Month: May 2014

The other new French book on inequality

It is The Society of Equals, by Pierre Rosanvallon, and it is a transatlantic look at how the notion of inequality has changed over the last three centuries.  It strikes me as the sort of book Crooked Timber would have a symposium on.  Here is one good bit:

Thus there is a global rejection of society as it presently exists together with acceptance of the mechanisms that produce that society.  De facto inequalities are rejected, but the mechanisms that generate inequality in general are implicitly recognized.  I propose to call this situation, in which people deplore in general what they consent to in particular, the Bossuet paradox.  This paradox is the source of our contemporary schizophrenia.  It is not simply the result of a guilty error but has an epistemological dimension.  When we condemn global situations, we look at objective social facts, but we tend to relate particular situations to individual behaviors and choices.  The paradox is also related to the fact that moral and social judgments are based on the most visible and extreme situation (such as the gap between rich and poor), into which individuals project themselves abstract, whereas their personal behavior is concretely determined by narrower forms of justification.

Roger Berkowitz has a very good review here, excerpt:

As does Piketty, Rosanvallon employs philosophy and history to characterize the return of inequality in the late 20th and now 21st centuries. And Rosanvallon, again like Piketty, worries about the return of inequality. But Rosanvallon, unlike Piketty, argues that we need to understand how inequality and equality now are different than they used to be. As a result, Rosanvallon is much more sanguine about economic inequality and optimistic about the possibilities for meaningful equality in the future.

And:

…inequality absent misery may not be the real problem of political justice. The reason so much inequality is greeted with resentment but acceptance, is that our current imagination of justice concerns visibility and singularity more than it does equality of income.

Recommended.

A Critique of Tabarrok on Bundling

In my MRUniversity video on the economics of bundling I argue that bundling raises total surplus and that requiring the Cable TV companies to price by the channel is unlikely to reduce most people’s cable bill (see also Does Cable TV Ripoff People Who Don’t Like Sports?). Pragmatarianism offers an excellent critique. Here is one bit from a longer post worth reading in full:

The flaw in Tabarrok’s logic is that it completely ignores the necessity of determining what the actual demand is for the individual components in the bundle.  For example, when I subscribed to cable…Charter had no idea how much I valued the Discovery Channel.  Neither did the Discovery Channel.  But is my valuation relevant?  According to Tabarrok…it really isn’t.  Uh, what? 

How could the Discovery Channel and Charter and Tabarrok not care what the actual demand is for the Discovery Channel?  In the absence of consumer valuation…how could society’s limited resources be put to their most valuable uses? 

Tabarrok is basically arguing that we don’t need accurate information in order to efficiently allocate resources.  Except, does he really believe that?  Let me consult my magic database…

The most valuable public goods are constantly changing, just as the most valuable private goods are constantly changing.  The signal provided by prices and mobility is therefore of great importance. – Alexander Tabarrok, in The Voluntary City

Huh.  Hmmm.  Is the Discovery Channel a private good?  Yes.  Is its value constantly changing?  Yes.  So…according to Tabarrok…it’s of great importance that the Discovery Channel should have its own price.  But this sure wasn’t what he said in his video. 

An excellent point that was made most forcefully by Ronald Coase in The Marginal Cost Controversy. Coase argued that pricing goods with high fixed cost at marginal cost would generate static efficiency but at the price of dynamic efficiency because we would not be able to say with assurance that the total value of the product exceeded total cost. Similarly we lose some information with bundling, perhaps especially so because marginal cost in this case is zero. With bundling, we know that the total value of the bundle exceeds the total cost but we are less certain that the total value of each bundle component (channel) exceeds the total cost of each component.

But this cannot be the whole story because in another paper, The Nature of the Firm, Coase pointed out that sometimes we choose not to use prices. Firms, for example, are islands of central planning in a market ocean (see Yglesias for a good discussion).

A channel such as HBO is itself a bundle of dramas, comedies and documentaries. Should Girls and Game of Thrones always be priced and sold separately and not through the HBO bundle? HBO certainly learns something from individually priced downloads on iTunes and that information helps HBO to improve its service. But how much is this information worth?

In 2002 should HBO have individually priced episodes of the Sopranos and sold them through AOL?  Individual pricing generates value but it also has costs. Tradeoffs are everywhere. And, to the crux of the issue, if a law had been passed in 2002 requiring HBO to sell The Sopranos on an episode by episode basis would that have resulted in better and more programming at lower prices? I think not. Similarly, I see few reasons to think that welfare would be improved by a law requiring cable TV companies to price by channel.

More generally, the price system is embedded in the larger field of the market economy which includes non-price institutions such as firms; and the market economy is embedded in the larger field of civil society which includes non-profits and non-market institutions such as the family. Economists often focus on the virtues of the price system but that should not blind us to the many virtues and many margins on which a free society operates.

