Month: January 2012

Markets in everything (and proud ye shall be)

Interesting throughout, but let’s cut to the chase:

Advertising our altar bread is a positive thing for Cavanagh Company. We take a lot of pride in putting our family name on a product that will eventually become the body and blood of Jesus.

You can file that under “Very good paragraphs.”  How about this one?:

Had production remained the exclusive bailiwick of monastic communities, it is likely that the findings of Vatican II would have prompted some minor changes in Communion-wafer production. Among the guidelines issued by the Church was a directive to “make the bread look more breadlike,” head of production Dan Cavanagh told me. It is a change whose significance may yet be lost on the millions of churchgoers who continue to think of hosts as a form of Styrofoam. Nevertheless, Cavanagh’s more “breadlike” whole-wheat wafer caught on. It became the industry standard, and forced the Poor Clare nuns to follow suit.

Some of it is better than satire:

…the company maintains a fully-automated production process where employees are forbidden from laying their hands on the wafers. “I feel pretty strongly that the host should not be touched,” Dan said. His view makes it easier to comply with legal guidelines for industrial food production, but it also gives the company something to market. “Our wafers are untouched by human hands,” boasts one promotional brochure. “That gets my dander up,” a Sister in Clyde told the Chicago Tribune: The Sisters’ touch gives what other businesses would call “added value.”

And what if you have coelic disease?  Every paragraph in this story is fascinating.  I thank Paul Hsieh for the pointer.

Arab Spring and the stability of monarchy

Victor Menaldo has a new paper:

This paper helps explain the variation in political turmoil observed in the MENA during the Arab Spring. The region’s monarchies have been largely spared of violence while the “republics” have not. A theory about how a monarchy’s political culture solves a ruler’s credible commitment problem explains why this has been the case. Using a panel dataset of the MENA countries (1950-2006), I show that monarchs are less likely than non-monarchs to experience political instability, a result that holds across several measures. They are also more likely to respect the rule of law and property rights, and grow their economies. Through the use of an instrumental variable that proxies for a legacy of tribalism, the time that has elapsed since the Neolithic Revolution weighted by Land Quality, I show that this result runs from monarchy to political stability. The results are also robust to alternative political explanations and country fixed effects.

Here are his other papers.

Maybe those papers are correct?

As a small test, Zingales looked at the 150 most-downloaded papers that had been done on executive pay. He found that papers supporting high pay for top executives were 55 percent more likely to be published in prestigious economic journals. They were also much more likely to be cited in other papers.

Here is more.  This is considered evidence for the “capture” of economists.  Here is another article on the new code of ethics.  It will hurt researchers who work in finance.  From Olaf Storbeck, here is more, an interview with Gerald Epstein.  Here is coverage from David Warsh.  Here is coverage from The Chronicle.  How many people will basically just stop publishing in the top journals?

Is there an easy way out of the eurozone?

Robert J. Barro writes:

Italy could have a new lira at 1.0 to the euro. If all the euro-zone countries followed this course, the vanishing of the euro currency in 2014 would come to resemble the disappearance of the 11 separate European moneys in 2001.

In the meantime, doesn’t every euro — a few sticky grannies aside — leave the Italian banking system?  Presumably the new lira is not pegged at 1-to-1 forever.  Switching out of lira/euros in Italian banks, before the inevitable depreciation, would offer a short-run rate of return of at least thirty percent, maybe more.  Or if such a peg holds, and can be enforced, and is seen as credible, isn’t it just like the euro?  (Do they deflate their economy by thirty percent or more to validate the exchange rate?)  The difference being, of course, that with a separately marked currency it would be easier for Italy to leave the eurozone, which is one reason why a 1-to-1 peg would not be seen as eternally credible.  I don’t see how this transition works; am I missing some segment of Barro’s argument?

By the way, the switch to the euro was easier for a few reasons.  People believed the national currencies would become stronger (certainly for Italy), not weaker, and there were few doubts about the solvency of various banking systems.  That said, the switch to the euro did give rise to unsustainable capital flows into the weaker countries and that is not working out well either.

