Buttonwood presents a trilemma:

The issue may be another example of that common political problem; the trilemma, under which three options are available, but only two at most can be selected. In this case, it is a simple tax system; independent national tax policies; and the existence of multinational companies and investors.

Here is Megan McArdle:

What we’ve seen from the papers so far is not so much an indictment of global capitalism as an indictment of countries that have weak institutions and a lot of corruption. And for all the outrage in the United States, so far the message for us is pretty reassuring: We aren’t one of those countries.

Consider the big names that have shown up so far on the list. With the notable exception of Iceland, these are not countries I would describe as “capitalist”: Russia, Pakistan, Iraq, Ukraine, Egypt.  They’re countries where kleptocratic government officials amass money not through commerce, but through quasi-legal extortion, or siphoning off the till. This is an activity that has gone on long before capitalism, and probably before there was money.

From a Ray Lopez email:

5.  Panama Papers fallout will be: (1) a drive to reduce large denomination bills, (2) a drive to make a ‘paperless’ payment system, (3) a drive to eliminate tax loopholes, (4) a drive towards negative interest rates once paper is abolished

6.  Xi of China is the biggest loser.  He ran on an ‘anti-corruption’ ticket and his Politburo members will be pissed if they see he is corrupt, unless he winks and tells them they are immune from his anti-corruption offensive.  In which case, to pay them off, Xi, needs to appropriate the assets of his enemies to give to his friends.  So possibly it’s a “double down bet” for Xi:  he either folds or has to double down, redoubling his anti-corruption campaign, so he can seize assets to pay off his cronies keeping him in power.  We live in interesting times.

7. The net effect of Panama Papers, along with the FATCA issues above, is that criminals no longer will use law firms, and decent people hiding money as well, which means these services will be offered by more informal channels like from a single proprietor “fixer”.  “Nick the Greek money launderer” will profit, big law firm will suffer.

Here is China in the Panama Papers.

A sex worker in Oklahoma who was filmed using a quadcopter by a self-described “video vigilante” has pleaded guilty to a lewdness charge. According to a report from BBC News, the woman was sentenced to a year in state prison for the misdemeanor, although the case is still pending against her alleged client.

The encounter between the two was filmed by drone pilot Brian Bates, a known figure in Oklahoma City who describes himself as a “video vigilante.” Bates has long used video cameras to capture footage of alleged sex workers, which he uploads to his YouTube channel and his website, JohnTV.com, earning money through ad revenue in the process.


Here is the full story, the photo is of Bates, who because of a famous musical does not live in the most obscure state.

I thank a loyal MR reader for the pointer.  And here is the Roam-E-Selfie drone.

Addendum: It is worse than you think.  In the comments Jason Bayz alerts us to this story:

FEBRUARY 9–An Oklahoma man who has gained national exposure for his “video vigilante” campaign to expose street prostitution in his hometown was arrested yesterday for allegedly paying hookers to ensure that they serviced customers in an area where he could easily film the illicit trysts.

According to the below Oklahoma City Police Department report, Brian Bates, 34, orchestrated the public encounters so he could peddle the resulting videotape to media outlets (some of Bates’s surveillance tapes are offered for sale on his web site).

In his dealings with prostitutes, Bates was choosy, investigators contend.

For example, if a john was a “regular,” Bates asked prostitutes to give “specific signals” so he would know not to bother rolling tape. Investigators also noted that, like any good auteur, Bates “gave direction to the prostitutes on how to complete the act with a high probability of success,” as well as tips on how to spot an undercover cop.

Bates was hit with a felony pandering charge and a misdemeanor count of aiding in prostitution. The pandering rap, which is usually reserved for pimps, carries a minimum two-year jail term, and a maximum of 20 years in the stir.

Jason wins the internet today!

There has been some back and forth on this topic over the last few years, but it now seems to be settled.  Neil Irwin reports:

new research…indicates the proportion of American workers who don’t have traditional jobs — who instead work as independent contractors, through temporary services or on-call — has soared in the last decade. They account for vastly more American workers than the likes of Uber alone.

Most remarkably, the number of Americans using these alternate work arrangements rose 9.4 million from 2005 to 2015. That was greater than the rise in overall employment, meaning there was a small net decline in the number of workers with conventional jobs.

…The labor economists Lawrence F. Katz of Harvard and Alan B. Krueger of Princeton found that the percentage of workers in “alternative work arrangements” — including working for temporary help agencies, as independent contractors, for contract firms or on-call — was 15.8 percent in the fall of 2015, up from 10.1 percent a decade earlier. (Only 0.5 percent of all workers did so through “online intermediaries,” and most of those appear to have been Uber drivers.)

And the shift away from conventional jobs and into these more distant employer-employee relationships accelerated in the last decade. By contrast, from 1995 to 2005, the proportion had edged up only slightly, to 10.1 percent from 9.3 percent. (The data are based on a person’s main job, so someone with a full-time position who does freelance work on the side would count as a conventional employee.)

Here is the full NYT coverage.

