Month: June 2011

My favorite things Hungary

The Austro-Hungarian empire does not count per se, so I will use the Hungarian language for demarcation.  As you might expect, there is lots:

1. Author: Peter Nadas, A Book of Memories, is a classic novel of ideas which is under-read in the United States.  Nadas has a new book coming out this fall.  Imre Kertesz doesn’t do much for me.

2. Movies: Bela Tarr, Satantango.  It’s over seven hours long, but don’t be put off.  It has some of the best shots of grazing cows and angry peasants committed to reel, and I wanted it to be longer.  It’s mesmerizing in a way that makes it one of the film classics of the new century.  I find Werckmeister Harmonies too corny but it has some fine scenes.  Less traditionally thought of as Hungarian is the great Emeric Pressburger, who collaborated with Michael Powell on numerous fine films.  Alexander Korda did The Thief of Baghdad.

3. Actor, Peter Lorre is the obvious choice, plus Bela Lugosi made the best Frankenstein ever, forget about Dracula.

4. Conductor: You have George Szell, Antal Dorati, Georg Solti, and Eugene Ormandy.  Szell was so often perfect, Dorati cut some of the best sounding records of all time, Solti’s whiplash style was either offputting or splendid, and Ormandy was deeper than he was given credit for.   Ivan Fischer is a more recent contender, for instance his Mahler’s 4th reflects a scrupulous concern with rehearsals.  Péter Eötvös is an excellent conductor of contemporary music.

5. Pianist: Gyorgy Cziffra and Ervin Nyiregyhazi are two memorable eccentrics.  Solti and Szell were underrated as pianists and Zoltan Kocsis is very good.  Don’t forget Franz Liszt, even though no recording has survived.

6. Scientist: There is Szilard, Teller, and von Neumann and many many others but can they come close to this top tier?  The options for Hungarian mathematicians defy belief.  Hungarian inventors were critical to the “great non-stagnation” of 1870-1940, including for the all-important electrical transformer; few if any of those names have survived much into general Western history which I suppose says something.

7. Artist: Victor Vasarely is the obvious choice, but I don’t like him so much.  This area seems oddly weak.  Am I forgetting something?  Mihaly Munkacsy anyone?

8. Economist: Janos Kornai comes to mind, and Melchior Palyi remains underrated.  I believe Milton Friedman’s parents were from Hungary.

The bottom line: You can’t gush enough about music and math and physics and science and invention.  The achievements from a small country are staggering and unprecedented.  Yet literature and painting are relatively weak.  Hungarian composers will get a post of their own, but there is a strong line-up of Liszt, Bartok, and Ligeti.  What else am I forgetting?  I can’t think of major films set in Hungary and I don’t count the Hollywoodesque The Shop Around the Corner even though nominally it is Budapest.

Assorted links

1. Against amenities.

2. Interview with Ricardo Caballero.

3. There is no great stagnation.  Here is even more, and better, proof.

4. Are children an inferior good?  And Caplan’s response.  Is it possible that education is a form of real income, and so using education and real income variables — unadjusted — picks up real income better than stand-alone “real income” does?

5. Higher status for computer science.

6. Iceland is crowdsourcing its new constitution.

Bryan Caplan vs. Amy Chua debate

Here I am, sitting on a bench in downtown Budapest, reading the Guardian, when on p.20 I see a published debate between Bryan Caplan and Amy Chua.  If I have one wish, it is that Chua would put her anecdotal points in the form of a statistical argument.  Which assumption behind the twin adoption studies is she rejecting?  Or where are those studies engaged in too much aggregation?  I suspect she will never tell us.  Coming back to the hotel room, I now find Bryan’s commentary on the debate.  The two have very different senses of humor, and I bet she wouldn’t think that Bryan’s jokes are funny either.

Czech markets in everything

Prague Zoo has started selling what look like ice cream containers but are actually full of elephant dung.

It’s the latest fad among Czech gardeners who are buying out the manure pails to use as fertilizer. The brain behind the project is zoo director Miroslav Bobek, whose surname literally means dung.

Zoo officials estimate they sell around 200 of the 1-kilogram (2.2-pound) containers of dung per weekend, at 70 koruna ($3.90) each. But sales have been so brisk they decided to expand to weekdays.

AP video showed handlers scooping up the manure Thursday and placing it in the white containers to the bemusement of visitors.

The link is here and for the pointer I thank Heath Gordon.

Words of wisdom

Referring to the forthcoming ban on “plain-vanilla 100-watt incandescent bulbs” (California is already there), Virginia Postrel writes:

If they’re really interested in environmental quality, policy makers shouldn’t care how households get to that total. They should just raise the price of electricity, through taxes or higher rates, to discourage using it.

Instead, the law raises the price of light bulbs, but not the price of using them. In fact, its supporters loudly proclaim that the new bulbs will cost less to use. If true, the savings could encourage people to keep the lights on longer.

“It is too soon to tell” — the real story China fact of the day

The impact of the French Revolution? “Too early to say.”

