Month: June 2010

The economics of *Le Monde*

It seems the newspaper is going under.  Here is one snippet:

In France, firing a printing plant employee is hugely expensive. The gent is paid €50,000 per year, works 32 hours per week and 164 days per year. Firing him costs about €466,000 – that’s a  French government estimate…

It is worth reading the article in full, as it makes many other points.  For the pointer I thank Sam Bishop.

Berlin is ugly

The buildings don't have nearly the charm of what you would find in Paris, Rome, or much of London.  There are some nice residential areas, some pretty tree-lined boulevards, some occasional 19th century (or earlier) masterworks, and scattered sleek contemporary successes, such as by Potsdamer Platz.  There is lots of 1950s through 1980s mediocrity.  There are nice river settings, but for the most part the city doesn't use its waterfront especially well.  Many streets or plazas in the East remain huge cavernous monstrosities, devoid of Jane Jacobs-like inspiration.

It's nice enough that you can tell yourself it's not ugly, which perhaps is a sign of its ugliness.

I like that it's ugly, because it keeps the city empty and cheap and it keeps away the non-serious.  There are not many (any?) splashy major sights.  Even the Wall is mostly gone.  The way to see and experience Berlin is to do things.  The ugliness selects for people who want to enjoy the city's musical, theatrical, museum, and literary treasures.

Berlin is evidence that most tourists don't actually care so much about history, culture, and museums, as it is not for most people a major tourist destination, despite having world-class offerings in each of those areas.  Mostly tourists like large, visually spectacular sites, or family activities, combined with the feeling that they are taking in culture or seeing something important.  

There are, however, a fair number of Russian tourists who enjoy the nostalgic feeling they get walking through the eastern part of the city and visiting communist monuments and sites.

If you are in Mexico, and you visit ruins of any kind, prepare to see disproportionate numbers of Germans.

What kind of currency units do beggars want?

Akshay asks me:

Given that there are more coins and coins are worth more in London, with gbp1 and gbp2 coins, would you expect panhandlers to do better or worse? I would guess that people are less likely to part with their change and give it to beggars, whereas in the US people generally hate carrying around coins… And they are worth a lot less.

On the other hand, when they do get donations, the amounts are probably higher.

You can ask a comparable question about tips.  In the Eurozone, one works pretty hard to avoid a steady accumulation of coins.  The twenty cent piece feels worth less than does a U.S. quarter, because it competes for pocket space with the one- and two-euro coins. My intuition is that, adjusting for the size of tip or donation, in Europe or the UK small-denomination transfers are more common, which means that people with lower values of time end up sorting the coins.

Turkish integration in Germany

Here's from the FT:

In the past decade Europe’s largest nation has embraced its foreign population of 15m, and [soccer] team and country seem to have benefited.

“Joachim Löw’s team reflects the Germans’ greater sense of belonging together,” says Maria Böhmer, chancellor Angela Merkel’s minister for immigrant issues. “We’ve never had as much integration as we have in Germany today.”

The article offers anecdotal evidence for that view.  A little more on the scientific side:

A new report by Germany's Advisory Council for Integration and Migration says immigrants are fitting into German society better than first thought. The council found a high level of trust between Germans and immigrants…

Ines Michalowski from the Social Science Research Center in Berlin said…"This report and the research that is behind this report actually shows that there is more optimism and that people are pretty much used to immigrant neighbors and immigrants are used to having people without immigrant backgrounds as their neighbors," she said. "People are actually used to living together."

The survey also showed that most people who were questioned approved of, rather than disapproved of, the integration policies of the German government. Michalowski said this is because integration is not a central political issue in the country.

Here is much more.  I found this bit interesting:

The council canvassed more than 5,000 people, including immigrants and Germans, for its integration barometer. Both groups were asked how they perceived the other group, with nearly two-thirds of immigrants responding that they either "more or less" or "completely" trusted Germans. Astonishingly, only 54 percent of Germans reported trusting other fellow citizens.

Two out of three immigrants also said they felt Germans were interested in their social integration.

