History

Singapore is a well-run place by world standards, and has perhaps the world’s highest quality bureaucracy, yet right now the country faces a somewhat menacing constellation of silent risks, none of their own making:

1. It is possible that the role of the United States in the Pacific Ocean is rewritten rather suddenly.  This could come about through either a Trump presidency, or a successful Chinese attempt to grab more in the South China Sea.  Can you imagine a Singapore that had to court Japan and India rather than relying on the United States for protection?  In this same world Japan is probably more militarized than in the status quo, and possibly even a nuclear power.

2. Singapore sovereign wealth funds and related institutions have been pulling in high returns since the 1970s.  Yet the opportunities in both China and Singapore’s own real estate just aren’t there any more.  They would be very lucky to pull in four percent a year looking forward.  While fiscal risk is minimal, this will crimp expansion plans, especially if Singapore ends up needing to spend more on national defense.

3. It seems increasing pressure is being brought to bear on the Chinese currency yet again.  China would like to lower rates to stimulate its economy, and the Fed is likely to raise rates at least once more this year.  There is surely a chance that the renminbi simply snaps due to capital outflow.  During the Asian currency crisis, the Singaporean dollar fell about twenty percent as a side effect of the turmoil elsewhere.  Yet now China is much bigger than South Korea + Thailand + Indonesia were in 1997.  Furthermore Singapore is much more of a financial and clearinghouse center.  How insulated is Singapore from this China risk?  Does anybody know?  To what extent might a flow of capital into Singapore mitigate some of this risk?

4. Climate change could well lead to rising water levels for island nation Singapore.  Investing in sea walls and other forms of protection could take what percent of gdp?  The Dutch are already putting 0.5% of gdp a year into a fund for future water defense.

From this list, #2 and #4 are more likely problems, whereas #1 and #3 are more speculative, but by no means in the realm of science fiction.  There is the possibility of a perfect storm from all four.

And yet think of how things must have looked in 1965.  The Vietnam War was going badly, and most of the trends in Southeast Asia were negative.  Chinese Communism was at its nadir with the Cultural Revolution.  Indonesia had just massacred 500,000 citizens, many of them Chinese.  Singapore itself had just been kicked out of Malaysia, an outcome which its key founders mostly opposed.  There was not yet evidence that what later became “the Singapore model” was going to work, and even Japan was not yet an evident success.  It was commonly believed that Singapore, Malaysia, or both might collapse into a kind of ethnic civil war.  British military expenditures were about 20% of Singapore’s gdp, and it was widely understood that source of income would be going away.  Somehow they managed, most of all with the aid of human capital and being in the right place at the right time.

Here is the Singapore Complaints Choir, one of my favorite music videos.

In any case, I am happy to be here once again.  For dining, I recommend Sinar Pagi Nasi Padang, at Geylang Serai hawker centre, get the beef rendang.  National Kitchen, in the new National Gallery is also very good for a more traditional kind of dining.

Maybe so, here is the latest:

Where witchcraft beliefs are widespread, American University Economics Professor Boris Gershman found high levels of mistrust exist among people. Gershman also found a negative relationship between witchcraft beliefs and other metrics of relied upon for a functioning society, including religious participation and charitable giving.

It’s long been argued that witchcraft beliefs impede economic progress and disrupt social relations, and Gershman’s statistical analysis supports that theory. From a policy perspective, Gershman’s results emphasize the importance of accounting for local culture when undertaking development projects, especially those that require communal effort and cooperation. Gershman and other social scientists believe that education can help foster improved trust and decrease the prevalence of witchcraft beliefs.

Furthermore:

Parents in witchcraft-believing societies inculcate antisocial traits in children.

Second-generation immigrants from witchcraft-believing nations are less trusting.

Here is the summary statement, here is the full article.  Here are related papers by Gershman.  For the pointer I thank the excellent Samir Varma.

