From an excellent column by Wolfgang Münchau:

The reason Greece was able to attract so much interest in last week’s bond issue was a combination of the promise of a high yield and the maturity profile of existing Greek debt. Official loans – from eurozone member states and the International Monetary Fund – make up 80 per cent of the total debt. Greece will not start to repay this until 2023. In other words the country is solvent in the short run. But long-run solvency is far from certain.

The rest of the FT piece is here.  He suggests (without advocating it) that this could be the moment for Greece to default.

I would be surprised if there wasn’t:

Mr. Pilley told me, “The big lesson is to recognize that dogs are smarter than we think, and given time, patience and enough enjoyable reinforcement, we can teach them just about anything.”

It’s true that dogs everywhere are doing things that would have been unimaginable in the Alpo era. Last year, researchers at the University of Pennsylvania’s Working Dog Center trained a team of shepherds and retrievers to sniff out lab samples containing ovarian cancer. Scent hounds are also being used to forecast epileptic seizures and potentially life-threatening infections. A black Labrador from the St. Sugar Cancer-Sniffing Dog Training Center in Chiba, Japan, was accurate 98 percent of the time in picking up early-stage signs of colon cancer. As Mr. Hare, from Duke, said, “I will take a dog smelling my breath over a colonoscopy any day of the week, even if it’s just an experiment.”

From David Hochman, there is more here.

Assorted links

by on April 13, 2014 at 12:51 pm in Uncategorized | Permalink

1. Chinese signaling in the East China Sea.  Good news, sort of.

2. Kling on Krugman on Piketty.

3. A.I. remains a masterpiece and there is a new toy to prove it.

4. “Sluggish cognitive tempo” — the new disability?

5. “We just visited with the penguins,” she said. “It was very calm.”

6. The Good Judgment Project — is it outguessing national intelligence?

Le Weekend explains why the Coase theorem does not hold in the marriages of aging British whinersThe Lunchbox, in addition to having an interesting plot (imagine a lower-tech Indian “You’ve Got Mail”), is the best movie I’ve seen on the nature of Indian micro-transactions, whether in relationships or in the workplace.  Erving Goffman would be proud,  and the mention of Harvard is the funniest line I’ve heard in a movie in years.   Under the Skin, as I understood it, asks what kind of trades might be possible between us and one of Rilke’s angels, if the latter were to come down to earth.  The movie does indeed answer that question, and the underlying connection between Rilke and Islam is discussed here.  And here is a fascinating article about the most memorable actor in the movie.  Maybe the best piece you will read today.

I thought all three movies were excellent, and full of social science, though none is a movie that everyone will enjoy.

When I am watching a movie I often think “why isn’t the Coase theorem holding here?”  There are few movies — outside of sappy romantic comedies — in which the Coase theorem explains much of the plot.

Michael Ben-Gad, a professor at London’s City University who has studied the credibility of long-term promises by governments, questions whether Nato’s commitment to collective defence is absolute and asks what would happen if Russia’s border guards crossed the bridge that separates Narva from Ivangorod and took the Estonian town.

“Would the US and western Europe really go to war to defend the territorial integrity of Estonia? I think Estonia has reasons to worry. Narva is the most obvious place; it is almost completely Russian-speaking,” he says.

More than 82 per cent of Narva’s residents are ethnic Russians and 4 per cent are ethnic Estonians. More than a third have Russian citizenship.

Here is the FT article, here are photos of Narva.  Here is a map of Narva:

Narva_in_Estonia

Italy fact of the day

by on April 12, 2014 at 3:46 pm in Uncategorized | Permalink

The Italian Tourist Board spends an astounding 98 percent of its budget on salaries, with basically nothing left for its actual job of tourism promotion.

The point of the article is that hardly anyone visits southern Italy any more, thus making it one of the world’s best arbitrage opportunities. It is one of my favorite regions.

By the way:

There are trains in the Mezzogiorno that travel at an average speed of 8.7 miles an hour.