Tim Geithner’s *Stress Test*

I quite am enjoying this book, which I find to be readable and also one of the best introductions to the history of America’s financial crisis.  The argumentation is conceptual throughout, though it should be recognized this is indeed an apologia.  Gretchen Morgenson offers some critical remarks on book in this regard.  Here is one good bit from that review:

…he fails to answer one of the most crucial questions about the crisis: How did he and his regulatory colleagues at the Fed, with their army of researchers and high-powered economists, miss the immense and obvious buildup of risk in the financial system that led to the crisis?

See Felix Salmon’s remarks too.

I also found Stress Test to be a good story of an American public servant, but perhaps a kind of career which is becoming increasingly rare.  Geithner writes:

Larry once said he could envision me as the managing partner of a law firm, or running some big institution, if only my credentials weren’t so thin.

There is also this:

When I left Treasury at the end of the Clinton administration, my colleagues put together tongue-in-cheek recommendations for my next job; for instance, Rubin suggested I could be Larry’s biographer.  Greenspan proposed “first assistant to the deputy to the managing director of the Asian Monetary Fund,” his wry way of celebrating its nonexistence.

You can buy the book here.

How to find good food in Chengdu

1. Many people in Chengdu are experts on the local food scene.  Recruit one of them, but don’t be shocked if they insist on paying for your meal every time.

2. Go downtown to the Crowne Plaza hotel, walk out on the main road to your left, and within two minutes you will see on your left a “TangSong food street” — a covered food court about twenty-five small Sichuan places.  There is a sushi place too but I saw the customers dipping their sushi rolls in hot red chili oil.  It is heartwarming to walk into such a culinary universe.

2b. Within this court my favorite place is labeled “1862 History,” you might spot the small print, in any case the place looks spare and is somewhat larger than the very small venues.

3. MaPo tofu is much finer here, and the black peppers and quality vinegars are to be appreciated.

4. Sichuan chili chicken and Dan Dan noodles are two of my favorite Sichuan dishes back home.  Here they have been good, but actually slightly disappointing relative to expectations.  Don’t obsess over those during your quest.

4b. There are two philosophies of international trade.  In one philosophy, the best dishes are the best dishes and so you should order them at home and also order them abroad in their countries of origin.  In the second philosophy, it is the most exportable dishes which get exported but they are not in general the best dishes period.  When abroad you therefore should try out the dishes you cannot find at home.  For Chengdu at least, this second philosophy is the correct one as Jacob Viner had hinted way back in the mid-1930s.

5. Often the most interesting dishes are the accompanying vegetables.  For instance at a hot pot restaurant I had excellent elongated yam cubes coated in a (slightly sweet) blueberry sauce and stacked ever so perfectly.  It was the ideal offset to the hotness and tingle of the core dishes.  At another restaurant I most enjoyed some simple greens dipped in a sesame soy sauce.  Or try potato or lotus root in hot pot.

6. Unless you go to great lengths to avoid this fate, you will end up eating strange parts of the animal.  You won’t like all of them, but you won’t dislike all of them either.

6b. If you utter “Ma La” with conviction, they will think you are remarkably sophisticated or perhaps even fluent in Chinese.  The populace here seems unaware that some version of real Sichuan food is now reasonably popular in the United States.

7. Many menus have photos, but they show lots of red and are not useful for identifying exactly what you will be eating.  See #6.

8. There are two areas — Jin Li and Wenshu Fang — where old buildings and streets are recreated and you can stroll in a kind of outdoor shopping mall.  Everyone goes to these locales and they are fun.  These neighborhoods are good for finding lots of takeaway Sichuan snacks, including desserts, in a single area, and served in sanitary conditions.  That said, I don’t think these are the very best Sichuan goodies to be had in town, as they are designed explicitly for tourists, albeit food-loving Chinese tourists.

9.   “Chengdu food” and “Sichuan food” are not the same thing.  Sichuan province has more people than France, and Chengdu is simply one large city, and so your favorite Sichuan dish may not be a staple here.  The town also has a fair amount of Tibetan food, though I haven’t tried any.

10. If you leave Chengdu confused as to exactly where and what you ate, you probably had a very good food trip.

Anti-surveillance mask (look for this to be an issue)

The 3D-printed resin mask, made from a 3D scan of Selvaggio’s face and manufactured by ThatsMyFace.com, renders his features and skin tone with surprising realism, though the eyes peeping out from the eye holes do lend a certain creepiness to the look.

…It turns out some states have anti-mask laws. And Selvaggio [the creator of these masks] — whose earlier project You Are Me let others use his social-media profiles — says he’s considered the possibility that anyone wearing his face in public could engage in illegal activity…That being said, I have come to the conclusion that it is worth the risk if it creates public discourse around surveillance practices and how it affects us all.”

The article is here, with excellent photos of the masks.

For the pointer I thank Vic Sarjoo.

*The Fourth Revolution*

That is the new book by John Micklethwait and Adrian Wooldridge, with the subtitle The Global Race to Reinvent the State.

