Month: May 2012
Sentences to ponder (West Virginia fact of the day)
Those results come two weeks to the day after Keith Judd, a convicted felon incarcerated in Texas, won 41 percent of the vote against Obama in the West Virginia primary.
There is more here.
Driverless car update
Getting lawmakers in the seat of a self-driving Prius has become Google’s M.O., according to Matthew Newton, editor of DriverlessCarHQ.com, a site dedicated to covering autonomous cars. “Google has been giving free rides to policymakers in California, Nevada and Florida,” Newton told Wired from his home base in Melbourne, Australia. “So it makes sense that they would do it in D.C.”
Eric Cantor, for one, was given a ride.
Could Japan use some more private equity?
Noah Smith writes:
In Japan, there is no big private equity industry, because it is very difficult to do a leveraged buyout of a company. The Japanese government allows companies to defend themselves from takeovers in ways that are illegal in America. Also, Japanese companies often hold each other’s shares, a practice known as “cross-shareholding”, which tends to prevent hostile takeovers. Cross-shareholding creates huge financial risks; however, many of the Japanese companies that engage in cross-shareholding are big banks that are backed by the government (much as ours are here in the U.S., but more explicitly), so this risk is assumed by the Japanese taxpayer. For a comprehensive primer on Japanese corporate governance, see here.
Upshot: In Japan, private-equity firms cannot buy companies and force them to restructure.
Fact 2: Japan has a productivity problem. We think of Japan as being super-productive, and in fact some industries (and most export-oriented factories) are. But overall, Japanese productivity kind of stinks. Since at least the 90s, Japan’s Total Factor Productivity has lagged far behind that of the U.S. Nor is this due (as Ed Presott has tried to claim) to a slowdown in technology; it appears to be a function of how resources are allocated within and between Japanese companies.
New issue of Econ Journal Watch
It is here, along with the table of contents. Here are two segments, reproduced from the front page of the journal:
Willie Mays, Mickey Mantle, and the Guy Next Door: Race, Ethnicity, and Baseball Card Prices
David Findlay and John Santos replicate an analysis of the market for baseball Hall-of-Famer rookie cards produced since 1947, when Jackie Robinson made his major-league debut. The earlier study did not find evidence of significant racial discrimination by card buyers. Having detected a pattern of data errors in that study, Findlay and Santos correct the errors, extend the analysis, and include Hispanics. Their more powerful analysis also finds no evidence of significant racial or ethnic discrimination.
- The Findlay and Santos article
- Robert Muñoz—one of the authors of the original study—acknowledges the corrections, applauds the extensions, and explores dimensions of the discrimination question that are not well illuminated by the findings of the investigation.
Characteristics of the Members of Twelve Economic Associations:
Using survey responses from 299 U.S. economics professors, the authors report on membership in the professional economic associations with names including the following terms: American, Eastern, Southern, Western, Econometric, Evolutionary Economics, Private Enterprise Education, Feminist Economics, Public Choice, Socio-Economics, Austrian Economics, and Radical Political Economics. Association membership is related to voting, policy views, and favorite economists.
How to find good food in American bars
Jacob Grier has an excellent post on this topic (which I do not cover), here is just one part of a longer discussion:
Reading An Economist Gets Lunch inspired me to think explicitly about how to find good food in American bars. Here are a few general suggestions based on my own experience:
Avoid places with lots of vodka and light rum. These can be bought cheaply and are easy to dress up in crowd-pleasing ways with liqueurs, fruit, and herbs. If these are what the customers are demanding than the food may be equally designed for broad appeal.
In contrast, look for ingredients that signal a knowledgeable staff and consumers. Italian amari, herbal liqueurs, rhum agricole, quality mezcal, batavia arrack, and – lucky for me – genever are good indicators. If I see a bar stocked with these I’ll want to see the food menu.
Go into the city. The density of consumers with expendable income, knowledge of food and drinks, and access to transportation that doesn’t require them to drive is in urban areas.
Laws matter. In some states regulations require that places selling spirits also serve food. Where these laws don’t exist, many of the best cocktail destinations won’t bother much or at all with food, so one might plan to eat and drink separately. (These laws are bad news if you just want to drink, since your drink prices may be covering the cost of an under-utilized cook and kitchen or bars may simply close earlier to save on labor. Virginia’s law creates particularly perverse incentives.)
