Month: April 2014

Customized restaurant markets in everything privacy is dead

A restaurant with three Michelin stars is now trying to up its customer service game by Googling its customers before they arrive. According to a report from Grub Street, an Eleven Madison Park maitre d’ performs Internet recon on every guest in the interest of customizing their experiences.

The maitre d’ in question, Justin Roller, says he tries to ascertain things like whether a couple is coming to the restaurant for an anniversary, and if so, which anniversary that is. If it’s a birthday, for instance, he wants to wish them “Happy Birthday” when they arrive. He’ll scan for photos of the guests in chef’s whites or posed with wine glasses, which suggest they might be chefs or sommeliers themselves.

It goes deeper: if a particular guest appears to hail from Montana, Roller will try to pair up the table with a server who is from Montana. “Same goes for guests who own jazz clubs, who can be paired with a sommelier that happens to be into jazz,” writes Grub Street.

Obviously, the restaurant is just trying to be better in tune with the people sitting around eating its food and drinking its wine. But it seems like a reasonable assumption to believe people posting their birthday dates online aren’t doing so in the hopes that someone they’ve never met before will know, as if by telepathy, to wish them the best on their special day.

There is a bit more here, and for the pointer I thank Donnie Hall.

I am now curious what they would do for me.  Any ideas?

Addendum: Here is what happens if you buy a scale on Amazon.

A rigidity-based theory of executive compensation

There is a new paper by Kelly Shue and Richard Townsend (pdf), it is quite intriguing though note it is preliminary work. I am not linking to it but the authors appear to have distributed the abstract on the internet:

We explore a rigidity-based explanation of the dramatic and off-trend growth in US executive compensation during the late 1990s and early 2000s. We show that executive option and stock grants are rigid in the number of shares granted. In addition, salary and bonus exhibit downward nominal rigidity. Rigidity implies that the value of executive pay will grow with firm equity returns, which averaged 30% annually during the Tech Boom. Rigidity also explains the increased dispersion in pay across firms, the difference in growth rates between the US and other countries, and the increased correlation between pay and firm-specific equity returns. Regulatory changes requiring the disclosure of the value of option grants help explain the moderation in executive pay in the late 2000s. Finally, we find suggestive evidence that number-rigidity in executive pay is generated by money illusion and reference-dependent motivation, the same behavioral biases that may underlie downward nominal wage rigidity among rank and file workers.

For the pointer I thank Robert J. Shiller.

Addendum: The authors recommend this link to a new version of the paper.

The book culture that is Norway

So long as a new Norwegian book passes quality control, Arts Council Norway purchases 1,000 copies of it to distribute to libraries—or 1,550 copies if it’s a children’s book. (This comes on top of the libraries’ acquisition budgets.) The purchasing scheme, I was told, keeps alive many small publishers that could not otherwise exist. American independent presses would drool at the prospect. Another effect of the scheme is that it subsidizes writers as they build a career. They make royalties on those 1,000 copies—in fact, at a better royalty rate than the contractual standard. Books are also exempted from Norway’s value-added tax.

There is more here, partly on Knausgaard, here is more TNR on Knausgaard, via Scott Sumner.

I would note that, other than Knausgaard, the merits of recent Norwegian literature are…subject to debate.

The Greek debt profile and why they are still being lent money

From an excellent column by Wolfgang Münchau:

The reason Greece was able to attract so much interest in last week’s bond issue was a combination of the promise of a high yield and the maturity profile of existing Greek debt. Official loans – from eurozone member states and the International Monetary Fund – make up 80 per cent of the total debt. Greece will not start to repay this until 2023. In other words the country is solvent in the short run. But long-run solvency is far from certain.

The rest of the FT piece is here.  He suggests (without advocating it) that this could be the moment for Greece to default.

Is there a Flynn Effect for dogs?

I would be surprised if there wasn’t:

Mr. Pilley told me, “The big lesson is to recognize that dogs are smarter than we think, and given time, patience and enough enjoyable reinforcement, we can teach them just about anything.”

It’s true that dogs everywhere are doing things that would have been unimaginable in the Alpo era. Last year, researchers at the University of Pennsylvania’s Working Dog Center trained a team of shepherds and retrievers to sniff out lab samples containing ovarian cancer. Scent hounds are also being used to forecast epileptic seizures and potentially life-threatening infections. A black Labrador from the St. Sugar Cancer-Sniffing Dog Training Center in Chiba, Japan, was accurate 98 percent of the time in picking up early-stage signs of colon cancer. As Mr. Hare, from Duke, said, “I will take a dog smelling my breath over a colonoscopy any day of the week, even if it’s just an experiment.”

From David Hochman, there is more here.