But a new study from Robert Clifford, an economist at the Boston Fed, and Daniel Shoag, an assistant professor at Harvard’s Kennedy School, finds that when employers are prohibited from looking into people’s financial history, something perverse happens: African-Americans become more likely to be unemployed relative to others.

…What’s surprising is how that redistribution happened. In states that passed credit-check bans, it  became easier for people with bad credit histories to compete for employment. But disproportionately, they seem to have elbowed aside black job-seekers.

I can’t say that mechanism makes me feel better about the world, but there you go. Consider this:

A powerful study published last year in the Review of Economics and Statistics shows something of the opposite happening: When employers began to require drug tests for job applicants, they started hiring more African-Americans.

“The likely explanation for these findings is that prior to drug testing, employers overestimated African-Americans’ drug use relative to whites,” the study’s author explained in an op-ed. Drug tests allowed black job applicants to disprove the incorrect perception that they were addicts.

It’s possible that credit checks were playing a similar role to drug tests, offering a counterbalance to inherent biases or assumptions about black job-seekers.

Here is the Jeff Guo Wonkblog piece, here is one version of the original study.  Here is related earlier work by Daniel Klein.

Angolan arbitrage

by on March 24, 2016 at 2:01 pm in Film, Music, Television, Web/Tech | Permalink

Wikimedia and Facebook have given Angolans free access to their websites, but not to the rest of the internet. So, naturally, Angolans have started hiding pirated movies and music in Wikipedia articles and linking to them on closed Facebook groups, creating a totally free and clandestine file sharing network in a country where mobile internet data is extremely expensive.

Here is more, via Kevin Burke.

From Alexander Dubbs:

We use a simple machine learning model, logistically-weighted regularized linear least squares regression, in order to predict baseball, basketball, football, and hockey games. We do so using only the thirty-year record of which visiting teams played which home teams, on what date, and what the final score was. No real “statistics” are used. The method works best in basketball, likely because it is high-scoring and has long seasons. It works better in football and hockey than in baseball, but in baseball the predictions are closer to a theoretical optimum. The football predictions, while good, can in principle be made much better, and the hockey predictions can be made somewhat better. These findings tells us that in basketball, most statistics are subsumed by the scores of the games, whereas in baseball, football, and hockey, further study of game and player statistics is necessary to predict games as well as can be done.

That is an almost Hayekian result, and I wonder what the people at 538 will think of it.

For the pointer I thank Agustin Lebron.

Americans who leave news comments, who read news comments, and who do neither are demographically distinct. News commenters are more male, have lower levels of education, and have lower incomes compared to those who read news comments.

That is from Dr. Natalie (Talia), Jomini Stroud, Cynthia Peacock, and Emily Van Duyn, via the excellent Laura Miller.

Comments are open on this one, people…

Uber drivers carry more passengers per mile driven or hour worked than do taxi drivers. In other words, the Uber system is more productive than the taxi system. That’s the big finding from a new paper by Judd Cramer and Alan B. Krueger.

On average, the capacity utilization rate is 30 percent higher for UberX drivers than taxi drivers when measured by time, and 50 percent higher when measured by miles, although taxi data are not available to calculate both measures for the same set of cities.

Four factors likely contribute to the higher utilization rate of UberX drivers: 1) Uber’s more efficient driver-passenger matching technology; 2) Uber’s larger scale, which supports faster matches; 3) inefficient taxi regulations; and 4) Uber’s flexible labor supply model and surge pricing, which more closely match supply with demand throughout the day.

Krueger co-authored an earlier paper on Uber drivers commissioned by Uber but this paper was not commissioned.

China is getting into the venture capital business in a big way. A really, really big way.

The country’s government-backed venture funds raised about 1.5 trillion yuan ($231 billion) in 2015, tripling the amount under management in a single year to 2.2 trillion yuan, according to data compiled by the consultancy Zero2IPO Group. That’s the biggest pot of money for startups in the world and almost five times the sum raised by other venture firms last year globally, according to London-based consultancy Preqin Ltd.

The money’s in what are known as government guidance funds, where local and central agencies play some role. With 780 such funds nationwide and a lot of experimentation, there’s no set model for how they’re managed or funded. The bulk of their capital comes from tax revenue or state-backed loans.

The article is here.  If you are both impressed and worried at the same time, that is the correct reaction.

A startup named Delhivery has hired more than 15,000 staff, from developers to executives poached from Facebook and posh consultancies. Its headquarters in Gurgaon are so packed that engineers spill onto an outdoor porch, tapping their keyboards furiously. Delhivery, which works with a number of e-commerce firms, is using machine learning to subdivide India’s postcodes, the better to map idiosyncratic descriptions. “We’ll know the house with the yellow door next to the temple,” says Sandeep Barasia, the managing director. The company moves goods to 700 or so small distribution centres overnight to avoid congested main roads during business hours. Thousands of delivery boys then dash to and from the distribution centres throughout the day, bearing more than 20 kilos on their bikes.

That is from The Economist, a good article throughout.

