Month: September 2013

Assorted links

EconTalk with Russ Roberts on *Average is Over*

You will find the podcast and text here, and Russ is as always an excellent interviewer.  Excerpt:

TC: And I think 50 years from now we’ll look back on that and be shocked at the notion that so many poor people got to live in Manhattan, Los Angeles, wherever we are talking about. Because in the future they will be in other places with lower rents.

Markets in Everything: Fake Articles

DISGUISED as employees of a gas company, a team of policemen burst into a flat in Beijing on September 1st. Two suspects inside panicked and tossed a plastic bag full of money out of a 15th-floor window. Red hundred-yuan notes worth as much as $50,000 fluttered to the pavement below.

Money raining down on pedestrians was not as bizarre, however, as the racket behind it. China is known for its pirated DVDs and fake designer gear, but these criminals were producing something more intellectual: fake scholarly articles which they sold to academics, and counterfeit versions of existing medical journals in which they sold publication slots.

…The pirated medical-journal racket broken up in Beijing shows that there is a well-developed market for publication beyond the authentic SCI journals. The cost of placing an article in one of the counterfeit journals was up to $650, police said. Purchasing a fake article cost up to $250. Police said the racket had earned several million yuan ($500,000 or more) since 2009. Customers were typically medical researchers angling for promotion.

From The Economist.

Hat tip: Derek Lowe.

Arresting the bad guys in Greece

Probably most of you know by now that the Greek government has moved to arrest leading members of Golden Dawn, their neo-Nazi Party, including parliamentary members and leaders of the party.  These members seem to be bad people, even by the low standards of neo-Nazi parties worldwide.

Still, it is odd to arrest the leadership the leadership of an elected political party — even a bad one — all at the same time.  At least the typical foreign sources are not completely clear on the exact nature of the “criminal gang” charges (there is a slightly more detailed summary here, and here, see also @Yiannisbab, and one reads that the charges themselves have been leaked only in part to the press).  I understand full well that this is an attempt to preserve democracy for Greece, not an attempt to eliminate it, but still the resulting situation is rather awkward.  And what if some of the key players cannot be convicted?  What kind of new elections are required?  And until conviction, what kinds of political powers, and claims to political funds, do the defendants have?  As Gideon Rachman wrote: “Mass arrests of legitimately elected politicians should always spark unease.”

From this distance, it is difficult to judge whether the right thing has been done.  In any case, when you feel you have to arrest your neo-Nazi party to limit their influence, things have gone far indeed in a very bad direction.  Some sources indicate that fifty percent of the police voted for Golden Dawn.

Addendum: Interestingly, for all of their anti-immigrant stances, the Golden Dawn party seems to have used migrants to sell products illegally on black markets as a revenue raiser.

A point on Spanish economic adjustment

Yesterday Edward Hugh wrote an intriguing passage:

Despite the fact that Spain’s unemployment rate is currently around 27% immigrants continue to arrive in the country (often risking their lives to do so), a fact which puzzled the Financial Times demography correspondent Norma Cohen when we spoke about this article. “Why on earth,” she asked me “would people want to come to Spain with such a high rate of unemployment?” Because salaries are better than in their home countries would be the simple answer, and because they are willing to do work which many Spaniards are reluctant to do, at least at the salaries which are on offer. So economic migrants continue to arrive, an estimated 300,000 of them last year, even though the net migrant flow reversed since more left (both native Spaniards and immigrants) with Spain’s population falling for the first time in modern history as a result.

One interpretation of this finding (not one that Hugh necessarily endorses) is thus.  Given the quality of its institutions, Spain is due for a lower wage structure, with lower quality jobs, as they might be perceived by the workers themselves.  To some extent, Spain will achieve this new equilibrium by population adjustment and exchange.  Spanish engineers will move to southern Germany and Ecuadorans will move to Spain.

Hugh’s post is mostly about Latvia, here is another interesting bit:

…three IMF economists (hereafter BGG) effectively signed off on their study of “what just happened on Latvia” and, they hoped, drew to a close a debate which has been going on now for some 6 years. In fact, far from closing the debate, what they may have done is effectively extend it into new terrain, since these apparently harmlesss words – “the recovery from the slump is largely complete” – have far reaching implications, as does the methodology they use for reaching it. These implications reach well beyond Latvia, and even far beyond the Baltics and the CEE in general, despite the conclusion that everyone seems to be reaching that Latvia was just a “one off”. Possibly without intending to do so, they have drawn onto the clinical investigation table issues which have been mounting  up in the theoretical lumber rooms of neoclassical growth theory for some time now, issues which begin to assume a paramount practical importance in the context of our rapidly ageing societies. What, for example, do we understand by the term “convergence” these days? And if “steady state” growth can no longer be understood as implying a constant growth rate (trend growth in developed economies is now systematically falling) should we be considering the possibility that headline GDP growth will at some point turn negative, even if GDP per capita may continue to rise, due to the fact that populations are steadily starting to shrink. And if the answer to the former question is “yes”, then what are the implications of this for the financial system, for the system of saving and borrowing, and for the sustainability of legacy debt? Not little questions these, but one which will need to find answers and responses in countries like Latvia over the next couple of decades.

