Month: September 2013

On the importance of symbolic victories in politics

Harold Meyerson writes:

The Democratic Party’s romance with Wall Street may finally be breaking up. In the past 10 days, a diverse group of Democratic senators scuttled Larry Summers’s candidacy for Federal Reserve chair and New York Democrats voted for the mayoral candidate whose campaign was an attack on Michael Bloomberg’s care and feeding of the super-rich at the expense of the rest of the city. Former commerce secretary (and JP Morgan Chase executive) William Daley’s surprise withdrawal from the Illinois Democratic gubernatorial primary is one more indication of Wall Street’s diminished sway.

There is more at the link.

Yet I view it differently.  As I observe the new equilibrium, the Left won a big symbolic victory by striking down the Summers nomination.  But it was precisely that — a symbolic victory.  When it comes to banking regulation, there is not much reason to believe that “Summers plus current political forces” would have been very different from say “Yellen plus current political forces” or for that matter Donald Kohn.

Symbolic victories are a relatively cheap way to buy off or appease interest groups, and arguably you can view this as part of a broader portfolio — from the Democrats too — to continue catering to Wall Street, for better or worse.  After all, share prices did rise on the Summers withdrawal (which by the way does not have to mean he was a bad pick, perhaps Wall Street simply did not like the uncertainty of a highly politicized confirmation battle), so that is hardly a slap in the face to the Street.

One might also expect that, as political polarization increases, political agents will allow more such symbolic fights to arise, or perhaps even manufacture them deliberately.  These symbolic fights make it easier to trade with the more extreme or dissident elements in a political party or movement.

The problem with the current budget negotiations is that the Republicans have not yet seized upon what would be the suitable symbolic victory to take home to some of their supporters.  Yet likely such a symbolic “victory” (also known as “defeat”) exists and it will be found, and that is one reason why stock markets are up and interest rates remain low.

Who needs the law of one price?

From Jason Kottke (I have eschewed indentation):

“File this under “markets in everything”: people will pay big money for US currency notes with interesting serial numbers.

Low serial numbers, from 00000001 to 00000100, are sought after, as well as palindromes (23599532), solids (with a digit that repeats eight times), seven-of-a-kinds (66666665), ladders (45678901) and important dates (12071941). The criteria get even more obscure from there: Undis is seeking a pi note, with the number 31415927. But the more apparently jumbled the digits, the less likely it is that anyone with the bill in their wallet will ever notice.

Which is too bad when you consider how much these fancy numbers can sell for-quite a bit more than the bill’s face value, in some cases. Right now, on Undis’ website, you can buy a $1 bill with the serial number 00000002 for a whopping $2,500. If that sounds like chump change, consider that a $5 bill with the number 33333333 goes for $13,000.

And here I thought I was being pretty eagle-eyed by fishing a $2 bill out of the tip jar at the bagel place this morning. (via digg)”

Update: The original story was from Graeme Wood at The Boston Globe.

The delayed Fed taper, as experienced abroad

Emerging markets: on fire: Brazil yields down 40bps, real nearly 3% up Rupee 2.5% stronger. Zloty 1.5%, rand 2% etc

That is from Pawel Morski.  I’ve read many pro-delay-the-taper posts, and agreed with the (domestic) analysis in most of them, but I haven’t seen anyone address the um…shall we call it a trade-off?…here.

The optimistic reading is that those are sustainable gains based on higher U.S. growth, and thus higher demand for developing country exports, but it’s very hard to get the numbers to add up, or anything close, for that kind of explanation.  More likely the pricking of those bubbles has been delayed.  Is that good or bad?  (What happened to caring most about the poor?)  To even raise such a question means we probably should be agnostic about what is going on, and that is hardly the most popular attitude in the economics blogosphere when it comes to monetary policy.

The case of the disappearing teaspoons

That is the title of a new research paper, by Lim, Hellard,and Aitken, and here are some of the key results:

Subjects 70 discreetly numbered teaspoons placed in tearooms around the institute and observed weekly over five months.

Main outcome measures Incidence of teaspoon loss per 100 teaspoon years and teaspoon half life.

