I did not expect to be reading this within my lifetime, and yet here it is:
Medicare spending isn’t just lower than experts predicted a few years ago. On a per-person basis, Medicare spending is actually falling.
Russia’s largest bank wants to lend you a cat. Isn’t that nice?
What did you do for the good folks of Sberbank, the Moscow-based lender, that would make them want to drive a van to your home and drop off one of their 10 cats — which they keep just for occasions like this — so you can hang out with it for not more than two hours? Well, they just lent you the money for the house and, as Russian superstition has it, it’s good luck for the first creature to cross the threshold of a new home to be a feline. And, yes, the cat has to be returned to the bank.
This neighborly campaign from the friendliest of all Russian banking behemoths is a ploy to cash in on Russia’s mortgage market boom.
The cat is brought to you, and then taken away, by “two unshaven men in green overalls.” There is more here.
Trevor Paglen speculates:
Humanity’s longest lasting remnants are found among the stars. Over the last fifty years, hundreds of satellites have been launched into geosynchronous orbits, forming a ring of machines 36,000 kilometers from earth. Thousands of times further away than most other satellites, geostationary spacecraft remain locked as man-made moons in perpetual orbit long after their operational lifetimes. Geosynchronous spacecraft will be among civilization’s most enduring remnants, quietly circling earth until the earth is no more.
That is via Kottke.
Also known as labor market precommitment:
St. Louis Rams rookie defense lineman Ethan Westbrooks made the final 53-man roster on Saturday, beating out Michael Sam for one of the team’s final spots.
Westbrooks has a remarkable story of his own. In 2011 he was working at a Toys “R” Us and playing for Sacramento City College. Three years later, he’s in the NFL. According to Westbrooks, an unlikely motivational tool — a face tattoo — is part of the reason for his success.
Westbrooks told ESPN’s Nick Wagoner that he got a tattoo below his eye in 2011 because he never wanted to get a normal job again. Making it in the NFL would be the only way to prevent him from becoming “a guy that has a tattoo on his face looking for another job.”
The full story is here, with a good photo.
The pointer is from G. Patrick Lynch.
3. Why so many Russians support Putin, from a Russian opposition source.
6. Defense of Thomas Piketty (pdf).
Michael Pettis writes:
The choice, in other words, is not between hard landing and soft landing. China will either choose a “long landing”, in which growth rates drop sharply but in a controlled way such that unemployment remains reasonable even as GDP growth drops to 3% or less, or it will choose what analysts will at first hail as a soft landing – a few years of continued growth of 6-7% – followed by a collapse in growth and soaring unemployment.
A “soft landing” would, in this case, simply be a prelude to a very serious and destabilizing contraction in growth. Rather than hail the soft landing as a signal that Beijing is succeeding in managing the economic adjustment, it should be seen as an indication that Beijing has not been able to implement the reforms that it knows it must implement. A “soft landing” should increase our fear of a subsequent “hard landing”. It is not an alternative.
There is more here.
Our new class on international finance is up here. The class description reads as follows:
International finance covers some of the most complex but also important topics in economics. How are exchange rates determined? When if ever are ongoing trade deficits harmful? Are fixed or floating exchange rates better? What are the roots of the euro crisis and what resolution can we expect? Does China manipulate its exchange rate and if so how does that matter? We cover all of these topics and more, with an eye toward what a person really might want to know. There is no use of mathematics in this course beyond the very basic.
The interesting thing about international finance is that even a lot of professional economists don’t understand it very well, unless they have specialized in the area. If you complete this course, you’ll probably know a lot which they don’t!
You will find particular videos on capital controls, the classical gold standard, “dark matter,” “the Dutch disease,” the Asian financial crisis of 1997, and are devaluations contractionary?, among many other topics.
Again, here is Guinevere Liberty Nell’s recent class on the Soviet Union (still relevant alas!) and our Principios de Microeconomía, by Andres Marroquin, is growing as well. There is more on the way!
