Month: December 2009

Not in a liquidity trap

Hyperinflation in Zimbabwe, the former Rhodesia, was a quadrillion times worse than it was in Weimar Germany.

That's via Jason Kottke (source here).  There's also this bit:

The cumulative devaluation of the Zimbabwe dollar was such that a stack of 100,000,000,000,000,000,000,000,000 (26 zeros) two dollar bills (if they were printed) in the peak hyperinflation would have be needed to equal in value what a single original Zimbabwe two-dollar bill of 1978 had been worth. Such a pile of bills literally would be light years high, stretching from the Earth to the Andromeda Galaxy.

The division of labor is limited by the extent of the market

Brian Eno writes:

…go into a record shop and look at the dividers used to separate music into different categories. There used to be about a dozen: rock, jazz, ethnic, and so on. Now there are almost as many dividers as there are records, and they keep proliferating. The category I had a hand in starting–ambient music–has split into a host of subcategories called things like “black ambient,” “ambient dub,” “ambient industrial,” “organic ambient” and 20 others last time I looked. A similar bifurcation has been happening in every other living musical genre (except for “classical” which remains, so far, simply “classical”), and it’s going on in painting, sculpture, cinema and dance.

Recently an MR reader sent along a link to this new genre:

Shava are probably the only representatives so far of the genre of Suomibhangra, a Finnish take on the South Asian diaspora dance genre, bhangra. One one level there's a lot to be critical of here, perhaps – the wilful exoticism, the fake Indian dancers, the almost-brownface of someone like the "Finnjabi bad boy" in the video.

Nonetheless most South Asians seem to approve of their Finnish mimics.  Elsewhere, here is yet another essay on the fragmentation of music

Going back to Eno, I liked this point:

The idea that something is uncool because it’s old or foreign has left the collective consciousness.

China fact of the day

A Chinese policeman who died after drinking too much at a banquet he was made to attend has been deemed a martyr who died in the line of duty, in an apparent attempt to meet his family's demands for compensation, a state-run newspaper said.

The story is here, via Daniel Lippman.  If you're looking for China estimate of the day, it is this:

Chinese academics have estimated that government officials spend about 500 billion yuan ($73 billion) in public funds each year on official banquets, nearly one-third of the nation's expenses on dining out.

Tie CO2 Tax to Temperature

John Tierney relays today what seems like a very sensible idea from economist Ross McKitrick, tie a carbon tax to the temperature.  If the temperature rises the tax goes up, if the temperature does not rise (as McKitrick, a climate change skeptic thinks) the tax will stay at a low level.  Temperature of the troposphere would be measured by satellite at the equator and averaged over a period of time.  (More here and a more detailed version here).

In theory, both climate change proponents and skeptics ought to agree to this proposal, but I predict the proponents will object.

Addendum: As predicted most of the objections (in the comments) are from climate change proponents.  In essence, they argue that the problem is so serious that we must act before the evidence is in.  Aside from the obvious epistemic problems with such a position do note that a) this is a way of getting agreement where otherwise there might be none b) the tax can be non-linear so it rises (in Bayesian fashion) with the strength of the evidence, i.e. the tax need not always lag.

Distilling famous thinkers

Following up on a discussion, Arnold Kling asks:

Should we approach famous thinkers by digesting distilled versions, or should we study them in the original?

I'm for distilling, for reasons Arnold offers, but I'm also for reading the originals.  Here are a few reasons why, drawn from a number of longer sources I have read and digested:

1. Secondary sources are unreliable and they do not capture or understand many of the original insights.  To remove it from the distant past, what I get from John Rawls or Robert Nozick is quite distinct from what I get from their distillers.

2. Truly great thinkers require numerous distillers.  Can you read just one book on Keynes?  No.  So you have to read a few.  Shouldn't one of these then be Keynes himself?  Yes.

3. The errors of top thinkers are often more interesting and instructive than their successes.  Distillers have a hard time capturing these errors and their fruitfulness.

4. We often read great thinkers not to learn what they understood but also to set our minds racing and to find interesting new questions.  Great thinkers are usually better at supplying this service than are their distillers.

5. Sometimes the value is in having read common sources and benefiting from the commonality per se.  Great thinkers are usually more focal than any of their distillers and thus reading them is a good input for discussions with others.

6. Original sources often help you challenge or reexamine your world view or intellectual ethos.  Distillers very often pander to that world view, while pretending to challenge you.

7. Consider a simple comparison.  You can read either Adam Smith's two major books or any ten or even twenty books on him, toss in articles if you wish.  It's a no-brainer which you should choose.

8. The best distillers often are original sources in their own right (and in part unreliable expositors), such as in Charles Taylor's excellent book on Hegel.

9. Distillation works best in very exact sciences, such as physics and mathematics.  If you rely on distillation for an inexact science, you will do best at capturing its exact parts.  You will be left with a systematic bias, and knowledge gap, regarding its inexact parts.

I could say more, but I fear this post is already too long.

Bad Design Within Reach

Warning: this post is about furniture. Fast Company has an article on the decline of the furniture company Design Within Reach.  The article focuses on how in an effort to cut costs DWR "copied" designs it had earlier sold as a distributor.  A look at the before and after, however, shows that the real problem is that the copies are nowhere near as aesthetically pleasing as the originals.

Take a look at these credenzas.  In the DWR version where is your eye first drawn?


Is the eye not drawn first to the stodgy feet?  The thick and heavy feet of the DWR version combined with the shorter width give it a weighted down, stolid feel.  The original in contrast is light and airy, it almost floats above the floor, an effect which is aided by the shading with its subtle look of fluffy clouds.

