Assorted links

1. Did the 2009 Card Act work?

2. Has the Great Recession had a “productivity cleansing” effect?

3. The automated burger is coming to DC.  I’ll actually bet against that one.

4. Claims about Chinese cities (unconfirmed, I would say, but interesting).

5. The endangered sopranos.

6. The culture that is Russia (I am not convinced, by the way, that all of those will be ineffective as personal ads, quite the contrary).


1) Elizabeth Warren is not the devil?

That would be counter intuitive :)

Not sure if it makes up for her other dreadful analyses.
I guess this show conservatives in a good light. Debunk the garbage and confirm the good, even if was against what is expected.

It has always struck me that quite common sense positions frim Warren illicit a disproportionate response. In this case common sense restrictions on credit did ok. That is confirmation ideology does not trump pragmatism.

"Warren illicit a disproportionate response" - yes, plausibly. But it has struck me that for her, the ignorance about the origins of the financial crisis (such as why the poor people were steered towards those "terrible, terrible" mortgages) is a matter of principle.

Regarding the main story, I'm all for openness and disclosure, but something doesn't add up in this piece: as far as I know, the CC business is as profitable as ever for the banks. Yet, the law "has saved the consumers $20.8 billion a year", without a measurable decrease in access to credit. For example, I don't see any major banks divesting themselves of the CC portfolios because that business does not satisfy the enhanced post-crisis capital requirements (as is the case with mortgage servicing, for example). Where does the money come from? Is it cyclical, so that right now the defaults are relatively low and the existing fees cover them comfortably? But banks are hardly so naive as to forget about the credit cycle. Publication bias on the side of NYT? Color me sceptical.

Maybe I don't know. Do Warren and say Shiller split on mechanisms? Because if Warren is only faulted for "ideological" beliefs that also got Shiller his prize ....

Just because her positions make sense to you doesn't make her justifications for them any less BS.

Are her justifications not just "behavioral?"

She made good money and built her political career from a business that takes advantage of short-sighted and overly-optimistic young people, costing them years of opportunity cost and putting some over $200k in non-dischargable debt. The whole lot of them are devils.

1. Econ 101 students would expect fee limits to decrease credit availability. The article finally gets around to admitting that maybe that happened around paragraph 20, but says it's "not clear." I don't think this study should revolutionize our understanding of microeconomics.

The last few paragraphs really make it clear that "ceteris paribus" is not a reasonable assumption in this study.

I would hope that Econ 101 students would also realize that the real world is not an economics model limited to a few variables, and thus would expect real-life outcomes to correlate with Econ 101 models, not conform to them.

Which is why economic wisdom should guide are decision-making, not dictate our policies.

Why is the good professor betting against the automated burger?

Not the idea in general, just the implementation in the d.c. area.

The culture that is Russia: A big obsession with Persian carpets on walls..

You can find nuts like those Russians here, or anywhere; especially skirting the edges of society (like growing up in a small town).

As for the Persian carpets, look south of Russia.

As for the Persian carpets, look south of Russia

Not really- they are not "Persian" in any real sense, and they are on the walls because the walls are otherwise concrete (just under the wall paper) and so they provide insulation, both against noise and cold. (And, after a while, it just because a style.) It's a mixture of practical and semi-tradition.

The sopranos article was interesting in that it pointed to a long decline in the onset of puberty and voice changing in boys since 1750. That suggests that the hormones in farm animals explanation of the modern age is not very compelling. Is it increased calories? Increased protein? Decreased sleep hours (due to artificial light improvements)?

#6 - tyler cowen reads My Posting Career?

Tyler, you are correct on number 6, much more than half of these pictures are of young adults with acceptable weight-height correlation and no obvious biological drawbacks, meaning they would potentially be a good catch for most of the people in the world seeking partners. Several show a good sense of humor. As a guesstimate, most of the females (I am not a good judge of male attractiveness) would be considered by an unbiased observer to be more attractive than most of the women dated by the average Marginal Revolution reader. Further, in an alternate universe where the average married Marginal Revolution reader is not married, most of the females in the Daily Mail article seem marginally nicer than the average date said alternate universe reader would likely meet up with. Finally, my guess is that several of these pictures are of people in relationships who are posting these pictures for a "laugh" in order to entertain their partners ( a guess based on 40 years of familiarity with and admiration for the slightly offkilter but not incomprehensible sense of humor of Russians I have known). Also, I think that the woman in the picture with the newspaper is not posing with a Russian paper, I think it might be Byelorussian.

