Month: June 2012
Steven Pearlstein on the United Kingdom
Indeed, there is a suspicion that at least some of the downturn here is a statistical mirage caused by the necessary adjustment to wages and prices following the bursting of that financial bubble. If the financial sector never really added as much genuine value to the economy as was indicated from all those inflated salaries and bonuses, then at least some of the decline in GDP since then may merely reflect a healthy repricing of labor, financial assets and goods across the economy rather than a worrisome loss of output. Low inflation, slowly rising employment, little or no growth in measured productivity, household incomes and GDP — these are all consistent with that story of statistical mirage.
Here is much more. And there is this:
Other than Labor Party politicians, nobody seriously doubts the wisdom of cutting back on the number of public employees or the size of their pensions, or capping welfare payments to any household at the median income, or bringing more efficiency to public education or the public health service through greater competition. The idea that these will be done once the economy returns to normal growth is a political fantasy.
From JohnLeemk
It’s incredibly frustrating. The political and policy world falls into two camps:
Those who believe no stimulus is necessary, everything is supply-side.
Those who believe stimulus is necessary but only fiscal stimulus can or should supply it.It’s like people completely forgot the existence of Milton Friedman, and decided to revert to the stupidest possible version of New Keynesianism, where interest rates are the only lever of monetary policy and the printing press is something that only functions when rates are above zero.
I feel like to both the centre left and the right, Milton Friedman is too heretical now — too right-wing for the left obviously and too left-wing for the right. Consequently, everything about monetarism has been stripped out of the public consciousness and we are left with vulgar Keynesianism and vulgar Austrianism.
We truly live in a Dark Age of economics.
That was a comment from Scott Sumner’s blog, passed along to me by David Levey.
Why has Foreign Aid Been Untied?
The more cynical among us have sometimes thought that rather than recipient welfare the purpose of “foreign” aid is to provide a cover for domestic aid. Foreign aid pork, i.e. using foreign aid to subsidize special interests in the donor country has certainly been common. Historically, most foreign aid has been tied; that is, the recipient was required to spend the money on the donor country’s exports. Relative to cash, tying raises prices and reduces choice and recipient welfare–the deadweight loss of Christmas problem.
US food aid is a classic example. US food aid tends to peak after a glut. It’s cheaper for us to give food away when we have lots and not coincidentally giving food away after a glut helps to keep prices higher, benefiting US farmers. It’s precisely when food is plenty, however, that prices are low and aid is less needed. When food is scarce, prices are high and aid is more needed but then we would rather sell our food than give it away. In addition, we typically require food aid to be transported on US ships which raises costs. Finally, the food we give away is not always best suited to the recipient’s preferences or needs.
For a public choice theorist the fact that foreign aid benefits domestic special interests is not at all surprising. What is surprising is that tied aid is way down. Great Britain banned most tied aid in 2002 and indeed tied aid is down across all of the major OECD donor countries. Food aid and technical assistance are still tied but these aid categories are down and untied grants and loans are up. In 1984-1986, for example, about 60% of aid was tied and today only 10-25% of aid is tied (depending on source).
Why has aid become untied? Could this be a case of improved public policy due to lobbying from the aid industry? It is interesting to note that although tied aid is down in the US, the US continues to tie a lot of aid, considerably more than the Europeans. One explanation may be that the decentralized US political system gives more weight to local domestic interests so tied aid continues to sell here despite opposition from most aid groups.
Special interests are also not the only explanation for tied aid. Tied aid can reduce corruption in the recipient country. If donors have become less worried about corruption, perhaps because governance has improved in the developing world, this could offer a public interest explain for an increase in untied aid.
Overall, I find it puzzling that foreign aid has become untied as the major beneficiaries appear to be poor foreigners with little political power.
*The Ocean of Life*
The author is Callum Roberts and the subtitle is The Fate of Man and the Sea. It is an excellent look at the environmental problems associated with oceans. Here is one bit:
European seas are far less productive than they once were. The fact that the UK bottom trawl fleet lands only half the fish today that it did when records began in 1889, despite a massive increase in fishing power, says all we need to know about how we have squandered natural capital.
…In 1889, there were ten to fifteen times as many large bottom-living fish like cod, haddock, and halibut in the seas around the UK as there are today.
The book is interesting throughout and very readable, without losing its fundamental seriousness.
The globalization of the food truck?
Among young Parisians, there is currently no greater praise for cuisine than “très Brooklyn,” a term that signifies a particularly cool combination of informality, creativity and quality.
And this:
An artisanal taco truck has come to Paris. The Cantine California started parking here in April, the latest in a recent American culinary invasion that includes chefs at top restaurants; trendy menu items like cheesecake, bagels and bloody Marys; and notions like chalking the names of farmers on the walls of restaurants.
