History

This cracks me up:

The illustrations on the banknotes show generic examples of architectural styles such as renaissance and baroque rather than real bridges from a particular member state, which could have aroused envy among other countries. “The European Bank didn’t want to use real bridges so I thought it would be funny to claim the bridges and make them real,” Stam told Dezeen.

The article headline is “Fictional bridges on Euro banknotes constructed in the Netherlands.”  Perhaps this will prove a broader and subtle metaphor for making the eurozone actually work…

For the pointer I thank Joel Cazares.

There is a new article by Seitz, Tarasov, and and Zakharenko:

This paper develops a quantitative model of trade, military conflicts, and defense spending. Lowering trade costs between two countries reduces probability of an armed conflict between them, causing both to cut defense spending. This in turn causes a domino effect on defense spending by other countries. As a result, both countries and the rest of the world are better off. We estimate the model using data on trade, conflicts, and military spending. We find that, after reduction of costs of trade between a pair of hostile countries, the welfare effect of worldwide defense spending cuts is comparable in magnitude to the direct welfare gains from trade.

There are ungated versions here, and for the pointer I thank the excellent Kevin Lewis.  Kevin also directs our attention to this paper: “…these results provide evidence for a relationship between feelings of disgust and the endorsement of equality-promoting political attitudes.”

Those are the topics of a new paper by Güell, Mora, and Telmer, which is interesting on multiple levels.  The abstract is here:

We propose a new methodology for measuring intergenerational mobility in economic well-being. Our method is based on the joint distribution of surnames and economic outcomes. It circumvents the need for intergenerational panel data, a long-standing stumbling block for understanding mobility. It does so by using cross-sectional data alongside a calibrated structural model in order to recover the traditional intergenerational elasticity measures. Our main idea is simple. If ‘inheritance’ is important for economic outcomes, then rare surnames should predict economic outcomes in the cross-section. This is because rare surnames are indicative of familial linkages. If the number of rare surnames is small this approach will not work. However, rare surnames are abundant in the highly-skewed nature of surname distributions from most Western societies. We develop a model that articulates this idea and shows that the more important is inheritance, the more informative will be surnames. This result is robust to a variety of different assumptions about fertility and mating. We apply our method using the 2001 census from Catalonia, a large region of Spain. We use educational attainment as a proxy for overall economic well-being. A calibration exercise results in an estimate of the intergenerational correlation of educational attainment of 0.60. We also find evidence suggesting that mobility has decreased among the different generations of the 20th century. A complementary analysis based on sibling correlations confirms our results and provides a robustness check on our method. Our model and our data allow us to examine one possible explanation for the observed decrease in mobility. We find that the degree of assortative mating has increased over time. Overall, we argue that our method has promise because it can tap the vast mines of census data that are available in a heretofore unexploited manner.

There are ungated versions here.  For the pointer I thank the excellent Kevin Lewis.

“Something out there is killing everything, and you’re probably next.”

You can view the talk here.  It is called “The Great Filter.”

How collecting takes on its own life

by on December 12, 2014 at 3:04 am in Books, History, The Arts | Permalink

Collecting, [Howard] Hodgkin insists, is a form of shopping.  But it also takes on its own life.  Once the ‘design’ of the collection has formed in the collector’s mind, according to Hodgkin, then things have to be bought out of ‘necessity as well as passion.’  That, he believes, is the most dangerous, but also the most creative, phase of collecting, involving the head as well as the heart and other ‘lower organs.”

That is from the new and notable Rendez-Vous with Art, by Philippe de Montebello and Martin Gayford.  The book is an ongoing dialogue between the two men about classical, Renaissance, and 17th century art, centered around specific pictures they are viewing together, recommended, in this genre it is difficult to execute such a book well but they pull it off.

Scott Sumner writes:

Here’s one thought experiment. Get a department store catalog from today, and compare it to a catalog from 1964. (I recently saw Don Boudreaux do something similar at a conference.) Almost any millennial would rather shop out of the modern catalog, even with the same nominal amount of money to spend. Of course that’s just goods; there is also services, which have risen much faster in price. OK, so ask a millennial whether they’d rather live today on $100,000/year, or back in 1964 with the same nominal income. Recall the rotary phones and bulky cameras. The cars that rusted out frequently. Cars that you couldn’t count on to start on a cold morning. I recall getting cavities filled in 1964, without Novocaine. Not fun. No internet. Crappy TVs, where you have to constantly move the rabbit ears on top to get a decent picture. Lame black and white sitcoms, with 3 channels to choose from. Shorter life expectancy, even for the affluent. No Thai restaurants, sushi places or Starbucks. It’s steak and potatoes. Now against all that is the fact that someone making $100,000/year in 1964 was pretty rich, so your social standing was much higher than that income today. So it’s a close call, maybe living standards have risen for people making $100,000/year, maybe not. Zero inflation in the past 50 years may not be right, but it’s a reasonable estimate for a millennial, grounding in utility theory. In which period does $100,000 buy more happiness? We don’t know.

