Month: October 2010
Bill Bryson’s *At Home*
Indeed, the history of early America is really a history of coping with shortages of building materials. For a country famed for being rich in natural resources, America along the eastern seaboard proved to be appallingly deficient in many basic commodities necessary to an independent civilization. One of those commodities was limestone, as the first colonists discovered to their dismay. In England, you could build a reasonably secure house with wattle and daub — essentially a fraework of mud and sticks — if it was sufficiently bound with lime. But in America there was no lime (or at least none found before 1690), so the colonists used dried mud, which proved to be woefully lacking in sturdiness. During the first century of colonization, it was a rare house that lasted more than ten years…A hurricane in 1634 blew away — literally just lifted up and carried off — half the houses of Massachusetts. Barely had people rebuilt when a second storm of similar intensity blew in…Even decent building stone was not available in many areas. When George Washington wanted to pave his loggia at Mount Vernon with simple flagstones, he had to send to England for them.
The one thing America had in quantity was wood.
That is all from the new Bill Bryson book, subtitled A Short History of Private Life, which is both entertaining and informative.
Mario Vargas Llosa wins Nobel Prize
That's for literature, sadly he never had the chance to win a prize for economics, as his political career as a Peruvian classical liberal was cut short by electoral defeat. He has many fine books but I have two particular favorites: The War of the End of the World (serious and epic, concerning a millenarian revolt in Brazil) and Aunt Julia and the Scriptwriter (a fun story and spoof of telenovela culture). Conversation in the Cathedral is sometimes considered a classic but I find it unreadable. I suspect his early The Green House will resonate more with Latin Americans. His last major novel, The Bad Girl, was entertaining but not entirely satisfying and it reminded me a bit too much of an older man writing about sex. The Feast of the Goat is a very good study of political power. Here are previous MR mentions of Mario Vargas Llosa.
Here is Wikipedia on Vargas Llosa. Alex has done a good bit of work with Alvaro Vargas Llosa, son of Mario and a prominent writer on classical liberal themes, and perhaps he will relate some of that to us.
Comali foods: tamales and pupusas from El Salvador
They sent me, gratis, non-frozen tamales from El Salvador. They sell pupusas too, and with improved technologies:
The retort process uses a combination of heat and pressure to “sterilize” the foods, which are sealed in special pouches similar to military MRE’s (but ours taste a lot better 🙂 ).
They were excellent (I knew immediately when I smelled them) and no artificial preservatives are required. They will deliver to your door and their web site is here. I am told there is a 30 percent off discount with use of the code TCowen30; I receive no kickback.
Don't forget the white sour cream.
Canada’s budget triumph
From a new paper by David Henderson:
A federal government runs a large deficit. Deficits are so large that the ratio of federal debt to Gross Domestic Product (GDP) approaches 70 percent. A constituency of voters have gotten used to large federal spending programs. Does that sound like the United States? Well, yes. But it also describes Canada in 1993. Yet, just 16 years later, Canada’s federal debt had fallen from 67 percent to only 29 percent of GDP. Moreover, in every year between 1997 and 2008, Canada’s federal government had a budget surplus. In one fiscal year, 2000–2001, its surplus was a whopping 1.8 percent of GDP. If the U.S. government had such a surplus today, that would amount to a cool $263 billion rather than the current deficit of more than $1.5 trillion.
Status plateaus
Colin, a loyal MR reader, writes to me:
My girlfriend and I were having dinner at a swanky place…and noticed everyone had essentially the same phones–either an iPhone or some version of a Blackberry–which are the same models I see all over campus…It seems to me that with most items like cars, handbags, or houses, there are always more expensive/prestigious items one can get to signal a new tier of wealth, but with phones this is not the case (iPhones and Blackberrys look to be the end of the line, and are not particularly exclusive to the wealthy). We were curious if you could come up with any other items or industries that plateau like this–the only other we could really think of was media/entertainment (plateau at the NYT/WSJ; everyone sees roughly the same new released movies or tv shows). Thanks for your consideration and thanks for keeping up the excellent blog!
