A good rule of thumb is that if a policy is going to happen, it is better to have that policy sooner rather than later.  Here is the latest from the land of fesenjan:

With hopes high that Tehran’s nuclear accord with world powers could lead to the lifting of international sanctions, consumers are holding back on spending in the expectation of price drops and the arrival of better quality imported goods. The motor industry has been badly hit, with sales of domestically produced cars dropping by 15 per cent over the past five months, according to official figures.

Officials warn the carmakers’ crisis is having knock-on effects across the economy, hitting sectors from parts-makers to the critical steel industry, the second-biggest non-oil sector, which is already struggling amid a housing slowdown.


The centrist government of President Hassan Rouhani has managed to cut inflation from about 40 per cent to 12.6 per cent over the past two years and end three successive years of economic contraction, with growth of 3 per cent in the year to March. But economists believe the economy has now stopped growing and may even be contracting.

Of course some of that is an oil price effect.  The full FT story by Najmeh Bozorgmehr is here.

Monday assorted links

by on September 21, 2015 at 12:26 pm in Uncategorized | Permalink

1. Don Boudreaux responds to Dani Rodrik on free trade.  And Arnold Kling responds.  And Dan Klein reviews Charles C.W. Cooke’s The Conservatarian Manifesto.

2. A quick way to access what betting markets are telling us about the candidates.

3. The NBA is moving toward wearable tech — are you next?

4. More data on Chinese services, including telecom.

5. Should we adjust for this data, or learn from it?  The temporal evolution of citation counts, across fields.

6. Generalized results about interest rates and banks profits, check out the Chicago Fed link here, Genay and Podjasek, it is #2 in the order which comes up for me, or try this link.  Overall banks are more profitable when interest rates are low, contra some recent blog posts by Krugman.   This effect is especially strong for small banks, which have a good deal of political power.  In any case “Interest rate changes generally have small effects on bank profits…” and that effect is dominated by the effect from macroeconomic conditions, including employment and also home prices.  Here are useful comments from Brad DeLong.

A Phool and His Money

by on September 21, 2015 at 7:21 am in Books, Economics | Permalink

I was disappointed with Akelof and Shiller’s Phishing for Phools.

Cinnabon pastries are hard to resist. Advertising can be deceptive. Humans sometimes act in foolish ways. If these statements strike you as anodyne then there is no need to read George Akerlof and Robert Shiller’s new book Phishing for Phools, a disappointing foray into behavioral economics from two recent Nobel Prize winners. If these statements strike you as novel then I recommend instead Ariely’s Predictably Irrational, Sunstein and Thaler’s Nudge, Kahneman’s Thinking, Fast and Slow or Daniel Gilbert’s Stumbling on Happiness, to name just a few classics in the field

You can read my full review at The New Rambler.

Mas-Colell recuerda que España está obligada a pagar a los pensionistas aunque Catalunya se independice

There is eventually a noisy video at the link, my apologies.  I am not sure what is exactly the best translation of “recuerda” in this context, but the article involves Andreu Mas-Colell asserting that even after Catalonian independence the government in Madrid is obligated to pay for pensions in Catalonia.  That obligation is a legal one which (supposedly) international tribunals will enforce.

The fine points of the conditional and the subjunctive are important for interpreting that article, and perhaps some of those are escaping me.  But I don’t take the journalist to be reporting a prediction that Madrid actually will pay for those pensions, only that they have such a legal obligation, combined with the assumption that this law will reign supreme and the issue therefore won’t be a problem for Catalonia.  There is no mention of the current Spanish law essentially forbidding Catalonian secession or even direct consideration of such.

I have a question.  Of all the economists who have endorsed or indeed fought hard for Catalonian independence (Galí, Mas-Colell, Sala-i-Martí, Antràs, Boix, Ventura, etc.), who offers the best and clearest account of what the associated costs would be?  Please leave your answer in the comments, or if you wish email me.

Here are photos of Escudella.


For the pointer I thank Gerardo Gonzalez.

What I’ve been reading

by on September 21, 2015 at 1:05 am in Books | Permalink

1. Lavinia Greenlaw, A Double Sorrow.  A deeply sad but very affecting poem, based loosely on Chaucer’s Troilus and Cressida.  Here is a useful review of the work, and unlike many poems it is very easy to read.

