Month: January 2010

French-Tasmanian betting markets in everything

Tasmanian millionaire David Walsh takes that speculation to a new level by buying the life of an artist. He has entered a unique arrangement to film an artist's entire life until he dies. The French artist Christian Boltanski will be filmed 24 hours a day in his Paris studio. The Herald Sun reports that the video will be streamed live to Walsh's $70 million Museum of Old and New Art once it opens in 2011. Boltanski will be paid a fee until he dies so the longer he lives, the better a deal it is for him. Boltanski is currently 65. Boltanski has called the deal a game, to win he must stay alive at least eight years. Walsh is essentially gambling that he won't. Filming began yesterday.

The full story is here and I thank N. Mehra for the pointer.

The Washington Post on Austro-Chinese business cycle theory

For investors, many of the usual bubble warning signs are flashing. Fueled by low interest rates, prices in Shanghai and Beijing doubled in less than four years, then doubled again. Most Chinese home buyers expect that today's high prices will climb even higher tomorrow, so they are stretching to pay prices at the edge of their means or beyond. Brokers say it is common for buyers to falsely inflate income statements for bank loans.

…The Xinhua news agency quoted Goldman Sachs as saying that housing price increases had outpaced wage hikes by 30 percent in Shanghai and 80 percent in Beijing in recent years.

A popular television soap opera known as "Snail House" depicts two sisters' desperate struggle to buy an ever more unaffordable home. One sister resorts to becoming the mistress of a corrupt, married official to get money for an apartment.

Here is much more.

The Chait-Manzi debate

Paul Krugman links to some of the key pieces, or trace through Chait's blog or Manzi plus Krugman has a NYT column today on this.  I won't go through the debate as a whole (i.e., no mention of military spending or ideas as an international public good), which covers many of the basic "U.S. vs. Europe" issues, but here are a few relevant points:

1. For this debate, "levels" are more important than growth rates.  The United States has higher per capita income than most of Europe, although I don't mean to suggest that Europe is an economic disaster.  You also can try to "argue back" some of that difference by citing social indicators or leisure time, but don't focus on the growth rates.

2. If you see the United States compared with Europe, ask if the same analysis also compares the United States to the highly successful Singapore or for that matter Brazil.  If not, be wary.

3. It would be an interesting exercise to construct an "imaginary Europe," so instead of the current gdp of Italy you would sub in the output of a comparable number of Italian-Americans, and so on.  The Swedish-Americans in Minnesota get subbed in for the Swedes in Sweden, and so on.  I've never seen that done but I would like to know the answer, both with respect to per capita income and social indicators.

4. One question is whether the U.S. or Europe does a better job of elevating poor immigrants to higher income levels.  You would think egalitarians would be obsessed with this issue, but they're not.  In fact most of them hardly mention it.

5. There has never, ever been a well-functioning social democracy — in the European sense — with the size, population, and diversity of the United States or if you wish make that any two of those three.  How about any one of those three, noting that Canada isn't really such a large country?  That doesn't mean it's impossible, but keep that in mind the next time you hear talk about evidence-based reasoning.

6. Per capita growth rates or levels can be misleading, for some of the reasons mentioned above.  A country which adds a lot of low wage labor through immigration, for instance, will look worse than it ought to.  And if you cite "higher average productivity" in some parts of Europe, you are neglecting the differences between average and marginal and also the allergies to low-wage jobs in places such as France.

7. One view is to see significant pockets of poverty in Appalachia and decry there is nothing comparable in Denmark.  Another view is to see those same poor people and compare them to the poor of the European continent, which includes places such as Belarus and Albania.  Both approaches can be misleading exercises.

8. Countries have to start from where they're at.  If you're constructing policy advice, you can either build on what a country is really good at or you can try to revise the internal culture of the country.  If you're going to do the latter, come out and say so.  Most of my policy recommendations are based on the former approach, namely strengthening what (the better-functioning) countries already are good at.  I'm not suggesting that countries never change, but getting such changes right by deliberate policy interventions is very hard to do.  I wish to stress this point applies to the pro-U.S. as much as the pro-Europe side.

I'd like everyone to have a sign, which they would hold up when appropriate: "My policies seek to revise the internal culture of my country."  That's OK, but you're raising the bar for your own ideas and don't fool yourself into thinking otherwise.

Addendum: You'll find related points here.

Andrei Shleifer on the Junker problem

Via Brad DeLong, here is Andrei:

Andrei Shleifer is offering an justification for what Federal Reserve Chairman Ben Bernanke calls “credit easing.”… It is, Shleifer argued at a presentation at the American Economic Association in Atlanta, the best way to get banks to resume lending. In a crisis, the price of securities – mortgage-backed, Treasury debt, packages of loans, etc. – fall to fire sale prices, well below fundamental values…. Banks with the wherewithal to make new loans… prefer to buy securities because the opportunity for profit is so tempting…. “Because asset prices are out of whack,” he said, “injecting capital into banks doesn’t restart lending.” Banks simply use the money “to buy underpriced securities… to speculate.” “Financing of new investment by banks [via lending to business] is always competing with speculation. If speculation is more attractive, it is going to draw the attention of banks,” he argued.

The solution: The Fed or the government should buy a lot of securities, so many of them that the price rises and the banks no longer find them attractive for speculation and lend instead…

The original source, from David Wessel, is here and it includes a critique from Gary Gorton.  Here are my previous posts on the Junker problem; I'm not sure I have met an economist who has never made this mistake or is it one?  One question in this case is whether the security purchases lead to that cash being recycled right back into the banking system, and thus available for lending, as Fritz Machlup had suggested in his 1940 book on the stock market and capital formation.

