Month: April 2013
The nature of French austerity
Mr Hollande himself has acknowledged that the state has got too big. “Public spending has reached 57 per cent of national wealth. It was 52 per cent five years ago. Do we live better for it? No,” he said late last year.
Agnès Verdier-Molinié put it differently:
“The reason spending has exploded is the multitude of different benefits and all the layers of administration,” she says.
Of course the French economy is already a mess. Spending cuts may well be coming:
The government admits that it has run out of room to increase taxes, with the tax burden now equal to more than 46 per cent of GDP – one of the highest in the EU. This leaves Mr Hollande, who campaigned against austerity, having to persuade the country to accept a programme of public spending curbs of at least €60bn through 2017 from a total currently running at about €1.2tn a year.
I suppose you could argue that the current French slowdown is due to the expectation of future spending cuts, but most of us would find this difficult to swallow. I will also predict that — if and when the spending cuts come — they will be accompanied by a worsening of output and employment, if only because French labor markets are not very flexible. Still, it would be odd to suggest that “austerity” is the root cause of the French economic problems rather than a symptom of other, deeper issues.
Assorted links
2. Play-Doh 3-D printer (didn’t I have one of those when I was three, namely my fingers?).
3. Will drones revolutionize farming?
4. Samoa Air charges by the kilo.
5. Yelp reviews of a jail; excerpt: “The staff seem like former Walmart employees or even criminals themselves…” That commentator gave the jail only a single star. And cosmopolitan Norwich.
Felix Salmon on Bitcoin
It is a very good piece, although I fear by adding this link I will get more media requests to comment on Bitcoin. Here is the best set of sentences I have read today:
…bitcoins are an uncomfortable combination of commodity and currency. The commodity value of bitcoins is rooted in their currency value, but the more of a commodity they become, the less useful they are as a currency.
There is, by the way, no current way to short Bitcoin.
The hybrid educational model works
This is from the new William G. Bowen book, Higher Education in the Digital Age:
…we found no statistically significant differences in standard measures of learning outcomes (pass or completion rates, scores on common final exam questions, and results of a national test of statistical literacy) between students in the traditional classes and students in the hybrid-online format classes…This finding, in and of itself, is not different from the results of many other studies. But it is important to emphasize that the relevant effect coefficients in this study have very small standard errors…what we have here are “quite precisely estimated zeros.” That is, if there had in fact been pronounced differences in outcomes between traditional-format and hybrid-format groups, it is highly likely that we would have found them.
Note also that this finding holds across various subgroups of the basic student population, including students from families with incomes below 50k a year, first-generation college students, non-white students, and students with GPAs below 3.0.
The core report is here.
What’s the best sentence ever formed?
That was the topic of a recent Quora forum (by the way may I officially announce that Quora seems to have succeeded? Would it be so bad to spend less time with your Google Reader and more time browsing Quora?), and here was the top pick:
“I do not know where family doctors acquired illegibly perplexing handwriting; nevertheless, extraordinary pharmaceutical intellectuality, counterbalancing indecipherability, transcendentalizes intercommunications’ incomprehensibleness.”
(Dmitri Borgmann, Language on Vacation: An Olio of Orthographical Oddities. Scribner, 1965)
This is a ‘rhopalic’ sentence: A sentence or a line of poetry in which each word contains one letter or one syllable more than the previous word.
File under “Very good sentences’! If I understand the Quora system correctly, that was from Ramnath Ragunathan.
Nishit Jain has the runner-up:
Buffalo buffalo Buffalo buffalo buffalo buffalo Buffalo buffalo.
No, really. There’s a whole Wikipedia page on it – Buffalo buffalo Buffalo buffalo buffalo buffalo Buffalo buffalo
The sentence’s intended meaning becomes clearer when it’s understood that it uses the city of Buffalo, New York and the somewhat-uncommon verb “to buffalo” (meaning “to bully or intimidate”), and when the punctuation and grammar is expanded so that the sentence reads as follows: “Buffalo buffalo that Buffalo buffalo buffalo, buffalo Buffalo buffalo.” The meaning becomes even clearer when synonyms are used: “Buffalo-origin bison that other Buffalo bison intimidate, themselves bully Buffalo bison.”