Contracting:

America, China, Hong Kong, Russia, Ukraine, Austria, Hungary, Poland, Slovakia, Turkey, Syria, Libya, Iraq, Yemen, Kosovo, Afghanistan, Philippines, Venezuela, Nigeria, South Africa, Malaysia, and Brazil, though the latter may be in flux.  Tunisia and Iran are problematic, but arguably hard to call.  Saudi may be headed toward collapse, but I don’t think you can say they are less free just yet.  Ethiopia is losing more political freedom, though still making very real economic progress.

Advancing:

Mexico and Colombia, if only by consolidating previous gains, and still there is a chance of a turnaround in Argentina at some point.  Latvia?  Where else?  You could make a (modest) case for India and some of the smaller African countries.

Neutral:

Japan, South Korea, Canada, and much of Western Europe though many of these cases appear fragile to me.

Overall this is not a thrilling ledger.  I haven’t listed most of the smaller countries, but in the longer run they often follow the lead of their larger neighbors.

File under Not Good.

There are so, so many environmental lawsuits, often brought by non-profits backed by philanthropists.  These institutions, among other things, target polluting corporations and bring lawsuits against them for purposes of constructing a deterrent against yet more pollution.  The Sierra Club and Greenpeace would be two examples, and of course a big chunk of the funds comes from the relatively wealthy.  How is this for one example of many?:

On 7 October, Greenpeace filed a lawsuit in Superior Court for the District of Columbia against Dow Chemical, Sasol North America (owned by the South African State Oil Company), two public relations firms – Dezenhall Resources and Ketchum – and four individuals.

On top of that, it is easy enough to be an anonymous donor to these groups, and to stay anonymous.  That said, I have heard tales — apocryphal perhaps — of donors who gave to environmental causes because they too earlier in their lives had suffered under the adverse effects of pollution.  In back room whispers they are sometimes called “vengeance donors,” and it is suggested that because of the vengeance donors soon enough all companies will go out of business or at the very least be at the mercy of the whims of the wealthy.

Now, to be sure, many of these environmental lawsuits are excessive, or unfair, or would fail both a rights and cost-benefit test and we should condemn them, as indeed you see happening with equal frequency on the Left and on the Right.  Many companies have gone out of business because of environmental lawsuits or the threat thereof, or perhaps the companies never got started in the first place because they couldn’t afford large enough legal departments.  I can safely say that just about everyone sees the problem here.

But we shouldn’t condemn the good lawsuits, right?  Right?  Or is this whole philanthropic lawsuits business simply out of control and needs to be stopped altogether?

And oh, that Greenpeace lawsuit I linked to above?  It actually wasn’t about environmental pollution at all, at least not directly.  It was because Greenpeace felt it was under secretive and privacy-intruding surveillance.  You should have seen my Twitter feed light up when the vengeance donors let on their role in that one.

Jinan is the second largest city in Shandong province, and a good place to see “normal China”; it is much more in the “concrete and motorbikes” mode than is Qingdao.

Qufu is the birthplace of Confucius, and a longstanding home of the Chinese nobility and Chinese scholars, with monument-building visits by various emperors.  Reputedly the town is full of fine-featured individuals with very exact patterns of speech.  In any case downtown is pleasant to walk and shop in, and has relatively few environmental problems.

confucius

The tomb of Confucius was my favorite site.  There is a continuity of civilization (if not regime) for over 2500 years, and visiting the tomb drives this point home.  Even the Cultural Revolution did not much damage this area of homage, in part because of loyalty to Confucius, itself a form of Confucian behavior.

Many of the flowers on the tomb were left by the national television station, perhaps as advertising and also signaling loyalty to Confucian ideals.

But that is not China’s oldest heritage, far from it:

This research reveals a 5,000-y-old beer recipe in which broomcorn millet, barley, Job’s tears, and tubers were fermented together. To our knowledge, our data provide the earliest direct evidence of in situ beer production in China, showing that an advanced beer-brewing technique was established around 5,000 y ago.

One local functionary said to me: “We think Trump will win.  You always surprise us — he is the next surprise.”