How many scary ideas can you fit into one paragraph?

Government officials say their rationing plan should help the country reach May, when seasonal rains are predicted to return. But even Chavez concedes the situation is serious. His past efforts to solve the problem have included sending cloud-seeding planes to produce rain with the help of Cuba.

I count at least seven.  The broader story, which has even more scary ideas, is here.  It seems quite possible that over seventy percent of Venezuela could end up without electrical power, within a year.

On the brighter side, they've finally devalued the currency.

Assorted links

1. Are good-looking staff bad for business?

2. Manhattan vs. Alaska.

3. Here is an old post, advice for budding economists, a reader asked me to rerun it.

4. Myths of the American Revolution (of general interest, don't hold me to endorsing these).

5. Was this movie subsidized?: "Sandrine Bonnaire is Hélène, a middle-aged housekeeper in a luxurious Corsican hotel, who one day sees a couple on a balcony exchanging erotic glances and seductive gestures over a chessboard. She is sexually aroused and tries to lure her husband into a similar situation by giving him a chess computer – but the attempt fails when he does not understand the connection between chess and erotic intimacy (really)."  Kevin Kline plays in his first French-speaking role.

6. How to warn people.

One data point on tax incidence

Warning: do not generalize.  Still, this is an interesting story:

City bankers will suffer little or no impact from the bonus supertax imposed by the government last month, according to a Financial Times poll of leading investment banks.

Most banks, polled in an anonymised survey, said they would absorb all or part of the cost of the one-off 50 per cent tax by inflating their bonus pools, even at the risk of irritating the government and their own shareholders.

The results chime with intelligence garnered by headhunters. “The tax is going to be 90 per cent absorbed by the banks,” said one senior recruitment consultant with clients in the City.

In many cases that will mean banks doubling bonus pools, with the cost of the tax borne by shareholders. Dividends, already under pressure as regulators force banks to retain earnings to boost capital, are likely to be hit, bankers concede.

Innovative Solutions to the Shortage of Transplant Organs

Millions of people suffer from kidney disease, but in 2007 there were just 64,606 kidney-transplant operations in the entire world.

Today in the WSJ I discuss innovative solutions to the worldwide shortage of transplant organs from places like  Iran, India, Singapore, Israel and elsewhere.  One interesting bit I haven't blogged about before is routine removal of organs without the donor's or their families consent.  China?  No.  America.  It's been legal here for decades.

In a number of U.S. states, medical examiners conducting autopsies may and do harvest corneas with little or no family notification. (By the time of autopsy, it is too late to harvest organs such as kidneys.) Few people know about routine removal statutes and perhaps because of this, these laws have effectively increased cornea transplants.

Here is another bit on the shadowy definition of death:

Organs can be taken from deceased donors only after they have been declared dead, but where is the line between life and death? Philosophers have been debating the dividing line between baldness and nonbaldness for over 2,000 years, so there is little hope that the dividing line between life and death will ever be agreed upon. Indeed, the great paradox of deceased donation is that we must draw the line between life and death precisely where we cannot be sure of the answer, because the line must lie where the donor is dead but the donor's organs are not.

In 1968 the Journal of the American Medical Association published its criteria for brain death. But reduced crime and better automobile safety have led to fewer potential brain-dead donors than in the past. Now, greater attention is being given to donation after cardiac death: no heart beat for two to five minutes (protocols differ) after the heart stops beating spontaneously. Both standards are controversial–the surgeon who performed the first heart transplant from a brain-dead donor in 1968 was threatened with prosecution, as have been some surgeons using donation after cardiac death. Despite the controversy, donation after cardiac death more than tripled between 2002 and 2006, when it accounted for about 8% of all deceased donors nationwide. In some regions, that figure is up to 20%.

More on markets for organs, presumed consent, and point systems at the WSJ,

Critique of transhumanism

Here is one sample point:

First, that the Enlightenment project of Reason to which many transhumanists are committed is self-erosive and requires nonrational validation. Transhumanist advocates for Bayesianism and transcending cognitive biases need to confront the repeated implosions of the religion of Reason into romanticism and mysticism, and develop more sophisticated and nuanced defenses of rationality.

And this:

…while most transhumanists are liberal democrats, their Enlightenment beliefs in human perfectibility and governance by reason can also validate technocratic authoritarianism. Even staunchly libertarian transhumanists appear to be blithely unaware that arguments for government by benign superintelligent beings that know human interests better than we do recapitulate arguments for totalitarianism from the French Revolution through Marxist-Leninism.

Etc.  I thank Kyle Munkittrick for the pointer.  Here is my previous post on transhumanism.

Burning books in Wales?

It is, therefore, genuinely shocking to learn that book-burning is taking place in south Wales. Pensioners in Swansea are reportedly buying books from charity shops for just a few pence each and taking them home for fuel. With temperatures plummeting and energy costs on the rise, thick books such as encyclopaedias are said to be particularly sought after.

I am not sure how firm "reportedly" should be taken.  The full story is here and I thank Michael Bracken for the pointer.

Large industrial enterprises in the late 19th century

By the time of Appo's first incarceration in 1874, Sing Sing was a sprawling, seventy-seven-acre industrial complex, simultaneously a "great human cage" and "a leviathan" factory complex…Inside, horses and wagons moved higher and thither, ship masts towered above the quay walls, and freight trains thundered through the prison grounds.  In the age of industry, wrote another observer, Sing Sing was a "vast creative emporium."  It was arguably the largest manufacturing complex in the country, if not the world.

The size of Sing Sing's labor force dwarfed those of most American factories.

That's from Timothy Gilfoyle's excellent A Pickpocket's Tale: The Underworld of Nineteenth Century New York.