Results 56 (80%) of the 70 teaspoons disappeared during the study. The half life of the teaspoons was 81 days. The half life of teaspoons in communal tearooms (42 days) was significantly shorter than for those in rooms associated with particular research groups (77 days). The rate of loss was not influenced by the teaspoons’ value. The incidence of teaspoon loss over the period of observation was 360.62 per 100 teaspoon years. At this rate, an estimated 250 teaspoons would need to be purchased annually to maintain a practical institute-wide population of 70 teaspoons.

For the pointer I thank Tord Mule, guitar shredder.

Assorted links

Does changing household size resurrect American economic performance?

Persons per family household:

1990: 3.22

2000: 3.24

2010: 3.24

Not so much change, and if you look you will see there is also not so much change for non-family households.  The Census pdf is here.  I have covered this ground before, but the myth of “changing household size means economic progress has been just fine” dies hard.

By the way, the average number of people in a household categorized as “living alone” has remained strictly constant at one.

All of this is referring back to yesterday’s discussion, and I thank Paul for the reminder.  Also from the MR comments, Ricardo writes:

…you can find median income numbers broken down by size and type of household over time precisely to distinguish single 19-year-olds from married couples with children. They do not change the underlying story much at all. See:

http://www.census.gov/hhes/www/income/data/historical/household/http://www.census.gov/hhes/www/income/data/historical/families/http://www.census.gov/hhes/www/income/data/historical/people/

What happens in these debates is that some people simply cannot bear the thought that incomes for a large percentage of Americans are stagnant and so try to introduce all sorts of red herrings into the discussion without actually doing the basic research required to see that the stagnationists are basically correct on just about any relevant measure you care to use. To pick one example, let’s look at white married-couple families to move past any concerns about single moms or poor, non-white immigrants skewing the results downward. You can find this in Census Table F-7. You will note that white married-couple families where the wife does not work have experienced almost complete stagnation in real income. Real income among this group was slightly higher in the 1970s than it was in 2007 (the peak over the past 10 years). I challenge you to look at any number of measures and you will see that the gains made in overall family or household income are almost entirely due to more women entering the labor force and earning only slightly higher wages. If you focus solely on per capita income, you miss the fact that people may be marrying less and having fewer children as a consequence of the stagnation in male wages and the need many women feel to work longer hours.

Guy S writes:

Household composition adjusted data from the Census Bureau can be found on pgs 16-17 in this document: http://www.census.gov/newsroom/releases/pdf/20130917_ip_slides_with_plotpoints.pdf

This has been a total wipeout of income potential for the lowest quintile households in the US.

Here is Russ Roberts, with a possibly more optimistic perspective on the comparison with 1989.  You also might want to read this post by Kebko.

The Daily Beast reviews *Average is Over*

This is by Robert Herritt, here is one excerpt:

…in filling in his vision, Cowen lets lose a barrage of teased-out implications. For one, not everyone will need to be a Zuckerberg-level coding wunderkind to stay in a job. Since machine intelligence makes it easier for businesses to orchestrate complex, team-based projects, skilled managers will be prized employees. Those put out of work by some less error-prone descendent of Siri, he predicts, will move to professions where the trustworthiness and conscientiousness of a flesh-and-blood human are most required, whether they become valets, babysitters, interior designers, or carpenters. Since, in this new world, “Rewards will flow readily to top talent, not to the socially well-connected,” self-motivation and the ability to repeatedly “reeducate” in new fields will also go a long way. In such a “hyper-meritocratic” environment, those adept at coaching will be in high demand (as Cowen sees it, everyone from CEOs to elite physicians will have a professional motivator on the payroll). Aided by machines, scientists will develop theories so complex that the general public could “be shut out from a scientific understanding of the world.” And as demographic and fiscal realities catch up with our public sector, “aid from the government will increasingly fall short of a growing set of demands.”

