Month: February 2013

Our drone future?

 (In case you’re worried that drones lack allies in Congress, rest easy: there’s a Congressional Unmanned Systems Caucus with 60 members. With global spending on drones expected to nearly double over the next decade, to $11.3 billion, industry groups like the AUVSI are rapidly ramping up their lobbying budgets.)

And:

Singer estimates that there are 76 other countries either developing drones or shopping for them; both Hizballah and Hamas have flown drones already. In November, a Massachusetts man was sentenced to 17 years for plotting to attack the Pentagon and the Capitol with remote-controlled planes.

The very interesting article is here, by Lev Grossman at Time, hat tip goes to The Browser.

The economics of budget sequestration

Here is my latest New York Times column, on how we should deal with sequestration.  One theme is that, economically speaking, we really can get away with cutting our defense budget:

 In the short run, lower military spending would lower gross domestic product, because the workers and resources in those areas wouldn’t be immediately re-employed. Still, that wouldn’t mean lower living standards for ordinary Americans, because most military spending does not provide us with direct private consumption.

To be sure, lower military spending might bring future problems, like an erosion of the nation’s long-term global influence. But then we are back to standard foreign policy questions about how much to spend on the military — and the Keynesian argument is effectively off the table.

On a practical note, the military cuts would have to be defined relative to a baseline, which already specifies spending increases. So the “cuts” in the sequestration would still lead to higher nominal military spending and roughly flat inflation-adjusted spending across the next 10 years. That is hardly unilateral disarmament, given that the United States accounts for about half of global military spending. And in a time when some belt-tightening will undoubtedly be required, that seems a manageable degree of restraint.

When you hear talk of Keynesian arguments as applied to sequestration, don’t be so quick to aggregate the “G.”  The Keynesian argument, as well as some supply-side arguments, does apply however to infrastructure and also to the funding of basic scientific research.  The domestic half of the sequester should be redone to focus more tightly on farm subsidies and Medicare reimbursement rates:

 THE Keynesian argument suggests that spending cuts do the least harm in economic sectors where demand is high relative to supply. Thus, the obvious candidate for the domestic economy is health care, and the sequestration would cut many Medicare reimbursement rates by 2 percent. We could go ahead with those cuts or even deepen them, because America has had significant health care cost inflation for decades.

We already have huge demand in our health care system, along with a corresponding shortage of doctors. And the coverage extension in the Affordable Care Act will add to the strain. In this setting, cutting Medicare reimbursement rates wouldn’t result in fewer health care services over all. Yes, doctors might be less keen to serve Medicare patients but might be more available for others, including the poor and the young. In the long run, the improved access for those groups would yield much return on investment, and would move the health care system closer to many of the European models.

Of course that is unlikely to happen.  Here are some related points by Veronique de Rugy, which I found helpful for doing the piece.

I would view the sequestration as a kind of referendum on whether we are ever capable of cutting or restraining spending and I fear not.   When it comes to the defense budget, “gdp fetishism” suddenly makes a comeback.  Or sometimes I read or hear the argument: “let’s not do this, it is only a small nick in the budget deficit.”  That attitude is exactly the problem.  The point remains that the laws of opportunity cost still apply.  As David Brooks has noted, I am willing to live with the price of my house going down.

Very Fast Insider Trading

On January 31, 2013, approximately 400 milliseconds before the official release of the EIA Natural Gas Report, trading activity exploded in Natural Gas Futures and ETFs such as UGZ, UNG and BOIL. Now that the Feds have stated (as claimed by a recent WSJ article) that they don’t think there is merit in prosecuting people who get news information earlier than others by milliseconds, is it any wonder?

More here. Previous MR posts on high frequency trading.

Questions that are rarely asked

If the multiplier is 1.4, recovery should have been accelerating pretty rapidly, right? Right? Bueller?

That is me on Twitter.  I am not sure what is the right way to think about the appropriate counterfactual here, but the explanation of “growth has not much accelerated because some other pending catastrophe was in the works” does not seem correct to me.

You can cite various reasons for economic slowness (“they cut state and local spending,” etc.), but the point of course is to explain the second derivative and then make that consistent with a multiplier estimate.  Or is it that government spending is supposed to have a higher multiplier than private economic activity?  Bueller?

Will marathon viewing become the TV norm?

On Friday, Netflix will release a drama expressly designed to be consumed in one sitting: “House of Cards,” a political thriller starring Kevin Spacey and Robin Wright. Rather than introducing one episode a week, as distributors have done since the days of black-and-white TVs, all 13 episodes will be streamed at the same time. “Our goal is to shut down a portion of America for a whole day,” the producer Beau Willimon said with a laugh.

“House of Cards,” which is the first show made specifically for Netflix, dispenses with some of the traditions that are so common on network TV, like flashbacks. There is less reason to remind viewers what happened in previous episodes, the producers say, because so many viewers will have just seen it. And if they don’t remember, Google is just a click away.

The story is here.  You can buy an entire book at once, as serialization — while not dead — has ceased to be the norm for long novels.  At MOMA they do not run an art exhibit by putting up one new van Gogh painting each day.  Coursera, you will note, still uses a kind of serialization model for its classes rather than putting up all the lectures at once; presumably it wishes to synchronize student participation plus it often delivers the content in real time.  Sushi is served sequentially, even though several cold courses presumably could be carried over at once.  Still, a plate in an omakase experience typically has more than one piece of fish.