The entire thread is worth reading, and in your spare time you can ponder why most of the best answers come from individuals with names from the subcontinent. Here is the contribution of Veekas Shrivastava, listed as an elementary school chess player (retired):
A little grammar puzzle:
“that that is is that that is not is not that is it is it not”
Correctly punctuated: “That that is, is. That that is not, is not. That is it, is it not?”
Here is from Sugavanesh Balasubramanian:
“However, this valorous visitation of a by-gone vexation, stands vivified and has vowed to vanquish these venal and virulent vermin vanguarding vice and vouchsafing the violently vicious and voracious violation of volition.”
So there.
William Shakespeare, grain hoarder
There seem to be some new results about the life of the Bard:
The Bard of Avon, who championed the downtrodden in plays like “Coriolanus,” was a conniving character in his personal life, British researchers claim — a tax dodger who profiteered in food commodities during a time of famine.
William Shakespeare was fined repeatedly for illegally hoarding grain, malt and barley for resale during a time of food shortages. He also was threatened with jail for avoiding taxes, according to the study of court and tax archives by researchers at Aberystwyth University in Wales.
The profits were channeled into real-estate deals, the researchers wrote, making Shakespeare one of Warwickshire’s largest landowners.
…It would seem that Shakespeare was drawing on personal knowledge when he wrote “Coriolanus,” a political tragedy that includes an early 1600s version of an Occupy protest against the 1%:
“They ne’er cared for us yet: suffer us to famish, and their storehouses crammed with grain; make edicts for usury, to support usurers; repeal daily any wholesome act established against the rich, and provide more piercing statutes daily to chain up and restrain the poor.”
Adam Smith of course argued that the grain hoarder was usually welfare-improving. Other accounts of the new Shakespeare results are here. Here is one good article with this interesting bit:
She said the playwright’s funeral monument in Stratford’s Holy Trinity Church reflected this. The original monument erected after his death in 1616 showed Shakespeare holding a sack of grain. In the 18th century, it was replaced with a more ”writerly” memorial depicting Shakespeare with a tasseled cushion and a quill pen.
So far I cannot find a draft of the original research paper itself.
The recent boost to Medicare
This was an under-reported story which I missed at first. Sarah Kliff reports:
…the Obama administration reversed a proposed 2.3 percent pay cut for private Medicare plans, replacing it with a 3.3 percent raise.
For health plans, this was a huge victory. As Citi analyst Carl McDonald put it in a Tuesday note to investors, this was “Armageddon averted.”
“The rate adjustment,” McDonald continues, “sends a pretty clear message that CMS has no interest in seeing major disruption in the Medicare Advantage program right now, quieting concerns about a post election desire to rein in enrollment and margins.”
Medicare Advantage plans will still get a tiny haircut due to other changes the federal government proposed. The 2.3 percent pay cut that became a 3.3 percent raise was one among a few cuts that the Obama administration had proposed for 2014.
Cuts to Medicare Advantage plans mandated in the Affordable Care Act, for example, will still go forward.
Overall though, the cuts are way smaller than what the Obama administration initially proposed. McDonald at Citi estimates that Medicare Advantage plans will see a 2 percent rate reduction, compared to 7 percent to 8 percent that analysts predicted with the initial rates.
Here is more. This is but a single data point, but I take it as further evidence that fiscal consolidation cannot easily be done on a dime. In fact it cannot easily be done at all, especially in the United States. Here is my earlier post “Why are budget issues urgent now?”. You will note that Medicare Advantage is a program considered especially irksome, and especially costly, by many commentators on the left.
Assorted links
1. How has the sequester turned out for air travel?
3. Economic difficulties in the Netherlands.
4. Are Americans saving enough?
5. Kidnapping markets in everything.
6. Speculations about China and bird flu.
7. Good short review of Ray Fisman and Tim Sullivan’s The Org. Here is an associated Freakonomics Q&A.
8. Fed odds from Neil Irwin; my prediction is we get one extra year of Bernanke and only then another candidate.
Patent Thickets Reduce Innovation
In a report for the UK Intellectual Property Office, Bronwyn Hall et al., find that patent thickets exist in a number of technological fields and that thickets reduce innovation.