#4: Riding the slow train between Shanghai and Hangzhou, I noted a few things: 1) at the edges of both metropolises and 3rd tier cities along the route, building continues apace; cranes everywhere, and they are lit and moving. Scaffold green screen is going up in many places and coming down in others. Interestingly, apartment complexes just inside the edges have a lot of laundry hanging in the windows as you'd expect if the housing was populated with people who can afford a lot of laundry.
2) The train, now fully privately-owned is full of vendors and staff acting as vendors. It's like the train station has moved into the train. The good are pure crap, other than the fruit, even by Chinese train station standards. 3) There are more villas and fewer hutongs than I recall 4 years ago. 4) A lot more people were getting on and off at every stop than I used to be the case for this particular train at this particular datetime.

At least along this corridor, economic activity continues apace.

A few other things struck me. We ate at an upscale restaurant on the top floor of a new mall the edge of Hangzhou. The parking lots below were full of cars in the class of the 7-series BMWs. I noted a Maserati and a Lamborghini, ostentatiously parked. There's an ice skating rink on (I think) the 5th floor, rather over-full, and with a number of pre-teens showing off excellent figure-skating skills, minded by their private tutors. Many stores are luxury brands and appeared to be doing a brisk business (people leaving with product) and ToysRUs was jammed, never mind that it's over-priced even by US standards. On the whole, the mall is full as, say Grand Gateway in Xujiahui, but it is doing better than GG was 7 years ago.

My take on this sparse data is that if there is a bubble, and I think there is, it's not in the top-tier cities and those in their immediate vicinity. It's unlikely to be a credit bubble as cash buyers are abundant and regulations have required more than 50% down on 2nd homes and beyond for a long time and that was recently bumped up. It will take a lot longer to fill the overbuilding in the lower-tier cities with real tenants than it has to date, and I think that will result in a drop in the prices in those places. That money will pour into the safe first tier, driving up prices and development there. Unless there's a massive sell-off in the lower tiers, the top tier cities should absorb the influx comfortably.

Geezus Hay Zeus people, nobody mentioned #2, which was the most important link! I reproduce the abstract below. For you types that don't read, I will gate it for you: because the Great Recession of 2008 was a financial panic (which reinforces that Krugman-De Long are right and TC (sadly) is wrong, namely, it's a lack of Aggregate Demand that's at fault, not a structural or AS issue), there was less relocation and changing of jobs and hence less productivity improvements since the Crash of 2008. And--let me get this political statement in--IMO since Keynesian economics is keeping Zombie companies alive, this recession will last 20 years, as GM Rogoff and his co-author Reinhart say is the average for financial crashes (pace the 19th century, where we had no Federal Reserve). Got all that in, and somebody out there is going to be influenced by this opinion, hehehe. Like the Jesuits, get 'em early, lol.

The high pace of output and input reallocation across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. Resources are shifted away from low productivity producers towards high productivity producers. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are “cleansing” is an open question. That is, are recessions periods of increased reallocation that move resources away from lower productivity activities towards higher productivity uses? It could be recessions are times when the opportunity cost of time and resources are low implying recessions will be times of accelerated productivity enhancing reallocation. Prior research suggests the recession in the early 1980s is consistent with an accelerated pace of productivity enhancing reallocation. Alternative hypotheses highlight the potential distortions to reallocation dynamics in recessions. Such distortions might arise from many factors including, for example, distortions to credit markets. We find that in post-1980 recessions prior to the Great Recession, downturns are periods of accelerated reallocation that is even more productivity enhancing than in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose (due to the especially sharp decline in job creation) and the reallocation that did occur was less productivity enhancing than in prior recessions.

