Month: February 2013
I say the division of labor is limited by the extent of the market:
Generally, the protective silk cases the caddisfly larvae build are decorated with gravel, sand, snail shells, twigs or other common debris but French artist Hubert Duprat gave them shinier materials. He introduced beads, pearls, turquoise, and 18-karat gold pieces into their environment and let them construct tiny gilded sculptures. Duprat has been collaborating with the larvae since the 1980s.
The first is what kinds of jobs will be available for low-skilled Americans in the decades to come. I’ll be writing more on that.
The second is whether inflation is due to kick up in some kind of big storm, either in the next few years or when the major bills start coming due ten or so years from now.
Probably not. Let’s consider a few factors:
1. The future budget situation will consist, most of all, of largely of unfunded Medicare liabilities, which to whatever extent they are met must be met in real terms. Inflation will not make that problem go away.
2. The flow of debt is large, relative to the current stock (yes, I fully agree that is a scary thought in its own right). That means the federal government won’t gain much, and would probably lose, by trying to inflate away the value of the stock of debt. Furthermore a lot of the current debt is quite short-term.
3. Seigniorage revenue simply isn’t a big deal these days.
4. Everything we were taught about the monetary base is wrong in a world with interest on reserves (IOR). A large base can sit there forever. The price level is not proportional to the base, changes in the base, etc. It just isn’t. The broader aggregates, such as M2, haven’t grown so rapidly.
5. If needed, the Fed could soak up lots of the monetary base by selling assets from its portfolio. I don’t have some utopian vision of the Fed doing this remarkably well (hard to say, this is not Fed-bashing either), but of course the Fed can make mistakes in many ways and I would not focus exclusively on that way, which is in any case part of a broader program of expectations management.
6. Every market price we can possibly look at it is forecasting low to moderate inflation. The price of gold, by the way, seems these days to be a hedge against catastrophic risk not a hedge against inflation per se.
Please do not get me wrong, it is entirely possible that inflation will go up. Things could change. And even if the current deck of cards is played out, I do in fact think inflation will go up somewhat, perhaps more than markets are expecting (for one thing, I am more of a pessimist on supply bottlenecks than are many observers). That said, I do not see any ticking inflationary time bomb. Neither market evidence nor economic theory support such a conclusion.
Technological change has also been a key driver of spending increases for some time. From pharmaceuticals to imaging to cardiac procedures, markets have been saturated with new and expensive services and products in recent decades. But the adoption of new technology seems to have slowed. Major parts of imaging growth are down, some cardiac procedures are being performed less frequently as studies show they are overused, and the number of new molecular entities approved by the Food and Drug Administration has not kept up with research and development spending.
To be sure, there are many new drugs and imaging devices on the market, especially in fields like oncology. But sales of these new technologies have been more disappointing than robust. The therapeutic prostate cancer vaccine Provenge was not the hit it was expected to be; Zaltrap, a therapy for some cancers and macular degeneration, had to halve its price because it was losing out to Avastin.
Efficiency efforts are finally taking hold in the health care community. Recent news reports about delivery system changes in large health care organizations, declining rates of hospital-acquired infections, and new emphasis on reducing readmissions are indicative of changes going on across the country. These efforts have been facilitated by the ACA and state efforts to limit Medicaid, total health care spending, or both (as in Arkansas, Massachusetts, and Oregon).
The first part is “the great stagnation to the rescue,” the second part is good news, and in the third part the reference to Massachusetts is some kind of Straussian satire. The article itself is here, and contains further analysis.
The initial pointer is from @JustinWolfers.
I started reading Napoleon Chagnon’s Noble Savages: My Life Among Two Dangerous Tribes — the Yanomamo and the Anthropologists. The first fifty pages are excellent fun and well-constructed, though I cannot speak to the details of his claims about the frequency of conflict or the motivation of conflict by sexual competition for women. At some point, however, I realized I don’t want to read an entire book on either tribe, at least not at this moment. I am not suggesting that the book gets worse, but my interest did ebb.
I do not have a view about the controversies surrounding Chagnon, and ultimately that is what should decide the merits of this work. Here is Dreger’s systematic defense of Chagnon. Here is a survey of the Chagnon disputes. I wonder if he has ended up with less credibility from having the first name “Napoleon”?
5. Tales of 3-D printing; “It took 45 minutes and it was kind of crappy, but I was encouraged,” Mr. Drumm said.
From the FT
The number of people using Intrade has plummeted since a US government crackdown late last year…At its peak, Intrade counted 112,000 users. At midday on Wednesday, the site said there were 509 – and 498 were guests.
The vanishing traffic raises questions about the predictive value of a market feted by journalists and academics as a pioneering gauge of public opinion.
The government failed to protect the public from CDOs plumped up with bad mortgages or from swindlers like Bernie Madoff but don’t worry when it comes to the markets that Arrow, Schelling, Smith, Hanson, Wolfers et al. said have “great potential for improving social welfare” the government has got it covered. Call me cynical but I suspect Intrade would have been better treated had it been a project of Goldman Sachs.
Most people assume a degree in the arts is no guarantee of riches. Now there is evidence that such graduates also rack up the most student-loan debt.
A Wall Street Journal analysis of new Department of Education data shows that median debt loads at schools specializing in art, music and design average $21,576, which works out to a loan payment of about $248 a month. That is a heavy burden, considering that salaries for graduates of such schools with five or fewer years’ experience cluster around $40,000, according to PayScale.com.
The story is here. And here is some sad news in particular:
New York’s Manhattan School of Music had the second-highest median debt load, at $47,000. Graduates with up to five years’ experience earn an average of $42,700, according to PayScale.