And:

Metaponto, in the Basilicata region east of Naples, has a five-track, marble-clad rail station, paid for by $25 million in European Union funds. But the last train out is an 8:21 a.m. express to Rome. If you want to go anywhere else, you have to take a bus.

In the 1970s, Italy was the world’s #1 tourist destination but now it has slipped to number five.  There has never been a better time to go.

Assorted links

by on April 12, 2014 at 12:39 pm in Uncategorized | Permalink

1. Space-saving sink and toilet combined design.

2. “Dr. Hirotaka Osawa from Tsukuba University, in Japan, has developed a new wearable device to help us with something called “emotional labor.”" The full link is here.  Recommended.

3. What is the worst kind of mistake a small German furniture store might possibly make?  Note that so far fewer than ten percent of the sold cups have been returned.

4. Indian economic recovery may not be so assured after all.

5. Romantic consensus decreases as individuals get to know each other better.

6. Land, secular stagnation models, negative rates of return, and a new proposed rustication.

7. Prefiero un otro nombre del pueblo, si?

Henry Aaron and the Lucas Critique

by on April 12, 2014 at 6:57 am in Economics, Sports | Permalink

No, not the Henry Aaron at the Brookings Institution.  I mean what the ten year old Tyler Cowen would have called “the real Henry Aaron.”  Nate Silver writes:

What if Aaron had never hit a home run? What if those 755 round-trippers had fallen for base hits instead? (If we’re trying to isolate the effect of his power, that seems like the fairer way to do it, instead of turning them into popups or something.) Would he still be a Hall of Famer?

If all of his homers had been singles, Aaron would still have his 3,771 hits. Instead of being the second-best home-run hitter of all time, he’d be the third-best singles hitter of all time, after Ty Cobb and Pete Rose. His RBI total would have gone way down; based on the number of runs that Aaron knocked in on home runs and singles throughout his career, I estimate that he’d have 1,232 of them rather than 2,297. But 1,232 isn’t a shabby total; it would rank Aaron 141st all time, in the general vicinity of Derek Jeter, Edgar Martinez and George Sisler. He’d still be a lifetime .305 hitter and have a .374 on-base average.

OK, here is where Lucas comes in.  If Hank Aaron did not carry significant home run potential to the plate, he would have seen a lot more blazing fastballs, pitchers’ “best stuff,” and so on.  Why not challenge the hitter and try to blow it by him if all you are risking is a single up the middle?  As it was, pitchers often threw Aaron a variety of slower curves and off-speed junk, stuff he might grab a piece of with the bat but would have a harder time drilling straight over the fence.

And thus a homer-less version of Aaron probably would have had a harder time making contact at all.  And he certainly would have had many fewer walks.  But yet, with the amazing wrists he had…pitchers were afraid of him.

It is funny how the Lucas critique went from one of the most underrated ideas in economics (pre-Lucas), to one of the most overrated ideas (1980s-early 1990s), and now it is back as one of the most underrated ideas again.  If we vary one policy or one element of a calculation or algorithm, other individuals will respond strategically.

Addendum: Scott Sumner adds comment.

Here is the new paper (pdf):

This article shows that official statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens. Drawing on a unique Swiss data set and exploiting systematic anomalies in countries’ portfolio investment positions, I find that around 8% of the global financial wealth of households is held in tax havens, three-quarters of which goes unrecorded. On the basis of plausible assumptions, accounting for unrecorded assets turns the eurozone, officially the world’s second largest net debtor, into a net creditor. It also reduces the U.S. net debt significantly. The results shed new light on global imbalances and challenge the widespread view that after a decade of poor-to-rich capital flows, external assets are now in poor countries and debts in rich countries. I provide concrete proposals to improve international statistics.
The original pointer was from Paul Krugman.  Yesterday I was at an IMF forum with Jeff Sachs and he too was placing great stress on this issue.

I enjoyed this book, and I recommend that you get it for your kid.  Here is one bit of many:

Good help is hard to find.  Really hard to find.  Sure, there are lots of people with the right degrees and résumés, but the kind of employee we yearn for sticks out almost immediately.

You can buy the book here.