2. Gillen D’Arcy Wood, Tambora: The Eruption that Changed the World.  This 1815 volcanic eruption in Indonesia had a bigger impact on global history than you might think.  Be afraid, be very afraid.

3. Lillian Faderman, The Gay Revolution: The Story of the Struggle.  A good, readable, even-tempered treatment of what the title promises.  I learned a good deal about the 1940s and 50s most of all, recommended.  It is 816 pp. but never a drag.  I am surprised it is not being reviewed more prominently.

4. Andrew Wender Cohen, Contraband: Smuggling and the Birth of the American Century.  A good look at how America really ran its nineteenth century trade policies, full of good anecdotes and examples.

5. Peter Frankopan, The Silk Roads: A New History of the World, it is out already in the UK, which was my source.  My main objection to this book is the overselling in the subtitle.  It is a nice, readable account of Silk Road history and the importance of Eastern land transport for global economic history.  I liked it, but didn’t feel it revised my worldview in any big way or even tried to.  The material on the twentieth century struck me as too familiar.  Here is one useful review.

I read about thirty pages of the new Salman Rushdie.  While it was better than expected, I didn’t feel compelled to continue; it is odd to tell a rationalist story through magical realist means.  Hanya Yanagihara’s A Little Life is turning out to be one of the year’s sensations.  I’ve read about one hundred pages and seems to be of high quality but its themes don’t grab me (New York City, child abuse), and it is taking too long to become conceptual.  And for another recent novel on child abuse themes, don’t forget the new Rafael Yglesias.

Sunday assorted links

by on September 20, 2015 at 3:36 pm in Uncategorized | Permalink

1. Your personal tear-wiper (Japan).  And the culture that is golf.  I’ll never play, or for that matter watch.

2. Claims about Canadian Mounties and Canadian hockey players and Canadian violence (pdf).

3. A climate change plan for coal.

4. Tougher times for Alibaba.

5. The South Bronx gentrifies.

One of the UK’s biggest graduate recruiters is to remove degree classification from the entry criteria for its hiring programmes, having found “no evidence” that success at university was correlated with achievement in professional qualifications.

Accountancy firm Ernst and Young, known as EY, will no longer require students to have a 2:1 degree and the equivalent of three B grades at A level to be considered for its graduate programmes.

Instead, the company will use numerical tests and online “strength” assessments to assess the potential of applicants.

There is more here, via the excellent Jake Seliger.

I found this a fascinating book, in spite of some over-generalizations.  We all know that something is wrong with Europe, and with France in particular, but what?  The argument starts with this:

We need to take religion seriously, especially when it starts to disappear.

It continues:

…we gave the name ‘zombie Catholicism’ to the anthropological and social force that emerged from the final disintegration of the Church in its traditional bastions…This cultural survival is probably the most important social phenomenon of the years from 1965 to 2015.  It eventually led France into a multifaceted ideological venture, including the rise of a new kind of socialism, decentralization, a surge of pro-European feeling, a masochistic monetary policy, a deformation of the nature of the Republic, and, as we shall later see, a particularly shifty form of Islamophobia and, probably, of anti-Semitism.

It’s hard to unpack this following sentence in a blog post, but it gives you an indication of where the book is heading:

The demonization of Islam is a response to the intrinsic need of a completely de-Christianized society.

Todd notes that the vote share of the National Front is higher in “egalitarian territory” than in inegalitarian territory (pp.125-126).  And yet there is more:

We have been obliged to admit that there is a zombie Catholicism, and a zombie Protestantism too.  We should not shy away from postulating that there is a zombie Islam.

Ross Douthat, telephone!

I ordered my copy from Amazon.uk.  Here is a useful article on the French controversies surrounding this book.  It’s making my list for one of the most interesting of the year.

Here is Bloomberg on next week’s election:

If separatist parties secure a majority and Madrid refuses to negotiate, Mas says he’ll declare independence unilaterally within 18 months.

I read this earlier in the week:

The gap between Spanish 10-year bond yields and Italian yields has widened to a two-year high as political uncertainty escalates ahead of an election in Catalonia this month and a general election in December.