A simple account of the pending government shutdown

The House GOP has voted to repeal Obamacare 41 times, as of last count, but that link is from Sept.12 and maybe by now the number is higher yet.  One can thus conclude that the GOP sees advantage in staking out a public position against Obamacare, whether this be with voters, donors, primary opponents, whatever.

By threatening a government shutdown over Obamacare defunding, the GOP is again staking out a public position against the law.  Such a statement is more focal, and generates more publicity, than a 42nd vote for repeal.  Everyone is talking about it, even me (sorry people).  If you’ve voted 41 times for repeal, you will like the fact that everyone is concerned with this new dispute.

If the GOP lets the government actually shut down, people will talk about their Obamacare stance even more.  But the party, and its representatives, will bear costs from being associated with the shutdown, which is inconvenient, hurts the economy, and lowers our international status.  We don’t know whether they will cross this threshold, but either way it is a purely political calculation and not especially mysterious or “irrational.”

It seems to me that ideally the GOP would prefer to “negotiate” forever, without having to shut down the government at all, see this recent report.

The GOP also wishes to combat the notion that it is the intransigent party, and a battle over the relatively unpopular ACA (“why will Obama negotiate with Putin and Assad but not with us?”) is a better arena for them than most of the other venues where this clash of reputations might pop up.

The GOP, from its budget strategies, might manage to repeal the medical devices tax.  Repealing a tax, and chipping away at ACA, is in this setting a major victory for them, especially given that right now they are not winning so many victories.  It doesn’t matter so much that the medical device tax repeal would be relatively small in its impact.  “We forced the repeal of one part of Obamacare” is a big symbolic victory.

Recent events are simply public choice theory in action.

*The Essential Hirschman*

Jeremy Adelman, Hirschman’s biographer, is the editor behind this one, and you can pre-order your copy here.  It contains many of Hirschman’s best known essays, with an afterword by Amartya Sen and Emma Rothschild.

Self-recommending, to say the least.  I find only the title strange, as I would have preferred “Some of the essays by Albert Hirschman which perhaps we are not still underrating,” though I grant that might sell fewer copies.

My interview with Eric John Barker

It is here in excerpts, mostly about Average is Over, but with some twists, here is one part:

TC:…That’s right, and Obi-Wan also tells Luke, “Finish your training in the Dagobah system,” right? How many times did he tell him? Yoda tells him. Yoda. What does Luke do? He tells Yoda to get lost. So I think as humans we’re somewhat programmed to be a bit rebellious and to not want to be controlled, which is perfectly understandable given that others are trying to control us as often as they are. But that’s going to mean in those new settings, which we’ve never biologically evolved to handle, we’re going to screw up an awful lot. Just like Luke did not finish his training in the Dagobah system.

Eric’s very interesting blog you will find here.

Can we sell a good undergraduate degree for $10,000?

Dylan Matthews has an interesting discussion of a plan by Anya Kamenetz, you can read an outline of the plan here.  The upshot of her approach is that an entire degree can be done for 10k per student.  There is much in the plan I have sympathy for, and I do think higher education could be much cheaper and still serve most of its useful functions.  That said, I consider this specific proposal to involve some overselling.

Let me just pick up on the single sub-proposal closest to my life:

She [Kamenetz] would also abolish the major of “business,” the single most popular undergraduate major, but perhaps also the least rigorous, and which produces relatively poor-achieving students. Instead, she’d fold practical business classes into the economics major.

Let’s just, for the sake of argument, accept the premise of the business major being less rigorous at many schools.  I would not make such an incendiary claim myself, certainly not about my own school, but this is an exercise in logic, not empirics.

OK, so at many schools below the top, what would happen?  It would be simple: many of the former or would-have-been business majors would not be able to pass the mid- or upper-level classes of the economics major.  What then?

You can flunk out the less scholastically oriented business majors, which is probably not a good idea.

Or you could make all of those economics classes much easier, which is also probably not a good idea.  The better students lose out and the whole major becomes worth less money and also less prestigious for the school.  In essence you end up abolishing the economics major.

Or you can push the former business majors into some other easy major (communications? education?…those are againt purely hypothetical examples, please put aside the empirics).  That’s not the end of the world, but then the point of the exercise is less than clear.  If a lot of students want to be business majors, is it such a big educational gain to shovel them into some major they perhaps do not want and may also be less marketable?

The most likely outcome would be the creation of a multi-tiered economics major, with a harder track and easier track, labeled accordingly, a bit like the B.S. vs. the B.A., though different in the details.  Again, that is hardly the end of the world, and maybe the idea is worth considering, but at this point we must again ask where are the gains.  I have an idea: let’s call the less rigorous economics track the business major.  Or in the interests of the fig leaf producers, how about the business economics major?  The reality is that many schools do combine economics and business and they don’t seem to achieve major competitive or cost advantages in doing so; in fact they may be more likely to encounter clashes of mission and disagreements over what kind of faculty to hire.