The full story is here. And if you were wondering, and I hope you were:
Ms. Frederick waded through the thick red tape of four separate Paris bureaucracies: the business licensing commissariat; the mairie de Paris, or the local municipal office; the prefecture of police; and the authority that oversees the markets. Unlike some food trucks in the United States, the ones here are not allowed to troll for parking spots, or roam from neighborhood to neighborhood. They are assigned to certain markets and days.
Doller Otaku, or the culture that is you-know-where
It is hard to pull out just one paragraph from this gem of an article, but here goes:
I like to think myself as a kigurumist [from kigurumi, costume] because I don’t only dress up as two-dimensional beautiful girls. I also dress up as fairies, furry animals and monsters too. I think that dollers dress up as dolls as an extension of cosplay and I don’t want to be categorized as a doller or a cosplayer because I don’t put on an act. I don’t change my character or personality to match my kigurumi as others do.
And:
What’s important is I can become something on the borderline between human beings and dolls. I like the idea of existing somewhere between the 2-D and 3-D worlds.
Why wear a mask when you’re so pretty?
I must admit, I think I’m the cutest girl in the world. But I want to keep on pursuing beauty.
The article is here, with photos, via a loyal MR reader.
Spoons and the social discount rate
Its hard to imagine spoons will exist in their current form in 30 years. What does this tell us about the social discount rate?
That is from the ModeledBehavior hive mind.
Let’s assume an intertemporal equilibrium. The rate of return on buying consumer durables ought to equal (risk-adjusted) the rate of return on capital. Spoon improvement means a lower rate of return on holding spoons, which means a lower return on durables, which in turn means a lower rate of return on capital investment. For a given set of interest rates, that implies a higher rate of social discount.
That said, I find it easy to imagine spoons will exist in their current form in 30 years. What if I were wrong? I would be overestimating the MU of money in future periods and thus saving too much. I ought to buy more non-spoon items, renting my current spoons, knowing that spoon improvements will glide me into a cushy retirement.
Assorted links
1. Review of the new Chris Hayes book.
2. Garett Jones on speed bankruptcy (pdf).
3. The politics of Obama vs. Romney; politics isn’t about policy!
4. NYT presents 32 innovations that will change our world; are you impressed by their list? I like this one:
A team of Dutch and Italian researchers has found that the way you move your phone to your ear while answering a call is as distinct as a fingerprint. You take it up at a speed and angle that’s almost impossible for others to replicate. Which makes it a more reliable password than anything you’d come up with yourself. (The most common iPhone password is “1234.”) Down the line, simple movements, like the way you shift in your chair, might also replace passwords on your computer. It could also be the master key to the seven million passwords you set up all over the Internet but keep forgetting.
5. Are economics Ph.D programs teaching the right material?
6. More Paul Krugman on science fiction.
Is popular music becoming sadder?
Over the past half-century, pop hits have become longer, slower and sadder, and they increasingly convey “mixed emotional cues,” according to a study just published in the journal Psychology of Aesthetics, Creativity and the Arts.
“As the lyrics of popular music became more self-focused and negative over time, the music itself became sadder-sounding and more emotionally ambiguous,” according to psychologist E. Glenn Schellenberg and sociologist Christian von Scheve.
Analyzing Top 40 hits from the mid-1960s through the first decade of the 2000s, they find an increasing percentage of pop songs are written using minor modes, which most listeners—including children—associate with gloom and despair. In what may or may not be a coincidence, they also found the percentage of female artists at the top of the charts rose steadily through the 1990s before retreating a bit in the 2000s.
…Strikingly, they found “the proportion of minor songs doubled over five decades.” In the second half of the 1960s, 85 percent of songs that made it to the top of the pop charts were written in a major mode. By the second half of the 2000s, that figure was down to 43.5 percent.
In addition, the songs’ average tempo has decreased over the decades, although this measure is a bit more complicated. “In absolute terms, the slowest-tempo recordings were from the 1990s,” they note, “which suggests that the trend may have leveled out, or started to reverse direction.”
The researchers found this slowdown was more pronounced for major-mode (that is, joyful) songs. This points to “a general reduction in unambiguously happy-sounding recordings,” they write, “as well as an increase in recordings with ambiguous emotional states.”
By the way, the Turtles song “Happy Together” is mostly in a minor key. There is more here, and for the pointer I thank Janice and also Brad Plumer.
Thomas Schelling’s Middle East peace plan
With Shlomo Ben-Ami and Jerome Siegal and Javier Solana:
• The U.N. Security Council (or the General Assembly if the United States does not support this approach) will establish a special committee composed of distinguished international figures acting in their own capacity. Possibly it would be headed by a former American statesman or senator.
