Month: February 2014
Yuriy Gorodnichenko on Ukraine
He is an economics professor at Berkeley and he recently gave a talk there on “Ukraine: A Battle for the Future of Europe?”
The slides are here (pdf)., Q&A is here, the slides are especially useful. Gorodnichenko’s home page is here.
The pointer is from @MatiasBusso.
Local loop unbundling for cable
Felix Salmon endorses local loop unbundling for cable, so does Kevin Drum.
My earlier analysis simply was assuming that we will not make this policy shift and then asking how worried we should be about the resulting semi-monopoly power in that market. If you would like to see the pro-case, here is a UK study (pdf) showing unbundling improves quality. Here is French evidence for higher penetration, often through quality rather than just price effects. Here is Tom Hazlett on related issues (pdf) and Vernon Smith is a long-time proponent of related ideas.
I don’t, however, agree with Felix’s presumption that all we need do is refine the current infrastructure, or his claim that there are no other effective forms of competition at current margins. Penetration rates could be a few percentage points higher, and that is an economic cost from the status quo, but in Felix and some of the other commentators I am seeing a black and white version of a monopoly story that simply does not correspond to the facts. Furthermore the current monopoly power of cable means that infrastructure will be laid down more quickly next time around, and moving to local loop unbundling would weaken this incentive by confiscating some of the rents from the infrastructure investments of the cable companies. I probably would make this trade-off, but that further blunts any estimate of the net costs from the U.S. status quo.
Note also that Netflix has turned out to be worth a lot of money as a company, a reality which those who pushed the “cable as extreme monopoly” view denied could happen, out of a belief the cable companies would simply confiscate any Netflix rents.
And here is Peter Huber on how deregulation — yes the dreaded “D word” — can improve cable competitiveness.
“Why has Ukraine returned to economic growth?” (wheel of fortune)
Anders Åslund wrote an interesting piece on that question, published in 2002:
For ten years Ukraine was one of the sickest economies in the former Soviet Union. By 1999 most observers had decided that Ukraine displayed all the symptoms of economic malaise. It was hopelessly corrupt, market reforms were generally tardy and unfinished, the budget deficit was larger than the available financing, non-payments and arrears were rife. It is, therefore, all the more surprising that this country is currently experiencing an extraordinary economic surge, with industrial and agricultural production skyrocketing. Even if the present economic situation doesn’t last it is already remarkable and requires serious study. The purpose of this paper is to provide a quantitative analysis of Ukraine’s sudden economic growth and strong recovery. It begins by looking at common explanations of economic growth that have not proven relevant, discusses what concrete economic policy measures appear to have contributed to the generation of growth and ends by scrutinising how this was politically feasible. A proper understanding of Ukraine’s situation should help towards an understanding of post-Soviet transformation and offer clues about how to reform other countries.
For a more complete picture, I refer you also to his contrasting 2000 essay “Why has Ukraine Failed to Achieve Economic Growth?” Circa 2014, another piece or two could be penned on this topic.
Åslund has much more on Ukraine here, including this 2009 book. For a while now he has been predicting the end of Yanukovych, for instance in this piece. In any case he is the most prominent economist who writes regularly on Ukraine.
Ukraine vs. Argentina, which country is more likely to default?
From a loyal MR reader, with some editing by me:
Ukraine default risk is way up, but Ukraine has barely closed the gap with Venezuela in the default probability race and Argentina, with its pari-passu case now under review for cert at the Supreme Court, is still way ahead with its CDS-implied likelihood of default. I know its hard to look at pictures of Kiev and think “that looks like a safe sovereign credit,” but even with the recent run-up Ukraine still has a market-implied default hazard at only about 60% of the level of Argentina.
Those are some graphs at the link from the CDS-implied default probabilities page from Deutsche Bank.
Part of the run-up in the Ukraine and Venezuela insurance prices is due to Argentina’s repeated losses in their pari-passu case. Should they be denied cert or lose at the Supreme Court, other nations with pari-passu clauses will find it both difficult to restructure and harder to selectively default. That is driving up CDS rates across the risky sovereign space, mostly because of lower recovery in CDS settlement auctions. On related issues with pari passu see this law and econ paper.
The difference between Ukraine and Argentina probably says something about the importance of willingness to pay versus ability to pay and willingness to pay is what really matters.
Assorted links
1. NASCAR and the Tullock paradox. And how Zerocoin can turn Bitcoin into complete anonymity.
2. What job carries the highest recommendation rate and how much does it pay? And Peter Thiel possibly supports a minimum wage hike.
