and the Icelandic Professional Trade Association (SGS) and strike action planned by members of these unions remains on the timetable.

For the pointer I thank Peter Kobulnicky.

The still-underrated Todd Kliman interviews her:

I’ve been given special powers, and I appoint you czar (funny, isn’t it, how we have so many appointed czars in this unaristocratic country) of food in the US. What is your first order of business? What sorts of laws do you push for? What public statements do you make? What is your 5-year plan? Your 10?

Me? A czar? My first order of business would be to go to the bathroom and throw up in sheer terror. I’m not a fan of appointed czars or of five-year plans. I am a fan of incremental changes. Look what’s happened in the 15 years since I wrote the article. Walmart’s become a major player, so has Monsanto, celebrity chefs, sustainability, and locavore have become household words, fats and sweeteners have been vilified and un-vilified, and now Taco Bell is removing artificial flavoring and coloring, corporations are scrambling to make their products appealing to those who want healthful and organic foods, and McDonald’s is in trouble. No one could have predicted or managed these changes. And many have happened through the power of the word. So I’d turn down the offer. The pen is mightier than the czar!