Here is a good general discussion of some relevant issues.  Keep in mind, the question is not whether Turks do as well as Germans or other immigrants.  Usually the Turks in Germany start off with much less education so as a group they have not caught up.  The real question is whether the costs from the migration are so large as to overwhelm the gains from trade reaped by both sides.  I say no.

Here is an article on the döner bratwurst.  The döner kebab, by the way, was invented in Berlin, not Turkey.  It is now popular in Istanbul.

Here is some basic summary information.  I should add that Berlin is a safe city throughout and also that large parts of Kreuzberg (the major Turkish section) have been gentrified.  It is now less common to hear talk of the subway train through that section as "the Orient Express."  If your working mental model for multicultural Berlin is Paris, you are making a mistake.

Berlin is in terms of the numbers a major "Turkish" city in its own right, but it almost always feels remarkably German.  

Germany fact of the day

Germany’s real effective devaluation in terms of relative unit labour costs compared with the EU27 during 1994-2009 is about 20%.

The post, which focuses on German outsourcing to Eastern Europe (an effect not included in the above estimate), is interesting throughout.  Germany is sometimes called an "inflexible" country or an "inflexible" culture.  But if you look at the longer sweep of history, you can make an equally good or better case that the Germans have a remarkably flexible culture, sometimes too flexible.  In this particular case it seems to be just flexible enough.

This account can help us understand why Germany is not so keen on higher inflation and a weaker euro.  Think of depreciation as a substitute for wage flexibility.  If you've managed a good deal of wage flexibility — in part in advance — policymakers probably don't need or want the depreciation.  It bears also on why the Germans don't so much see Keynesian economics as applying to their country.

Addendum: I very much enjoyed this Paul Krugman post.

Steven Johnson responds to Nicholas Carr on multitasking

It’s no accident that most of the great scientific and technological innovation over the last millennium has taken place in crowded, distracting urban centers. The printed page itself encouraged those manifold connections, by allowing ideas to be stored and shared and circulated more efficiently. One can make the case that the Enlightenment depended more on the exchange of ideas than it did on solitary, deep-focus reading.

Here is more.

Response from Brad DeLong on fiscal policy

Read the whole thing; my original post was here.  

On my point 1, that the central bank moves last, Brad writes:

Yes, the central bank can neutralize any additional fiscal stimulus by raising interest rates. (It is not clear that it can undo any fiscal contraction by some combination of lowering interest rates and quantitative easing: it may be able to.) What is clear is that the U.S. Federal Reserve and the Bank of England are right now definitely not in a place where they would neutralize any additional fiscal stimulus by raising interest rates. And my bet is that the ECB is also not in such a place–although it is much harder to figure out what they think and what they will do. That the central bank moves last is important and relevant, but not determinative when you are in the neighborhood of the zero lower bound on interest rates.

Maybe the central bank cannot undo a fiscal tightening, but surely it can undo a fiscal expansion, by making money tighter, limiting QE, and/or changing the pace at which it undoes previous QE.  My assumption is that the central bank has a preferred inflation vs. unemployment position for the economy, so why be so sure they won't undo the expansion of the fiscal authority, if only probabilistically?  Portfolio considerations, or public relations, may matter, so I am not postulating strict neutrality, rather changes in fiscal debt do less good than we might think.   

On point two, that monetary expansion is easy, even at the zero bound, Brad writes:

That's why having the government hire unemployed people to do useful things and paying for it by printing up money at basically zero budgetary cost (right now) is an even better policy. Even if consumers do save all that money, fiscal stimulus on the spending side still has an impact: useful stuff gets done.

That's fine, with the side note that I am more skeptical about public sector spending.  I'll push this line of reasoning to the next step, however, and stress we don't need to increase debt at all to have a big and effective stimulus.  (By the way, accepting this argument means that a central bank can undo a decrease in the federal debt, as mentioned in point one.)   

On point three, on federalizing Medicaid, we agree.  Point four is about the value of worst-case thinking and that means a fiscal crisis can come even when it appears unlikely.  I wish to heed that risk by doing something other than pledging our next President and Congress will solve the problem.