Assorted links
1. Credit guarantee risk in China.
2. The world’s largest swimming pool.
3. ELA and now “de-euroisation” are the words which should be attracting your attention these days.
4. How will self-driving cars reshape our cities?
5. Truly disgusting markets in everything, calling Jonathan Haidt, you are needed in Tokyo. I still wonder if it is some kind of joke.
Shout it from the rooftops, Matt!
Matt Yglesias shouts it from the rooftops on occupational licensing:
Licensing requirements…are by far the best statistical predictor of business-friendliness, for those subjected to them. And unlike taxes or environmental rules, these have spread like kudzu, with little scrutiny and often scant policy rationale.
A recent comprehensive survey of state licensing practices by the Institute for Justice reveals little consistency or coherent purpose behind most licensing. Nevada, Louisiana, Florida, and the District of Columbia, for example, all require aspiring interior designers to undergo 2,190 hours of training and apprenticeship and pass an exam before practicing. In the other 47 states, meanwhile, there’s no legal training requirement. My friends and co-workers living in D.C.’s Virginia and Maryland suburbs appear to get on fine with unlicensed interior decorators, and all across America, amateurs have decorated their own homes without imperiling public safety.
Almost all states—though not Alabama or the anarchic United Kingdom—require barbers to be licensed, but the specific requirements seem to vary arbitrarily. New York barbers need 884 days of education and apprenticeship. Across the river in New Jersey, it’s 280. But getting one’s hair cut in New Jersey (to say nothing of England) is hardly a life-threatening gamble.
…a wide range of these rules could be done away with entirely at basically no risk. Regulation is needed when it would make sense for a firm to deliberately engage in malfeasance. Dumping harmful toxins into the air is highly profitable unless it’s prohibited. Financiers can draw huge bonuses by taking on too much risk, only to wreck the economy later. In other occupations, though, shoddy work brings its own punishments. An interior decorator who can’t get recommendations from satisfied customers probably won’t remain an interior decorator for long.
In these cases, licensing rules raise the prices the rest of us pay, make it difficult for successful entrepreneurs to expand their businesses, and are often a major barrier to employment for the most vulnerable populations.
We have covered these issues before on MR but sometimes you just have to KEEP SHOUTING.
I, Robot?
In experiments at six public universities, students assigned randomly to statistics courses that relied heavily on “machine-guided learning” software — with reduced face time with instructors — did just as well, in less time, as their counterparts in traditional, instructor-centric versions of the courses. This largely held true regardless of the race, gender, age, enrollment status and family background of the students.
Here is more. The report was led by William Bowen, an economist who is famous for, among other things, having described education as subject to an inexorable “cost disease” for lack of labor-saving innovation.
The money pump (sentences to ponder)
Let’s say the run on Greek banks continues or accelerates. Then this sentence will become more relevant:
Importantly, Greek banks ONLY run out of Euros if the ECB can justify a shut down in funding to the BoG ELA facility or the Greek banks directly.
In other words, the ECB has to pull the plug at some point or simply finance Greece ad infinitum. Read the whole thing, ignore the hyperbole toward the end, and study up on brinksmanship.
Here is a useful discussion of ELA [Emergency Liquidity Assistance], excerpt:
ELA is a subject on which the ECB is deeply reluctant to provide information – even on where or when it is provided.
“You don’t say when you are in an emergency situation, because then you make the situation worse. So I really don’t see the usefulness of being more transparent,” Luc Coene, Belgium’s central bank governor, explained in a Financial Times interview this month.
And here is yet further detail, excerpt:
Some of Europe’s central bankers are nevertheless no longer willing to allow themselves to be endlessly tapped for cash. Belgian Luc Coene has already openly warned that even the ELA payments must “absolutely” be stopped if the Greek banks are actually hopelessly bankrupt, and not merely illiquid.
If you read through these sources, it will help answer the question — which I receive frequently — “why can’t Greece default and yet not leave the eurozone?”
Markets in Everything: Torturer
At left is an ad that ran in the Guardian newspaper. “The government of a Middle Eastern state is recruiting a senior torturer to work in a well-equipped prison. Our ideal candidate would be prepared to inflict extreme pain and suffering… Candidates will be expected to inspire a small but enthusiastic team.”
No, I don’t think the ad is real. Alas, I am sure the job is real.
Hat tip: Boing Boing.