Donald Trump may get the nuclear suitcase, a cranky “park bench” socialist took Hillary Clinton to the wire, many countries are becoming less free, and the neo-Nazi party came very close to assuming power in Austria.  I could list more such events.

Haven’t you, like I, wondered what is up?  What the hell is going on?

I don’t know, but let me tell you my (highly uncertain) default hypothesis.  I don’t see decisive evidence for it, but it is a kind of “first blast” attempt to fit the basic facts while remaining within the realm of reason.

The contemporary world is not very well built for a large chunk of males.  The nature of current service jobs, coddled class time and homework-intensive schooling, a feminized culture allergic to most forms of violence, post-feminist gender relations, and egalitarian semi-cosmopolitanism just don’t sit well with many…what shall I call them?  Brutes?

Quite simply, there are many people who don’t like it when the world becomes nicer.  They do less well with nice.  And they respond by in turn behaving less nicely, if only in their voting behavior and perhaps their internet harassment as well.

Female median wages have been rising pretty consistently, but the male median wage, at least as measured, was higher back in 1969 than it is today (admittedly the deflator probably is off, but even that such a measure is possible speaks volumes).  A lot of men did better psychologically and maybe also economically in a world where America had a greater number of tough manufacturing jobs.  They thrived under brutish conditions, including a military draft to crack some of their heads into line.

To borrow a phrasing from Peter Thiel, perhaps men did better in the age of “technological progress without globalization” rather than “globalization without technological progress,” as has been the case as of late.

Here’s a line from Martin Wolf:

Princeton professors Anne Case and Angus Deaton note, in addition, a sharp relative deterioration in mortality and morbidity among middle-aged white American men, due to suicide, and drug and alcohol abuse.

(Addendum: note this correction.)

For American men ages 18-34, more of them live with their parents than with romantic partners.

Trump’s support is overwhelming male, his modes are extremely male, no one talks about the “Bernie sisters,” and male voters also supported the Austrian neo-Nazi party by a clear majority.  Aren’t (some) men the basic problem here?  And if you think, as I do, that the incidence of rape is fairly high, perhaps this shouldn’t surprise you.

The sad news is that making the world nicer yet won’t necessarily solve this problem.  It might even make it worse.

Again, we don’t know this is true.  But it does help explain that men seem to be leading this “populist” charge, and that these bizarre reactions are occurring across a number of countries, not just one or two.  It also avoids the weaknesses of purely economic explanations, because right now the labor market in America just isn’t that terrible.  Nor did the bad economic times of the late 1970s occasion a similar counter-reaction.

One response would be to double down on feminizing the men, as arguably some of the Nordic countries have done.  But America may be too big and diverse for that really to stick.  Another option would be to bring back some of the older, more masculine world in a relatively harmless manner, the proverbial sop to Cerberus.  But how to do that?  That world went away for some good reasons.

If this is indeed the problem, our culture is remarkably ill-suited to talking about it.  It is hard for us to admit that “all good things” can be bad for anyone, including brutes.  It is hard to talk about what we might have to do to accommodate brutes, and that more niceness isn’t always a cure.  And it is hard to admit that history might not be so progressive after all.

What percentage of men are brutes anyway?  Let’s hope we don’t find out.

That is the title of his posthumous memoir, highly recommended.  It is one of the best books on the charm of studying Southeast Asia, and also a very good look at how American academia rose from mediocre to excellent in the postwar era.  It is short and can be consumed in a single gulp.

Here is Andrew Batson on the book.  Here is Anderson on Wikipedia; he was best known as a theorist of nationalism but he also did important work on Indonesia and Thailand.

Ratio of most-cited publication to second-most-cited publication for authors among the top-10 most cited books in the social sciences:

Benedict

New York City fact of the day

by on May 20, 2016 at 10:18 am in History, Law | Permalink

Nearly three-quarters of the existing square footage in Manhattan was built between the 1900s and 1930s, according to an analysis done by KPF, an architecture firm based in New York.

