Month: June 2008


Matt Yglesias offers a good review of this excellent movie, which chronicles the early life of Genghis Khan, or one vision thereof.  There are at least two increasing returns to scale mechanisms in this movie.  First, leadership is focal, which tends to bind groups together and make concentrated rule possible.  Winning battles makes you focal and winning larger battles makes you focal across larger groups.  Second, if you walk or ride alone in the countryside, you will be snatched or plundered.  That causes people to live in settlements and also larger cities.  Put those mechanisms together, solve for equilibrium, and eventually one guy rules a very large kingdom and you get some semblance of free trade.  Sooner or later, that is.  The movie brings you only part of the way there and I believe a sequel is in the works.

The King Monopolist

At the "Silk Market" in Beijing you can buy high quality goods from "Chanel," "Gucci," "Ralph Lauren" and just about any other famous brand.  Prices are very, very low ;).  But there is one brand that no one copies and for which you must pay full price – the 2008 Olympics brand.  It’s not good to offend the King monopolist.   

The culture that is Dutch

1. As of July 1, the Netherlands will ban smoking in public places.

2. The smoking of cannabis and hashish, however, will be allowed, at least in licensed cafes.

3. The regulation will be that adding tobacco to the smoke (a popular practice) will be forbidden and that only "pure pot" will be allowed.

4. It is noted that "This year, the Chinese have started to come."

That is from "What are the Dutch Smoking," in the 30 June 2008 issue of Business Week.  Here is one related article.

Markets in everything: lives for sale

He says he’s not the first person to put his life on the

Australian philosophy student Nicael Holt, 24, offered his
life to the highest bidder last year to protest mass

American John Freyer started All My Life For Sale
( in 2001 and sold everything he owned
on eBay, later visiting the people who bought his things.

Adam Burtle, a 20-year-old U.S. university student, offered
his soul for sale on eBay in 2001, with bidding hitting $400
before eBay called it off. Burtle admitted he was a bored geek.

Here is the story.  The current seller is Ian Usher, a lovelorn Australian:

From Sunday, June 22 for one week, Usher’s life is up for
sale on eBay with the package including his $420,000
(US$397,000) three-bedroom house in Perth, Western Australia, a
trial for his job at a rug store, his car, motorbike, clothes
and even friends.

Here is a previous MR post on an Australian life for sale.

W.H. Auden on banking

Auden wrote the following praise to Cyril Connolly about his recently published book:

As both Eliot and Edmund Wilson are Americans, I think Enemies of Promise is the best English book of criticism since the war, and more than Eliot or Wilson you really write about writing in the only way which is interesting to anyone except academics, as a real occupation like banking or fucking, with all its attendant boredom, excitement, and terror.

That is from Stefan Collini’s often quite interesting Common Reading: Critics, Historians, and Public.

What does campaign finance do?

Here is Ed Lopez’s survey article, here is the survey from Thomas Stratmann.  Overall the academics who work on this issue tend to see the practical ramifications of campaign finance restrictions as very often constituting less than meets the eye.  It’s also well understood that most campaign finance reform benefits incumbents, who already have name recognition.

The pointer is from Ed Lopez, who notes:

Consider two ratios.

1. In 2000 the federal government spent about 1.8 trillion (~18% of
GDP), and total campaign expenditures on all federal elective offices
was about $1.85 billion (about $1b on congressional races, $0.35b on
presidential, and $0.5b in soft money). So federal public sector
advertising was 1/1000th of federal public spending. Ratio 1 = 0.001.

2. In 2000 the private sector share of GDP was about $7.5 trillion
(after federal, state and local spending net of intergovernmental
transfers), and total private sector advertising, according to
Advertising Age, was $240 billion (Statistical Abstract Table 1251). So private advertising was 3.2% of private spending. Ratio 2 = .032.

By this comparison, private sector advertising is more than thirty times greater
than the amount we spend on federal elections trying to make sure we
get the right person for the job. Given how much we expect from our
federal government, isn’t it surprising that campaign spending isn’t
twice, or even ten times, more than it is right now?

Ed thinks that campaigns need more money flowing through them, not less; I don’t have a personal view on this issue.  Reihan Salam offers interesting comment on recent controversies surrounding Barack Obama.

First Stop in the New World

The subtitle is Mexico City, The Capital of the 21st Century.  If you are familiar with this charming metropolis, it is a superb book.  Excerpt:

Apart from the obvious problems of traffic and transportation, the growth created other confusing complications.  Today, out of the city’s eighty-five thousand streets, there are about eight hundred fifty called Juárez, seven hundred fifty named Hidalgo, and seven hundred known as Morelos.  Two hundred are called 16 de Septiembre, while a hundred more are called 16 de Septiembre Avenue, Alley, Mews, or Extension.  Nine separate neighborhoods are called La Palma, four are called Las Palmas, and there are numerous mutations: La Palmita, Las Palmitas, Palmas Inn, La Palmas Condominio, Palmas Avenida, La Palma I y Palma I-II Unidad Habitacional.