(Are there big gains in overhead reduction from consolidating these two departments?  I don’t see it.  And note that some business schools which contain economics departments are broken down into “groups,” sometimes with semi-autonomous status to limit conflict and transactions costs, and that is going to bring back some overhead costs.)

And so on.  Many parts of such proposals cannot be readily translated into reality, at least not a reality where the cost of a four-year degree sinks to 10k total.  A big problem with a lot of “good ideas” for education is simply that (in various hypothetical universes) the students are not up to them.

Are gas station restaurants the future of cuisine? Or is cuisine the future of gas stations?

Gas stations have not historically inspired confidence as palate pleasers. Day-old (or longer) doughnuts or hot dogs rolling (and rolling) on a spinner grill come to mind. But across the Washington region, there are at least a dozen eateries serving delectable, sometimes organic, fare near the pump. There’s Korean bibimbap in Wheaton, authentic Mexican in Jessup, Thai in Leesburg and Latin American in the District. Corned Beef King cooks its meat for 11 hours.

And here are the economics:

The chefs and dreamers have found willing partners in gas station owners. Some have volunteered to cover the cost of building kitchens to tap new sources of revenue — from rent and increased foot traffic — as the margins on gas sales shrink even furtherand retailers such as Best Buy encroach on their quick-bite turf by stocking soda and snacks at the register.

Here is much more, from Michael Rosenwald.

Assorted links

The nature of current unemployment

Dylan Matthews writes:

…Short-term unemployment is actually lower than it was in 2007. Indeed, the percentage of the labor force that had been unemployed for five weeks or less didn’t grow all that much during the economic meltdown. What changed was what happened after or within those five weeks. In 2007, they typically ended with a job. In 2009 and 2010, they more often ended with another few weeks of unemployment. The result is that if you break down the unemployment rate by duration, the problem appears to be almost entirely about long-term unemployment

There is more here, including a good picture.

Book and movie splat

1. Ilya Somin, Democracy and Political Ignorance: Why Smaller Government is Smarter.  From my colleague at GMU Law, I have not yet read this one.

2. Damien Ma and William Adams, In Line Behind a Billion People: How Scarcity Will Define China’s Ascent in the Next Decade.  How often does a book have both a good title and subtitle these days?  The authors are more pessimistic about China long-term than I am, but nonetheless this is a very interesting take on The Middle Kingdom.

3. Clare Jacobson, New Museums in China.  Good text but mostly a picture book, I loved this one.  Stunning architecture, no art, full of lessons in multiple areas, think of it as a Straussian picture book with beauty on its side too.

4. John Durant, The Paleo Manifesto: Ancient Wisdom for Lifelong Health.  A useful overview of its topic, with an influence from Art DeVany, but you will not find recipes for either “grubs” nor “worms” here.

5. John Sides and Lynn Vavreck, The Gamble: Choice and Chance in the 2012 Presidential Election.  Good, sane tome on how the fundamentals matter and lots of campaigning ends up being cancelled out by the campaign of the other candidate.

From another direction, In a World… is a subtle and entertaining movie with much economics in it, most of all the economics of superstars in the “voiceover” sector.  The Autobiography of Nicolae Ceacescu is mesmerizing, like watching one of the great silent films of the past, and the scenes where the Chinese communists praise the Romanian communists are some of the best ever filmed.

None of the Above Wins!

NEW DELHI—Indians have a new choice when they go to the polls: None of the above.

On Friday, the Supreme Court said voters in the world’s largest democracy have the right to disapprove all candidates on the ballot, a step that could put pressure on parties to field better-qualified politicians.

“This judgment allows people to send a clear message to political parties,” said Mahi Pal Singh, national secretary of the People’s Union for Civil Liberties, which had petitioned the court for the change.

Activists said they hope the court’s ruling—ahead of five state elections this year and national polls due by the end of May—is a first step toward the establishment of a broader “right to reject.”

Excellent news. Bear in mind:

Nearly a third of the members of the lower house of Parliament are facing criminal charges, according to the Association for Democratic Reforms, a New Delhi-based advocacy group for transparency in governance.

Even if that were not the case, however, one of the problems of democracy is that there is too little feedback and information transmission, due both to rational ignorance and the bundle nature of politics. Allowing for “none of the above” provides, not a panacea, but a little bit more feedback. Many people vote but have to hold their noses to do so. Many others don’t vote but do they not vote because they are satisfied or dissatisfied? None of the above gives the dissatisfied a chance to reveal their views and in so doing it may encourage more and better candidates.

At present, voting none of the above is just informational, i.e. none of the above is never “elected” even if it gets a majority, although the option to vote NOTA may change the outcome of the election. In the future a NOTA majority might signal a new election.

India is the world’s largest democracy. It will be interesting to see how this plays out.

Hat tip: Reuben Abraham