Month: November 2011

*The Lives of the Novelists*

by  Tyler Cowen in

Here is a mini-review from today’s FT, from their best books of the year discussion:

Lives of the Novelists, by John Sutherland, Profile, RRP£30

The fruit of decades of reading and research, Sutherland’s quirky compendium offers selective mini-biographies of 294 English novelists including Jeffrey Archer but not, oddly, Lewis Carroll or PG Wodehouse. A witty and enjoyably wide-ranging work.

The book has a remarkable density of information, as virtually every sentence tries to teach you something.  I have never read a book quite like it, definitely recommended.

The Coase theorem is back in the saddle

by  Tyler Cowen in

On nearly every count, the deal favors the owners, who had sought all along to overhaul the system. The players made significant concessions, including a reduction of up to $300 million year in salaries, $3 billion over the life of the agreement.

It seems there will be an NBA season.  The details of the deal have not yet been released, and on minor issues are still being negotiated, but the exact revenue split will depend on revenue projections.  Henry Abbott discusses winners and losers.

The culture that is Germany, kein eurobond für den Papst

by  Tyler Cowen in

A GERMAN citizen has filed a complaint against Pope Benedict XVI for not using a seat belt in the Popemobile during his September visit to his homeland.

Lawyer Johannes Christian Sundermann has filed papers in Dortmund on behalf of his unnamed client, charging the Pope with “repeated breaches” of Germany’s seat belt law.

“Herr Joseph Ratzinger, born 16 April 1927 in Marktl/Altötting” travelled on September 24th and 25th “for the duration of more than an hour” without a seat belt, the lawyer states in documents.

Mr Sundermann and his client say they can prove the repeated misdemeanour during his visit to Freiburg – using videos from YouTube.

Here is more.

Claims without evidence

by  Tyler Cowen

…perhaps the biggest sin of the lot was effectively to render all credit default swaps (a form of insurance against default) on sovereign debt essentially worthless, or void, by making the Greek default “voluntary”. This has made it impossible to hedge against eurozone sovereign debt purchases, and thereby destroyed the market. Worse, it’s made investors believe that the euro cannot be trusted, that it’ll repeatedly find ways of reneging on contract. That’s the point of no return. This is no longer a serious currency.

I am by no means sure this is correct, but I thought I would pass the argument along.  The link is here, the pointer to the broader article is from dearieme, a loyal MR reader and commentator.

Is the end near?

by  Tyler Cowen in

I am seeing reports of 7.7 on the Italian ten-year bond, over eight percent on the two-year bond, 6.5 percent on the six-month note, and so on.  Here is one account.

Maybe these markets simply will shut down soon.  There is so much talk about what the Germans should do, but I don’t see the viable options.  With Germany’s own credit status now in doubt, eighty percent debt to gdp ratio, massive welfare state, and unfavorable demographics, are they supposed to endorse — going to endorse — ten or fifteen percent price inflation for a few years’ time, all with no guarantee of reforms in the economically weaker countries?  And is that inflation then followed by a subsequent deflation?  Or does it continue forever?  And would Germany have to move to a regime of wage flexibility for the professions too?  How politically feasible is that?  I don’t see how the Germans benefit from going down this road, even if you think, as I do, that the alternatives are quite dire.

Honduras is doing much worse than Portugal, and is a much smaller country.  I don’t see the United States even considering significant aid to Honduras.  If you’re going to play the “who is in a formal political agreement?” card, note that the current EU agreement explicitly specifies that, fiscally speaking, countries are pretty much on their own.

The motto “no monetary union without a fiscal union” isn’t wrong, but more to the point is “no fiscal union without a common electorate.”

I don’t see anybody who has put a successful reform option on the table.  I do see a lot of articles and Op-Eds trying to create a moral equivalence between Germany and the periphery, followed by proposals which ignore the question of what is a sustainable political equilibrium in Germany.  Germany can’t just plop down the money, or turn on the monetary spigot, and get back to where it was.

The economics of Black Friday

by  Tyler Cowen in

Robert H. Frank writes:

In recent years, large retail chains have been competing to be the first to open their doors on Black Friday. The race is driven by the theory that stores with the earliest start time capture the most buyers and make the most sales. For many years, stores opened at a reasonable hour. Then, some started opening at 5 a.m., prompting complaints from employees about having to go to sleep early on Thanksgiving and miss out on time with their families. But retailers ignored those complaints, because their earlier start time proved so successful in luring customers away from rival outlets.

This is portrayed as a zero-sum or negative-sum game, but I view the matter, at least in efficiency terms, more optimistically.  The alternative to waiting in line and fighting the crush is to go shopping some other day, hardly a terrible fate.  More analytically speaking, the average return in other endeavors limits how bad these rent-seeking games can get, otherwise just switch and stay home and read your blogs, as some of you perhaps are doing right now.