Assorted links

by on April 11, 2014 at 12:50 pm in Uncategorized | Permalink

1. How Germans romanticize Russia.

2. What we are learning about Medicare expenditures on pharmaceuticals.

3. What happened to Tom Lehrer?

4. The email culture that is France.

5. Markets in everything, Ayn Rand musical edition.

Mexico City Recommendations

by on April 11, 2014 at 11:41 am in Food and Drink, Travel | Permalink

I will be in Mexico City next week (con la familia). Recommendations and suggestions welcome!

Breaking Bones

by on April 11, 2014 at 10:43 am in Economics | Permalink

It’s sometimes said that conservative economists are heartless bastards who don’t understand the evil of unemployment or what it’s like to live on a low income. Edward Lambert from the left-of-center Angry Bear proves that to get what they want some on the left can be equally heartless.

I would love to support continued aggressive policy to bring the economy back to full employment, but the social cost of inequality is sickening. And if stopping this disease means putting the economy back into a recession, then so be it…It is like re-breaking a bone to set it straight. If the re-breaking of a bone is not done, the bone won’t work correctly in the future. It is proper medicine.

…Current day economists seem squeamish…
Hat tip: Scott Sumner.

Should we regulate Bitcoin?

by on April 11, 2014 at 9:16 am in Economics, Law, Web/Tech | Permalink

There is a new paper by Jerry Brito, Houman Shadab, and Andrea Castillo, the abstract is here:

The next major wave of Bitcoin regulation will likely be aimed at financial instruments, including securities and derivatives, as well as prediction markets and even gambling. While there are many easily regulated intermediaries when it comes to traditional securities and derivatives, emerging bitcoin-denominated instruments rely much less on traditional intermediaries. Additionally, the block chain technology that Bitcoin introduced for the first time makes completely decentralized markets and exchanges possible, thus eliminating the need for intermediaries in complex financial transactions.

In this article we survey the type of financial instruments and transactions that will most likely be of interest to regulators, including traditional securities and derivatives, new bitcoin-denominated instruments, and completely decentralized markets and exchanges. We find that bitcoin derivatives would likely not be subject to the full scope of regulation under the Commodities and Exchange Act because such derivatives would likely involve physical delivery (as opposed to cash settlement) and would not be capable of being centrally cleared. We also find that some laws, including those aimed at online gambling, do not contemplate a payment method like Bitcoin, thus placing many transactions in a legal gray area.

Following the approach to Bitcoin taken by FinCEN, we conclude that other financial regulators should consider exempting or excluding certain financial transactions denominated in Bitcoin from the full scope of the regulations, much like private securities offerings and forward contracts are treated. We also suggest that to the extent that regulation and enforcement becomes more costly than its benefits, policymakers should consider and pursue strategies consistent with that new reality, such as efforts to encourage resilience and adaptation.

Along related lines, you might consider Adam Thierer’s excellent new book Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom.

There is yet another paper on this topic, I know you are weary of it, but I remain glued to the screen, so here goes:

Stock theft is an endemic crime particularly affecting deep rural areas of Pakistan. Analysis of a series of cases was conducted to describe features of herds and farmers who have been the victims of cattle and/buffalo theft in various villages of Punjab in Pakistan during the year 2012. A structured interview was administered to a sample of fifty three affected farmers. The following were the important findings: i) incidents of theft were more amongst small scale farmers, ii) the rate of repeat victimization was high, iii) stealing was the most common modus operandi, iv) the majority of animals were adult, having high sale values, v) more cases occurred during nights with crescent moon, vi) only a proportion of victims stated to have the incident reported to the police, vii) many farmers had a history of making compensation agreements with thieves, viii) foot tracking failed in the majority of the cases, ix) all the respondents were willing to invest in radio frequency identification devices and advocated revision of existing laws. The study has implications for policy makers and proposes a relationship between crime science and veterinary medicine.

The link is here, and for the pointer I thank Ben Southwood.  This is in fact a significant and understudied topic in development economics, namely small-scale predation in rural settings.

Not surprisingly, that piece appeared in the Berliner und Münchener tierärztliche Wochenschrift.