We find overwhelming evidence in the literature that patent thickets arise in
specific technology areas….Our main contribution in this study consists of an empirical analysis of the
effects of patent thickets at the European Patent Office on entry into patenting by
UK firms….Our results suggest a substantial and statistically significant negative association between the density
of thickets and the propensity to patent for the first time in a given technology
area.As we find thickets to affect entry negatively, there is a strong indication that
thickets represent some kind of barrier to entry in those technology areas in
which they are present. However, we must emphasize that the simple finding of a
barrier to entry created by patent thickets is not proof positive that reducing that
barrier and increasing entry would lead to welfare improvements in the
innovation/competition space. Rather it is the existence of evidence that the
presence of thickets reduces entry combined with the large literature we have
reviewed that shows that currently patent systems do not work as well as they
should. This literature documents quality issues with patents in technology areas
affected by patent thickets, a large decline in the relationship between R&D
spending and patenting in some sectors and a substantial increase in resources
devoted to patent litigation leading to the partial or complete revocation of
patents in areas identified as prone to thickets.
I like their understated conclusion:
All of this may lead one to the conclusion that the operation of the patent system could use some improvement.
In other words, see the Tabarrok Curve.
How do you build immunity from choking? (a meditation on Carlsen and Kramnik)
Yesterday Magnus Carlsen and Vladimir Kramnik each played decisive chess games in the Candidates’ tournament, for the right to challenge Vishy Anand for the world championship title. Carlsen held the tiebreaker, so he had only to match Kramnik’s result — draw or win — to proceed to the match with Anand.
Both lost. Uncharacteristically, both fell into time trouble. Both made bad mistakes even after time trouble was over. The chess world was shocked.
Arguably both choked.
Yet Kramnik has won several world championship matches, including against Kasparov, and Carlsen rose to world #1 at a very young age of course.
How does one become immune to choking?
If you have mastered stages 1 through n, presumably you still can choke at stage n + 1. Carlsen had never played in a world championship or candidates’ match before. In 1997 Kasparov choked when he had to play an improved Deep Blue, a machine.
Is there mean-reversion in choking and immunity to choking? If you play at a supremely confident level at the very top, nine times in a row, do you forget how to handle pressure and eventually revert to choking? Immunity against choking can wear off, or holding a title and having to defend it can raise the fear of choking through a kind of endowment effect (Bobby Fischer).
Does a string of confident winning raise the stakes more rapidly than you can master a rising choke, thus bringing you to n + 27 too quickly? (The Miami Heat just lost a 27-game winning streak.) Joe DiMaggio’s 56-game hitting streak has proven so hard to break, as there is always a new and tougher choking margin.
Or can one ascend to n + 3 with sufficiently strong margins of error that perhaps the fear of choking is never overcome and remains in the background for when tougher situations come along? Or one can ascend to n + 3 if everyone chokes along the way; someone must be choking least but still you are always a choker.
Under one theory, you become immune to choking at stage n + 2 only by at least once choking at stage n + 2 and then, on another occasion, overcoming your choke. I call this the LeBron James theory. Can it be that such loss/win experiences are required periodically and not just once up front?
The lessons are that it can be difficult to overcome choking, and that a complex mix of losing and winning may help you more with choking than simply lots of winning.
The thinning out of the labor market middle
The US has gained 387,000 managers and lost almost 2m clerical jobs since 2007, as new technologies replace office workers and plunge the American middle class deeper into crisis.
Data from the Bureau of Labour Statistics divide the US workforce into 821 jobs from dishwasher to librarian. They show rapid structural shifts – on top of a cyclical unemployment rate of 7.7 per cent – that may increase income inequality.
One probable cause of rising inequality is new computing technologies that destroy some middle-class occupations even as they create jobs for highly skilled workers who can exploit them.
The number of clerical workers such as book-keepers, tellers, data entry keyers, file clerks and typists has been falling, pointing to a structural decline. The number of retail cashiers has also dropped – indicating that internet shopping and self-checkout systems may be eroding another occupation.