I say I prefer $100k today to $100k in 1964, that being a nominal rather than a real comparison.  If you are not convinced, try comparing $1 million or $1 billion (nominal) today to 1964.  For some income level, we have seen net deflation.

But here’s the catch: would you rather have net nominal 20k today or in 1964?  I would opt for 1964, where you would be quite prosperous and could track the career of Miles Davis and hear the Horowitz comeback concert at Carnegie Hall.  (To push along the scale a bit, $5 nominal in 1964 is clearly worth much more than $5 today nominal.  Back then you might eat the world’s best piece of fish for that much.)

So for people in the 20k a year income range, there has been net inflation.

Think about it: significant net deflation for the millionaires, but significant net inflation for those earning 20k a year.  In real terms income inequality has gone up much more than most of our numbers indicate.

This is from Wojciech Kopczuk in his recent NBER paper:

The methods that rely on direct measurement of wealth — that is, those based on the Survey of Consumer Finance and on the estate tax — show at best a small increase in the share of wealth held by the top 1 percent, while the capitalization methods show a steep increase.

These methods start diverging in their estimates in the 1980s, and the paper has a very useful discussion of their strengths and weaknesses.  This is a notable paragraph:

The most striking feature of the estimates for 2000s is a huge run-up of fixed income-generating wealth in the capitalization series. In fact, this run-up accounts for virtually all of the increase in the share of the top 0.1% between 2000 and 2012 and most of the increase since 2003. The underlying change in taxable capital income (reported by Saez and Zucman, 2014, in their Figure 3) is nowhere as dramatic. The fixed income actually falls in relative terms, as would be expected when yields fall. Instead, the (almost) tripling of the fixed income component on Figure 3 (from 3.3% of total wealth in 2000 to 9.5% in 2012) is driven by an increase in the underlying capitalization factor from 24 to 96.6. This is precisely what the method is intended to do: as yields have declined, the capitalization method should weight the remaining income much more heavily. This increase – if real – would correspond to enormous re-balancing of the underlying portfolios of the wealthy throughout the 2000s. An alternative possibility is simply that the capitalization factors are difficult to estimate during periods of very low rates of return resulting in a systematic bias.

Overall Kopczuk does not favor the capitalization method and thus there seems to be a very real possibility that U.S. wealth inequality has gone up by only a modest amount.

For the pointer I thank Allison Schraeger.

The question refers to which economies are underrated or undervalued, not which economies are the strongest.  (Along these lines, LBJ is probably the most overrated player in the NBA today, but he is still also probably the best.)

Last time I picked Pakistan and the Philippines, the latter was a good choice for sure, although now its reputation has caught up to the reality of ongoing rapid growth.  I would say Pakistan remains up for grabs, but still the growth rate has been running about five percent, which you would hardly guess from a random episode of Homeland season four.  The fiscal deficit is down from eight percent to 5.5 percent, a big step for Pakistan.  The stock market has been doing quite well.  I don’t wish to claim vindication there, but at the very least it does seem they were underrated a year ago or two and still today.

This year I am going to pick Sri Lanka as well, which has a growth rate of about eight percent, one of the highest in the world.  The country receives a lot of bad press because of its vicious, decades-long civil war.  Sri Lanka also practices censorship and has iffy democratic credentials and a potentially chaotic election coming up.  That’s what helps make it underrated, but of course the war is over now.

The educational system is reasonably good relative to per capita income, English literacy is much higher than in India, and the Chinese are building a lot of infrastructure there.  Its tourism potential will expand considerably (I loved the trip there I did with Yana).  The poverty rate is down.  Here is one overview of recent developments.  Here are a variety of country reports, lots of positive features.

Still, you don’t hear so much positive about Sri Lanka these days.  On economic terms, I don’t find this one such a tough call, it’s simply a sticky reputation because of the bad politics and previous history.

So my picks for most underrated, this year, are Sri Lanka and Pakistan.

Here are some of my quasi-predictions from 2012.

