Month: June 2014
African-American fact of the day (there is a great stagnation)
As sociologist Patrick Sharkey shows in his book Stuck in Place, 62 percent of black adults born between 1955 and 1970 lived in neighborhoods that were at least 20 percent poor, a fact that’s true of their children as well. An astounding 66 percent of blacks born between 1985 and 2000 live in neighborhoods as poor or poorer as those of their parents.
That is from Jamelle Bouie, there is more here, mostly about neighborhood effects.
Extracting the surplus from being in prison
Inside the razor wire on Eagle Crest Way, in rural Clallam Bay, Wash., telephone calls start at $3.15. Emails out, beyond the security fence, run 33 cents. Money transfers in, to what pass for bank accounts, cost $4.95.
Within that perimeter lies the Clallam Bay Corrections Center, a state prison — and an attractive business opportunity. One private company, JPay, has a grip on Internet and financial services. Another, Global Tel-Link, controls the phones.
The problem of course is unfettered monopoly, not the private companies per se, but private companies are often more efficient at exploiting the gains from potential monopoly power. Still, government is in on the act too:
In Baldwin County, Ala., for instance, the sheriff’s department collects 84 percent of the gross revenue from calls at the county jail.
The story is here, and for the pointer I thank Henry Farrell.
Timothy Lee interviews Marc Andreessen on the death of the IPO
It is excellent throughout, here is one good sentence:
The funny thing about Piketty is that he has a lot more faith in returns on invested capital than any professional investor I’ve ever met.
Here is another:
The result of all that is the effective death of the IPO. The number of public companies in the US has dropped dramatically. And then correspondingly, growth companies go public much later. Microsoft went out at under $1 billion, Facebook went out at $80 billion. Gains from the growth accrue to the private investor, not the public investor…
Most American retirement savings is invested in the public stock market. Most Americans can’t invest in private companies and most Americans can’t invest in venture capital and private equity funds. They’re actually prohibited from doing so by the SEC. If you both prohibit them from investing in private growth and wire the market so they can’t get into public growth, then you can’t be invested in growth. That raises the societal question of how are we going to pay for retirements. That’s the question that needs to be asked that nobody asks because it’s too scary.
The full interview is here.
The dark side of the Chinese Coase theorem for dog meat
Yikes:
At about 11 o’clock in the morning [June 20], at the grand marketplace in Yulin [China], a dog peddler was haggling with dog lovers over the price of a dog, and because they couldn’t agree on a price, the dog peddler lifted the dog high into the air three times with metal prongs, doing so to force the dog lovers to buy the dog at a high price. In the end, a woman paid 350 yuan to buy the dog. At the scene, quite a few dog peddlers used mistreatment of the dogs to force dog lovers to buy the dogs.
Here is some further background:
Also, according to the official Weibo account of Chengdu Commercial Daily, on the eve of the Dog Meat Festival, a large number of dog lovers gathered in Yulin. On the morning of [June] 20, at 9 o’clock, at the Yulin dog meat market, upon seeing that there were dog lovers present, some dog peddlers began abusing their dogs at the scene, yelling: ”Will you people buy it or not? If not, I’ll strangle it to death [with the prongs]!” Dog lovers bought the dogs with tears in their eyes, and the dog peddlers waved the cash they got before the surrounding onlookers. The onlookers cheered, and some even gave them the thumbs-up.
The story with some rather gruesome photos is here, and for the pointer I thank Ben P.
Assorted links
1. There is no (Chinese) great stagnation. I wonder if it’s any fun.
2. Sky cars to be built in Tel Aviv.
3. Will Wilkinson returns to BloggingHeadsTV.
4. Is Amazon demanding “print on demand” rights?
5. Ricardian equivalence in Japan, or is it the “rotten kid theorem”?
6. Pablo Escobar’s hippos. And growth at The Washington Post.
The Hockey Stick of Human Prosperity
We are pleased to announce a brand new course at MRUniversity, Everyday Economics. The new course will cover some of the big ideas in economics but applied to everyday questions. The first section, premiering now and rolling out over the next several weeks, features Don Boudreaux on trade. Tyler will appear in a future section on food. You can expect more from me as well. Indeed, you may spot both Tyler and I in some cameos (ala Stan Lee) in some of Don’s videos!
Here’s the first video on trade and the hockey stick of human prosperity.
How Not to Bet
Tim Harford writes of bets:
Pundits who make wagers may look grubby but at least they are accepting a cost for failure. A more subtle advantage is that betting encourages forecasts that are specific and quantifiable.
Exactly, but not all bets are well considered. Consider the following from Christopher Keating:
I have heard global warming skeptics make all sorts of statements about how the science doesn’t support claims of man-made climate change. I have found all of those statements to be empty and without any kind of supporting evidence. I have, in turn, stated that it is not possible for the skeptics to prove their claims. And, I’m willing to put my money where my mouth is.