Other than reading blogs, what are further examples? By the way, here is the world's most expensive cellphone (beware: the pop-up at the link offers audio), at 300k, but I think your wealthy friends will simply laugh at you. Only 28 of them have been produced.
Status plateaus may be profit-maximizing when large numbers of upper-middle class customers wish to believe that they are enjoying the truly cutting edge technology and they are willing to pay for it. Creating the "iPhone plus for billionaires" would lower the demand for iPhones proper.
Assorted links
Economics Nobel odds at iPredict
iPredict is running contracts on who will win this year's Nobel Prize in Economics. As I write Oliver Hart heads the field with a 25% chance, Robert Schiller, Richard Thaler, Martin Weitzman come next, all with an 18% chance of winning.
Also listed are William Nordhaus, Jean Tirole, Angus Deaton, Richard Posner, Gene Grossman, Ernst Fehr, Gordon Tullock, Avinash Dixit, Sam Peltzman, Eugene Fama and Robert Barro.
It does seem to be a market based on real money payments, though I am not sure how much liquidity is there. The direct link to the contracts is here and right now Thaler is leading. The link cited above is here and for the pointer I thank Eric Crampton.
Should they have let the guy’s house burn down?
David Henderson blogs some of the basic information (Cohn at TNR comments here). Here is the upshot:
He refers to a story about a man who failed to pay an annual fee for fire protection and then, when his house caught on fire and he called the fire department, the fire department refused to show up.
They wouldn't even let him pay up ex post. David notes that this is a government-run fire department and thus the story is not much of a moral reductio on the market. Arguably a private company would behave the same way, sometimes, but it 's odd to claim that government failure reminds you market failure is possible and so let's damn the market. By the way, markets do pretty well at setting up schemes with a penalty for late payment; that's how my mortgage works.
I would make a broader point. Any social system must, at some stage of interactions, impose some morally unacceptable penalties. If you are very hungry, and you shoplift food, they still might prosecute you. If you don't pay your taxes, and resist wage garnishes, they might put you in jail. If you resist arrest, they might, at some point in the chain of events, shoot you while trying to escape. Somewhere along the line there is a doctor who can treat your rare disease except he doesn't feel like working so much, and so he lets you die or suffer; you can find both private and public sector examples here.
Social systems proceed by (usually) covering up the brutalities upon which they are based. The doctor doesn't let you get to his door and then turn you away, rather his home address is hard to find. The government handcuffs you so they don't have to shoot you trying to escape. And so on.
To borrow language from Thomas Schelling, social systems involve costs in terms of both "known" and "statistical" lives. It's the sum total of costs which is important. It's fine (though controversial) to argue that a "known" life should be more important than a "statistical" life, but it's not dispositive to pull out one example of a "known" life and draw a significant conclusion from that anecdote. That's what we teach students not to do in first year principles, sometimes citing Bastiat, the seen and the unseen, and so on.
I don't favor the policies of this fire department, but simply pointing out the vividness one of these social brutalities doesn't much influence me about the broader principles at stake.
Will America come to envy Japan’s lost decade?
That's Ezra's question, read this too. Moving away from traditional macro, I would add two points:
1. Japan has seen numerous quality improvements over the last twenty years, and Japanese consumers are renowned for valuing quality. The CPI mismeasurement problem may be greater for Japan and real Japanese living standards perhaps have risen a bit more rapidly than the numbers indicate.
2. Japanese politics is less competitive and Japanese rent-seeking is less competitive than in the United States. Sustained near-zero growth in the United States would mean that interest groups tear apart the social fabric and grab too lustily at the social surplus. Whether we like it or not, we are "built to grow" and we use the fruits of that growth to buy off interest groups as we go along. Japan in contrast has greater capacity to stifle these grabs for new redistributions because their politics is more of an insider's game.