Spanish 10-year bonds now yield 0.27 percentage points more than Italian bonds. In October 2014 they yielded 0.4 percentage points less. The spread has widened by 0.15 percentage points in the last week alone, indicating a rising risk premium, with the timing of the sell-off coinciding with a major demonstration by Catalonian separatists on Friday.

The EU warns that independence would mean automatic expulsion from the EU.  Various leading banks have warned they would leave an independent Catalonia.  The odds are still against this actually happening, but it’s climbed on the radar screen again.

My position remains that this would be a big mistake.  It would bring significant economic harms.  Furthermore the current notion of “what it means to be Catalan” seems to be as much defined by the union with Spain as it would be realized without such a union.  Voting to leave is like voting to become a very new people, although it is rarely framed that way and more commonly framed as a kind of self-preservation or cultural preservation.  There’s nothing wrong with deciding to become a new people, but that can be done within larger political units as well.

What about the evidence on the economics?:

First, no historical evidence supports this claim [that an independent Catalonia would grow more rapidly]. Andres Rodriguez-Pose from the London School of Economics has studied the economic record of independence, mostly in Eastern Europe and the former Yugoslavia, and finds that countries at best maintain their previous growth paths.

Second, no evidence suggests that institutions in Catalonia perform better than the Spanish average. Anecdotal evidence suggests that corruption is as pervasive in Catalonia as in the rest of Spain. On a more scientific basis, the 2012 European Commission report [pdf] measuring the quality of government in European countries and regions shows Spain ranked 13 out of 27 EU countries, while Catalonia ranked 130 out of 199 EU regions, thus in the bottom third of EU regions. Catalonia also ranked last among Spanish regions.

Third, Catalonia’s potential growth benefited massively from the 1992 Olympic Games, which were financed mostly by the Spanish State and the City of Barcelona, with a minor contribution by the Catalan government, and which opened up new parts of the city with civil infrastructure investments. Research conducted by the University of Barcelona and the City of Barcelona shows that this spending not only boosted the economy before the games but also provided long-lasting benefits. For example, Barcelona moved higher in the “best city to conduct business” ranking.

That all said, Spain and the eurozone are now outside their immediate and dire fiscal and financial crisis, at least compared to say 2011.  So I now think that if a clear majority in Catalonia wants to leave Spain, Spain should let them go.  I wrote a few years ago that would be my stance once the most pressing parts of the financial crisis are past, and it seems to me that is now the case.  Catalonian separatism, while I still think it is imprudent, is no longer morally irresponsible from a broader European point of view.

Good luck, I’ll be watching either way.

Backlash and secondary consequences

by on September 19, 2015 at 4:43 pm in Uncategorized | Permalink

Hispanic activists have two words for Donald Trump — thank you.

“I think the greatest thing to ever happen to the Hispanic electorate is a gentleman named Donald Trump, he has crystalized the angst and anger of the Hispanic community,” U.S. Hispanic Chamber of Commerce President & CEO Javier Palomarez told POLITICO in an interview. “I think that we can all rest assured that Hispanics can turn out in record numbers.”

Saturday assorted links

by on September 19, 2015 at 1:01 pm in Uncategorized | Permalink

1. Questions that are rarely asked: “How many who think we shouldn’t judge schools by how well students do also think we should judge companies by wages?”

2. An economist gets dessert, sort of (apologies for the video when you click on the link).

3. University of Maryland to spin off its data analytics division into a new company.  Solve for the equilibrium.

4. The grey market foods of New York City.  And Arnold Kling on Fiorina and Trump.

5. Data on Uber’s surge pricing, it keeps the expected wait time within a remarkably consistent range.

6. UK scientists apply for license to edit genes in human embryo.

7. The smart basketball.  Nein, danke, I prefer self-deception to keep me on the exercise track.

New data, released by the Centers for Disease Control, show that America’s love for fast food is surprisingly income blind. Well-off kids, poor kids, and all those in between tend to get about the same percentage of their calories from fast food, according to a survey of more than 5,000 people. More precisely, though, it’s the poorest kids that tend to get the smallest share of their daily energy intake from Big Macs, Whoppers, Chicken McNuggets, and french fries.

That is from Robert Ferdman.  By the way:

More than a third of all children and adolescents living in the country still eat some form of fast food on any given day, a number which hasn’t budged in decades, according to the CDC.

