Month: July 2013

*The Great Escape*

The author is Angus Deaton and the subtitle is Health, Wealth, and the Origins of Inequality.  It is a very good book, as you might expect.  Here are two bits I found especially interesting:

In Sweden in 1751 — well before the modern mortality decline — it was riskier to be a newborn than to be an 80-year old.

And, somewhat more recently:

…until around 1900, adult life expectancy in Britain was actually higher than life expectancy at birth.  In spite of having lived for 15 years, those teenagers could expect a longer future than when they were born.

The book’s home page is here.

The household economics of 3-D printers

I have been a skeptic about the import of this new technology, but I am happy to pass along estimates to the contrary.  This is from a new paper by Wittbrodt,

The recent development of open-source 3-D printers makes scaling of distributed additive-based manufacturing of high-value objects technically feasible.  These self-replicating rapid prototypers (RepRaps) can manufacture approximately half of their own parts from sequential fused deposition of polymer feed stocks. RepRaps have been proposed and demonstrated to be useful for conventional prototyping and engineering, customizing scientific equipment, and appropriate technology-related manufacturing for sustainable development.  However, in order for this technology to proliferate like 2-D electronic printers have, it must be economically viable for a typical household. This study reports on the life-cycle economic analysis (LCEA) of RepRap technology for an average U.S. household.  A new low-cost RepRap is described and the costs of materials and time to construct it are quantified.  The economic costs of a selection of twenty open-source printable designs (representing less than 0.04% of those available), are typical of products that a household might purchase, are quantified for print time, energy, and filament consumption and compared to low and high Internet market prices for similar products without shipping costs.  The results show that even making the extremely conservative assumption that the household would only use the printer to make the selected twenty products a year the avoided purchase cost savings would range from about $300 to $2000/year.  Assuming the 25 hours of necessary printing for the selected products is evenly distributed throughout the year these savings provide a simple payback time for the RepRap in 4 months to 2 years and provide an ROI between>200% and >40%.  As both upgrades and the components that are most likely to wear out in the RepRap can be printed and thus the lifetime of the distributing manufacturing can be substantially increased the unavoidable conclusion from this study is that the RepRap is an economically attractive investment for the average U.S. household already. It appears clear that as RepRaps improve in reliability, continue to decline in cost and both the number and assumed utility of open-source designs continues growing exponentially, open-source 3-D printers will become a mass-market mechatronic device.

I don’t see the twenty products a year as coming true, given the current limitations of the printers, plus there are significant start-up costs for learning how to run and fix the printers.  I still despair at the paper printer we own, which breaks periodically in a non-transparent manner.  What does it cost to have a plumber remove a simple hair stoppage in a drain these days?  And how much does one have to pay for the IP rights for what one prints?

Still, I am happy to reproduce one economic case for the import of the technology.

For the pointer I thank Sami Varma.

Assorted links

1. John Cochrane on the case for gold.

2. An update on European economies, including some pieces of good news.

3. Miracle Village, Florida.

4. The experiment with a tipless restaurant, part II here.  Here is one good passage: “The other reason we didn’t accept tips was that removing any option for tipping was the only way to remove those two parasitic businesses — the side business between the server and guest, and the side business between the server and cooks — from our own company.  By not allowing these side businesses to exist, we created an environment where all of us were engaged in only one mission, our stated goal of creating remarkable experiences for our guests, around local food and drink.  Being in only one business made us like pretty much every other company in America, except that it also made us unlike any other restaurant in America.”

5. “Borges never wrote a work of fiction longer than fourteen pages.”

6. Hermit shell crabs and city skylines, from Japan.

The Asian consequences of the taper

From the FT two days ago:

Mr Bernanke’s first mention of tapering in May sent debt markets worldwide into a tailspin. But Asia was in many ways the worst-hit region.

Having broken full-year records for junk bond issuance by mid-April, the market froze abruptly, and remained largely closed for two months. New high-yield deals raised $3.7bn in May but just $176m in June, according to Dealogic, while monthly investment grade corporate bond volumes more than halved.