Imagine a future world history where, fifty years from now, we look back and decide that Japan was the one country that made a semi-success of near-zero growth. Which means we are now watching a Golden Age there of sorts. I'm not betting on that, but if you're looking for strange scenarios that's my suggestion for the day.
Assorted links
1. When the eBook is more expensive.
3. MIE: The Lockup Prison Restaurant in Shibuya.
4. Is a rented friend a real friend?
5. The personal tax plan of the NZ central banker, Arthur Grimes.
6. "Future selves may score the best reviews of all" — read more here.
Nazi Nudging
Dan Ariely probably isn't doing his field of behavioral economics any favors when he points out that before he pushed, Hitler was not averse to using a nudge. Still, this 1938 voting ballot which reads, "Do you agree with the reunification of Austria with the German Reich that was enacted on 13 March 1938 and do you vote for the party of our leader; Adolf Hitler?; Yes; No,” is quite amusing as an early example of primitive nudge technology.
Ten memorable Nigerian books
Natalie has been staying with us, so I have been searching for interesting reads on Nigeria; here is an account of ten important novels about the country.
I am told that on Lagos island rents can run $60-70k a year and have to be paid two years in advance. Here is a short Rem Koolhaas video on Lagos. Lagos may soon be the third largest city in the world, and yet other than informal buses the city has virtually no mass transit. The traffic jams are legendary. A journey to nearby Benin should only take three hours but now it can last days.
Some say that Nigeria is the largest user of motorcycles in the world; many hospitals in the country have a ward named after the motorcycles. In Lagos, there is a recent partial ban on their use.
Here is a good article on the maturation of Nollywood. Here is a good, regular source of information about Nigeria, namely 234Next.com.
Here is the renowned BBC Lagos special.
Sentences to ponder
The chancellor intends that from 2013 household benefit payment will be capped at around the median earned income after tax and national insurance for working families – estimated at about £500 a week.
That's from the UK and I was surprised to see that benefits could run so high. Keep your eyes on this story: the UK is the first Western country in recent memory to attempt a comprehensive overhaul of its welfare state. The UK does a lot of things first (e.g., decline, revitalization) because its parliamentary system allows for relatively rapid and decisive legislative action.
Who will win the Nobel Prize in economics this year?
I see a few prime candidates:
1. Richard Thaler joint with Robert Schiller.
2. Martin Weitzman and William Nordhaus, for their work on environmental economics.
3. Three prominent econometricians of your choice, bundled.
4. Jean Tirole, possibly bundled with Oliver Hart and other game theorists/principle agent theorists. But last year the prize was in a similar field so the chances here have gone down for the time being.
5. Doug Diamond, bundled with another theorist or two of financial intermediation, such as John Geanakopolos. Bernanke probably has to wait, although that may militate against the entire idea of such a prize right now.
6. Dale Jorgenson plus ???? (Baumol?) for a productivity prize.
I see #1 or #2 as most likely, with Al Roth and Ernst Fehr also in the running. Sadly, it seems it is too late for the deserving Tullock.
In general I think Robert Barro has a good chance but I don't see him being picked so close to a financial crisis; the pick would be seen as an endorsement of Barro's negative attitude toward fiscal stimulus and I don't expect that from the Swedes. The financial crisis is a problem for Fama especially, though he is arguably the most deserving of the non-recipients. Paul Romer is another likely winner, although they may wait until rates of growth pick up in the Western world. He is still young. The Thomson-Reuters picks seem too young and for Alesina the political timing probably is not right for the same reasons as Barro.
Here is a blog post on the betting odds for the literature prize; NgŠ©gÄ© wa Thiong'o is rising on the list. Not long ago the absolute favorite was Tomas Tranströmer, who perhaps should start his own line of toys or have his name put on a school of engineering.
Assorted links
1. How much is a day of George Akerlof's time worth? How much is Joe Stiglitz's suit worth? Is Akerlof a Coasian?
2. Farmers vs. foragers, is the battle over? (speculative)
3. Race and the foreclosure crisis, more here.