Some of the White House economists were dubious and privately called Mrs. Clinton’s health care team “the Bolsheviks.” In return, according to Ms. Rivlin, the economists were “sometimes treated like the enemy.” Their suggested changes were ignored. “We could have beaten Ira alone,” said Mr. Blinder. “But we couldn’t beat Hillary.”

There is more here from the NYT, mostly about Hillary, not about that episode.

That is the theme of my latest column for The Upshot.  In Average is Over I offered a few sentences toward the end about how in the longer run technology might restore greater income equality. or at least greater consumption equality.  I thought I should turn that point into a column, here is one excerpt:

Another set of future gains, especially for lesser-skilled workers, may come as computers become easier to handle for people with rudimentary skill. Not everyone can work fruitfully with computers now. There is a generation gap when it comes to manipulating electronic devices, and many relevant tasks require knowledge of programming or, more ambitiously, the entrepreneurial skill of creating a start-up. That, in a nutshell, is how our dynamic sector has concentrated its gains among a relatively small number of employees, thus leading to more income inequality.

This particular type of inequality may very well change. As the previous generation retires from the work force, many more people will have grown up with intimate knowledge of computers. And over time, it may become easier to work with computers just by talking to them. As computer-human interfaces become simpler and easier to manage, that may raise the relative return to less-skilled labor.

Here is more:

A final set of forces to reverse growing inequality stem from the emerging economies, most of all China. Perhaps we are living in a temporary intermediate period when America and many other developed nations bear a lot of the costs of Chinese economic development without yet getting many of the potential benefits. For instance, China and other emerging nations are already rich enough to bid up commodity prices and large enough to drive down the wages of a lot of American middle-class workers, especially in manufacturing. Yet while these emerging economies are keeping down the costs of manufactured goods for American consumers, they are not yet innovative enough to send us many fantastic new products, the way that the United States sends a stream of new products to British or French consumers, to their benefit.

That state of affairs will probably end. Over the next few decades, we can expect China, India and other emerging nations to supply more innovations to the global economy, including to the United States.

Do read the whole thing.

The value of an NFL roster spot

by on December 5, 2014 at 2:03 am in History, Medicine, Sports | Permalink

One of the most self-sacrificing—read: craziest—players from that era, Jack Youngblood, played through the 1979 playoffs and 1980 Pro Bowl with a broken leg. (That’s right: he played through a severe injury in the Pro Bowl). Last year, Youngbloodtold the New York Post that guys who missed time with an injury back then didn’t just have to explain themselves to their untrusting employers—they had to explain themselves to their own teammates. Rather than fake injuries to swindle their way into bogus workers’ compensation claims, it has always been much more common for NFL players to fake health.

In the same New York Post story, Antrel Rolle says he hid not one, but two rotator cuff tears from team doctors. In 1974, the team doctor for the Los Angeles Rams told the Washington Post that he’d learned to check both legs for injuries because limping players liked to trick him by presenting the wrong one. The marginal guys, it is generally understood, are the most likely to fake good health, knowing how tenuous their hold on a roster spot can be.

Most of the rest of the quite interesting article details a case of a player who was administered truth serum in 1986.  The full article, by Andrew Heisel, is here.

I think that if you look only at males in isolation, you will see this in the data. That is, men are working much less than they used to. For some men, this leisure is very welcome, but for others it is not. In that sense, I think that we should look at the [technological unemployment] fears of the early 1960s not as quaint errors but instead as fairly well borne out.

For women, the story since the 1960s is different. In the economy as a whole, the share of labor devoted to preparing food, washing clothes, and cleaning house has gone down. Also, a higher share of the remaining work in these areas is coming from the market, via restaurants and cleaning services, rather than from unpaid female labor. The upshot is that, from the 1960s to about 2000, we saw a continuation of the trend for women to increase their share of market work and reduce their non-market labor. So, while men were increasing their leisure, women were increasing their market work. Combining men and women, you would not see a decline in market work.

It seems that around 2000, the trend for more market work by women reached its peak, making the trend toward technological unemployment more visible. From now on, what was happening to men before will be what happens to the total labor force. That is, leisure will go up, and some of it will be less than voluntary.

That is from Arnold Kling.

I enjoyed this LRB piece, here is one excerpt:

All Jerusalemites pay taxes, but the proportion of the municipal budget allocated to the roughly 300,000 Palestinian residents of a city with a population of 815,000 doesn’t exceed 10 per cent. Service provision is grossly unequal. In the East, there are five benefit offices compared to the West’s 18; four health centres for mothers and babies compared to the West’s 25; and 11 mail carriers compared to the West’s 133. Roads are mostly in disrepair and often too narrow to accommodate garbage trucks, forcing Palestinians to burn rubbish outside their homes. A shortage of sewage pipes means that Palestinian residents have to use septic tanks which often overflow. Students are stuffed into overcrowded schools or converted apartments; 2200 additional classrooms are needed. More than three-quarters of the city’s Palestinians live below the poverty line.