Most colleges are non-profits with unclear ownership status so their incentives do not lead to simple profit-maximization. Don’t be fooled, however, neither do colleges maximize student welfare or the public good. Instead colleges pursue some index of free cash flow, prestige, and administrative and faculty independence. The result is some peculiar outcomes. Most businesses, for example, don’t want to reject customers but colleges often encourage students to apply so that they can reject them. The Washington Monthly’s college issue has an excellent primer, Ten Ways Colleges Work You Over, that explains:
The aim of the game for colleges is to boost the number of students who apply and can be rejected. By doing this, the schools see their acceptance rates fall, making them appear to be more selective—which helps them rise up the U.S. News & World Report rankings.
Take Northeastern University in Boston… [which] sends nearly 200,000 personalized letters to high school students each year. The institution then follows up these letters with emails, making it seem that the school is wooing these individuals.
… Nearly 50,000 students applied to Northeastern this year for 2,800 spots in the fall 2014 class…
Lowering its acceptance rates is at least one factor in why Northeastern has catapulted up the U.S. News rankings, rising more than 100 spots since 2002.
Profit-maximization (or maximization of free cash flow) is also not absent from the process. Many schools, for example, say they are need blind but that just means that admission officers don’t know the student’s income. Admissions officers, however, do know lots of information that is highly correlated with income including where applicants live, what high school they attended and the occupations of the applicants parents–not exactly what I would call blind.
Schools even use seemingly arbitrary bits of information to increase their revenues. The Free Application for Federal Student Aid (FAFSA) form, for example, has students list the colleges that they are interested in applying to. Although the order is irrelevant, students often list in preferential order and the colleges see this information. As a result, colleges have an incentive to offer students who list their college first less financial aid simply because that is an indication that the student has a high demand for that college.
Well, “endorsed” isn’t exactly the right word, but I did say “simpatizante.” Here are my views:
1. I disagree with most of his economic policy, for reasons you can find stated in Adam Smith and the other classical economists.
2. Governments work very hard to stay in power.
3. In a weighted average of public opinion sense, I think of Bolivia as about 60-70% “indigenous,” one way or another.
4. If a Bolivian government is not strongly connected to the country’s indigenous population, that government cannot have a strong base. Yet it will still work hard to stay in power (#2), which will mean it will resort to oppressions and distortions, with high long-run costs. Bolivian history has seen an especially large number of coups and attempted coups, illustrating this weakness of the power base, which you can think of as the major problem in historical Bolivian public choice. Think of Mancur Olson on permanent vs. temporary bandits, where most of the past bandits have been temporary, and thus Bolivian governance has been of extremely low quality, even relative to its region.
5. The government of Evo Morales is quite popular and pretty stable. It has a strong and enduring power base, partly because of its specific policies and partly for symbolic reasons, such as its strong and explicit attachment to indigenous culture and “cosmovisions,” a notion newly embedded in the nation’s constitution.
6. The stability gains from #5 — the permanency of the bandit so to speak — exceed the costs from #1.
7. A democratic Bolivia will have “an indigenous government” sooner or later, better sooner. Let’s hope they learn some better economic policy. Something like the Morales government was in any case a necessary step, again without denying #1.
8. Bolivia is too decentralized for the Morales government to collapse into true dictatorship and Chavismo of Venezuela. That said, I would feel better if it were assured that the Morales government were to be limited in term.
9. See also my reasons why I am optimistic about Bolivia, including their fiscal prudence, supported by Morales I might add.
I made this argument to an audience of elite Bolivians and elite Bolivian students. Some of them hated it, some of them really liked it. A speaker should usually try to shake up his or her listeners in some manner.
Chinese authorities in the restive western region of Xinjiang have begun offering large cash incentives for interracial marriages in the latest attempt to quell growing unrest among the mainly Muslim Uighur ethnic group that inhabit the region.
The policy, celebrated by local Communist party officials as advancing the “great cause of assimilation” and “ethnic unity”, offers couples entering into mixed marriages an annual bonus of Rmb10,000 ($1,600), equivalent to 135 per cent of average annual rural incomes.
Uighurs, Mongolians and other ethnic minorities who marry people from the dominant Han race, which makes up more than 90 per cent of China’s 1.36bn population, will also be eligible for a broad range of medical, schooling and housing benefits.
3. Which states are in the Midwest? I say no to all the marginal cases, including Kentucky. And how can it be that not everyone thinks Iowa is in the Midwest?