And many children are getting alarmingly high proportions of their diet from chicken nuggets and french fries. About a quarter of all kids in the United States get 25 percent of their calories from fast food. And 12 percent of kids get more than 40 percent of their calories from fast food.

Busan — the second largest city in South Korea — would also be the second largest city in Western Europe.

That is from the new and interesting paper by Glaeser, Ponzetto, and Zou (pdf), on mega-cities vs. networks.  By the way, I consider Busan to be a lovely and underrated city, think of it as the Vancouver of Korea, and on a clear day you can look across the water and see Japan.

Update: See the comments for some challenges to the #2 claim.

Licinius wrote:

Some thoughts from a pseudonymous political consultant:
1) The filter for politicians hardly selects for spontaneous television charisma at all until the very highest levels. Typically the types of offices one holds prior to being a Governor or a Senator (Congress, lesser statewide office, Mayor of a medium-sized but not too big city) are offices that select for skill-sets like working a room of a handful of insiders, and avoiding making mistakes; not spontaneously debating on camera. Let’s say at any given point in time there are 1,000 people in the country in one of these “feeder” offices (Congress, Statewide elected officials, mid-city mayors, etc).
2) Governor and Senator positions select a little bit more for charisma and media presence, but not much, and usually they only do so in big expensive contested Senate Races – not in the safe blue or safe red states that most Senators and Governors represent. If I were to hazard a guess, I’d say that no more than 50 out of 150 Governors and Senators were elected in the sorts of elections that test a person’s debating mettle and television presence. This doesn’t seem like a process where one is going to end up with tremendously charismatic TV personalities running for president. But it does pose an interesting puzzle, because it would seem to me that professional entertainers could wipe the floor with politicians.
3) Very rarely do celebrities or CEOs run for offices that are “to scale,” or things that they could easily win. If Carly Fiorina had run for an open Republican seat in Congress instead of Senate on her first shot, she’d be a shoo-in. Ben Affleck would be iffy for Senate, but he’d coast to a victory in Congress (and then Congressman Ben Affleck could easily rise up the ranks and build a political career from there, if he had the patience). When they do run for things that are “to scale” – like Kevin Johnson running for Mayor of Sacramento – they tend to win. When they do things not to scale – Chris Dudley running for Governor of Oregon – they tend to lose.
4) Being an entertainer/CEO is generally a better life than being a politician. This selects for second tier CEOs and entertainers running for office, not first tier ones. Al Franken was an entertaining guy, but he was hardly a first-tier celebrity prior to running for office. For him, running for Senate was a step up in status. For somebody like John Stewart or Stephen Colbert, not so much. Similarly, Bill Gates and Tim Cook have nothing to gain by running for office, so the businessperson candidates we get are generally not first-tier. No offense to Carly Fiorina, she has “succeeded” more than the vast majority of people ever will in her field, but she has dedicated her life singularly to making money, and there’s thousands of people who have done a better job than her. She’s the businessperson equivalent of a State Attorney General, not a Governor or a Senator. Trump fares a little better, but still, there are dozens of more successful businessmen in the U.S. than him. If you were to rank all the politicians in the U.S. in terms of electoral success, all the legitimate presidential contenders would be in the top 150. Would anybody make the case that Carly Fiorina is one of the top 150 businesspeople in the U.S.?
5) This leads to the interesting observation that CEOs and entertainers may be so much more talented at some aspects of charisma than politicians are that a C-list CEO or entertainer might still be more compelling than an A-list politician. And if an A-list entertainer or CEO ever decides to run for major office (like Arnold running for Governor), they’ll have a real shot at winning.

Here is what some Chinese thought of the candidates.  Here are comments from David Brooks.

Don Boudreaux had asked Dani why favor free trade within nations, but not always favor free trade across nations?  Dani wrote a long response here, self-recommending, do read the whole thing, but here is a brief excerpt:

So the national market and the international market are different. The defining characteristic of a national market is that it is deeply embedded in a set of social and political institutions – a common legal and regulatory framework provided by the nation-state. The international market is at best weakly embedded in transnational arrangements, and the arrangements that do exist such as the WTO and bilateral investment treaties are commercial rather than fully-fledged political/redistributive/regulatory arrangements.

On Thursday the dialogue will continue