The Destruction of Pompeii

The Art Newspaper: A Unesco report has identified serious problems with the World Heritage Site, including structural damage to buildings, vandalism and a lack of qualified staff….The collapse of a column at Pompeii on 22 December raised further alarm. The column was in a pergola in the courtyard of the House of Loreio Tiburtino, whose adjacent rooms have very fine frescoes.

…The Pompeii crisis came to a head with the collapse of the Schola Armaturarum, known as the House of the Gladiators, in November 2010, along with three further collapses later in the month. This was after extremely heavy rain.

The problems at Pompeii are all too familiar in Italy:

Staffing at Pompeii remains a fundamental problem. The structure is “very rigid”, with “jobs ­being secure until retirement”, making it “virtually impossible to recruit new staff”. Although around 470 people are employed at Pompeii, it is “very short” of professional staff, there are “very few” maintenance workers and only 23 guards are on site at any one time.

The guards do not wear uniforms and fail to display their badges. The experts observed them “grouped together in threes or fours”, which meant there was a limited presence on the enormous site. Since 1987, the number of guards has been reduced by a quarter while visitor numbers have increased considerably.

And how about this for an Italian microcosm:

Management changes have resulted in further problems. In July 2008, the Italian government declared Pompeii to be in a “state of emergency”, putting it under special administration until July 2010 (two commissioners served during this period: Renato Profili and then Marcello Fiori). There have been four successive superintendents since September 2009: Mariarosaria Salvatore, Giuseppe Proietti, Jeannette Papadopoulos and Teresa Elena Cinquantaquattro.

Markets in everything the culture that is Scot

In 1907, Ernest Shackleton and crew set out on the ship Nimrod to visit Antarctica and, they hoped, the South Pole. The good news was, the entire party survived the trip, thanks in part to the Rare Old Highland Whisky they brought to the frozen continent. But the expedition was forced to evacuate in 1909, some 100 miles short of the Pole they sought. And, as winter ice encroached and the men hurried home, they left behind three cases of the choice whisky.

In 2007, just about a century later, the whisky was found, intact, at the expedition’s hut at Cape Royds in Antarctica.

The stuff was made by Mackinlay & Co at the Glen Mhor distillery in 1896 or thereabouts. Mackinlay hasn’t been an active brand for a while now, but the current owner of the Mackinlay name, Whyte and Mackay, obtained a few of the precious bottles and set out to do what any right-thinking Scot would do: first, taste the whisky; and second, attempt to analyze and re-create it. The result, a product called Mackinlay’s Rare Old Highland Malt Whisky, is, as of this writing, buyable in stores.

The article is here, and the pointer is from Jodi Ettenberg, who serves up her favorite longreads of 2011 here.

Jeff Madrick, unwittingly, makes the case for fiscal austerity

There is a far better solution. And it would not require the failure of the euro. The eurozone and perhaps the entire EU must act like a unified country, ready to recognize that it must take responsibility for the drastic social effects of rapid spending cuts… A financially unified Eurozone must then issue bonds to raise the money to pay back debts but also to provide a social net for the people of nations that are cutting back their spending on social programs to meet their remaining financial commitments…This can be accompanied by demands for reforms in nations like Greece where taxes must now be collected more efficiently and unusually excessive public spending stopped.

There is more here, and of course similar advice will work for Belgium too.

Markets in everything

Squatting at a makeshift shrine with joss sticks burning beside her, Granny Leung starts bashing a manlike paper cut-out with a pair of sandals.

“I beat you little people, I’m sending you away!” chants the 76-year-old woman, one of the last practitioners in Hong Kong of the ancient Chinese ritual of “da siu yan”, or “beating the petty little people”.

Granny Leung performs her mysterious incantations in the bustling shopping district of Causeway Bay. And business is booming.

For as little as HK$50 ($6), Leung claims she can curse her customers’ enemies and reverse their bad luck by burning paper offerings and hitting paper figures with shoes.

Believers say the ritual can help to drive away evil spirits in general, or a specific nemesis such as a hated neighbour, a business competitor or a love rival.