• UNSCOP-2’s first task would be to determine if there is any possible peace agreement that would be acceptable to a majority of both the Israeli and Palestinian people.
• The committee would go to the region where, over a period of several months, it would conduct a transparent inquiry into the possibility of genuine peace.
First and foremost, it would listen to the Israelis and the Palestinians. Its hearings would be televised. It would conduct public opinion research and study the record of past Israeli-Palestinian negotiations — in particular, the Clinton Parameters and the progress made at Taba and in the Olmert-Abbas round. UNSCOP-2 would seek new ideas for resolving the most difficult issues, such as refugees.
• Assuming the committee concludes that there is sufficient popular support on both sides for a specific peace agreement, it would then develop a draft treaty which it would forward to the Security Council for further action.
• In a departure from 1947, no effort would be made to impose this treaty. Rather, the Security Council would call on Israel and the Palestinians to use the UNSCOP-2 proposal as the starting point for negotiations in which the two sides would seek to determine if they can agree on any mutually acceptable improvements. The United States could be invited into the process to play the role of honest broker.
Here is more. Elliott Abrams doesn’t seem to like it.
Why do humans play chess in such a risk-averse manner?
Today I ask why computers playing among themselves have produced livelier games than recent matches of humans equipped with computer preparation.
That is from Kenneth Regan, much more at the link. And here is part of his answer:
The reason may literally be that the computers have greater contempt for each other. The contempt factor is a term in a program’s evaluation function that makes it pretend to be a couple tenths of a pawn better off than it is, in situations where a drawing or drawish continuation is available.
The computers also have no awareness of high stakes that puts “staying in the game” ahead of maximizing one’s chance of winning.
The context of course, is the recent Anand-Gelfand world chess championship match, which featured unprecedented levels of computer preparation, and, arguably, a lot of very boring games of “theoretical interest” only.
So will iPhones make us all more boring?
*Eric Hoffer: The Longshoreman Philosopher*
I very much enjoyed the new biography of Eric Hoffer, here is one excerpt:
Reminding us of Immanuel Kant, Hoffer went on solitary walks, did not marry, had a stomach that often gave him trouble, and (after he moved to San Francisco) rarely traveled. (Kant, it seems, never did.) Remarkably, we know more about Kant’s early life than we do about Hoffer’s. A professor of geography, Kant early on was more interested in science than in philosophy; Hoffer was the same. After moving to skid row in Los Angeles, he said, he taught himself chemistry and botany.
…Hoffer’s hundreds of three-by-five-inch index cards carried quotations from Aristotle, Bagehot, Clemenceau, Disraeli, Gandhi, Hobbes, Kant, Montaigne, Nietzsche, Pascal, Spinoza, and a hundred others, compiled over many years. Was there any precedent for this in the life of the nation? An apparently unschooled laborer who became a longshoreman and made an attempt to compile the wisdom of the ages on his own? he was filling them out by the 1940s and he continued adding to them until near the end of his life. the later dates are conspicuous because his handwriting becomes ever more shaky.
The author is Tom Bethell, you can buy the book here.
One scenario for the eurozone
Not a prediction, but I have been thinking through one possible path. Germany supports a phased-in backstop of eurozone bank deposits, but with intermediate goals and targets along the way. They’re not simply going to write a blank check. Some of the goals and targets are fiscal, while others involve turning over bank supervision to the EU. Obviously, none of this can be done quickly, thus there is no immediate done deal, but it might calm the markets. Germany also requires that Spain commit “the Irish mistake,” namely guaranteeing the returns to bondholders and funding that guarantee through “austerity.” Since Germany would also be backstopping Italy, France, and others, it doesn’t want a bondholder run, even if Spain, taken alone, might be better off forcing the bondholders to take losses.
Spain will claim it accepts the agreement, but in fact it won’t. It won’t over time, and it won’t pledge up front to fully protect the bondholders. Spain wants to see the money first. Capital flight continues and eventually intensifies. The deal does not get made in time and arguably there was no deal there in the first place, since Spain never had the willingness, or perhaps not even the ability, to meet the intermediate targets along the way.
One current option for Spain is to announce preemptively that it will accept significant EU supervision for their banks, with or without a broader deal. Arguably this would help ease their way into an agreement with Germany. In fact they are doing the opposite, by playing to the domestic audience and stonewalling on transparency about the nature and extent of their banking problems.
A new age of religious “austerity”
In an announcement posted Feb. 15 on the government’s website, Italian Prime Minister Mario Monti said he would seek legislation requiring the church to pay taxes on all its commercial holdings. About one-third of the 100,000 properties owned by the church in Italy are used for commercial ventures, according to Italy’s Radical Party, which has long campaigned against the tax exemption.
Here is more, and for the pointer I thank Mark Thorson.