Month: November 2012

The political culture that is Uruguay

Laundry is strung outside the house. The water comes from a well in a yard, overgrown with weeds. Only two police officers and Manuela, a three-legged dog, keep watch outside.

This is the residence of the president of Uruguay, Jose Mujica, whose lifestyle clearly differs sharply from that of most other world leaders.

President Mujica has shunned the luxurious house that the Uruguayan state provides for its leaders and opted to stay at his wife’s farmhouse, off a dirt road outside the capital, Montevideo.

The president and his wife work the land themselves, growing flowers.

This austere lifestyle – and the fact that Mujica donates about 90% of his monthly salary, equivalent to $12,000 (£7,500), to charity – has led him to be labelled the poorest president in the world.

…His charitable donations – which benefit poor people and small entrepreneurs – mean his salary is roughly in line with the average Uruguayan income of $775 (£485) a month.

In 2010, his annual personal wealth declaration – mandatory for officials in Uruguay – was $1,800 (£1,100), the value of his 1987 Volkswagen Beetle.

The article is here, and for the pointer I thank Adam Dayan.

Why are observations of inflation so biased? And biased by gender?

This is from an older piece, but I ran across it while browsing the internet.  It is from the Cleveland Fed, by Michael Bryan and Guhan Venkatu, 2001, excerpt:

The data indicate that the public’s estimates and predictions of inflation are significantly and systematically related to the demographic characteristics of the respondents. People with high incomes perceive and anticipate much less inflation than people with low incomes, married people less than singles, whites less than nonwhites, and middle-aged people less than young people. This Commentary describes what is perhaps the most curious observation of all: Even after we hold constant income, age, education, race, and marital status, men and women hold very different views on the rate at which prices are changing.

And now, more specifically:

In the roughly 20,000 responses we have received from our telephone survey since August 1998, the average rate at which respondents thought prices had risen over the previous 12 months was about 6.0 percent. This “perception” of inflation is more than twice the rise recorded by the Consumer Price Index (CPI) over the same period (2.7 percent). Further, if we separate our sample by gender, we find that the average inflation perceived by the nearly 8,500 men who answered our survey was 4.6 percent. While this response is higher than the official CPI inflation estimate, it pales in comparison to the 6.9 percent inflation perceived by the roughly 11,500 women who took our survey. What accounts for such a large discrepancy between the inflation rate perceived by the two sexes?

I found it through this piece, cited by Instapundit.  Is it possible that a high perception of inflation is largely the result of a relatively low real income, perhaps mixed in with a slight unwillingness to blame oneself for imperfect labor market prospects?  Does this help explain why tight money and stagnant median income have come together?

Exports as a factor behind the poor performance of the UK economy

This is from Gavyn Davies and Juan Antolin-Diaz:

We conclude that fiscal policy is responsible for a little less than half of the UK’s under-performance compared with the US, with much of the rest being due to the sluggish growth of UK export markets in recent years. The decline in UK oil production, and the possible under-recording of UK GDP in the official statistics, should also be taken into account. Therefore, while there is certainly some truth in the fiscal story, it is far from the whole truth.

So why the big difference with the U.S. performance?

We find that a large amount of the difference is explained by the fact that US export markets have grown much more strongly than UK markets over the past 5 years. This has been for two reasons. First, the UK’s greater exposure to the recession-hit markets of the eurozone has been very damaging, especially in the past two years. Second, and actually much more important, the UK’s lack of exposure to the rapidly growing markets in the emerging economies has been a major structural problem in recent years. The US, in contrast, has greatly increased its exposure to the emerging markets, notably in Latin America.

The summary blog post is here, and underlying research is here. Note that the bigger you make the multiplier, the more that exports should matter as well.

Simon Blackburn suffers from mood affiliation

Via Ross Douthat, here is the close of Blackburn’s review of the new Thomas Nagel book:

There is charm to reading a philosopher who confesses to finding things bewildering. But I regret the appearance of this book. It will only bring comfort to creationists and fans of “intelligent design”, who will not be too bothered about the difference between their divine architect and Nagel’s natural providence. It will give ammunition to those triumphalist scientists who pronounce that philosophy is best pensioned off. If there were a philosophical Vatican, the book would be a good candidate for going on to the Index.

The Nagel book continues to go up in my eyes.

Economists are everywhere China fact of the day

North Korean-trained economist Zhang Dejiang is expected to head the largely rubber-stamp parliament, while Shanghai party boss Yu Zhengsheng is likely to head parliament’s advisory body, according to the order in which their names were announced.