In fact it seems that early December has in general the cheapest prices of the year, not Black Friday.

Dare I suggest that some people like waiting in those lines with their thermos cups and stale bagels.  You could try to argue they are “forced to do so,” to get the bargains, but in a reasonably competitive world  each outlet will (roughly) try to maximize the consumer surplus from visiting the store, including the experience of waiting in line.

If your store does a crazy sale at 5 a.m., and mine does a crazy sale at 9 a.m., the somewhat saner people still can go to my store, if they prefer to, without losing any bargains.  Maybe the truly early opening hour signals bargains, and customers would assume that a 9 a.m. opening means no bargains, but of course there are plenty of other ways to signal low prices, including through advertisements and the overall reputation of the store’s Black Friday over the years.  I don’t see any line in front of Bon Chon Chicken, now at Fairfax Circle by the way on Old Lee Highway.

You might try a behavioral story that consumers are tricked by the prospect of low prices, yet shelves rapidly empty, but it’s hard to see that working year after year, or even in one year, if pissed off customers won’t buy anything else.  More likely, the mix of low price and queue is a form of price discrimination, which as we know is generally welfare improving.

Although my efficiency prognosis is more optimistic than Frank’s, my underlying view of human nature — or perhaps economic growth — may be worse.  Is that really what people want to be out there doing?  I saw the Best Buy line last night and those people looked pretty normal.  That’s scarier than postulating a bunch of negative-sum games.

Best non-fiction books of 2011

by  Tyler Cowen in

I’ve already covered best economics books, best fiction, and the very best books.  General non-fiction remains missing.  It’s been a very good year, and these are the other non-fiction books which I really liked, a stronger list than the year before:

Anatol Lieven, Pakistan: A Hard Country.

Daniel Treisman, The Return: Russia’s Journey from Gorbachev to Medvedev.

Frank Brady,  Bobby Fischer’s Remarkable Rise and Fall — from America’s Brightest Prodigy to the Edge of Madness.

Javier Cercas, The Anatomy of a Moment: Thirty-Five Minutes in History and Imagination.  In the waning of Franco’s time, how did Spain turn away from military rule and toward democracy?  Can a mediocre man make a difference in history simply by retreating at the right moment?  Can a political life boil down to a single response, under gunfire at that?  Half of this book is brilliant writing, the other half is brilliant writing combined with obscure, hard-to-follow 1970s Spanish politics (does Adrian Bulli understand the life of John Connally?  I don’t think so).  Cercas is a novelist, intellect, and historian all rolled into one, and he is sadly underrated in the United States.  There’s nothing quite like this book.  On top of everything else, if you can wade through the thicket, it is an excellent public choice account of autocracy.

Hamid Dabashi, Shi’ism: Religion of Protest.

Jonathan Steinberg, Bismarck: A Life.  This vivid biography brings its subject to life through the extensive use of correspondence and quotation.  The reader gets an excellent feeling of how Bismarck’s government actually worked, his intensity and also his mediocrities, and also the importance of Bismarck in building up Germany as a European power.  The story is as gripping as a good novel.  Sadly, almost no attention is paid to the origins of the welfare state.  Still, this has received rave reviews and rightly so.

Daniel Richter, Before the Revolution: America’s Ancient Pasts.

Jacques Pepin, The Origin of Aids.

Charles C. Mann, 1493: Uncovering the New World Columbus Created.

Mara Hvistendahl, Unnatural Selection: Choosing Boys over Girls, and the Consequences of a World Full of Men.

David Gilmour, The Pursuit of Italy: A History of a Land, its Peoples, and their Regions.

Joshua Foer, Moonwalking with Einstein: The Art and Science of Remembering Everything.  Funny thing is, I read this on Kindle, didn’t have a physical copy to put in “my pile,” had no visual cue as to the continuing existence of the book, and thus I forget to cover it on MR.  I enjoyed it very much.

John Gimlette, Wild Coast: Travels on South America’s Untamed Edge.  This book covers Guyana, Suriname, and French Guiana.  A revelation, I loved it.  Could Gimlette be my favorite current travel writer?

Robert F. Moss, Barbecue: The History of an American Institution.

Anna Reid, Leningrad: The Epic Siege of World War II.

John Sutherland, Lives of the Novelists, A History of Fiction in 294 Lives.  I’ll blog about this remarkable book soon.

What is striking is how many “big books” make this list, and that is exactly what you would expect in an age of Twitter, namely that a lot of shorter books are being outcompeted — aesthetically though not always economically — by on-line reading.

Here is the best “best books” list I’ve seen so far, apart from my lists of course.