Chinese companies – which had been the main source of issuance this year – have been notably absent in recent months. No mainland-based borrower has tapped the dollar or euro bond markets since May 22, the day of Mr Bernanke’s remarks, while the market for new offshore renminbi bonds has been suffering from its longest ever barren spell.

The problems have not been confined to China. Indonesia’s sovereign bonds offer the clearest example of the change in attitudes towards Asian credit. In April this year, the country raised $3bn in 10-year debt with a coupon paying just 3.5 per cent, a record low. When it returned to the market two weeks ago, it sold $1bn of bonds with the same duration at a yield of 5.45 per cent. In that time the spread paid above US Treasuries had jumped from 1.76 per cent to 2.87 per cent.

Fund flows have played their part. June saw record outflows from emerging market fixed income funds, according to data from EPFR, forcing many to cut positions. Rising concerns about China, which late last month saw its worst interbank liquidity crunch to date, also sapped demand.

But Mr Bernanke’s comments have been by far the most important factor…

Again, I don’t wish to endorse the “we have created bubbles” argument as it is usually stated.  Still, those are not the results I had expected and I am seeing this data being more or less ignored by the corners of the economics blogosphere which I live in.

Here are some signs that Asian debt markets are stirring back to life.

What are the major market indices for climate change?

Dan Kahan asks me that question.  The Credit Suisse index does not seem very liquid and it is not clear to me if it is still actively traded.  In any case this earlier look at the index implies it is about mitigation efforts, not the extent of warming or climate change per se.  UBS launched an index in 2007, but I don’t see recent activity in the index mentioned in Google.  There are various anecdotal accounts of insurance companies being less willing to cover waterfront property in hurricane-prone areas.

I hit some walls on this one and so I turn it over to you, MR readers.  What are the best market indices — of whatever nature — for tracking the extent of the problem?  I thank you in advance for your assistance.

Assorted links

1. Angus on the Fed succession debates.

2. Borges on Dr. Johnson.

3. Private coupon currency in the Bangladesh slum in Kenya.  The legal update is here.

4. Will India beat us to biometric ATM cards?

5. The etiquette of escalator travel, where inefficiency and barbarism reign.

6. Why has India been so successful in reducing poverty?  For one thing, there is some progress on the agricultural front.

The High Costs of Travel Visas

U.S. citizens are fortunate in that most European and South American countries no longer require a visa for US travelers. It’s surprising, however, how many countries continue to make it difficult to visit. Some countries don’t want visitors, of course, but even a country like India, a democracy that relies a lot on tourism, still requires costly and time-consuming visas. A new paper from Robert Lawson and Saurav Roychoudhury estimates that the cost of these restrictions can be quite large.

Using a travel visa data set developed by Lawson and Lemke (2012) and travel flow data from the World Bank and the UN’s World Tourism Organization (UNWTO), we investigate the deterrent effect of travel visa requirements on travel flows. At the aggregate level, a one standard deviation more severe travel visa regime, as measured, is associated with a 30 percent decrease in inbound travel. At the bilateral level, having a travel visa requirement on a particular country is associated with a 70% reduction in inbound travel from that country. The gains associated with eliminating travel visas appear to be very large.

Oh for the days prior to 1914 when Keynes wrote that a person could travel “without passport or other formality” throughout much of the world.

There is now a for-profit university entering NCAA Division I ranks

…Mueller’s company, Grand Canyon University, in Phoenix, is in the process of becoming the first-ever for-profit university to join the NCAA’s Division I ranks. The Antelopes (hence, the ticker symbol) accepted an invitation to the WAC last December when the oft-raided league was on life support. On July 1 they became official members, beginning a four-year transition period from Division II to Division I

The presidents of the Pac-12 — including one in particular — are none too pleased about it.

The conference’s 12 presidents signed and delivered a letter dated July 10 urging the NCAA’s Executive Committee to “engage in further, careful consideration” about allowing for-profit universities to become Division I members at the committee’s August meeting. In the meantime, Pac-12 presidents decided at a league meeting last month not to schedule future contests against Grand Canyon while the issue is under consideration.