I very much liked this book.  It is probably the best current manifesto on the proper roles for market and state, intelligent but also accessible to a lay reader.  For me the biggest takeaway was the import of the technological revolutions coming to government, or already arrived, and how countries do not have the luxury of sitting still in response.  Looking forward, quality of government will be an increasingly important competitive factor.  This book is also the single best statement of the thesis that these days government simply is not working very well, and that such an insight is recognized by many voters better than by many intellectuals.  Many of the illustrations of this point come from the state of California.

One interesting feature of this book (not its main point, nor a point the authors are celebrating) is the recurring recognition that democracy has diminished in global status over the last decade.

From the book, here are two facts about China:

In 2012 revenue from land-rights sales made up more than half of local-government tax revenue.

And:

The Beijing-based Unirule Institute of Economics argues that, when you allow for all the hidden subsidies such as free land, the average real return on equity for state-owned companies between 2001 and 2009 was -1.47 percent.

Definitely recommended.

From the comments

Here is Brett on Piketty:

I’m surprised to see so few critiques of Piketty on the grounds that higher wealth and income inequality won’t necessarily lead to oligarchical politics and the capture of the economy by rentiers. I’m a bit skeptical myself of his interpretation of 19th century politics – at the same time we had the Belle Epoque, there was increasing working class political power in the UK (particularly with reforms in the 1830s and 1860s), the lead-up to the near-complete loss of political power in the House of Lords in 1911, the rise of income taxes in both the UK and France, greater social mobility, broader modernization and consumer culture, and so forth. You see some pushback from Larry Bartels and the like pointing to research showing policymaking following the preferences of the rich and organized, but they don’t provide much information about whether this has changed with increasing income and wealth inequality – the rich and organized interest groups may have just always had a disproportionate interest on policymaking, even during the Postwar Period.

Morgan Kelly, in his review (via John O’Brien), serves up a related point:

If Piketty’s story about slow growth leading inevitably to rising inequality and the power of the rich is true, then we expect that inequality would have risen sharply during the 19th century when growth in industrialised economies was less than 1 per cent per year. In fact the longstanding research of Peter Lindert and Jeffrey Williamson on English inequality (which Piketty, incredibly, fails to cite) finds inequality was fairly constant, albeit high, until about 1870, and then appears to have fallen somewhat until 1913.

What is the economic future of literature?

Could it be as an add-on to higher-margin, branded carry-away commercial products?  Here is one new development:

Starting Thursday…bags and cups in Chipotle’s stores will be adorned with original text by Foer, Malcolm Gladwell, Toni Morrison, George Saunders, and Vanity Fair contributing editor Michael Lewis.  Foer says, ”Chipotle refrained from meddling in the editorial process for the duration of the initiative, which the burrito chain has branded Cultivating Thought. “I selected the writers, and insofar as there was any editing, I did it,” Foer said. “I tried to put together a somewhat eclectic group, in terms of styles. I wanted some that were essayistic, some fiction, some things that were funny, and somewhat thought provoking.”

You can read more here, via @ArikSharon.

The Americanization of China?

Yaoming

Former NBA star Yao Ming is being sued by Beijing resident Feng Changshun for endorsing a health food product that Feng said misleads consumers, in one of the first consumer rights cases involving a celebrity since a new protection law was enacted in March.

Feng is suing Baxsun Pharmacy, a retail chain in Beijing, for exaggerating the benefits of its fish oil capsules.

Yao, a spokesman for the product, is also being sued. Beijing’s Xicheng district court has confirmed that it will hear the case.

Feng said he is seeking 500 yuan ($80.10) in compensation from the retail chain and 0.01 yuan from Yao Ming.

“(The lawsuit) is symbolic. I want (Yao Ming) to admit to infringements of my rights,” he said.

You can read more here.

Is globalization bypassing New Zealand?

Bryce Wilkinson and Khyaati Acharya write:

A report in 2012 by The New Zealand Initiative drew attention to New Zealand’s seventh position among 57 countries for having the most restrictive FDI regulatory regime. This was largely due to New Zealand’s economy-wide screening regime and the broad definition of ‘sensitive’ land. Treasury has confirmed that there is credible anecdotal evidence that New Zealand’s regime is having a chilling effect on inwards FDI investment, but the materiality of this effect is an open question. It is doubtful that the damaging Crafar farms case would have triggered regulatory barriers in other Anglo-Saxon jurisdictions or comparable Asian countries.

New Zealand’s Overseas Investment Act further detracts from the country’s ‘open for business’ image by starkly asserting that it is a privilege for foreigners to be allowed to own or control sensitive New Zealand assets. This is in stark contrast to the explicitly welcoming approach widely taken elsewhere.

Statistics show that New Zealand has largely missed out on the expansion of global FDI since the mid-1990s. Both inwards and outwards stocks of FDI peaked as a percentage of GDP more than a decade ago in New Zealand, while world stocks continued their upwards climb. Between 2000 and 2011, New Zealand’s rank on UNCTAD’s FDI attraction index slumped from 73rd in the world to 146th. Hong Kong and Singapore have been in the top five throughout this period.

The longer study (pdf) covers many other points.  And here are further writings by Bryce Wilkinson on New Zealand.