3. Is human stool a tissue or a drug? It matters.
5. Why do Japanese people wear surgical masks?
6. “When you feel the ice on your shoulder all of a sudden?” he said. “That is not good.”
Ukraine seems to win the “next financial crisis” award
And they win the award by having a much larger crisis overall. Russia has suspended financial aid to Ukraine. There are rumors of runs on banks and long queues at ATMs. There are rumors of Ukraine possibly splitting into two countries. Here is a NYT Q&A.
Here is the one-year CDS chart. The Russian ruble is declining to record lows.
Here are interesting remarks from Timothy Garton Ash.:
I have argued that, in our time, 1989 supplanted 1789 as the default model of revolution. Rather than progressive radicalization, violence and the guillotine, we look for peaceful mass protest followed by negotiated transition. That model has taken a battering of late, not only in Ukraine but also in the violent fall that followed the Arab Spring.
When the Soviet Union first split apart, I expected something like the current scenario to happen rather quickly. Obviously it did not. It is interesting to ponder what assumptions are required to produce a 25-year lag for a similar result.
If you know of interesting or good sources on what is happening in Ukraine, please leave them in the comments.
My review of Diane Coyle and Zachary Karabell
That is published in The Washington Post, and I can recommend both books. Coyle’s book is GDP: A Brief But Affectionate History and Karabell’s is The Leading Indicators: A Short History of the Numbers That Rule Our World. My opening sentences are this:
‘May my children grow up in a world where no one knows who the central banker is” is a wise saying. One also can hope for a world where arguments about measuring GDP (gross domestic product, the sum total of the goods and services produced within a nation) or the inflation rate are rare. In good economic times, we tend to take reported economic numbers for granted, but more recently, conspiracy theories have run wild.
On Coyle:
If you are going to read only one book on GDP, Diane Coyle’s “GDP: A Brief but Affectionate History” should be it. More important, you should read a book on GDP, as many of the political debates of our time revolve around this concept. Can we afford our current path of entitlement spending? Was the Obama fiscal stimulus worth it? When will China overtake the United States as the world’s largest economy?
The answers all depend on GDP. In 140 pages of snappy text, Coyle lays out what GDP numbers measure, what roles they play in economic policymaking and forecasting, and how GDP numbers can sometimes mislead us, albeit not in the way many current critics suggest.
With Karabell I have a quibble:
I do not agree with Karabell’s claim that “Bhutan is now routinely described as one of the happiest nations in the world.” The prime minister of Bhutan, Tshering Tobgay, has moved away from talk of “Gross National Happiness,” perhaps because he has realized that his country has relatively little of it. Most of the population is engaged in subsistence farming and has only a minimal chance of performing rewarding or creative labor. The prime minister instead wishes to focus on concrete goals such as “a motorized rototiller for every village and a utility vehicle for each district.” For all the talk of being content with less, external debt has soared to 90 percent of GDP. If anything, Bhutan may show that measures of GDP get at happiness more clearly than does focusing on happiness more directly. Just look at where immigrants wish to move — it is almost always wealthier countries.
Read the whole thing.
Manhattan markets in everything
How much would you pay to poop in private? A new company called Posh is betting the answer is six dollars, alongside a $15-a-year membership fee. Taking a Zipcar-style approach to bathrooms in Manhattan, the service will offer private powder rooms with baby-changing stations and luxury showers in a central Manhattan location. The service also offers lockers where visitors can store their bags, but the core appeal is the bathroom, a crucial respite for small-bladdered tourists without access to other facilities. According to the site, the rooms will be cleaned after each usage, and equipped with touchless faucets and flushers to minimize hygenic concerns. The first facilities are set to arrive in the summer of 2014.
Nonetheless I find this problem to be much less severe than in the New York City of old, perhaps because merchants are less worried about you shooting up drugs in their bathroom.
There is more here, with visuals, and for the pointers I thank Samir Varma and Bill Badrick.
New trend of people naming their kids after guns
Via Kottke, here is Abby Haglage:
In 2002, only 194 babies were named Colt, while in 2012 there were 955. Just 185 babies were given the name Remington in 2002, but by 2012 the number had jumped to 666. Perhaps the most surprising of all, however, is a jump in the name Ruger’s (America’s leading firearm manufacturer) from just 23 in 2002 to 118 in 2012. “This name [Ruger] is more evidence of parents’ increasing interest in naming children after firearms,” Wattenberg writes. “Colt, Remington, and Gauge have all soared, and Gunner is much more common than the traditional name Gunnar.”
WalMart fact of the day
Wal-Mart has 1.3 million U.S. employees, and about 4,000 of them currently make either a state or federal minimum wage, Tovar said.