Thus did Zhou Enlai – in responding to questions in the early 1970s about the popular revolt in France almost two centuries earlier – buttress China’s reputation as a far-thinking, patient civilisation.

The former premier’s answer has become a frequently deployed cliché, used as evidence of the sage Chinese ability to think long-term – in contrast to impatient westerners.

The trouble is that Zhou was not referring to the 1789 storming of the Bastille in a discussion with Richard Nixon during the late US president’s pioneering China visit. Zhou’s answer related to events only three years earlier – the 1968 students’ riots in Paris, according to Nixon’s interpreter at the time.

How so?

At a seminar in Washington to mark the publication of Henry Kissinger’s book, On China, Chas Freeman, a retired foreign service officer, sought to correct the long-standing error.

“I distinctly remember the exchange. There was a mis­understanding that was too delicious to invite correction,” said Mr Freeman.

He said Zhou had been confused when asked about the French Revolution and the Paris Commune. “But these were exactly the kinds of terms used by the students to describe what they were up to in 1968 and that is how Zhou understood them.”

But will this revelation diminish the use of this story?  Dare I say it is too soon to tell?  By the way:

The oft-quoted Chinese curse, “May you live in interesting times”, does not exist in China itself, scholars say.

Assorted Links

1. Richard Florida adds interesting data on skills to the great male stagnation debate.

2. Freedom in the 50 States; New Hampshire is first. Appropriate.

3. Excellent pictures of the Bolivian salt flats.

4. Attorney-General Eric Holder wants a new season of The Wire. David Simon names his conditions.

5. The Corporatist Threat to the Arab Spring, good op-ed by Edmund Phelps. Recall, The Pharaoh and the Commanding Heights.

6. Soviet Dolphin Paratroopers.

7. Rinderpest is no more. Only the second time in history—smallpox was the first—that an infectious disease has been eradicated from the planet.

India’s Voluntary City

Fascinating piece in the NYTimes about a new city in India, a new city of 1.5 million people and more or less no city government.

Gurgaon was widely regarded as an economic wasteland. In 1979, the state of Haryana created Gurgaon by dividing a longstanding political district on the outskirts of New Delhi. One half would revolve around the city of Faridabad, which had an active municipal government, direct rail access to the capital, fertile farmland and a strong industrial base. The other half, Gurgaon, had rocky soil, no local government, no railway link and almost no industrial base.

As an economic competition, it seemed an unfair fight. And it has been: Gurgaon has won, easily. Faridabad has struggled to catch India’s modernization wave, while Gurgaon’s disadvantages turned out to be advantages, none more important, initially, than the absence of a districtwide government, which meant less red tape capable of choking development.

Gurgaon  has no publicly provided “functioning citywide sewer or drainage system; reliable electricity or water; public sidewalks, adequate parking, decent roads or any citywide system of public transportation.” Yet Gurgaon is a magnet for “India’s best-educated, English-speaking young professionals,” it has 26 shopping malls, seven golf courses, apartment towers, a sports stadium, five-star hotels and “a futuristic commercial hub called Cyber City [that] houses many of the world’s most respected corporations.” According to one survey, Gurgaon is India’s best city to work and live. So how does Gurgaon thrive? It thrives because in the absence of government the private sector has stepped in to provide transportation, utilities, security and more:

From computerized control rooms, Genpact [a major corporation, AT] employees manage 350 private drivers, who travel roughly 60,000 miles every day transporting 10,000 employees. Employees book daily online reservations and receive e-mail or text message “tickets” for their assigned car. In the parking lot, a large L.E.D. screen is posted with rolling lists of cars and their assigned passengers.

And the cars are only the beginning. Faced with regular power failures, Genpact has backup diesel generators capable of producing enough electricity to run the complex for five days (or enough electricity for about 2,000 Indian homes). It has a sewage treatment plant and a post office, which uses only private couriers, since the local postal service is understaffed and unreliable. It has a medical clinic, with a private ambulance, and more than 200 private security guards and five vehicles patrolling the region. It has A.T.M.’s, a cellphone kiosk, a cafeteria and a gym.

“It is a fully finished small city,” said Naveen Puri, a Genpact administrator.

…Meanwhile, with Gurgaon’s understaffed police force outmatched by such a rapidly growing population, some law-and-order responsibilities have been delegated to the private sector. Nearly 12,000 private security guards work in Gurgaon, and many are pressed into directing traffic on major streets.

Not everything works well, of course. Gurgaon is describe as a city of “private islands.” Private oases would be a better term. Within the private oases life is good but in between lies a desolate government desert. Not only are services such as roads and utilities poor, the private oases don’t internalize all the externalities so there are problems with common resources such as the water table. It would also be more efficient to have centralized sewage and electricity.

Much of the article is written as a “cautionary tale,” the private sector can’t do everything and the absence of government has made the city dysfunctional.  I see the situation somewhat differently. The problem is that the original developer didn’t go far enough. The original developer, DLF, made a deal to build commercial buildings and apartments but:

… a state agency, the Haryana Urban Development Authority, or HUDA, was supposed to build the infrastructure binding together the city.

