Month: February 2013

*What to Expect When No One’s Expecting*

That is the new book by Jonathan Last, which I liked very much.  Last recently wrote “In the end, demography always wins” and you will find that view writ large in the book.  He also wrote “Global demographics, not domestic policy, will control who comes and who goes.”

I am one who believes that the inability of a society to reproduce itself is per se a major problem, even if you don’t accept the most pessimistic fiscal interpretation of demographic collapse.  Geopolitical influence also shall not be neglected.  Here is one bit:

Low-fertility societies don’t innovate because their incentives for consumption tilt overwhelmingly toward health care. They don’t invest aggressively because, with the average age skewing higher, capital shifts to preserving and extending life and then begins drawing down. They cannot sustain social-security programs because they don’t have enough workers to pay for the retirees. They cannot project power because they lack the money to pay for defense and the military-age manpower to serve in their armed forces.

That is from Last’s WSJ essay, based on his book.

Here is an article on why Germany may be failing to raise its birth rate.  And here is a good response to Dean Baker’s lack of worry about the fiscal  issues.

Here is a critical Ruy Teixeira review of the book.  Here is Reihan on the critique.  Here is Maggie Gallagher.

How much does graduate school matter for being an economics professor?

There is a new paper, by Zhengye Chen, an enterprising undergraduate from the University of Chicago:

Of the 138 Ph.D. economics programs in the United States, the top fifteen Ph.D. programs in economics produce a substantial share of successful economics research scholars. These fifteen Ph.D. programs in turn get 59% of their faculty from only the top six schools with 39% coming from only two schools, Harvard and MIT. Those two schools are also the PhD origins for half of John Bates Clark Medal recipients. Details for assistant professors, young stars today, American Economics Association Distinguished Fellows, Nobel Laureates, and top overseas economics departments are also discussed.

There is much more here, and for the pointer I thank Lee Benham.  I’ll add three points:

1. It has been evident for a while that the former “top six” is in some ways collapsing into a “top two,” namely Harvard and MIT.

2. I was surprised that NYU beats out Stanford for the #6 slot.

3. Two Nobel Laureates, John Hicks and James Meade, did not have a Ph.d at all.

Assorted links

Health care cost control in Massachusetts, continuing the bad news string for ACA

Representatives from the state’s nonprofit health plans as well as national for-profit insurers doing business in Massachusetts estimated the “medical cost trend,” a key industry measure, will climb between 6 and 12 percent this year — higher than last year’s cost bump and more than double the 3.6 percent increase set as a target in a state law passed last year.

Here is more, and for the pointer I thank Jeffrey Flier.

Sentences about coal

Europe’s use of the fossil fuel spiked last year after a long decline, powered by a surge of cheap U.S. coal on global markets and by the unintended consequences of ambitious climate policies that capped emissions and reduced reliance on nuclear energy.

…In Germany, which by some measures is pursuing the most wide-ranging green goals of any major industrialized country, a 2011 decision to shutter nuclear power plants means that domestically produced lignite, also known as brown coal, is filling the gap . Power plants that burn the sticky, sulfurous, high-emissions fuel are running at full throttle, with many tallying 2012 as their highest-demand year since the early 1990s. Several new coal power plants have been unveiled in recent months — even though solar panel installations more than doubled last year.

Here is more.

How many niches can eBooks fill out?

I’m not sure this will work, but I suppose we will see:

Amazon’s business model has long been dependent on resellers of used books and other merchandise. But a U.S. patent that Amazon Technologies in Reno, Nev., received last week indicates that the mega-retailer has its sights on digital resale, including used e-books and audio downloads. According to the abstract, Amazon will be able to create a secondary market for used digital objects purchased from an original vendor by a user and stored in a user’s personalized data store.

Here is a bit more, and for the pointer I thank Chaim Katz.  And here is news of a new Texas library that will offer digital books only.

Dinner with Fuchsia Dunlop

I am pleased to have shared a meal at A&J Manchurian restaurant, in Rockville with the charming Fuchsia Dunlop.  You may recall that Fuchsia has written what I consider to be the very best Chinese cookbooks in English and indeed some of my favorite books of all time.  She was in town to speak at Georgetown University and to promote her new book Every Grain of Rice: Simple Chinese Home Cooking.

Here were a few topics of conversation and related points:

1. To what extent did excellent Chinese food, in China, go underground during the 1960s and 70s, or to what extent did those traditions need to be reconstructed?

2. Why is there good Chinese food in Panama and Tanzania (my claim not hers), but not in most of Europe, least of all Italy?  Why does Latin America have so little good Chinese food?

3. Should the advanced state of Chinese food in the 18th century, relative to European food, cause economists — including Adam Smith– to revise upward their estimates of Chinese standards of living?

4. Her books are effectively written, in part, because the points are continually reduced to their simplest elements, yet those simple bits are woven together to construct and reveal multiple layers of complexity.

5. The Chinese servers seemed unsurprised by her effortless fluency in Mandarin.

6. When speaking in the United States she is often taken to some local’s idea of a good Chinese restaurant.  A&J was her proposal.  She was surprised that northern Virginia has restaurants which are exclusively or in significant part Peruvian-Chinese, Indo-Chinese, and Korean-Chinese.