Employment growth came from healthcare, management, computing and food service jobs. The number of personal care aides is up 390,000 since 2007. Demand for people who figure out how to replace clerical workers – such as operations managers, management analysts and logisticians – grew substantially.
…But salaries for many of the fast-growing occupations are lower than those they are replacing. The average wage for a clerical job in 2012 was $34,410 compared with $24,550 for a post in personal care. The average computing wage was $80,180 and $108,570 for managers.
The FT story is here.
I would add this. It is often a mistake to think that “cyclical” and “structural” explanations of unemployment are conceptually separate. When there is a liquidity crunch, as there was in 2008-2009, business owners must plan rather rapidly for the future, and decide which capabilities they will hold on to and build up, and which they will let go of and let rot. It is as if a big part of future plans is suddenly compressed into current decisions. Some unemployment will result, but it is both cyclical and structural at the same time. A separate point is that the “structural” features will help determine how much of a nominal wage decline may be required to maintain or restore employment. Furthermore in many search models the distinction between structural and cyclical unemployment is also not easy to define.
The innovator that is France
This is on multiple news sites and the articles claim indeed swear they are not April Fools’ jokes (update: though it seems they are), so here goes:
In Auvergne, a province in central France, residents get their daily news the old-fashioned way: through newspapers. But the delivery of said newspapers, apparently, will soon be executed with the help of high tech — because it’ll be done with the help of drones.
Auvergne’s local postal service, La Poste Group, announced on its blog that it is partnering with the drone-maker Parrot to explore the wacky world of high-flying news delivery. The service will be called “Parrot Air Drone Postal,” and it will make use of Parrot’s quadricopter drones. To test its general feasibility, the delivery service is already being, er, piloted in Auvergne, Silicon Alley Insider reports, with a team of 20 postal workers and 20 drones. (The postal workers control the drones by a specialized app — which they can use on iOS or Android devices.)
For the pointer I thank Charlie Schaezlein, a loyal MR reader.
Assorted links
1. Haitian art museum for sale, $40 million, in the DR.
2. The new Jeff Sachs book is due out in June and appears to cover JFK and foreign policy.
3. China imprisons four men for ‘ghost marriage’ corpse bride trafficking. And the general manager in the Maldives refuses to provide hot water and kettles to Chinese tourists.
How effective are capital controls?
In general, capital controls are found to have little impact on the total volume of capital inflows and thus on currency appreciation. For example, the imposition of inflow restrictions by Brazil, Chile, and Colombia in the 1990s had no significant impact on total capital inflows, nor were pressures on the exchange rate alleviated. In fact, over the course of their capital controls, the real effective exchange rate appreciated by about 5 and 4 percent annually in Brazil and Chile, respectively. In Thailand the real exchange rate started appreciating within a week after controls of short-term flows were imposed in December 2006. The most recent episode of control in Colombia (during 2007-08) was also ineffective in reducing the volume of non-FDI inflows or in moderating the currency appreciation…
That is from Jonathan D. Ostry, “Managing Capital Inflows: Old and New Debates,” in The Great Recession: Lessons for Central Bankers, edited by Jacob Braude, Zvi Eckstein, Stanley Fischer, and Karnit Flug.
Do note that the passage above can be taken either as evidence for or against restrictions on capital flows.
John Stuart Mill’s Letter to Bentham
TO JEREMY BENTHAM
My dear Sir,
Mr. Walker is a very intimate friend of mine, who lives at No. 31 in Berkeley Square. I have engaged him, as he is soon coming here, first to go to your house, and get for me the 3.d and 4.th volumes of Hooke’s Roman history. But I am recapitulating the 1.st and 2.d volumes, having finished them all except a few pages of the 2.d. I will be glad if you will let him have the 3.d and 4.th volumes.
I am yours sincerely
John Stuart Mill.
Newington Green,
Tuesday 1812.
A rather ordinary letter until one considers the date. Mill you see was born in 1806, thus making him six at the time of writing. The editors of Mill’s letters note that his essay on Hooke’s Roman history has survived and includes a footnote correcting Hooke’s Greek.