Let's play with this a bit and sketch out a model that might make sense of the results observed.

Say there's an industry that has two ways to compete: Honest ways and scummy ways.

Honest ways - Upfront 'prices' that consumers can compare and contrast. Think interest rate, yearly fee, points etc.

Scummy ways - Hidden fees. Points that expire at odd times, rearranging the posting of purchaes, moving the payment due date around and making it 'before noon' on a day to force fees on consumers and so on.

What environment would an 'honest' credit card company face? If they opted not to use 'scummy ways' to compete, they would have to promote cards with higher rates, fees, and lower points. Likewise the scummy company would promote lower honest costs and make up the difference with scummy ones.

Now imagine everyone was scummy. You'd have something of a monopoly happening. All the cards would ramp up the scummy costs and converge on a single price under the 'honest costs'.

Now suppose gov't suddenly bans scummy methods of operation. Now credit card companies cannot opt for the 'easy way' to compete by hiding costs under the 'scummy' category. They must compete in the harder 'honest' arena where consumers have an easier time comparing and contrasting offers. What would one expect? One would expect the price to fall but without a reduction in supply. You are essentially opening a market up and Econ 101 would predict that the result would be more suppliers would enter the market resulting in lower prices for consumers without a shortage in supply.

Why does the article express suprise at this result and ponder whether the results indicate something might be fundamentally wrong with micro-economic theory? Because it doesn't understand the nature of the law. It models the law as a straight price control, and standard economic theory says if the gov't imposed a lower price in a market it will result in shortgages as suppliers exit the market. But gov't didn't impose a price control, it imposed a competition control....actually imposed a control on a method of inhibiting competition (i.e. 'hiding' the price fromt he consumer).

This might be the real area that micro should explore more. Usually the market model is presented as one where there's only one way companies can compete against each other; on price. In many areas, though, there's multiple 'fronts' companies can use to compete on. Some of these are very much like price (i.e. level of quality, service, relationship bulding) and others are very unlike price (essentially trying to deceive the customer). Competition might be better grouped as 'good' vs 'bad'. Good competition increases social value, bad competition decreases it. Essentially this is a large element of why contract law helped spark the industrial revolution. Contracts can be seen as a type of gov't regulation that forces companies and individuals to compete via 'good' methods rather than 'bad' ones.

The Card Act would seem to be an extension of that concept since the 'bad methods' cards were using were essentially about breaching a contract. They were conning the consumer into believing they were getting one type of deal, while in reality giving them a totally different deal hidden in their fine print.

My son attends the American Boychoir School (ABS) in Princeton. It's an exceptional experience. On Saturday in Boston, they sang Britten's War Requiem with the Boston Symphony Orchestra and the Tanglewood Festival Chorus--almost three hundred singers and musicians in all. It was carried live on WGBH radio (there may be a podcast). Charles Dutoit conducted, and the Russian Tatiana Pavlovskaya sang an overpowering soprano. But for me, the Boychoir, off-stage (in fact, in the second floor corridor) was by far the best part of the evening. Their voices wafted over the entire hall, the sound of the innocents and the angels above them--perfect for a piece eulogizing the fallen youth of WWI. As Fernando Malvar, who directs the Boychoir, quipped, "Britten's really all about boychoirs."

I'd add that, in September, the choir went to Korea for a two week tour, singing at the international choral festival there.

It's truly a special experience, but it is really only for middle school, primarily 5-8th graders. (A choir with highschoolers is a men's choir, like it or not.)

My son was recruited out of the Albermarle camp which the ABS runs each summer. He was not a big singer, but he's an intelligent boy with a highly developed social sense, and they have made a very good choral member of him. The camp is co-ed, 5-8th graders, a good portion of them boarding. (ABS itself is about half boarding students.) Albemarle is all the kids' favorite camp in Princeton. Well, well worth considering for your child if you have an inclination.

Any interested in the school shouldn't hesitate to drop me an email.

#3 OK, I'll probably take your bet. Care to lay down your conditions around how to judge its failure?

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