And that is where the problems arose. HUDA and other state agencies could not keep up with the pace of construction. The absence of a local government had helped Gurgaon become a leader of India’s growth boom. But that absence had also created a dysfunctional city.

Had the original developer been responsible for both the oases and the desert it could have built the power plants, the roads and other infrastructure and made locating in Gurgaon even more desirable than it is now. It is true that a city requires public goods which local governments often do not provide. Charter cities try to get around this problem by importing wholesale a new, higher-quality government. An alternative is to avoid government all together and privatize enough to make the entire city what is in effect a hotel on a grand scale.

But what to do now?  The governments involved are inefficient and often corrupt. We can hope that they will get better in response to the well-educated populace and the incoming corporations but even today, the solution is not simply to hope for better government but to expand on what is working well. The firms that operate the private oases are “small cities,” the solution is to make these cities larger.

Connect enough office parks, factories, and apartments, for example, and it will make sense for a private firm to build an efficient electric plant rather than have smaller firms use inefficient and polluting diesel as is the case now. Similarly, Will Rogers once said the solution to congestion was to have business build the roads and government build the cars. In fact, only the former is necessary. Privatize the roads and they will be quickly built and well maintained (yes, they will probably be more expensive than necessary due to some monopoly power but at this point in time that is a second-order problem).

As the private oases reach out and connect with one another most of the kinks will be ironed out. The city is only thirty years old and undergoing a growth spurt, so some problems are to be expected. The big picture, however, is that a modern city has been built from the ground up based almost entirely on private development, it is attracting residents and jobs and leading the country in economic growth. A remarkable achievement.

Addendum: For more historical and contemporary examples on the private provision of public goods see The Voluntary City.

Addendum 2: Matt Yglesias gets it and then makes some interesting comments and critiques.

T-bills as a substitute for financial regulation

Let’s say that somehow — miraculously — the United States achieved a balanced budget, and furthermore assume that this did not interfere with cyclical goals.  There would be many fewer T-bills, especially since the current structure of the debt is quite short-term.

Fully safe collateral would be hard to come by.

I see the paucity of safe assets, and safe collateral, as a major financial problem looking forward.  Our economy desires to extend more short-term credit than we can back by ready safe collateral or that we can cover by FDIC-like insurance.  Yet credit moves forward, in part because of bailout incentives but also because failed managers simply aren’t, and cannot be, punished very hard.  We return to the 19th century problem of bank runs, this time on the shadow banking system, and we realize to our horror that 1934-19?? was the exceptional and now-disappeared “safe period.”  We shudder to think of the next crisis, which is one reason why so many people are skittish about the Greek situation.

T-bills limit one agency problem, but create another.  If there were T-bills “coming out our noses,” finance would be much safer, although of course we would have to face the moral hazard problem of what the government does with so much borrowed money.  When the quantity of T-bills goes down, financial regulation becomes a tougher act to pull off.

When the Fed pays interest on reserves, cash becomes like T-bills.  Interbank lending falls, because there is less need to dispense of “idle” reserves.  I agree with Scott Sumner that interest on reserves is contractionary and that has had negative macroeconomic consequences.  Still, I worry that if we eliminate interest on reserves, the regulation of interbank credit becomes more problematic.  Much more overnight lending would go on.  In essence fear of inadequate bank regulation pushed the Fed to contract in this manner.

If you want to get rid of all or nearly T-bills, you are very optimistic about bank regulation.  I am not very optimistic about bank regulation.

The new preface from TGS

It is added to the print version and is available on-line from Reuters, to coincide with the publication of the physical book, which is now in stores.  Excerpt:

The original publication of The Great Stagnation was in eBook form only, and I meant for that to reflect an argument of the book itself: The contemporary world has plenty of innovations, but most of them do not benefit the average household. After all, the average household does not own an eReader. It’s not even clear whether the average household buys and reads books. So I viewed the exclusive electronic publication, somewhat impishly, as an act of self-reference to the underlying problem itself. It was therefore a bit amusing when some critics suggested that the new medium of the eBook itself refuted the book’s stagnation theory—quite the contrary.

Plato visits Sicily and Siracusa

With these thoughts in my mind I came to Italy and Sicily on my first visit. My first impressions on arrival were those of strong disapproval-disapproval of the kind of life which was there called the life of happiness, stuffed full as it was with the banquets of the Italian Greeks and Syracusans, who ate to repletion twice every day, and were never without a partner for the night; and disapproval of the habits which this manner of life produces. For with these habits formed early in life, no man under heaven could possibly attain to wisdom-human nature is not capable of such an extraordinary combination. Temperance also is out of the question for such a man; and the same applies to virtue generally. No city could remain in a state of tranquillity under any laws whatsoever, when men think it right to squander all their property in extravagant, and consider it a duty to be idle in everything else except eating and drinking and the laborious prosecution of debauchery. It follows necessarily that the constitutions of such cities must be constantly changing, tyrannies, oligarchies and democracies succeeding one another, while those who hold the power cannot so much as endure the name of any form of government which maintains justice and equality of rights.

The link is here, hat tip goes to Yana.