Month: January 2013
The author is David A. Stockman and the subtitle is How Crony Capitalism Corrupts Markets and Democracy.
I am a big fan of The Triumph of Politics, for its understanding of American government, but in this book I disagree with too many of the key points. The author likes “sound money” and dislikes “easy money” yet this position is never really argued for. Fiat money is responsible for a very large number of ills but of course financial crises and bubbles are hardly new. Consistently, the author knows to vilify Milton Friedman. He is an explicit liquidationist of the kind you thought Brad DeLong was simply imagining.
On money and macro, I am more persuaded by Friedman, Irving Fisher, early Keynes, David Hume, and Scott Sumner, among others. If you are not, you will find this a very energetic economic history, including the New Deal, from a passionately argued point of view. There is an odd mix of historical detail and theoretical lacunae. I am still wondering what we are supposed to do when the deflationary shock arrives. The Stockman of The Triumph of Politics, I think, would have seen that our current institutions are not up to supporting such volatility.
Steven Kopit, a loyal MR commentator, asks:
Let’s have more on the economics of museums. That’s actually an interesting topic.
Only a very small portion of the collections of the Louvre other major museums is on display at any given time. I think it would make a great deal of sense to provide additional venues for shows–including in China. In the end, holdings of art (like income, per SS) only matter is someone actually consumes them, ie, gets to see them.
I say the deadweight loss here is not so large. Most art exhibitions are not self-financing from the side of the viewers, which suggests that the demand to see the pictures is not higher than the costs of mounting the exhibit. Arguably you can throw in philanthropic support as another part of “market demand,” but I consider that a separate valuation issue. Maybe our current artistic institutions are under-providing marketing opportunities for businesses and foundations, but that still won’t get you a major pent-up demand to view the pictures, again not relative to cost. The very popular pictures, such as the good works by the Impressionists and post-Impressionists, are shown quite frequently, including in traveling exhibitions.
Context matters a great deal in this setting. Currently most of the Louvre is not being viewed at any point in time, as the crowds tend to cluster in a few very well-known areas. Many people would want to go see anything they are told they ought to go see. What is underfunded is some kind of “demand for participation in a public event,” not the viewing of art per se. If only they could create more hullaballoo around the more obscure Flemish painters.
Almost all museums have large stretches of empty walls. I would put up many more pictures there, as indeed I do in my own home. That museums do not do this I find striking and indicative. Nor do I see viewers and visitors demanding this, if anything the unspoken feeling might be to wish for a bit less on the walls, so that one may have the feeling of having seen everything without exhaustion.
The costs of storing art are high. Perhaps the Louvre should sell some of its lower-tier works to private collectors. But the general public just doesn’t want so much more art to see, not if they have to pay for it and maybe even if they don’t.
The Hackley Endowment for the Study of Capitalism and Free Enterprise at Fayetteville State University is sponsoring an Economics Video Contest on the subject “Economic Value Is Subjective.” Entries are due Wednesday, May 15, 2013. First prize is $2,500, more info and rules here. The first entry, “big books” was pretty good once it got into the rap. Also, one of the big books looked familiar.
I used to drive a taxi. I made a lot of money doing it. I learned very early on to never drive someone to their destination if it was a route they drove themselves, say to their home from the airport, or from their home to work or vice versa. Everyone prides themselves on driving the shortest route but they rarely do. Often people develop a route that is based on need -say going by the day care, or avoiding an intersection where they once had an accident or to avoid driving by an ex’s house or skirting road construction long since resolved- but as they become habituated to it, they fail to reorganize their strategy when their needs change. When I first started driving a cab, I drove the shortest route –always, I’m ethical- but people would accuse me of taking the long way because it wasn’t the way they drove. So, I learned to go their way ending up with a lot less grief and a lot more money. If you’ve ever wondered why a seeming professional cab driver will ask you how to get to your destination, this is why. Going your way means they’ll make more money and they won’t be accused of ripping you off. Not to say that in the beginning, I wasn’t stupid. I’d try to show the customer the route on a map but they’d usually be offended that I was contradicting them. It was to their house, if I’d never been there, how could I possibly know better than they did? In the end, experts they consider themselves to be, people are a tangle of unexamined emotional impulses and illogical responses.
You can read more about quite different topics here. And here is another point:
Oh, and here’s a tip I hope you never need: if your car is ever stolen, your first calls should be to every cab company in the city. You offer a $50 reward to the driver who finds it AND a $50 reward to the dispatcher on duty when the car is found. The latter is to encourage dispatchers on shift to continually remind drivers of your stolen car. Of course you should call the police too but first things first. There are a lot more cabs than cops so cabbies will find it first -and they’re more frequently going in places cops typically don’t go, like apartment and motel complex parking lots, back alleys etc. Lastly, once the car is found, a swarm of cabs will descend and surround it because cabbies, like anyone else, love excitement and want to catch bad guys. Cabbies know a lot of stuff*. I found a traveling shoplifting ring in Phoenix once. Professional shoplifters always take cabs. So do strippers going to work but that’s another story.