That is from the new Upshot piece “Forty Percent of the Buildings in Manhattan Could Not be Built Today.”

Michael Tomasello reviews theories of learning–some suggest that liberalism may be unnatural:

…a consistent finding in comparative studies is that human children are much more concerned than are other great apes to copy the exact actions of others, including arbitrary gestures, conventions and rituals (Tennie et al. 2009). Indeed, this tendency is so strong…when children do not see a clear goal to an actor’s action, they imitate even more precisely than if they do see a goal…

Moreover, children quickly learn to enforce arbitrary conventions and rituals:

…young children are so concerned with conformity that they will even enforce it on others, even when they themselves are not affected and the action involved is merely an arbitrary convention. For example, if children learn that on this table we play the game this way and on that table we play it another way, if a puppet then plays the game the wrong way on the wrong table, they intervene and stop him (Rakoczy, Hamann, Warneken, & Tomasello, 2010; Rakoczy, Warneken, & Tomasello, 2008)….Interestingly, when actors violate conventional norms, 3-year-olds admonish them more often if they are in-group rather than out-group members, presumably because in-group members should know better and be more committed to how “we” do it (Schmidt, Rakoczy, & Tomasello, 2011).

The enforcement of conformity is so important for young children that 5-year-olds have more positive feelings toward a norm enforcer (even though he is acting aggressively) than they do toward someone who simply lets a norm violation go (even though he is behaving in a neutral manner; Vaish, Herrmann, Markmann, & Tomasello, 2016).

In the environment of evolutionary adaptedness (EEA) an individual could not survive outside the group of their birth and so conformity was a matter of life and death. Conform or be cast out. Conformity to arbitrary convention was not in fact arbitrary but signalled affiliation. Conformity banded groups together.

Today, however, conformity is often counter-productive. Trying to enforce the arbitrary conventions of one’s in-group impedes social cooperation on the scale that makes modernity possible. Conformity also slows the development of new ideas and new ways of doing things–the essence of growth and progress. Even though conformity is now counter-productive the desire to conform and to enforce conformity is buried deep–the atavism of social justice.

Individualism and liberalism are foundational ideas for modernity but these adult ideas battle the desire to conform in our childish hearts.

Hat tip: Rolf Degen on twitter.

Dalibor Rohac had a new and important book just out — Towards an Imperfect Union: A Conservative Case for the European Union, obviously of great relevance to the Brexit debates.  Here is the book’s home page, here is the publisher’s home page for the book.

My own view is this: if the United Kingdom could simply press a button and obtain the current status of Canada, via-a-vis the EU, probably they should do so.  But they cannot, and in some issues, as with Catalonian independence, the path is everything.  I’ve read through much of the Treasury report, and I believe it underestimates the economic cost of Brexit.  Were Brexit to happen, probably the UK would see a major recession, and possibly a financial crisis, and there is even a chance significant parts of the EU could unravel in response.  And for what gain?  The country would not be able to boost living standards through EU immigration cuts.  Building new trade agreements would take a long time and in few of the most important cases would the UK hold most of the bargaining power.  Security issues probably would worsen.

Even if the Brexit vote fails, it remaining on the table as a live option, as would result from a close vote, would dampen investment in the UK.  The best way forward is for the UK to swallow its pride and admit the whole referendum idea was a mistake by voting unanimously to stay.  No one would take the unanimity vote as a sincere reflection of preference, but best not to know the true state of public opinion on this one!

I sometimes call Brexit “the Donald Trump of England” — don’t be fooled!

The data start in 1880 and run through 2013.  Based on my visual reading of the chart, discussion of Chinese restaurants appears to have peaked in the 1940s (!).  German restaurants are the biggest loser over time, with plunges during each of the two World Wars; French falls more steadily.  American and Japanese go up slowly but consistently.  The big winner: Italian restaurants go up by far the most in discussions, starting in about 1940, and never stop rising.

The Los Angeles Times and Chicago Tribune show broadly similar patterns, though the absolute level of discussion for Mexican is much higher in Los Angeles.  For the Western world at least, Italian cuisine is the major winner from globalization.