*Birdseye: The Adventures of a Curious Man*
That is the new and oddly underreported book by Mark Kurlansky, about Clarence Birdseye and the early history of frozen food. I found it consistently good and enjoyable, here is one excerpt:
Birdseye asked himself many questions about food and survival in the subarctic. Why, he wondered, did people in Labrador eat lean food in the summer but a tremendous amount of fat in the winter? The ultimate winter survival dish was something he called bruise, which is sometimes known as brewis, a combination of dried and salted food mixed with a tremendous amount of fat. Usually it was salt cod, hardtack, flour, and water, baked hard and mixed with cubed salt pork, and then boiled and served like a hash with huge globs of melted pork fat. Bowls of melted fat were often served on the table to spoon onto food. Birdseye laughed when heard a host say, “Have some more grease on your bruise,” but everyone then took a few spoonfuls. It was a Sunday morning breakfast favorite. He remembered that people also ate a great deal of grease in the Southwest, where it was hot in the summer. They would open a can of corn and eat it with pork fat.
Here is one picture of fish and brewis. I found this book especially interesting on the early history of European-settled Labrador.
Capital flight in the Eurozone
In a fascinating research note*, Matt King of Citigroup calculates the outflows of capital from various euro zone nations, in particular Italy and Spain. He concludes that Italy saw 160 billion euros exit in 2011, while Spain lost 100 billion euros, in a mixture of bank withdrawals and sales of government and corporate bonds. He thinks a further 200 billion euros could follow.
…Foreign bank deposits have fallen 64% in Greece, 55% in Ireland and 37% in Portugal; in Italy, the fall is 34% and Spain 13%. Foreign government bond holdings have dropped 56% in Greece, 18% in Ireland and 25% in Portugal; in Italy the fall is 12% and Spain 18%. So if Italy and Spain were to move to the average for the other three, a further 200 billion euros would flow out.
A final thought. This is another example of the nationalisation of markets, in which official flows are steadily replacing private sector capital. It is a trend that seems unstoppable.
Here is a bit more.
The Father of Microcredit
You’ve heard how microcredit was born. In a nation long shackled by British rule and wracked by famine, a brilliant man was seized with a desire to strike a blow against the poverty all about him. Defying common sense and the skepticism of his colleagues, he began lending tiny sums out of his own pocket to poor people, which they were to invest in tiny businesses. He demanded no collateral, only the vouchsafe of the borrowers’ peers. The borrowers rewarded his faith with punctual repayment. In time, his experiment spawned a national movement that delivered millions of loans to poor men and women and broke the power of money lenders.
The hero of this story is…Jonathan Swift, author of Gulliver’s Travels.
Swift developed the main ideas of microcredit–small sums, co-signers on the loan who knew the recipient, loans to women–in the 1730s. Although the system did not grow large in his lifetime, by the 1840s Irish microcredit institutions served a fifth of the population of Ireland.
The quote and information are from David Roodman’s excellent book Due Diligence: An Impertinent Inquiry into Microfinance. Roodman is a remarkable scholar, equally at ease collecting information in the slums of Bangladesh as writing complex computer code, and Due Diligence is a very good book not just on microcredit but on development more generally.
(Loyal readers may recall that Tyler also noted Swift’s connection to microcredit in a post from 2006.)
Assorted links
1. Marc Gunther’s blog on food, sustainability, economics, and related matters. It is analytical, not just the usual rhetoric on these topics.
2. Does Hayek’s welfare state lead to serfdom? And how to unfold a rhino (short video).
3. Summary of the No-sterity debate.
4. Have we been underestimating the extent of the growth of the middle class in developing nations?
It would be premature to use the words “free fall”
Nonetheless those are the words which come to mind, to me, in my safe Fairfax home, far from China and European bank jogs:
Chinese consumers of thermal coal and iron ore are asking traders to defer cargos and – in some cases – defaulting on their contracts, in the clearest sign yet of the impact of the country’s economic slowdown on the global raw materials markets.
The deferrals and defaults have only emerged in the last few days, traders said, and have contributed to a drop in iron ore and coal prices.
“We have some clients in China asking us this week to defer volumes,” said a senior executive with a global commodities trading house, who warned that consumers were cautious. “China is hand to mouth at the moment.”
A senior executive at another large trading house also confirmed there had been defaults and deferrals in both thermal coal and iron ore.
Here is more, and here is a bit more detail.