Month: November 2010
Assorted links
1. The most boring day of the century.
2. What the Irish are reading.
3. The economics of Amazon Prime.
4. Meeting European men (video).
5. Via Chris F. Masse, www.academia.edu.
China subsidy of the day
China’s property bubble has a new casualty: the corpses of Shanghai. In spite of stacking bodies seven or eight deep in graves, the squeeze on space in the city of 20m people has prompted the government to support burials at sea, part of a “green funeral” movement that is challenging deep traditions of filial piety.
Sea burials are rising 10 per cent a year after an increase in municipal subsidies to Rmb400 ($60) per funeral, according to an official with Feisi Sea Burial Company in Shanghai’s “funeral street”, Xibaoxing Road.
Here is more.
Per unit pricing edition
It take a while to notice Ruben's scars. Though they're hardly subtle, they don't catch your eye as readily as his strong, smooth features or the big-ass smile that's totally disarming despite his size: six foot three, 225 pounds. Neck like a waist. Friendly as you please. When I pointed to each of the healed-up gashes on his fists and asked what they were from, he replied, "Teeth. Teeth. These are all from teeth." He charges $1,000 for every one that he knocks out of a person's head. It's the same price for each bone he breaks in a face, a practice that's cost him a couple of knuckles.
He enforces "justice" in a Native American community; the full story is here (interesting throughout) and I thank Mitch Mitchell for the pointer.
Revaluing Hayek
There has been plenty of talk about how Hayek's predictions in Road to Serfdom have been falsified. Nonetheless, recent events in Ireland and the EU raise the value of some other Hayek books:
1. Monetary Nationalism and International Stability (free at the link!). This book isn't as clear as it might have been, and he is too skeptical about currency depreciation. One point is that bad international currency arrangements can distort relative prices and also drive boom-bust cycles. Partially globalized currency arrangements will prove counterproductive and possible unworkable. While I am more sympathetic to "monetary nationalism" than is Hayek, this 1937 short book reveals him to be a thinker with concerns very much in synch with the world of 2010. There is a reason for that, and it's not an entirely reassuring one.
2. Individualism and Economic Order, Counterrevolution of Science, and in particular Hayek's critique of rationalist constructivism, of which the EU and the euro are prime current examples. If you wish to know why the euro is failing, or why not every Obama policy will work out, this is the #1 place to go. The euro project was even driven by the French and resisted by the English, exactly as Hayek's approach would have predicted.
I still think that The Sensory Order is Hayek's most overrated book, though many call it his most underrated book, which in my view is where the overratedness comes from. I know the recent talk about "neural nets" and the like and you can claim Hayek was a precursor of the idea of the mind as an organ of classification. I simply think this is an empirical book more or less written in the 1920s about a field which has changed dramatically in the last ten to fifteen years, never mind in the last ninety years. And for an empirical book…it's not even empirical! A few weeks ago I asked Bruce Caldwell whether the book had a single true sentence…
Time inconsistent markets in everything
Diplomatic ties with El Salvador remain solid amid reports that the Central American nation was considering switching its recognition to Beijing, the Ministry of Foreign Affairs (MOFA, Taiwan) said yesterday.
Salvadorean President Mauricio Funes was quoted by The Associated Press (AP) as saying that his government was “exploring” the possibility of establishing diplomatic relations with the People’s Republic of China (PRC).
Funes said the decision would depend on “what is best for the country,” business-wise, adding, “we’re exploring new markets,” AP reported.
Funes’ comments came as a trade fair opened in San Salvador that included representatives from more than 50 Chinese firms, AP said.
And this:
The loss of El Salvador would be extremely embarrassing to President Ma Ying-jeou (馬英ä¹), who has said that the apparent truce between Taiwan and China concerning attempts to gain diplomatic allies at the other’s expense was a major accomplishment of his administration.
Foreign affairs analyst Alexander Huang (黃介æ£) of Tamkang University said in Taipei that it was very unlikely that China would risk undermining Ma’s position by poaching El Salvador, particularly ahead of the special municipality elections on Saturday.
More here, and here. The first and context-setting installment of the story was here.
A new problem in social choice theory
S.L., a loyal MR reader, asks:
Suppose aliens came and demanded one or more chess games, one move per
day, with humanity (maybe these aliens):
where humanity would be destroyed on losing, and a draw would lead to a replay. One move per day. What would be the best way for humanity to run our decision process? How would we actually run our process? ("The committee must include at least one grandmaster from each UN country…")
I opt for Kramnik, Anand, Kasparov, and Carlsen, using Rybka and two or three back-up machines, such as Junior (which seems to find different moves). The Grandmasters vote, with 3-1 or better required for a move, but all four deferring at least initially to the single human agenda-setter and Rybka as tie-breaker. They would be playing a version of advanced chess. The goal is to have some different perspectives, but not so many that it becomes unmanageable. Most of the time the computer would get its way, but the four would consider those instances where Rybka suggests misleading moves.