7. Interest rates.
China’s 1% average annual growth in total factor productivity between 1978 and 2012 – a period when average per capita annual incomes rose from $2,000 to $8,000 — compares with 4% annual gains for Japan during its comparable 1950-1970 high-growth period, 3% for Taiwan from 1966-1990 and 2% for South Korea from 1966-1990, he said, when purchasing power in the relative economies is taken into account.
“Our study shows that China’s spectacular growth in the reform period has been mainly investment-driven and quite inefficient,” Mr. Wu wrote.
A big problem, which often complicates efforts to assess the health of China’s economy, is the reliability of Chinese data. Using three measures of productivity, J.P. Morgan economist Haibin Zhu concludes in a research note that China’s total factor productivity grew 1.1% in 2013 from a 3.2% expansion in 2008. Mr. Wu draws on different methodology to argue that total factor productivity turned negative from 2007 to 2012.
“Correctly measuring China’s productivity has, not surprisingly, been obstructed by severe data problems that have resulted in widely contradictory productivity performance estimates,” Mr. Wu said.
I would classify this as highly speculative. TFP is hard enough to measure in the first place, but in a rapidly growing economy productivity boosts are especially likely to be embodied in (and measured as) rising capital expenditures. Still, it is an interesting perspective on what is the number one economic problem in the world today.
1. Bolivia became a semi-stable democracy in the early 1980s and it has stayed that way.
2. For all the rhetoric to the contrary, the current regime is a mix of 1990s-era market-oriented reforms and Evo Morales. Probably you like one of these, though perhaps not both.
3. Many more Bolivian children go to school than before, and the incidence of malnutrition has been plummeting, with longer-run benefits for IQ. You will read many fabricated or non-causally-backed claims about the connection between inequality and growth, but for Bolivia I believe these arguments.
4. Bolivia has done so many things wrong in the past, there is a lot of low-hanging fruit through purely internal improvements. For instance the country is a fantastic tourist destination, but would not at this moment be experienced that way by mainstream American tourists, due to language, hotel, and infrastructure shortcomings. Eventually those problems can be and will be solved. Eventually.
5. Bolivia does not have much export exposure to China, and does not face much geopolitical risk.
6. Of all commodities, hydrocarbons may be relatively protected in price through the forthcoming global turmoil, because the Middle East implosion will make Bolivia’s current main resource more valuable.
The three main reasons to be pessimistic about Bolivia are:
1. Most of their economic policy is quite bad, especially when it concerns the nationalization of foreign direct investment. The FDI future of Bolivia will be extremely unfavorable. The rhetoric and indeed the behavior of the government sometimes is like a villain from an Ayn Rand novel.
2. Their main trading partner is Brazil, a country which will have gone from eight percent growth to near-zero growth in but a few years time. Argentina is either the number two or number three trade partner, along with the U.S., depending on the year in question.
Of those three reasons, #1 probably matters a bit less than you might think, and #3 a bit more.
It is much debated in Bolivia whether corruption is going up or down. I believe it is going up, but partially for good reasons. For instance the construction sector is doing well, and construction tends to be corrupt in many countries, for reasons intrinsic to the activity itself (e.g., lots of big contracts, easy to claim invisible expenses, etc.). That means higher corruption but also a better corruption than the penny ante bribes of a shrinking economy.
Right now Bolivia is growing at a rate of above six percent.
It is potent:
If people married each other more randomly, poverty levels would be considerably lower than they are now. If we abandoned all current family arrangements and randomly grouped all Bolivians into new families of 5 persons, poverty levels would fall by about 15 percentage points (from the current level of 55% of all households to about 40% of all households). The Gini coefficient measuring inequality would also fall from about 0.70 to 0.55.
But Bolivians do not mix much in marriage. The correlation between partners’ education levels is extremely high at about 0.77, with no signs of falling. For comparison, the corresponding number for Germany is 0.52 and for Britain it is 0.41.
But not all Bolivians are equally restricted in their marriage choices. In the department of Santa Cruz the correlation is only 0.69 while in Potosi it is 0.82, with a corresponding difference in poverty rates.
That is from Lykke E. Andersen, Development from Within, an interesting and well-written collection of essays on Bolivian development, and sometimes on development policy more generally. The cited piece was written in 2008.
Here is a good sentence from that book:
Just one little road block can disrupt an entire vacation.