For TV I do not think upfront bingeing can become the norm.  The model of “I don’t really care about this, but I have nothing much to talk to you about, so let’s sit together and drop commentary on some semi-randomly chosen TV show” seems to work less well when the natural unit of the show is thirteen episodes and you are expected to show dedication.

Ad-financed shows — still a clear majority of viewing — may prefer to have impressions from the ads spread out over weeks and months rather than concentrated in one long marathon sitting.  Furthermore the show itself relies more heavily on an effective and immediate burst of concentrated marketing, with little room to build word of mouth and roll out a campaign with stages.  That intense publicity can be achieved the first time this model is tried, as everyone will write about the novelty, but it will be harder to summon up interest for successive experiments in this format.

I do not myself enjoy the marathon approach to TV shows, as I prefer to ponder the episodes over weeks, months, or years.  I rebel against watching even two episodes in a row, no matter how much I enjoy the program.  Nonetheless I hope this model succeeds, as I have the self-control to watch only one episode a week or at some otherwise chosen regular pace.

*Shylock on Trial: The Appellate Briefs*

That is the new eBook by Richard Posner and Charles Fried, and I just bought my copy and expect I will be adding it to my Law and Literature syllabus.  The book’s home page is here.

A longer book, edited by Bradin Cormack, Marthua Nussbaum, and Richard Strier will be coming out as well, Shakespeare and the Law, containing this piece among others.

Observations on meeting Bill Gates

I am pleased to have been invited to a small group session in New York City to meet Gates and hear him present his new letter.  My observations are these:

1. Gates has a command of data and analytics in development economics better than that of most development economists, or for that matter aid professionals.  He also expects everyone at the meeting to know everything about what he is talking about, or at least is willing to proceed on that basis.  That said, when it comes to answering questions he sometimes assumes a stupider version of the question than what is actually being asked.

2. He is smart enough, and health-savvy enough, not to waste time with handshakes at the beginning of meetings.  People as productive as Gates should not be required to shake hands, and the same can be said for people less productive than Gates.

3. He does not go on and on.  His opening remarks were about two minutes long, with no notes, and all of his answers were to the point.

4. We were served water, at exactly the right cool temperature, yet without ice cubes.  No cookies.

5. Unlike Gates, I am not convinced that “health” is the key breakthrough area for economic development, but there is enough low-hanging fruit out there that it doesn’t have to be.  That said, when questioned on this his answers were closer to tautology than they needed to be.  Much of their emphasis on measurement seemed to me to track absolute movement toward goals, rather than relative efficacies of different project investments.

6. Gates suggested that if he had been more careful tracking and organizing his AP credits, he might have been able to receive his undergraduate degree.  That is one sense, in his words, in which he is barely a college drop out.  In another sense, it makes him a very extreme college drop out.

7. He mentioned that he is an extremely eager consumer (and not just funder) of on-line education and The Teaching Company.  And this is a man who could receive free (or paid) lectures from almost anyone he wants.

8. Empellon Tacqueria, in the West Village, has an excellent mackerel ceviche and I recommend also the quail eggs.

9. I have now run into Reihan Salam twice in the last two years, in random public places in Manhattan, without any reason for expecting to see him there.  This should cause me to revise my prior on something or other, but I am not sure what.  When changing/surfing the channels, which I do occasionally to “keep in touch,” I also run into him on TV a lot.

10. Gates understands the very high returns from better governance, but also sees it is not trivial to reap them.

11. In the context of U.S. education, he does not worry that teacher cheating will bias test results very much at the macro level.

12. He is more optimistic about charter schools than I am (though I favor them), and more optimistic about the results from giving teachers feedback about their performance.  In my view, bad teachers don’t very much want to improve and it is not so much a matter of knowledge.  Undergraduate college teachers are evaluated all the time, and it does help, but it hardly brings the rotten apples up to par and I don’t see it as the key to moving the system forward at lower levels.

Here is Jason Kottke’s account.  Here is Dana Goldstein’s account.

Gates’s annual letter, which was released earlier this week, is here.

Department of Uh-Oh

Labor unions enthusiastically backed the Obama administration’s health-care overhaul when it was up for debate. Now that the law is rolling out, some are turning sour.

Union leaders say many of the law’s requirements will drive up the costs for their health-care plans and make unionized workers less competitive. Among other things, the law eliminates the caps on medical benefits and prescription drugs used as cost-containment measures in many health-care plans. It also allows children to stay on their parents’ plans until they turn 26.

To offset that, the nation’s largest labor groups want their lower-paid members to be able to get federal insurance subsidies while remaining on their plans. In the law, these subsidies were designed only for low-income workers without employer coverage as a way to help them buy private insurance.

…Contacted for this article, Obama administration officials said the issue is subject to regulations still being written…

Top officers at the International Brotherhood of Teamsters, the AFL-CIO and other large labor groups plan to keep pressing the Obama administration to expand the federal subsidies to these jointly run plans, warning that unionized employers may otherwise drop coverage. A handful of unions say they already have examined whether it makes sense to shift workers off their current plans and onto private coverage subsidized by the government. But dropping insurance altogether would undermine a central point of joining a union, labor leaders say.

…The Teamsters’ Mr. Hall said his union has no plans to eliminate workers’ insurance. Instead, he worries employers will have an incentive to drop coverage in collective bargaining if they can’t tap the subsidies.

All of a sudden, people are figuring this out.  The article is here, and for the pointer I thank Craig Garthwaite.