Now take a look at the bookshelfs.

The DWR version has a clean look but it's boring–you see it once and you are done.  Now look at the original.  Does it not draw your attention?  In the original the middle shelves do not align vertically with the side shelves and the top and bottom middle shelves are open, not closed.  I think the result is a much more interesting and entertaining piece of furniture.

We now return you to your regularly scheduled dose of economics.

Chris Blattman on why aid seems to fail

Aid, if it achieves the UN’s goals, is often saving the lives of the poorest. In this respect, we can say aid has been successful. And it is this very success that could explain why we don’t see any effect on growth. In fact, for the first few decades of aid, it’s conceivable that it would appear to reduce per capita income growth.

If aid saves the lives of millions of poor infants, or mothers in childbirth, at roughly the same rate a country can industrialize, then we’ll see an increase in the number of poor people at about the same rate that we increase GDP per person. Unless aid is also spurring faster industrial growth, the growth figures essentially won’t change. The things that aid does well–increasing primary education, saving lives, and leading to a demographic transition (essentially lower population growth–may reasonably take a generation or two to impact industry.

So if aid has been good at saving lives now, but not (in the short term) at spurring industry, then we shouldn’t be surprised that we don’t see take-offs. Rather, in most countries aid might actually lower the short term, measured number.

But by almost any measure, though, aid would still be a huge success. Maybe the “failure of aid” is really a failure to industrialize, disguised.

The link is here.  Lately I've been trying to think through the opposite point.  How many uninsured do they have in China?  Over a billion?  Letting a lot of sick people die, or simply not treating them much, can help  your per capita growth statistics.  If you don't take individual preferences to have value in their own right, but simply wish to maximize measured growth per capita, you'll value human life at something like replacement cost.

Asteroid Deflection as a Public Good

I wrote this post over the weekend but given Paul Samuelson's classic contribution to public goods theory and to economic textbooks it seems to also fit today.

In Modern Principles we use asteroid deflection as our example of a public good.  Aside from memorability, the example has two virtues as a teaching tool.  First, asteroid deflection is a true public good for all of humanity which raises free riding issues on a worldwide scale.  Second, asteroid deflection is an example of a public good that is currently provided neither by the market nor by government. Thus the example underlines the fact that public goods are defined by their characteristics–nonexcludability and nonrivalry–and not by whether they are publicly provided, a point of confusion for many students.

The example may seem fanciful but Tyler and I are quite serious about the
importance of asteroid deflection.  Large asteroid hits are rare but if
a large asteroid does hit, billions will be killed.  As a result, sober calculations suggest that the lifetime risk of dying from an asteroid strike is about the same as the risk of dying in a commercial airplane crash.  Yet we spend far less on avoiding the former risk than the latter.

A new report from the National Academy of Sciences discusses efforts to detect near earth objects (NEOs).  Progress is mixed:

The United States is currently the only country with an active, government-sponsored effort to
detect and track potentially hazardous near-Earth objects (NEOs)…
Congress has mandated that NASA detect and track 90 percent of NEOs that are 1 kilometer in diameter
or larger. These objects represent a great potential hazard to life on Earth and could cause global
destruction. NASA is close to accomplishing this goal.

Congress has more recently mandated that by
2020 NASA should detect and track 90 percent of NEOs that are 140 meters in diameter or larger, a
category of objects that is generally recognized to represent a very significant threat to life on Earth if
they strike in or near urban areas….The administration has not requested and Congress has not
appropriated new funds to meet this objective….[Thus] the current near-Earth object surveys cannot meet the goals of the 2005 NASA
Authorization Act…

Moreover, detection is only the first step towards deflection.

As a classroom discussion starter I like the video embedded below.  The jovial attitude of the announcers contrasts amusingly with the topic while subtly illustrating some of our biases in perception yet the video does cover the main points about the worldwide risk, the fact that asteroid deflection is a public good and it hints at the free rider problem.  I do doubt the bit about the riches available from asteroid mining.  Enjoy.

Why is there a glut of extra-large clothing?

Edward Casabian writes:

I'm a mostly loyal reader of Marginal Revolution and have a question for you.

Why is it that the vast majority items on sale in a clothing store are almost always XL or XXL?  I was in Old Navy last weekend and wanted to pick up a few t-shirts, but virtually all of them were too big for me.  The same went for shorts and jackets.  I am average size, about 5'9"

I would think that there would be more small, medium and large size clothing as these items would cost less to produce and seem to have a higher demand as evidenced by the inordinate amount of large clothing that is always on sale at department stores.

I believe the same goes with footwear.  The most popular sizes (9-11) always seem to be out of stock.

I can't vouch for these stylized facts but I do have the same casual impression. 

One simple hypothesis is that the less common sizes have more unpredictable demands, relative to inventory, and so they are more likely to end up in surplus.  They're also more likely to be unavailable when you need them, though perhaps that latter state of affairs is less noticeable.

I also question whether you will find an equivalent overrepresentation of XL at Banana Republic (I guess no) and what that means about the clientele of Old Navy.  The company which owns both may be pursuing a market segmentation/price discrimination strategy and Mr. Casabian is expressing his preference for more search and lower prices instead of reading MR all the time. 

The most general question is which clothes sizes should be most likely to experience oversupply.  My guess is that occurs when branding is least important and the possible durable goods monopoly breaks down.  Maybe people buying XL are less interested in brands (or brands are less interested in them) and thus their market is more likely to be flooded.

These are just my guesses; maybe Kathleen Fasanella would know the answer.