Since 1967 no new Palestinian neighbourhoods have been established in the city, while Jewish settlements surrounding existing Palestinian areas have mushroomed. Restrictive zoning prevents Palestinians from building legally. Israel has designated 52 per cent of land in East Jerusalem as unavailable for development and 35 per cent for Jewish settlements, leaving the Palestinian population with only 13 per cent, most of which is already built on. Those with growing families are forced to choose between building illegally and leaving the city. Roughly a third of them decide to build, meaning that 93,000 residents are under constant threat of their homes being demolished.

And this:

The crucial difference between the mid-1980s and today is that Palestinian civil society is now much weaker, and so, too, is the likelihood of coherent political organisation of the kind that emerged soon after the First Intifada began. The groups that then channelled political activity have been supplanted, either by the institutions of a technocratic PA whose existence is premised on close co-operation with Israel, or by NGOs whose foreign funders make assistance conditional on the pursuit of apolitical development projects or vague peace-building strategies that explicitly rule out non-violent confrontation with Israel and any initiative likely to drive up the costs of military occupation. Palestinian society is afflicted with dependency, and it is dependent on forces that wish to preserve the status quo.

It is interesting (and controversial) throughout.

That is the early “computer,” remember?:

Who made the famed Antikythera Mechanism, the astronomical calculator that was raised from an ancient shipwreck near Crete in 1901?

The complex clocklike assembly of bronze gears and display dials predates other known examples of similar technology by more than 1,000 years. It accurately predicted lunar and solar eclipses, as well as solar, lunar and planetary positions.

For good measure, the mechanism also tracked the dates of the Olympic Games. Although it was not programmable in the modern sense, some have called it the first analog computer.

We now learn that the calendar of this mysterious device begins in 205 B.C.  The key point, in my view, is that we have discovered no other comparable machine from antiquity or any other era other than modern times.  It took us until 2006 to even understand what the device was supposed to do, using advanced tomography, and we had been holding it since 1901.

So what to infer?  The first option is that this device was a true outlier, standing sui generis above its time.  Cardiff University professor Michael Edmunds “described the device as “just extraordinary, the only thing of its kind””.

As an artifact that is true, but is that so likely in terms of broader history?  It is pure luck that we fished this thing out of the Mediterranean in 1901.  (By the way, further dives are planned to search for more parts of it.)  The alternative possibility is that antiquity had many more such exotic devices, which have remained unreported, at least in the manuscripts which have come down to us.  That would imply, essentially, that we don’t have a very good idea of what antiquity was like.  In my view that is the more rational Bayesian conclusion.  It is more likely than thinking that we just lucked out to find this one unique, incredible device.  To put it another way, if you found some organic life on a traveling comet, you ought to conclude there is more of that life, or something related, somewhere else.

And to me, the Antikythera Mechanism does not sound like a “lone genius” kind of device: “The gear teeth were in the form of equilateral triangles with an average circular pitch of 1.6 mm, an average wheel thickness of 1.4 mm and an average air gap between gears of 1.2 mm.” (Wikipedia)  That suggests it was made by some kind of regular industrial process.  It also had some sophistications which modern Swiss watches do not.

Given this Bayesian conclusions, which other strange claims stand a decent chance of being true of antquity?  Which other surprises await us?

I find this an interesting passage: “the mysterious device was already pretty ancient by the time it went down some time around 85BC to 60BC with a ship carrying a bride and her dowry, io9 reports…”  You don’t find a lot of people carrying around a lot of ancient PCs today, so might there have been an Antikythera Great Stagnation way back when?  I think maybe so.

Here is a Lego model of the device.  Here is an introductory YouTube video.  Here is Wikipedia on the Antikythera Mechanism, a very good entry.

I owe thanks to Vic Sarjoo for pointers and Robin Hanson for a useful conversation on this topic.

The best-laid plans…

by on November 27, 2014 at 11:32 am in History, Philosophy, Science, Travel | Permalink

Circa 1985:

Merkel, in her early thirties, was looking forward to 2014—when she would turn sixty, collect her state pension, and be allowed to travel to California.

That is from the George Packer profile of Angela Merkel, which I will recommend to you all once again, do note it starts a bit slowly but picks up.