Which school is number one?:
Among the 4,000 colleges and universities in the federal database, the Creative Center in Omaha, Neb., a for-profit school that offers a three-year bachelor’s in fine arts, had the highest average debt load, at $52,035. Median pay for graduates of the school with five or fewer years’ experience is $31,400, according to PayScale.com.
I say that’s a school in future financial trouble.
1. Humorist: It is hard not to pick Will Rogers. But was he funny? You tell me. I’ll go with Chuck Norris.
2. Jazz musician: Charlie Christian, and as runner-up Chet Baker.
3. Folk music: Woody Guthrie, here is Do Re Mi.
4. Popular music: Eddie Cochran, and overall the music categories are turning out better than one might have expected. I feel there should be lots in country music but I could not tell you who that might be.
5. Musical, set in: Duh. A favorite of my favorites.
6. Novelist: Ralph Ellison.
7. Painter: Ed Ruscha.
8. Outlaw: Pretty Boy Floyd.
9. Movie, set in: I can think only of Rumblefish.
Here are images of Tulsa Art Deco.
People, this is an underrated state. I hope to end up there later tonight.
The author is Zoltan J. Acs and the subtitle is Why Philanthropy Matters: How the Wealthy Give, and What It Means for Our Economic Well-Being. It is the best pro-philanthropy book I know.
By the way, Zoltan will be presenting at a forthcoming GMU conference on competitiveness, check out the other papers too.
1. Don’t forget to be reading Carola Binder.
3. De Gustibus (I don’t like either!).
4. The culture that is Norway, or as Alex wrote “Isn’t it good, Norwegian Wood?”
7. UK inflation rates on the essentials, yikes and also related to AD/AS debates.
That is the subtitle, the title is The Federal Reserve and the Financial Crisis, consisting of the lectures BB delivered at George Washington University.
File under “Arrived in My Pile.”
The president of Caltech, Jean-Lou Chameau, announced Tuesday that he would step down from the leadership of the prestigious science- and math-oriented campus in Pasadena at the end of the current school year and become head of a new and well-endowed university in Saudi Arabia.
Here is more. The school is:
…the King Abdullah University of Science and Technology (KAUST) in Saudi Arabia. The graduate-level school enrolled its first students in 2009 and, in English, educates men and women together, to the dismay of some Islamic fundamentalists. It was founded with a $10-billion endowment from the oil-rich Saudi royal family.
The current endowment of Caltech is about $1.9 billion. It is believed that Chameau will be receiving a raise in pay. By the way, KAUST seems to have no social sciences or humanities.
Many MR readers have asked for commentary on this very interesting piece by Scott Winship. Scott makes a number of points but here is one in particular:
As nations become wealthier, it is harder for them to sustain high rates of growth. That doesn’t mean that the United States is in decline, or even stagnating. When a nation is as rich as ours, it can realize larger absolute gains than it did in the past and larger gains than other nations even if it has lower growth rates. That’s because a growth rate of, say, 2.5 percent represents a larger increase in absolute wealth the richer an economy becomes. In 1900, a 2.5 percent increase in gross domestic product (GDP) per capita would have translated into about $150 in today’s dollars for every man, woman, and child in the United States. In 2010, it would have been roughly $1,200, reflecting the fact that in the aggregate, we are about eight times wealthier than we were 110 years ago.3 By focusing too much on growth rates and too little on absolute increases in wealth, we have failed to appreciate the magnitude of economic gains in recent decades.
A few remarks in response:
1. First, this is not so far from my own view, for instance Scott cites me as writing: “Life is better and we have more stuff, but the pace of change has slowed down compared to what people saw two or three generations ago.”
2. I still think this — to the extent it is true — is tragic. Just imagine the future potential loss that would result from the disappearance of compound growth. People one hundred years out would be much worse off, relative to exponential growth, and their ability to fix the environment or elevate poor countries to wealth, also will be much lower. In essence economics would be surrendering the gain it won from the victory over Malthus. “Hey, Reverend, you were right, growth will be only an arithmetical progression, not geometric as we had thought from 18?? through to 19??. But you were wrong about one other thing: the populations of many of the best countries in the world are shrinking!” I find that response horrible and depressing, not heartening.
3. Many features of our budgeting, especially from the public sector, rely on exponential rates of economic growth. For better or worse, we are not about to back our way out of those. We also may need exponential growth to pay off the growing power of special interest groups.
4. Most importantly, I think high rates of economic growth will resume, at some (unknown) date in the future. Note that in a very broad data sample, stretching across centuries, rates of growth for the technological leaders are on average rising, as shown by Paul Romer. It was a big deal in the 17th century when England started to manage an average of about one percent growth a year, but today we would call that a kind of stagnation. The Great Stagnation is a temporary slowdown in growth, not the permanent end of new ideas.
We live in a diverse world:
Reborn culture started around 1990, with people stripping the paint and hair off store-bought vinyl dolls and painstakingly reworking them to be more lifelike. Now some people use kits with doll parts that when assembled are weighted to feel like a real infant when held.
After discovering this movement, Ms. Martinez bought her own doll for research and started exploring the burgeoning subculture, attending conventions, photographing baby-beauty contests, baby showers, owners and artisans.
“In general, most of the women are Anglo, conservative, Christian and right-to-lifers,” Ms. Martinez said. “All of the things that I’m not.”
When Ms. Martinez travels, she will sometimes bring one of her own five reborn dolls to photograph people’s reactions. She prefers to carry them in open bags because she feels uneasy putting them into closed containers, and her suitcases are always searched by airport security if a doll shows up in a scan. This leads to unusual encounters — like when other people in line get upset thinking that a real baby is about to be harmed by X-rays as they pass through security.
The full story, interesting throughout, is here.