Elsewhere, Brad has written:

The obvious policy is the long-term debt neutral stimulus: spending increases and tax cuts for the next three years, standby tax increases with triggers and spending caps with triggers thereafter, all calculated to guarantee that the debt is no larger ten years from now than in the baseline.

An alternative version of this would be:

We can and should do major stimulus without increasing the debt burden, short-term or long-term.  Increasing M, through monetary policy, is usually more effective than making periodic attempts to keep V up and running, through fiscal policy.  Plus it is often easier to turn monetary rather than fiscal policy on a dime, especially in a democracy and for Brad I can cite the risk of a Republican administration.  Talk of the zero bound doesn't matter much for the policies we should choose, namely money-financed, non-exotic direct stimulus.

Why is it necessary to take on or intellectually defend higher debt levels?  Short-term debt can too easily become a long-term commitment.  Why is it necessary to discuss the zero bound so much?  In my view of this exchange, Brad and I largely agree, but he does not (yet?) agree that we largely agree.  I want to see him criticize debt finance more than he seems willing to do.

I believe the "zero bound" is perhaps the single largest "red herring" in the economics profession today.

Addendum: Arnold Kling comments.  And Brad DeLong responds in the comments section.

Disclosure for airbrushed models in Israel?

bill (note: linked site is written in Hebrew) submitted to Israel's parliament, the Knesset, by lawmaker Rachel Adatto — a doctor who devoted much of her career to women's health issues — pushed for legislation to keep underweight models out of commercials; to prohibit modeling agencies from employing them; and to bar advertising agencies and media from airbrushing models into stick figures.

The bill has since been modified to allow for airbrushing, provided it is identified as such in a transparent manner.  The original pointer comes from Berliner Morgenpost.

Greece fact of the day

I had never thought about this before, but once you ponder all of those islands, relatively close to Africa and the Middle East, it makes sense:

The vast majority of all illegal immigrants detected attempting to enter the 25-nation EU do so from Greece. The bloc's southernmost member accounted for 75 per cent of all attempted illegal border crossings in 2009 and 88 per cent in the first part of 2010…

Bob Dylan *Radio Hour*

Also known as German markets in everything, or alternatively why oh why can't we have a better U.S. copyright law?

Remember when Bob Dylan was DJ for those XM satellite radio shows, spinning a melange of blues, folk songs, vaudeville, gospel, and general bizarreness, with generally American themes, in the process proving himself one of the world's great musical infovres?  Some of those shows are collected on CD, in Germany, vol. I, II, and III, four discs a box, twelve discs in total.  The listings are here (they will ship to the US), or in German stores for about six dollars a disc, thank you Greece.

I own thousands of CDs, but these are among the very best and the song selection compares favorably to other collections of American music.  The sound quality and transfers are first-rate.

Here is a Bach box, his major choral works and some of the major cantatas, MP3, and CD, 42 euros, 22 discs, John Eliot Gardiner conducting, these are some of the best recordings of the chosen pieces and even with shipping costs this is an extremely favorable purchase.

Have I mentioned there are many outrageous bargains in Berlin, not just my apartment?

For five or six euros, you can buy an excellent spaghetti bolognese, better than almost anything in WDC or Virginia.  Apartments are cheaper, you don't need a car, mineral water and good bread is cheaper, gelato is cheaper, and in most social circles you're not expected to dress extraordinarily well.  I'm not sure books are cheaper but they're not outrageously priced either, even many English-language editions.  It's a strange feeling to come to Europe and have most things be cheaper, which still is not the case in Paris.

Here Angus recommends five CDs for Germany, good picks but the Dylan and the Bach round out some Alvin Curran and some gospel in my living room.

Wisdom on financial regulation

As a hedge funder, I'd love to see banks' proprietary trading limited (I hate competition), and it is certainly conceivable that a bank could blow itself up through unwise prop activity. Yet the vast majority of failed and nearly failed banks didn't have meaningful prop books. They made foolish decisions in ordinary lending activity.

That's HFM, who apparently is anonymous.  The post is interesting throughout and hat tip goes to Interfluidity at Twitter.