It is in the 1890s by the way that restaurants are discussed more often in The New York Tribune/Herald than are saloons.

That is all from Krishnendu Ray, The Ethnic Restaurateur, which is intermittently quite interesting.  Here is the Google Books page.

There is a new and intriguing book out by Benjamin Peters called How Not to Network a Nation: The Uneasy History of the Soviet Internet, which outlines exactly what it claims to.  Here is one introductory excerpt:

In late September 1970, a year after the ARPANET went online, the Soviet cyberneticist Viktor Glushkov boarded a train from Kiev to Moscow to attend what proved to be a fateful meeting for the future of what we might call the Soviet Internet.  On the windy morning of October 1, 1970, he met with members of the Politburo, the governing body of the Soviet state, around the long rectangular table on a red carpet in Stalin’s former office in the Kremlin.  The Politburo convened that day to hear Glushkov’s proposal and decide whether to build a massive nationwide computer network for citizen use — or what Glushkov called the All-State Automated System (OGAS, obshche-gosudarstvennyi avtomatizirovannaya system), the most ambitious computer network of its kind in the world at the time.  OGAS was to connect tens of thousands of computer centers and to manage and optimize in real time the communications between hundreds of thousands of workers, factory managers, and regional and national administrators.  The purpose of the OGAS Project was simple to state and grandiose to imagine: Glushkov sought to network and automatically manage the nation’s struggling command economy.

They failed!  The author blames this not on backward technology, but rather “entrenched bureaucratic corruption and conflicts of interest at the heart of the system…”

Anyone interested in the history of the internet, comparative systems, or the history of the Soviet Union should read this book.

In its first three decades, the Soviet Union urbanized at about the same rate as China since 1978.

That is from Arthur Kroeber, China’s Economy: What Everyone Needs to Know, a new and useful introductory guide to what the title suggests.  This parallel of course is one reason why the early years of Soviet communism went as well economically as they did.

I gave some comments on “Global Imbalances and Currency Wars at the ZLB,” by Ricardo J. Caballero, Emmanuel Farhi, and Pierre-Olivier Gourinchas at the conference, “International Monetary Stability: Past, Present and Future”, Hoover Institution, May 5 2016. My comments are here, the paper is here

The paper is a very clever and detailed model of “Global Imbalances,” “Safe asset shortages” and the zero bound. A country’s inability to “produce safe assets” spills, at the zero bound, across to output fluctuations around the world. I disagree with just about everything, and outline an alternative world view.

A quick overview:

Why are interest rates so low? Pierre-Olivier & Co.: countries can’t  “produce safe stores of value”
This is entirely a financial friction. Real investment opportunities are unchanged. Economies can’t “produce” enough pieces of paper. Me: Productivity is low, so marginal product of capital is low.

Why is growth so low? Pierre-Olivier: The Zero Lower Bound is a “tipping point.” Above the ZLB, things are fine. Below ZLB, the extra saving from above drives output gaps. It’s all gaps, demand. Me: Productivity is low, interest rates are low, so output and output growth are low.

Data: I Don’t see a big change in dynamics at and before the ZLB. If anything, things are more stable now that central banks are stuck at zero. Too slow, but stable.  Gaps and unemployment are down. It’s not “demand” anymore.

Exchange rates. Pierre-Olivier  “indeterminacy when at the ZLB” induces extra volatility. Central banks can try to “coordinate expectations.” Me: FTPL gives determinacy, but volatility in exchange rates. There is no big difference at the ZLB.

Safe asset Shortages. Pierre-Olivier: driven by a large mass of infinitely risk averse agents. Risk premia are therefore just as high as in the crisis. Me: Risk premia seem low. And doesn’t everyone complain about “reach for yield” and low risk premia?

Observation. These ingredients are plausible about fall 2008. But that’s nearly 8 years ago! At some point we have to get past financial crisis theory to not-enough-growth theory.

I agree, here is the rest.

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.