…Each bout takes about 30 minutes, depending on how tough the villains are and how many times Leung needs to beat them until they are gone.

Another stage of the ritual involves feeding pig lard to paper tigers, which represent malignant beings, so they are full and will not bother people.

Here is more and for the pointer I thank Daniel Lippman.

Assorted links

1. Tyler Brûlé visits New Zealand and Australia.

2. Wilkinson on Rogoff and growth, although Will is closer than he thinks to the view he calls nutty, in fact he seems to hold it!

3. Does the narcissism of a CEO matter?, and the paper is here.

4. Rachel Strohm on development education at SAIS.

5. Economists who are gathering information on what other economists think, and why they are doing it.

Will Karl Smith have called “The Turn?”

Karl Smith assembles some green shoots.  If indeed there is a continuing (modest) recovery, what are we to make of it?  I see a few options:

1. Government responded to the downturn with vigorous policy actions and brought recovery.

2. We were in a liquidity trap, but enough depreciation of capital and consumer durables is pulling us out of it.  As marginal rates of return rise with depreciation, spending will go up.

3. The neo-Keynesian model applies, and enough nominally sticky decisions have been reset to undo most of the initial negative AD shock.

4. The economy had a strong positive technology shock.

5. A mix of default, savings, and refinancing have led to some balance sheet repair.

6. We had a strong positive AD shock through higher global demand for our exports.

7. Banks recapitalized through playing the spread and now they are lending again to marginal borrowers, thereby spurring economic activity.

8. Recalculation has proceeded apace.

Conditional on our economy being in the recovery stage (e.g., no pending eurozone implosion), I would assign most of the weight to #2 and #3 and #5, noting that #2 can operate in a liquidity trap but does not require it.  I see a small bit of #4 and #7 and #8 apiece, and I don’t regard #1 and #6 as playing roles in the story, mostly because they are not true.

The New Old Keynesian bloggers tend to downplay the recent bits of good news.  If a real recovery were shown to be taking root, would they invoke a large dose of #2?

Haiti watch

Gambling everything, thousands of Haitians have made their way across the Americas to reach small towns in the Brazilian Amazon over the past year in a desperate search for work, including a surge of hundreds arriving in recent days amid fears that Brazil’s government could slow the influx before it overwhelms the authorities here…Companies like Fibratec, a swimming pool manufacturer in southern Santa Catarina State, have even sent managers all the way here to hire dozens of Haitians.

The excellent article is here.  Via Carl-Henri Prophete, here is another story, of an Irish billionaire working to build up Haiti:

Digicel, on the other hand, is the country’s largest employer and taxpayer. The privately held company has invested $600 million in Haiti, making it by far the country’s largest foreign investor ever, and it has democratized communications with its strategy of selling low-price cellphones and services to the masses.

Mr. O’Brien has profited extensively from Haiti, which is Digicel’s largest market and accounts for roughly one-third of its 11.1 million subscribers.

…Digicel, for instance, has put up street signs in parts of Port-au-Prince, serving as reminders of the company’s role in public life as much as guides for navigating the city.

Most mornings, people crowd around the reception desk of Digicel’s office building, not to complain about the firm’s services but to see the mayor and other city officials whose offices are on the sixth floor since the earthquake.

The company provides the space rent-free, Mayor Jean-Yves Jason said, and gave the city computers and furniture. “We have plans to build a new city hall in downtown Port-au-Prince, but we are so comfortable here it is easy to delay,” Mr. Jason joked.

The article gives some other stories of growing foreign investment in Haiti.  Here is Twitter and the Haitian earthquake response.  Also via Carl-Henri, here is a Le Monde article on the Haitian elite, and here is their excellent slide show.

I have been reading and enjoying Laurent Dubois’s new Haiti: The Aftershocks of History, one of the very best books on the history of the country.  In 1914-15, about eighty percent of the government’s revenue went to debt service.  It is one of those rare books where you can know a lot about the topic, and yet still learn something interesting on virtually every page.