Or is there a better decision-making process? Could a decision-making process like this be used for other dilemmas?
David Brooks on Tolstoy
Tolstoy devoted himself to activism and spiritual improvement – and paid the mental price. After all, most historical leaders write pallid memoirs not because they are hiding the truth but because they’ve been engaged in an activity that makes it impossible for them to see it clearly. Activism is admirable, necessary and self-undermining – the more passionate, the more self-blinding.
Here is more. By the way, here is the Pope on padded pipes.
Assorted links
2. More from Henry on the political economy of Ireland, here and here.
3. Krugman should write a book on this (though it is simply wrong — and unnecessary — to claim that articles showing the potency of monetary policy were ever pushed out of the major journals. Somehow he cannot write correctly when the topic of real business cycle theory comes up.)
4. This is wrong (Obama, not Matt), an example of a dysfunctional management style (commenting on everything), and not an admission I would make as a relatively new but now gridlocked President, all in one.
5. America's two literary cultures?
der andere Schuh
NYTimes: Despite Germany’s economic growth, its banks are among Europe’s weakest. Moody’s, the ratings agency, ranks the average health of German banks below those of most other Western European countries as well as nations like Brazil, Jordan and Mexico.
In its annual financial stability report, the Bundesbank warned that German banks had increased their dependence on short-term financing, a profitable but risky practice…
Enlightened blogspam, part II
Kat sends me this link on CAPTCHA arbitrage.
Stephen Smith points our attention to some examples of quite good economics in blogspam. My example was here, and that comment attracted a lot of attention from subsequent spammers (some of that has since been erased). For instance Tiffany1837Jewelry (web site sadly now defunct) reported:
When Google crawls this page, it basically ignores the URL and any links in the the comment text. In order for the spammer to benefit, they have to persuade human readers to follow the link, so contributing meaningful content is perhaps the only way.
Not too shabby.
Savefuel noted:
a spam formed from the fusion of human and machine intelligence….maybe this is part of the evolution of spam. Not sure I am proud to part of that parentage.
The young Stephen Smith, by the way, is the author of the excellent, intelligent, and well-reasoned weblog marketurbanism.com. He tells me that he is looking for a job in journalism and/or think tank-related activities.
The war of politics and finance
There is talk of upping the euro bailout fund:
European Central Bank council member Axel Weber said governments can increase the size of the European Union-led bailout fund if necessary to restore confidence in the euro.
“Seven hundred and fifty billion should be enough to assure the markets,” Weber said at the German embassy in Paris late yesterday. “If not, it will have to be increased.”
The Spanish approach the same issues with another tone:
Spain has warned financial traders betting against its debt that they will lose money, in a defiant challenge to the markets which are driving Madrid’s cost of borrowing sharply higher.
José Luis RodrÃguez Zapatero, Spanish prime minister, on Friday ruled out any rescue package for the country even as the premiums demanded by investors to hold Spanish sovereign debt over that of Germany’s rose to euro-era highs.
You can find more detail at ElPais.com; most significantly it is a much bigger headline in the FT than in the Spanish paper.
In a nutshell, we’re watching the most pitched, highest-stakes, most determined battle between politics and finance which has been staged. I am expecting finance to win. It’s not just about PIGS and the future of the eurozone, it’s settling a very general question about the relative power of politics and finance. Either way, it is an event of momentous importance.
Department of Secondary Consequences
It is true that Irish mortgages are “recourse” – that is, you can’t just turn in the keys and walk away from a property as you can in many parts of the United States. On the other hand, Irish residents can leave the country – moving to Britain or the United States is a well-established tradition for many families. And how can an Irish lender enforce debts when someone has emigrated?
That's from Simon Johnson, interesting throughout.
Large-scale battles erupt in Rio
If American TV is too boring, you can watch here on Globo; some moments are quite dramatic.
For the pointer I thank Eduardo Pegurier.
Concerns about Spain
More federalistic than you might think, indeed more like the EU than you might think:
Another concern is that the central government’s cost-cutting zeal might not be matched by regional and local authorities, which accounted for 57 percent of public spending last year.
The full story is here.
Assorted links
1. The modified Out of Africa model, with an intermission.
2. New York Times Notable Book List.
3. Irish banks passed July 2010 stress tests; foreclosed homes in Spain to triple next year.
4. "Defending the undefendable": the Mafia.
5. Claims by Taleb.
6. How do interest rates (not) regulate lending in Austro-China.
7. Ireland's abandoned horses.
The Browser had especially good links today.