Month: October 2011

The shoe drops (cut and run)

by  Tyler Cowen

Greece’s prime minister unexpectedly announced a referendum to approve a second EU bail-out deal for his austerity-hit country, less than a week after it was agreed with international creditors at a European Union summit.

More here, and here, but that’s all you really need to know.  The so-called eurozone deal didn’t last a week, not that there was ever a deal in the first place.

p.s. they’re not going to vote yes on the referendum!

Update on the Austro-Chinese business cycle

by  Tyler Cowen in

Someone is sitting on a mound of $3.2 trillion in foreign exchange reserves, and yet this is possible:

With the same force that powered the most ambitious rail programme in history, China has slammed the brakes on its investment in high-speed trains.

The sudden halt has led to system-wide whiplash, leaving workers without pay, battalions of heavy machinery sitting idle and setting back plans for bullet trains that were meant to carry the nation’s future.

…Spending had already been slowing after a surge from stimulus money in 2009 but the decline since the Wenzhou crash in July has been precipitous. In year-to-date terms, investment in railways and transport had been up 7 per cent in the first half of 2011. By the end of September it was down 19 per cent, according to official data.

There is little chance of a return to the construction frenzy of the past five years but the government appears to be slowly setting the high-speed rail plans back in motion. Restarting the investment would provide an immediate boost to the weakening economy. Longer term, it is also expected to encourage a big structural shift, opening up China’s interior to make domestic growth more self-sustaining.

But this is less encouraging:

Passenger numbers have fallen sharply since the Wenzhou crash. About 151 million trips were made on Chinese trains in September, almost 30 million fewer than in July, according to ministry data.

Model this (a continuing series)

by  Tyler Cowen in

From a profile of Donald Keene:

“He [Mishima] died, as you know, at the age of 45, leaving at least 45 stacked volumes of novels, plays, criticism, poetry.” Mishima slit his belly after leading a failed, and farcical, coup to restore the emperor’s power but Keene thinks he committed suicide because he was passed over for the Nobel Prize. During the 1964 Tokyo Olympics, Mishima had written Keene a letter with the line, “I envy the athletes who know if they are first, second or third.” Keene says: “That was all he said but I knew exactly what he meant.” The irony was that Kawabata, who did win the Nobel Prize, also committed suicide because of the pressure of living up to his new reputation.

The Snuggle Theory of Horror

by  Alex Tabarrok in

From a survey on the psychology of scary stories:

With regard to age, there’s a suggestion that enjoyment rises through childhood, peaks in adolescence and then gradually fades with age. Related to this is the ‘snuggle theory’ – the idea that viewing horror films may be a rite of passage for young people, providing them with an opportunity to fulfil their traditional gender roles. A paper from the late 1980s by Dolf Zillmann, Norbert Mundorf and others found that male undergrads paired with a female partner (unbeknown to them, a research assistant), enjoyed a 14-minute clip from Friday the 13th Part III almost twice as much if she showed distress during the film. Female undergrads, by contrast, said they enjoyed the film more if their male companion appeared calm and unmoved. Moreover, men who were initially considered unattractive were later judged more appealing if they displayed courage during the film viewing. ‘Scary movies and monsters are just the ticket for girls to scream and hold on to a date for dear life and for the date (male or female) to be there to reassure, protect, defend and, if need be, destroy the monster,’ says Fischoff. ‘Both are playing gender roles prescribed by a culture.’

Happy Halloween.

*In Time* (spoilers about the macroeconomic model)

by  Tyler Cowen in

It is rare to see a movie with such a perfectly realized economic model, albeit one pulled from such exotic territory.  Imagine a Keynes chapter 17 world where the “own rate of interest” on time — which can be borrowed and lent — rules the roost.  Many people are at or near subsistence in their time endowments, and there are economies of scale in supply, so short rates on these loans are high.  Those high rates choke off other investments and a version of TGS ensues.  Medium-term rates, however, are negative in real terms.  Carry around too much time and it will be stolen and you die.  The economy has a strongly inverted yield curve and that discourages traditional financial intermediation and investment.  Wealth continues to fall, which exacerbates security problems, in turning lowering the negative medium-term real rates even further.  A downward spiral ensues.  The only way to make money is to buy marginal security (for time endowments) and spend less on that security than you earn on short loans of time.  More and more resources go into security, again exacerbating the inverted yield curve.  The economics of producing security are also the fundamental source of market power in the economy.  Market segmentation reigns and the marginal rates of substitution on time loans are not equated across different social classes.

The hero has read Kalecki (1943) and he operates under the assumption that a redistribution will prove isomorphic to an “Operation Twist” and restore full employment equilibrium, and positive economic growth, by fixing the inverted yield curve.  But is that policy commitment credible?  Does he have the support of the heroine?  You have to watch the movie to find out…

In Time also raises questions about why we find time inequality more objectionable than money inequality.  You also can interpret it as a model of a world where health care really works.

This is by no means a flawless film but conceptually it was stronger than I had been expecting.  Kudos again to Andrew Niccol, Gattaca is a worthwhile movie too.

Here is Robin Hanson’s review, he liked it less than I did.