There is more here, via @ModeledBehavior., who points out that is about 0.3%, and Clive Crook.
Assorted Friday links
The tax treatment of sperm and egg sales
But what kind of income is it?:
Also, Perez could pay lower tax rates on the income if it were treated as long-term capital gains. Eggs could be considered property she had possessed since birth, in which case the sale could be seen as a long-term capital gain.
If they’re not considered property until removed from her body, the eggs could be seen as generating short-term gains.
Richard Carpenter, Perez’s San Diego-based attorney, said the judge said after the trial that the capital gains questions wouldn’t apply in this case.
I like the phrase “future sperm tax certainty” from the title of the piece. There is more here, from Richard Rubin. For the pointer I thank Vic Sarjoo.
High prices for broadband, contestability, and Google Fiber
Here is a potential new development:
Verizon is adding more antennas to its network, forming smaller wireless cells with stronger coverage and rolling out service on new segments of the wireless spectrum, the digital equivalent of opening new lanes for traffic. Sprint is introducing a service called Sprint Spark that increases access speeds if customers have devices that can use multiple wireless frequencies at once.
If pCell works as promised, Mr. Perlman’s technology could result in much bigger gains in wireless speeds. In traditional cellular networks, antennas placed around a city transmit wireless signals to all of the mobile devices within their area. As more people enter an area, they share the wireless network with everyone else there, resulting in slower speeds. Wireless carriers cannot simply solve the problem by putting antennas everywhere because their signals can be disrupted if they are too close together.
With a network of pCell antennas, someone with a mobile device will get access to the full wireless data speed in the area, regardless of how many other people are sharing that network, Mr. Perlman said.
There is also this:
The plan is to bring Google Fiber to 34 cities and see how that goes.
Here are various satellite video streaming services.
I do not feel I can judge the prospects for these developments. The point, however, is this. Improving connectivity is an extremely dynamic market sector. A high mark-up on cable internet connectivity, as might be applied by say a Comcast monopolist, is also creating a “prize” for further innovation in the sector. Admittedly one does not prefer to have this prize funded by deadweight loss (less broadband consumption) but virtually all prizes are funded by deadweight loss in some manner rather than by lump sum taxation.
When people claim “the current mark-up is too high,” that is an entirely reasonable stance. But when you rewrite it as “the current innovation prize, funded out of deadweight loss” is too high, that reframing brings some clarity, some moderation, and I think also induces some more agnosticism about the costs of the current semi-monopoly. For similar reasons I don’t worry about monopoly in the eBook market and the like and there the case for simply ignoring the problem is much stronger because the options and cheapness have exploded so radically and so quickly.
So I don’t see the current cable semi-monopoly as lasting that long. And its current cost cannot be that much higher than the cost of sending a disc in the mail, otherwise the disc would be sent. Alternatively, most communities have public libraries which offer pretty good and pretty free internet connections, including video streaming of course. If the argument is simply “this prize, for future connectivity innovation, cannot be funded from deadweight loss because it means that in the meantime some poorer people will have to wait to get their discs in the mail and make too many trips to the public library”…well, I guess I’m not that impressed this is a major public policy problem.
The longer and more you regulate cable prices, the longer it will take this sector to reach a more competitive equilibrium.
By the way, dear reader, I am not clever enough to use Netflix streaming, as I find the TV menu confusing. So I still get the discs in the mail.
The life of a Western economist in China
For most academics not in China, it is difficult for them to understand the level of scrutiny and monitoring we face on regular basis. Most professors have students assigned to monitor them and security officials approaching many people to report on our behavior. Our email is widely acknowledged, even by students, as being read. While there are some overt obvious forms of intimidation as I have detailed, much of it is also the “deal you can’t refuse” variety. There are no overt threats but the message is clear.
There is much more here, from Christopher Balding (pdf of his vita), worth the read.
The economics of compensated pregnancy surrogates, and who wants surrogates?
From Anemona Hartecollis, here are some interesting points:
Agencies prefer to contract with surrogates who are married with children, because they have a proven ability to have a healthy baby and are less likely to have second thoughts about giving up the child.
Conversely, gay couples are popular among surrogates. “Most of my surrogates want same-sex couples,” said Darlene Pinkerton, the owner of A Perfect Match, the agency in San Diego that Mr. Hoylman used. Women unable to become pregnant often go through feelings of jealousy and loss, she said. But with gay men, that is not part of the dynamic, so “the experience is really positive for the surrogate.”
Or as her husband, Tom, a third-party reproductive lawyer, put it, “Imagine instead of just having one husband doting on you, you have three guys now sending you flowers.”
The piece is interesting throughout.