7. To what extent do we live in an unusual temporary bubble of easy foreign access to China?

8. I consider her Hunan book to be her most significant and original achievement, but Every Grain of Rice is the most useful single all-purpose Chinese cookbook she has written.  It is especially good on the vegetarian side.

9. Each of us wished to defer dictatorial ordering rights to the other.

10. At what age do people learn or discover the determination to carve out a life of (relative) freedom for themselves?  To what extent is their ability to achieve such a life the result of luck or of skill?

11. The cucumber salad in hot garlic sauce was very good.  No cookies.

Beware most measures of government consumption

Garett Jones reports:

Here’s one big area where I think we should change what we call one type of government spending: Medicare and Medicaid.  Currently, these types of spending are counted as transfer payments (BEA PDF here) and so when we measure GDP they show up in C, consumer purchases.  I think they should show up in G, government purchases.  These medical purchases are so tightly controlled by the government that doctors–oops, “medical service providers”–have become and should be considered government contractors just like defense contractors or construction firms.

Sometimes you hear or read talk of “government consumption plunging,” but sometimes what is happening is that health care expenditures are crowding out other programs, which is not exactly the same thing as fiscal consolidation.

The economics of Lego (investment markets in everything)

Here is one excerpt from a lengthy and data-intensive post, which likely offers more than you ever would wish to know:

The internet can be blamed for the size and scope of the secondary LEGO market. On the website, BrickLink, you can find almost any set that LEGO has ever produced. In addition, the site keeps records of trends in the market and value of individual pieces. This site is invaluable to a LEGO collector and has given many the ability to grow their collections. Before the advent of this site and sites like eBay, collecting LEGO required going to garage sales. There are now whole sites dedicated to buying LEGO as an investment, but that is a topic for another article.

This creation and expansion of the secondary market in conjunction with LEGO now marketing some of their products to an older audience has made the prices of some old sets increase exponentially.  On the extreme range, there is the UCS Millennium Falcon that is selling new for upwards of $2,000 (and close to $1,500 USED!). It sold for $500 new in 2007. Even non-licensed sets can run a premium, such as the Cafe Corner that was one of the original modular buildings. It was $150 new and now it can sell for over $1,000.

For pointers I thank Michael Rosenwald and Kevin Won.

Assorted links

Good sentences about fashion and copying

The mass copying of a style is what creates a trend, and trends sell clothes today.  This is why many in the industry furiously protect their right to ripping each other off.  Two law professors, Kal Raustiala and Chris Sprigman, have argued against the design piracy act on the grounds that the American apparel industry “may actually benefit” from copying, as it speeds up the creation and exhaustion of trends.

Note the clever assignment of the externality.  Rapid copying is needed for customers to develop the expectation that trends come and go rapidly, and thus to get customers to visit the store and buy today.  Yet no single business will invest enough on its own in creating these broader expectations, because the industry as a whole reaps the benefit.  The “copying game” induces the sellers to, in essence, act collusively to help establish these “hurry up and buy now” expectations.

The quotation is from Elizabeth L. Cline’s Overdressed: The Shockingly High Cost of Cheap Fashion, which I quite enjoyed reading, despite some glaring weaknesses when it comes to FDI, wages, and foreign development.  I now understand the affordable yet fashionable clothing stores in Tysons Corner Mall, and how they have changed over the last fifteen years, and I can thank this book for that.

Average earnings of young college graduates are still falling

Alas, take a look:

educationwages

Diana G. Carew, who works with Michael Mandel, reports:

The latest Census figures show real earnings for young college grads fell again in 2011. This makes the sixth straight year of declining real earnings for young college grads, defined as full-time workers aged 25-34 with a bachelor’s only. All told, real average earnings for young grads have fallen by over 15% since 2000, or by about $10,000 in constant 2011 dollars.

That picture is the single biggest reason why higher education in this country is in economic trouble as a sector.  And yes, I do understand that the “education premium” is robust, but that means wages for non-college workers have been hurting as well.  At some margin, when it comes to determining how much you will pay for college, the absolute return matters too.  The full article is here.

Not so Simply Orange juice

Simply Orange juice is actually not all that simple. The taste of the the Coca-Cola-owned brand is governed by a complex algorithm that allows for the 600+ juice flavors to be tweaked throughout the year to ensure consistency.

From Jason Kottke, here is more.  And from The Atlantic, here is further explanation:

The algorithm is designed to accept any contingency that might affect manufacturing, from weather patterns to shifts in the global economy, and make adjustments to the manufacturing process accordingly. Built into the model is a breakdown of the 600-plus flavors that are in orange juice that are tweaked throughout the year to keep flavor consistent and in line with consumer tastes. Coke even sucks the oxygen out of the juice when they send it to be mixed so that they can keep it around for a year or more to balance out other batches. Doug Bippert, Coke’s vice president of business acceleration, calls it “a flight simulator for [Coke’s] juice business.” (Funnily enough Delta uses the same algorithm to balance its books.) “If we have a hurricane or a freeze,” Bippert added, “we can quickly replan the business in 5 or 10 minutes just because we’ve mathematically modeled it.”