Three movies in which the Coase theorem does not seem to hold

Le Weekend explains why the Coase theorem does not hold in the marriages of aging British whinersThe Lunchbox, in addition to having an interesting plot (imagine a lower-tech Indian “You’ve Got Mail”), is the best movie I’ve seen on the nature of Indian micro-transactions, whether in relationships or in the workplace.  Erving Goffman would be proud,  and the mention of Harvard is the funniest line I’ve heard in a movie in years.   Under the Skin, as I understood it, asks what kind of trades might be possible between us and one of Rilke’s angels, if the latter were to come down to earth.  The movie does indeed answer that question, and the underlying connection between Rilke and Islam is discussed here.  And here is a fascinating article about the most memorable actor in the movie.  Maybe the best piece you will read today.

I thought all three movies were excellent, and full of social science, though none is a movie that everyone will enjoy.

When I am watching a movie I often think “why isn’t the Coase theorem holding here?”  There are few movies — outside of sappy romantic comedies — in which the Coase theorem explains much of the plot.

Narva, Estonia (speculative)

Michael Ben-Gad, a professor at London’s City University who has studied the credibility of long-term promises by governments, questions whether Nato’s commitment to collective defence is absolute and asks what would happen if Russia’s border guards crossed the bridge that separates Narva from Ivangorod and took the Estonian town.

“Would the US and western Europe really go to war to defend the territorial integrity of Estonia? I think Estonia has reasons to worry. Narva is the most obvious place; it is almost completely Russian-speaking,” he says.

More than 82 per cent of Narva’s residents are ethnic Russians and 4 per cent are ethnic Estonians. More than a third have Russian citizenship.

Here is the FT article, here are photos of Narva.  Here is a map of Narva:

Narva_in_Estonia

Italy fact of the day

The Italian Tourist Board spends an astounding 98 percent of its budget on salaries, with basically nothing left for its actual job of tourism promotion.

The point of the article is that hardly anyone visits southern Italy any more, thus making it one of the world’s best arbitrage opportunities. It is one of my favorite regions.

By the way:

There are trains in the Mezzogiorno that travel at an average speed of 8.7 miles an hour.

And:

Metaponto, in the Basilicata region east of Naples, has a five-track, marble-clad rail station, paid for by $25 million in European Union funds. But the last train out is an 8:21 a.m. express to Rome. If you want to go anywhere else, you have to take a bus.

In the 1970s, Italy was the world’s #1 tourist destination but now it has slipped to number five.  There has never been a better time to go.

Assorted links

Henry Aaron and the Lucas Critique

No, not the Henry Aaron at the Brookings Institution.  I mean what the ten year old Tyler Cowen would have called “the real Henry Aaron.”  Nate Silver writes:

What if Aaron had never hit a home run? What if those 755 round-trippers had fallen for base hits instead? (If we’re trying to isolate the effect of his power, that seems like the fairer way to do it, instead of turning them into popups or something.) Would he still be a Hall of Famer?

If all of his homers had been singles, Aaron would still have his 3,771 hits. Instead of being the second-best home-run hitter of all time, he’d be the third-best singles hitter of all time, after Ty Cobb and Pete Rose. His RBI total would have gone way down; based on the number of runs that Aaron knocked in on home runs and singles throughout his career, I estimate that he’d have 1,232 of them rather than 2,297. But 1,232 isn’t a shabby total; it would rank Aaron 141st all time, in the general vicinity of Derek Jeter, Edgar Martinez and George Sisler. He’d still be a lifetime .305 hitter and have a .374 on-base average.

OK, here is where Lucas comes in.  If Hank Aaron did not carry significant home run potential to the plate, he would have seen a lot more blazing fastballs, pitchers’ “best stuff,” and so on.  Why not challenge the hitter and try to blow it by him if all you are risking is a single up the middle?  As it was, pitchers often threw Aaron a variety of slower curves and off-speed junk, stuff he might grab a piece of with the bat but would have a harder time drilling straight over the fence.

And thus a homer-less version of Aaron probably would have had a harder time making contact at all.  And he certainly would have had many fewer walks.  But yet, with the amazing wrists he had…pitchers were afraid of him.

It is funny how the Lucas critique went from one of the most underrated ideas in economics (pre-Lucas), to one of the most overrated ideas (1980s-early 1990s), and now it is back as one of the most underrated ideas again.  If we vary one policy or one element of a calculation or algorithm, other individuals will respond strategically.

Addendum: Scott Sumner adds comment.

New data on tax havens, from Gabriel Zucman

Here is the new paper (pdf):

This article shows that official statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens. Drawing on a unique Swiss data set and exploiting systematic anomalies in countries’ portfolio investment positions, I find that around 8% of the global financial wealth of households is held in tax havens, three-quarters of which goes unrecorded. On the basis of plausible assumptions, accounting for unrecorded assets turns the eurozone, officially the world’s second largest net debtor, into a net creditor. It also reduces the U.S. net debt significantly. The results shed new light on global imbalances and challenge the widespread view that after a decade of poor-to-rich capital flows, external assets are now in poor countries and debts in rich countries. I provide concrete proposals to improve international statistics.
The original pointer was from Paul Krugman.  Yesterday I was at an IMF forum with Jeff Sachs and he too was placing great stress on this issue.