“A university using intercollegiate athletics to drive up its stock value — that’s not what we’re about,” Arizona State president Michael Crow said in a phone interview over the weekend. “… If someone asked me, should we play the Pepsi-Cola Company in basketball? The answer is no. We shouldn’t be playing for-profit corporations.”

There is more information here, and the hat tip goes to Tim Johnson on Twitter.

What I’ve been reading

1. The Childhood of Jesus, by J.M. Coetzee.  Two-thirds of this is superb, although as a whole it doesn’t quite hang together.  It’s still much better than most of what is published.

2. David Soll, Empire of Water: An Environmental and Political History of the New York City Water Supply.  A good overview of the history, plus it makes it clear just how much the growth of the City required somewhat rapacious behavior with respect to the water rights of upper New York State.  The early history of the Groton Reservoir is interesting too.

3. Mark Leibovich, This Town: Two Parties and a Funeral-Plus, Plenty of Valet Parking!, in America’s Gilded Capital.  I feared this would bore me with atheoretical mud-slinging and gossip, but it is actually an astute look at “behavioral public choice” and how a lot of D.C. politics actually operates.  If you think you might want to read it, you should, although you can stop somewhere in the middle just fine.  My main objection is the subtitle.

Higher education in Greece

From a recent article:

“He says his name is George but declines to give his last name. He’s 29 years old, holds a master’s degree in economics, and has been unemployed for a year and a half, not counting the five months he worked as a street cleaner.

“It’s more difficult for the highly qualified,” he says. “The market thinks we will cost too much.” He’s applying for a position as a secretary, a job that requires a high school degree. For a couple of minutes, he and Stratigaki discuss whether his education will be an asset or a liability, and then their names are called.”

The article is here, sad throughout.  For the pointer I thank George Hawkey.

*How to Get Filthy Rich in Rising Asia: A Novel*

For a while I resisted reading this novel because I assumed it was a clever title followed by pedestrian content.  But it is actually an engaging book centered around the topic of…how to get filthy rich in rising Asia.  It is also a nice parody of self-help books.  I never considered putting it down.

Furthermore it is a landmark in the integration of economics and fiction, in this case development economics.  It’s more individual-centric than the “economics novels” of Russ Roberts.  You can think of this as a fictional economics biography with the quality of a book you would wish to read for its own sake.

The author is Mohsin Hamid and you can order the book here.

The new Baptists and bootleggers?

Activists fighting to legalize marijuana in states across the country are running into an unlikely opponent: people who make a living in the medical marijuana industry. Politico calls it “Big Marijuana,” noting that those who form part of the billion-dollar industry are fighting hard to keep competitors out of the game. In its fight against full legalization, the medical marijuana sector has joined some unusual allies. The Medical Marijuana Caregivers of Maine, for example, joined law-enforcement groups and social conservatives to fight against a bill that would have legalized possession of small quantities, reports Politico.

Medical marijuana is good business not just for dispensaries but also the doctors who agree to prescribe the drug. Finding a doctor willing to recommend the drug “can take months,” reports Market Watch. In Massachusetts, for example, some 3,000 people are on the waiting list to see a doctor.

The link is here.

Off-label prescribing vs. RCT

Incidentally, another thing that’s fascinating to me is that, there’s a very funny saying when it comes to the ethical review of science, or an anecdote, which is that if a doctor wakes up in the morning and decides that, for the next 100 patients with cancer that he or she sees that have this condition, he’s going to treat them all with this new drug because he thinks that drug works, he can do that. He doesn’t need to get anyone’s permission. He can use any drug “off-label” he wants when, in his judgment, it is helpful to the patient. He’ll talk to the patient. He needs to get the patient’s consent. He can’t administer the drug without the patient knowing. But, he can say to the patient, “I recommend that you do this,” and he can make this recommendation to every one of the next 100 patients he sees.

If, on the other hand, the doctor is more humble, and more judicious, and says “you know, I’m not sure that this drug works, I’m going to only give it to half of the next 100 patients I see,” then he needs to get IRB approval, because that’s research. So even though he’s giving it to fewer patients, now there’s more review.

That is from Nicholas A. Christakis, via Jim Olds.  The discussion is mostly about Big Data.