Thanksgiving Lessons

by  Alex Tabarrok in

Here from 2004 is my post on the lessons of thanksgiving.

It’s one of the ironies of American history that when the Pilgrims first arrived at Plymouth rock they promptly set about creating a communist society.  Of course, they were soon starving to death.

Fortunately, “after much debate of things,” Governor William Bradford ended corn collectivism, decreeing that each family should keep the corn that it produced.  In one of the most insightful statements of political economy ever penned, Bradford described the results of the new and old systems.

[Ending corn collectivism] had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.

The experience that was had in this common course and condition, tried sundry years and that amongst godly and sober men, may well evince the vanity of that conceit of Plato’s and other ancients applauded by some of later times; that the taking away of property and bringing in community into a commonwealth would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort. For the young men, that were most able and fit for labour and service, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense. The strong, or man of parts, had no more in division of victuals and clothes than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labours and victuals, clothes, etc., with the meaner and younger sort, thought it some indignity and disrespect unto them. And for men’s wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it. Upon the point all being to have alike, and all to do alike, they thought themselves in the like condition, and one as good as another; and so, if it did not cut off those relations that God hath set amongst men, yet it did at least much diminish and take off the mutual respects that should be preserved amongst them. And would have been worse if they had been men of another condition. Let none object this is men’s corruption, and nothing to the course itself. I answer, seeing all men have this corruption in them, God in His wisdom saw another course fitter for them.

Among Bradford’s many insights it’s amazing that he saw so clearly how collectivism failed not only as an economic system but that even among godly men “it did at least much diminish and take off the mutual respects that should be preserved amongst them.”  And it shocks me to my core when he writes that to make the collectivist system work would have required “great tyranny and oppression.”  Can you imagine how much pain the twentieth century could have avoided if Bradford’s insights been more widely recognized?

Addendum: Scott Sumner comments.

Gratitude

by  Alex Tabarrok in

PsycNet: The effect of a grateful outlook on psychological and physical well-being was examined. In Studies 1 and 2, participants were randomly assigned to 1 of 3 experimental conditions (hassles, gratitude listing, and either neutral life events or social comparison); they then kept weekly (Study 1) or daily (Study 2) records of their moods, coping behaviors, health behaviors, physical symptoms, and overall life appraisals. In a 3rd study, persons with neuromuscular disease were randomly assigned to either the gratitude condition or to a control condition. The gratitude-outlook groups exhibited heightened well-being across several, though not all, of the outcome measures across the 3 studies, relative to the comparison groups. The effect on positive affect appeared to be the most robust finding. Results suggest that a conscious focus on blessings may have emotional and interpersonal benefits.

I’m not saying we should do this!

by  Tyler Cowen in

Yet neither is it crazy:

China’s Ministry of Education announced this week plans to phase out majors producing unemployable graduates, according to state-run media Xinhua. The government will soon start evaluating college majors by their employment rates, downsizing or cutting those studies in which less than 60% of graduates fail for two consecutive years to find work.

The move is meant to solve a problem that has surfaced as the number of China’s university educated have jumped to 8,930 people per every 100,000 in 2010, up nearly 150% from 2000, according to China’s 2010 Census. The surge of college grads, while an accomplishment for the country, has contributed to an overflow of workers whose skillsets don’t match with the needs of the export-led, manufacturing-based economy.

One of the targeted sectors might be biology, whose majors are not currently finding good jobs.  But is that the right decision for the future of China?  Here is yet another problem with the plan:

An op-ed in the Beijing News criticizes the approach for a different reason, saying that it will only spur false reporting of employment rates from schools that are looking for greater autonomy to produce more diversified, higher qualified students.

By the way:

What if the U.S. government were to adopt China’s approach? According to the most recent U.S. census data, among the first majors to go: psychology, U.S. history and military technologies.

For the pointer I thank Samuel Oehler.

How quickly do the bond market vigilantes appear?

by  Tyler Cowen in

Ahem:

Investors seem to have lost their taste for Germany’s once much sought-after government bonds. At an auction on Wednesday of the country’s 10-year bonds, one-third went unsold according to the German Finance Agency, which manages the nation’s debts. The federal government had initially intended to sell bond issues worth some €6 billion (around $8 billion), but managed to garner just €3.89 billion.

The Germans are being told they shouldn’t try to auction off so many bonds so quickly, further comment here.  Yet don’t the PIIGS have to roll over $100 billion plus by the end of this calendar year?

And who a week ago — or even two days ago –was predicting this for a German bond auction?

I hear the market whispering in the ear of the Netherlands “get out of the eurozone, before it’s too late!”  At this point all bets are off as to which country will be the first to bail on the arrangement.  It could be virtually anyone but France.