This piece (pdf) is by David M. Byrne, John G. Fernald, and Marshall B.Reinsdorf.  It argues that the productivity slowdown is real, and not the result of mismeasuring the value of information technology.  Here were some of the newer bits for me:

Adjustments to equipment, software, and intangibles imply faster GDP growth but also faster input growth (since effective capital services are rising more quickly). After adjusting hardware and software, the aggregate TFP slowdown after 2004 is modestly worse. Adding additional intangibles, as in Corradoet al. (2009), works modestly in the other direction, so in our broadest adjustment for investment goods leaves the 1-1/4 percentage point TFP slowdown little changed.

And later they restate the point in more general terms:

…we highlight here the conceptual reason why it is hard for capital mismeasurement to explain the past slowdown in TFP growth: It affect inputs as well as output in largely offsetting ways.

Note that there are some unmeasured productivity gains from fracking:

…fracking allow[s] access to lower “quality” natural resources is imperfectly measured. A back-of-the-envelope calculation suggests that true aggregate labor and TFP growth might be 5 basis points faster since 2004.

Outsourcing however cuts the other way:

…the import-prices declines from offshoring are largely missed. This led to an understatement of true import growth in the late 1990s and early 2000s (the time of China’s WTO accession), and a corresponding overstatement of perhaps 10 bp in growth in output, labor productivity, and TFP.

That makes three very good papers in the last few weeks, by very reputable economists, coming from different directions, but all establishing more or less the same conclusion.  My discussions of the other two papers are here and here.

So will this myth finally die?

A recent Wall Street Journal article (Aeppel 2015) argued that measured productivity growth is badly underestimated because measured GDP does not include ‘free’ apps and other online media services. This paper introduces an experimental GDP methodology which includes advertising-supported entertainment like Facebook in final output as part of personal consumption expenditures. This paper then uses that experimental methodology to recalculate measured GDP back to 1998. Contrary to the Wall Street Journal article, including ‘free’ apps in measured GDP has almost no impact on recent growth rates. Between 1998 and 2012, real GDP growth rises by only 0.009% per year.

There is also this:

Some firms have been creating software, which is already captured in the national accounts as investment. Other firms have been creating intangible investments in marketing, customer contact, business know how or other organizational capital. These intangible investments can pay off either in (1) eventual use of advertising or (2) moving customers to a premium service that does charge a fee. Despite their long-run value, expenditures on organizational capital are not currently captured in the national accounts as output. If we treat these expenditures on organization capital as intangible capital investment, then the productivity boom from 1995 to 2000 becomes even stronger and the weak productivity growth of the 2000’s is nearly unchanged.

That is from a new paper by Leonard Nakamura and Rachel Soloveichik (pdf), and I thank Hal Varian for the pointer.

Here’s a cool new feature at MRUniversity. Click on the settings icon (the gear) in one of our videos and you will find options for subtitles. English subtitles are useful for the deaf or those with hearing loss and also helpful for those learning English as a second language. In addition, we now have professional subtitles for our Principles of Microeconomics class in French, Arabic and Spanish. We have started in on Chinese and we have more languages on the way. Our Principles of Macroeconomics is subtitled in English and Spanish (so far!).

Actually, thanks to Google Translate, we have machine-translated subtitles in dozens of different languages including Turkish, Hindi, and Vietnamese. The machine translated versions are a bit crude, of course, which is why we are adding professional translations but the machine versions are getting better all the time!

The new pitcher, called the Brita Infinity pitcher, will be able to track how much water is flowing through the pitcher. When approximately 40 gallons of water have passed through the pitcher’s purification filter, the pitcher will then send a signal to the Dash Replenishment Service to reorder more filters.

The new Brita Infinity pitcher will sell on Amazon for $44.95. A three-pack of replacement filters costs between $15 and $20. Brita says the pitcher’s two lithium metal (non-rechargeable) batteries should last nearly five years, even if stored in a cold environment. You know, like your fridge. The pitcher holds up to eight cups of water, and is BPA-free.

Here is more, with a photo, via the excellent Samir Varma.

This is from David L. Stern, who is not the David Stern who was formerly commissioner of the NBA:

…I am won over by the arguments that science papers should be made available freely to everyone as soon as authors feel that the work is complete. Posting papers to preprint servers is one good solution; I imagine there are others. (I prefer to call such documents open papers to remove the stigma associated with calling the work “pre” anything.) However, the discussion about the future of open papers has been imbalanced, with too much emphasis on the consequences of open papers for peer review and too little discussion of the fact that scientists are driven to publish in journals because of the existing incentive structure. The CV, and, specifically, journal names (and impact factors, journal reputation, etc.) are used extensively to judge scientists in competitions for jobs, promotions, and grant money. This is the main impediment to widespread adoption of open papers. I have heard many arguments about how it is too hard to change the structure of these competitions and that we should, instead, focus on producing great science in open papers, and let the culture-shift follow. In contrast, I think it is easier to change the incentive structure first; widespread adoption of open-papers will follow, like water flowing downhill.

There are further suggestions at the link.  Hat tip goes to Jeffrey Flier.