The video is here, Thomas Friedman moderates, and for the pointer I thank MG. I have yet to view it (starting right now), but it is fair to call it self-recommending.
You will find it here (pdf). There are numerous good bits, here is one of them:
To admire an artist for his own sake, although certainly a compliment, can also be a way of suggesting that he has no place in the larger scheme of things
They chose a quotation from me:
Effective political ideas are those that can still do good in half-baked form
Americans have historically put great weight on the right of self-defense which is one reason why many people support the 2nd Amendment, as the Supreme Court noted explicitly in District of Columbia v. Heller. But what about medical self-defense? John Robertson argues:
A person can buy a handgun for self-defense but cannot pay for an organ donation to save her life because of the National Organ Transplantation Act’s (NOTA) total ban on paying “valuable consideration” for an organ donation. This article analyzes whether the need for an organ transplant, and thus the paid organ donations that might make them possible, falls within the constitutional protection of the life and liberty clauses of the 5th and 14th amendments. If so, government would have to show more than a rational basis to uphold NOTA’s ban on paid donations.
Unfortunately, the Supreme Court has rejected medical self-defense arguments for physician assisted suicide and let stand an appeals court ruling that patients do not have a right to access drugs which have not yet been permitted for sale by the FDA (fyi, I was part of an Amici Curiae brief for this case). Robertson argues, however, that these cases can be distinguished. Physician assisted-suicide doesn’t fall within a long-American tradition necessary to receive due-process rights and organ transplants are not untested or experimental. It’s a good argument although it’s disappointing that the medical self-defense principle must be unjustly delimited.
Hat tip: Law, Economic and Cycling.
From Luigi Zingales:
In fact, the authors find that more than 6% of mortgage loans misreport the borrower’s occupancy status, while 7% do not disclose second liens.
…The authors provide some interesting evidence in this context. They show, for example, that the misrepresentation is correlated with higher defaults down the line: delinquent payments on misreported loans are more than 60% higher than on loans that are otherwise similar. Thus, the errors do not seem to be random, but purposeful.
What the authors do not find is also interesting. The degree of misrepresentation seems to be unrelated to the incentives provided to the top management and to the quality of risk-management practices inside these firms. In fact, all reputable intermediaries in their sample exhibit a significant degree of misrepresentation. Thus, the problem does not seem to be limited to a few bad apples, but is pervasive.
I cannot tell whether the borrowers defrauded the lenders or the lenders defrauded the investors who bought the loans. I always presume that it is the borrower instigating the fraud. However, Zingales says that the bankers should be prosecuted. He makes it sound as if the lenders would record a loan internally as backed by an investment property and report it to investors as an owner-occupied home. That would require a much more complex conspiratorial action on the part of the lender, and until I learn otherwise, I will doubt that it happened.
A panel appointed by Mayor Rahm Emanuel to review taxpayer-subsidized health insurance for retired government workers suggested the city [Chicago] could drop coverage to help erase a financial shortfall…
Phasing out coverage for most retired city workers would leave the bulk of retirees dependent on the Affordable Care Act, also known as Obamacare.
Taiwanese businessman Samuel Yin has endowed a new science prize that not only gives bigger cash awards than the Nobel Prizes, but supports research as well. Individuals or institutions that have demonstrated what judges deem to be the most creative and influential research will receive about $1.36 million in each of four fields; an additional $341,000 will support recipient-proposed plans for research and talent development in related fields for 5 years. The combined $1.7 million tops the Nobel Prize, which for 2012 was about $1.2 million.
Announced at a press conference today in Taipei, the Tang Prize, named after China’s Tang Dynasty, which Yin admires as a golden age for Chinese civilization, will be awarded biennially for work in sustainable development, biopharmaceutical science, sinology, and rule of law.
Yin, who is endowing the Tang Prize Foundation with about $102 million, hopes “the prize will encourage more research that is beneficial to the world and humankind, promote Chinese culture, and make the world a better place,” according to a press release. Yin made a fortune in real estate, finance, and retail investments, and is worth about $3 billion, according to Forbes magazine. Academia Sinica, which oversees Taiwan’s premier research labs, will be responsible for the nomination and selection process. The first prize announcement is slated for July 2014.
The link is here and for the pointer I thank Michelle Dawson. This goes back to a discussion I have regularly with John Nye. If you simply put up money — say for a new prize or even for a new university, and try to spend that money well — but don’t court the traditional markers of status per se, how far can you get?
I’ve covered this before, but here is another update on a rapidly-evolving story in cultural economics:
Even for an under-the-radar artist like Ms. Keating, who describes her style as “avant cello,” the numbers painted a stark picture of what it is like to be a working musician these days. After her songs had been played more than 1.5 million times on Pandora over six months, she earned $1,652.74. On Spotify, 131,000 plays last year netted just $547.71, or an average of 0.42 cent a play.
Here is more, and you will recall that the streaming services don’t seem to be making money either.