In stark contrast to other practitioners of freewheeling prognostication, Cowen has focused much of his energy on answering questions that have real relevance to ordinary people. Many parts of the book can be read as an advice manual for the apprehensive undergraduate struggling to pick a career path in a turbulent job market. For instance, he predicts that proliferating demands on the attention of the most well-off Americans will make marketing “a seminal sector for our future economy.” He goes on to assert that “[i]f you have an unusual ability to spot, recruit, and direct those who work well with computers, even if you don’t work well with computers yourself, the contemporary world will make you rich.”

The full review is here, and for the pointer I thank Carrie Conko.

Assorted links

Is New Zealand busting out of the Great Stagnation?

Or is this a terrifying novelty for a country which doesn’t have very strict liability law?

…a planned launch of a jetpack in New Zealand next year has bureaucrats scratching their heads, particularly as the machine’s makers say the thing can travel up to 7,000 feet in the air at speeds of 50 miles an hour.

“Think of it like a motorcycle in the sky,” says Peter Coker, chief executive of Martin Aircraft Co. Ltd., which has spent 30 years developing the Martin Jetpack here. The Martin jetpack is unique in that it is not rocket powered but has a gasoline engine driving twin-ducted fans. The latest P12 prototype, a far sleeker and shinier model than the earlier versions, will allow a pilot to fly for up to half an hour.

New Zealand is taking the prospect of jetpacks in its airspace seriously, even though the product’s price—more than $150,000—means that just a few dozen have been reserved. Most of those are going to overseas customers.

And yet there is a problem, even in “regulation light” New Zealand:

“If you land in someone’s paddock, you will always land on their prime sheep,” Mr. Kenny says, stressing that liability insurance for pilots is a must.

…Still up in the air is whether they will eventually be allowed to fly over built-up areas. The latest prototype has been certified for manned test flights in New Zealand, but it can’t be flown more than 20 feet above ground or more than 25 feet above water.

The article has other points of interest.  Here are related pieces.

Russian shot in quarrel over Kant’s philosophy

An argument in southern Russia over philosopher Immanuel Kant, the author of “Critique of Pure Reason,” devolved into pure mayhem when one debater shot the other.

A police spokeswoman in Rostov-on Don, Viktoria Safarova, said two men in their 20s were discussing Kant as they stood in line to buy beer at a small store on Sunday. The discussion deteriorated into a fistfight and one participant pulled out a small nonlethal pistol and fired repeatedly.

The victim was hospitalized with injuries that were not life-threatening. Neither person was identified.

It was not clear which of Kant’s ideas may have triggered the violence.

The link is here, and for the pointer I thank Michael Rosenwald.

The German export powerhouse

Sonja Miskulin has forgotten her beloved cat, Pooki. She can’t remember whether she has grandchildren and has no memory of her nine-hour journey one recent Sunday to forever leave behind her home in Germany.

Suffering from dementia, the wheelchair-bound former translator celebrated her 94th birthday in a Polish nursing home last month. Her daughter sent her there in a bid for a better life and more affordable care.

Miskulin has joined the vanguard of a controversial movement: emigrant nursing home residents. The “Grandma export” trend has set hands wringing in Germany, where Munich’s leading newspaper denounced it as “gerontologic colonialism” and compared it to nations exporting their trash. Yet more families like Miskulin’s say it’s their best option to provide a dignified old age for elderly parents — and save money — amid a lack of affordable quality care at home. One in five Germans would now consider going abroad for a nursing home, according to a March survey by TNS Emnid, one of Germany’s biggest pollsters.

“I can only say, children, when your parents get older, send them to Poland,” said Miskulin’s 66-year-old daughter, Ilona von Haldenwang.

I suspect a media advisor would have encouraged her to reword that last bit.  The full article is here, and for the pointer I thank Florens.

Is the return on publicly-held companies now lower?

Assume that the net average return on all companies has stayed about the same.  Yet because the wealthy are wealthier than before (economic growth plus rising inequality), they have less need to go public for reasons of liquidity.  Thus if they have private information that their private companies will remain profitable for a while longer, they will keep them private and earn those extra-normal returns.

That means on average publicly-held companies will earn lower average returns than before.  Which in turn will increase income inequality between the top one percent and the top twenty percent.  Which may in turn make this effect even stronger.

So should you buy into the Twitter IPO?