Here is the Amazon link.  Here is the author’s home page and blog, which has an excellent Raymond Chandler quotation.

Is microfinance the new subprime?

Ryan Hahn asks:

In the case of microfinance, however, it seems to me the problem of limited liability is rearing its ugly head. Poor borrowers generally have little or no collateral, so they usually have little reason to avoid a strategic default.

It is a common myth that microfinance loans have no collateral.  I sooner worry that the process of collateralization is too thorough.  Remember that microfinance loans are made to small groups of five to ten people, typically neighbors.  If you don’t pay up, your associate has to.  The reality is that the person left holding the bag — who knows you well — will come seize your TV set or in some cases the process is a bit less pleasant.  Part of the efficiency of microfinance is simply the separation of the lending and the "thug" functions.  Banks can lend to high-risk individual borrowers without themselves resorting to the illegal intimidation practices of the village moneylender.  The dynamics of cooperative behavior in the village are not always pretty but overall it works better than the moneylender; if nothing else the person seizing the collateral knows that next time around he or she may be the non-payer.  For more detail, see my Wilson Quarterly article with Karol Boudreaux.

China’s Silver Lining

An hour and a half out of central Beijing, traveling through orchards of apples and pears and still the smog blankets the fields obscuring the view.  Pollution like this I have never seen.

And yet the intensity of the pollution makes me optimistic.  Pollution in China isn’t like the demise of the snail darter or some wispy thing that might take a few weeks off your life if you live long enough.  Pollution here irritates, it chokes and it kills young and old.  Pollution like this people are willing to pay to avoid and as the economy grows the Chinese are willing to pay more and more.  James Fallows, who is living in Beijing, suggests that pollution could be China’s Silver Lining, and ours.  I read the piece before arriving but after being here a while it rings true.

High commodity prices

Guillermo Calvo writes:

Incentives to stockpile commodities stem from the combination of low
central bank interest rates (especially in the US) and the growth in
sovereign wealth funds. The latter, in my view, is the crucial factor.
Sovereign wealth funds have been created partly with the intent of
switching the composition of government wealth from highly liquid but
low-return assets to more risky but much more profitable investment
projects. Thus, their attempt to get rid of excess liquidity resembles
the econ 101 exercise in which the student is asked to trace the
effects of a portfolio switch away from money and into capital.  The answer is – of course – higher prices.

The piece is interesting throughout, hat tip to Mark Thoma.

Atmospheric Disturbances

It may be that friendship is nourished on observation and conversation, but love is born from and nourished on silent interpretation…The beloved expresses a possible world unknown to us…that must be deciphered.

That is Gilles Deleuze and it is the front quotation in the new novel Atmospheric Disturbances, by the very beautiful Rivka Galchen.  The key premise of this novel is that a 51-year-old psychiatrist suddenly believes that his wife has been replaced with an exact look-alike; he refers to her as the Simulacrum.  I read it straight through.  Here is an interview with the author.

Pay For It: Radical Water Privatization for Poor Countries

Here is my piece for on the privatization of residential water supply in the Third World.  Excerpt:

And no, I don’t mean a water
concession with a price regulated by the government, I mean true
laissez faire in water supply. No price regulation, no rate of return
regulation, no government ownership of assets, no political pressure to
keep prices low. Water companies should be allowed to maximize their
profits, and because supplying water is nearly always a monopoly, they
should be allowed to make monopoly profits. I know the idea sounds
crazy–to an economist, water supply is a classic "natural"
monopoly–but on closer inspection the other alternatives might be

And more:

If complete deregulation
is too radical for you, consider the interesting compromise proposed by
the economist Jeffrey Sachs, currently heading the Earth Institute at Columbia University.
He suggests that the private company be allowed to charge high prices,
but only under the condition that it allocates a minimum amount of
water for everyone, either for free or at a much lower price. Basic
water needs would be met, and the company still might make a profit.

That said, I’m less worried about high prices than Sachs. Let’s say
the new water prices were so high as to capture all the benefits that
buyers would receive from the new supply of water. We can expect much
lower rates of diarrhea and other diseases, if only because the water
supplier can charge more for cleaner and safer water. The resulting
decline in disease means that children will die less frequently and
adults will be healthier and more energetic. Those long-term social
benefits are of enormous help to poor communities, even if high prices
take away many of the initial, upfront benefits of the new water
supply. In other words, we should consider radical privatization
precisely because water is a public good and because clean water is so
important for long-run economic growth.

Read the whole thing.

Podcast of my cultural economics talk

It is here, iffy sound quality (I only tested the beginning) but I believe it is mostly intelligible.  I talk about Facebook, Second Life, Kindle, and many other recent changes in cultural markets.  I make the bold claim — true in my view — that the last five years have seen more changes in "cultural economics" than in any other five-year period in human history.