Animal inventory cycle problems

by  Tyler Cowen in

Michael Lynch writes to me:

The prices tell the story. A baby chimpanzee can go for as much as $50,000 (£31,195) or $60,000 (£37434). An adult chimpanzee has no market value. Abandoned adult animals end up in sanctuaries. But in one of the paradoxes of the exotics world, some of the sanctuaries that rescue animals also breed animals to defray their expenses – thereby, arguably, making the problem of surplus adults even worse.
The related story is here.

*Engineering the Financial Crisis*

by  Tyler Cowen in

This is an excellent conceptual book on the financial crisis, full of deep research and intellectual honesty.  The authors, Jeffrey Friedman and Wladimir Kraus, are not in the usual loops of the economist elite, so I hope it is not ignored.  They place central importance on the Basel capital regulations and mark-to-market accounting, complemented by a credit channel, in their narrative.  Arnold Kling has much more on the book.  You can buy the book here; anyone interested in the financial crisis should read it.  The authors have some of the best arguments against the “moral hazard” interpretations of the crisis, preferring instead knowledge and calculation arguments.  My main worry is about how much the Basel regulations mattered, given that many banks held more mortgage-backed securities than Basel regulations required.

Here is a blog post on their most controversial claim in the book.

Factor endowment theories of trade and investment

by  Tyler Cowen in

The northern Scandinavian landscape is dotted with fjords, lingonberries and, if you believe some locals, elves. But another sight is increasingly common on the Arctic horizon: data centers.

Drawn by the promise of lower electricity costs, a growing number of tech companies are harnessing the region’s abundant cold air to cool their servers, cutting expensive air-conditioning out of the equation.

Facebook, the latest tech company to take the polar plunge, announced this week that it will build a data center just south of the Arctic Circle in Lulea, Sweden, where the average low in January is 3 degrees Fahrenheit.

…There are “overwhelming financial advantages” to building in the far north, according to Rakesh Kumar, an analyst with Gartner. Utilizing free outside air can result in “tens of millions, if not hundreds of millions [of dollars], of savings per year” for each site, Kumar said.

The full story is here.  For the pointer I thank Steve Silberman.

The update from Pompeii

by  Tyler Cowen in

Almost every word of  this report reflects some of Italy’s broader problems:

A labour union on Thursday reported that a chunk of the wall from Domus of Diomede building on Via Consolare collapsed a day after European Commissioner Johannes Hahn announced that the European Union would give up to 105 million euros to protect and restore the fragile site UNESCO World Heritage site that was buried by volcanic ash around two thousand years ago.

The funds are part of one billion euros earmarked for cultural heritage projects, with particular emphasis on southern Italy, according to Italian minister for regional affairs Raffaele Fitto.

An similar collapse last week prompted Italian culture minister Giancarlo Galan to promise that he would make Pompeii his “the utmost priorty.”

He made almost identical remarks in March shortly after the state of Pompeii led to his predecessor’s resignation.

Only thirty percent of the buildings at the site are considered to be in good condition.

Addendum: Here is a report which doubts whether in fact another wall has collapsed.

Paths out of The Great Stagnation

by  Tyler Cowen

Thankfully, Thingiverse user Tom Lombardi invented a solution for this age old problem. Enter the Lucky Charms Sifter.

According to Lombardi, the humble-looking 3D printed cup removes over 90 percent of all the cereal, leaving only the marshmallowy goodness. All the user has to do is pour Lucky Charms into the cup and give it a good shake. The precision-printed holes are just large enough for the whole-grain hamster food to fall through, while still retaining the slightly larger marshmallows.

Here is more, hat tip goes to ModeledBehavior.  And via Rob Nelson, here is 3-D printing for pet hermit crab shells.

That all said, 3-D printing is unlikely to end up being a transformative technology; transportation costs for what it can produce are already fairly low.  The printers may in some longer run be cheaper than UPS, truck, and commercial rail, but that’s a moderate savings only, albeit a nice one.

The most likely paths out of TGS — by far — are artificial intelligence and natural gas supply (with some chance of E-Cat).  Smart machines will be most successful in their least romantic, furthest from hard AI, most mundane forms, starting with Siri and Watson.  Natural gas and other energy source developments will likely make North America the cheap energy power for much of the next fifty years; this may improve the quality of our foreign policy as a collateral benefit.

The revolution which Roger Kerr hath wrought

by  Tyler Cowen in

Robots are being used to milk a herd of cows in Canterbury and the farmer who owns them says they are much healthier.

Farmer and businessman Ryan Carr of Mayfield has four robots on his farm near Ashburton which allow the cows to decide when they want to be milked.

Mr Carr told Country Life that the robotic system also means cows can eat and move at their own pace.

He says that’s doing wonders for their health and they have a longer life expectancy.

Farm production has also improved and is 4% ahead of this time last year.

Mr Carr said each unit costs about $250,000.

Here is more, hat tip goes to Chris F. Masse.  You may recall that New Zealand’s market-oriented economic revolution led to a deregulation of agriculture and the elimination of most farm subsidies, and as a result the sector became more innovative.

Chris also sends along this E-Cat update, it is not something which I am able to evaluate but in expected value terms worthy of more than zero reporting, via David Price here is more from Wired.