Tianjin party chief Zhang Gaoli and Liu Yunshan, a conservative who has kept domestic media on a tight leash, make up the rest of the group.

And who said education doesn’t matter?

The story is here, via Emily Kaiser.

Sentences to ponder (who’s next?)

…by my calculation it would take songwriting royalties for roughly 312,000 plays on Pandora to earn us [Galaxie 500] the profit of one– one— LP sale. (On Spotify, one LP is equivalent to 47,680 plays.)

Oh, and there’s more:

Pandora and Spotify are not earning any income from their services, either. In the first quarter of 2012, Pandora– the same company that paid Galaxie 500 a total of $1.21 for their use of “Tugboat”– reported a net loss of more than $20 million dollars. As for Spotify, their latest annual report revealed a loss in 2011 of $56 million.

The full story is here, interesting throughout, and for the pointer I thank HL.

Coase and Wang on capitalism in China

Nick Schulz does the interview.  After they discuss the topic, here is one bit toward the end:

We are now working with the University of Chicago Press to launch a new journal, Man and the Economy. We chose our title carefully to signal the mission of the new journal, which is to restore economics to a study of man as he is and of the economy as it actually exists. We hope this new journal will provide a platform to encourage scholars all over the world to study how the economy works in their countries. We believe this is the only way to make progress in economics.

For the pointer I thank David Levey.

What does equilibrium look like for the book business?

Adam Davidson offers some interesting remarks.  My take is a little more radical.  I expect two or three major publishers, with stacked names (“Penguin Random House”), and they will be owned by Google, Apple, Amazon, and possibly Facebook, or their successors, which perhaps would make it “Apple Penguin Random House.”  Those companies have lots of cash, amazing marketing penetration, potential synergies with marketing content they own, and very strong desires to remain focal in the eyes of their customer base.  They could buy up a major publisher without running solvency risk.  For instance Amazon revenues are about twelve times those of a merged Penguin Random House and arguably that gap will grow.

There is no hurry, as the tech companies are waiting to buy the content companies, including the booksellers, on the cheap.  Furthermore, the acquirers don’t see it as their mission to make the previous business models of those content companies work.  They will wait.

Did I mention that the tech companies will own some on-line education too?  EduTexts embedded in iPads will be a bigger deal than it is today, and other forms of on-line or App-based content will be given away for free, or cheaply, to sell texts and learning materials through electronic delivery.

Much of the book market will be a loss leader to support the focality of massively profitable web portals and EduTexts and related offerings.

There is this funny thing called antitrust law, but I think these companies are popular enough, and associated closely enough with cool products — and sometimes cheap products — to get away with this.

The wisdom of Alex Tabarrok

Alex did not reproduce this passage from his essay on on-line education, so I will did (and Reihan Salaam did):

Productivity in education has lagged productivity in other sectors of the economy because teaching is so labor intensive. Where exactly in the typical classroom is there room for investment, let alone productivity improvement? More chalk? Prior to online education, the bottleneck though which productivity improvements had to pass was the teacher, and we know that improving teacher productivity is very difficult, which is why teaching methods haven’t changed in millennia. Online education vastly increases the potential for productivity increases because it greatly increases the size of the potential market. Bigger markets increase the incentive to research and develop new products (coincidentally the very topic of my TED talk.) A tool used to improve online education–an interface, an algorithm, a new teaching method–can be applied very widely, potentially world-wide, thus greatly increasing the incentive to invest in the education sector, perhaps the most important sector of the 21st century economy.

Here are some budges forward on the accreditation of MOOCs.

Addendum: Here are interesting comments from Joshua Gans.

Undercounting very discouraged workers

Here is a guest post from Stephen Bronars.  Excerpt:

I estimate that there are over four million fewer labor force participants than what would have occurred if age-adjusted participation rates maintained their pre-recession trend.  In this recovery, the official BLS count of “marginally attached” workers underestimates, by 40%, the number of people who left the labor force because they stopped looking for work.  Although BLS figures suggest that marginally attached workers are a minority of the 5.6 million adults who left the labor force, a more plausible estimate is that 72% of these non-participants stopped searching for work in the past few years.

If official underutilization measures included jobless workers who gave up searching for work within the past 36 months the labor force underutilization rates reported by the BLS would be higher by about 0.9%.  For example, the underutilization measure that includes unemployed and marginally attached workers would have been 10.2% (rather than 9.3%) last month.