I am announcing the start of the $10,000 Global Warming Skeptic Challenge. The rules are easy:
1. I will award $10,000 of my own money to anyone that can prove, via the scientific method, that man-made global climate change is not occurring;
…5. I am the final judge of all entries but will provide my comments on why any entry fails to prove the point.
This is a poorly constructed bet. Notice first that the preamble, “empty”, “without any kind of supporting evidence”, “prove,” is simply unscientific bluster. Scientific thinking is Bayesian. (Appropriately, I first saw Keating’s bet flagged on the blog Prior Probability.) In contrast, this talk is suggestive of someone who doesn’t weigh evidence, a point of some importance given that he writes “I am the final judge of all entries…”. Keating is really betting that no one will change his mind and that’s not a bet that I would want to take.
Second, what counts as proof? And what does it mean to say that man-made global climate change is not occurring. How much is man made? How fast is it occurring? What are the costs? What are the benefits? Keating’s challenge is vague and poorly worded.
For an example of a much better bet consider the Caplan-Bauman bet on temperature change over the next 15 years. Caplan has agreed to pay Bauman $333.33 if the average temperature over the period 2015-2029 is more than .05C greater than the average temperature over 2000-2014 as measured by the National Climatic Data Center. If the average temperature increase over that time frame is less than .05c then Bauman will pay Caplan $1000.
The Caplan-Bauman bet is quantifiable and specific and it contains odds, as it should since Bauman expresses much greater certainty in his belief than Caplan.
Keating seems even more certain in his beliefs than Bauman. But how certain? Will he accept my offer of the same bet at 5:1 odds?
Scottish devolution hasn’t mattered much for actual policy
In the major fields of domestic policy responsibility assigned to the new devolved institutions, such as health, education, local government, there have been remarkably few initiatives. A system of local government, reorganised in 1996 on the basis of 32 multi-purpose local authorities and designed by the preceding Conservative UK government, has been largely left untouched. As in England a grossly inadequate system of council tax inherited from the preceding Conservative government and crying out for reform, has been left untouched by the first two Labour/Liberal Democratic administrations and the two successor SNP administrations. And under the latter the system has been shored up by Scottish government funding to facilitate a council tax freeze and containment of local government expenditure.
Or try this:
A 2012 Audit Scotland report has also indicated little change in health inequalities within Scotland in the last decade. Despite avoiding the major structural reorganisations experienced by the NHS in England, and being more generously endowed with public funds, the NHS in Scotland does not seem to have made, under devolution, any fundamental change to the pattern of relatively poor health outcomes. Devolution did not involve much change in the governance of health in Scotland in as much as the ministerial, civil service and medical leadership continued as before but within a new ministerial structure. What was new was the Scottish Parliament and it does not seem to have made much difference.
There is more here, by Norman Bonney, interesting throughout. The pointer is from www.macrodigest.com.
Peter Coy sums up the student debt debate
You can read his very useful overview here. It is hard to excerpt but worth reading in full. A Vox survey of the debate is here, also worth a look. Here is a testy response from Choire Sicha, here is the original David Leonhardt piece.
Assorted links
1. The French economy continues to stagnate.
2. Good math textbook cover (recursive).
3. Cochrane on Summers on stagnation.
4. The polity that is San Francisco, parking app ruled illegal.
5. When will deleveraging be over? And are morning people less ethical at night?
6. Russian pizza claims delivery by drone and not just publicity stunt, speculative, some might even say BS.
Norwegian betting bite markets in everything
A Norwegian football fan has scooped a cool £500 after betting on Luis Suarez to bite somebody at the World Cup in Brazil.
Suarez has twice been spotted biting opponents in recent years, so the punter thought he’d put £3 on the striker to take a munch out of somebody at Brazil 2014.
And low and behold, towards the end of Uruguay’s clash with Italy, he bit Italy defender Giorgio Chiellini – triggering the bookmaker to pay out.
With odds of 175/1, it was a pretty amazing outcome, despite Suarez’s reliability for biting his rivals.
See above for the betting slip, all numbers are in Norwegian krone.
The link with photo is here. For the pointer I thank Carlos Cinelli.
My interview with Ralph Nader
I interviewed him. You will find the full version here, the edited version here. Not surprisingly, I prefer the full version. Here is one excerpt:
TC: If I look back at your career, I see you’ve been fighting various kinds of wars or struggles against a lot of different injustices. If you look back on all those decades, during which time you’ve been right about many things, what do you think is the main thing you’ve been wrong about?
RN: Oh, a lot of things. Nobody goes through these kinds of controversies without making bad predictions. I underestimated the power of corporations to crumble the countervailing force we call government. We always knew corporations like to have their adherents to become elected officials; that has been going on for a long time. But I never foresaw the insinuation of corporatism as a policy in one agency after another in government. Franklin Delano Roosevelt foresaw some of this when he sent a message to Congress when he started the temporary national economic commission to investigate consecrated corporate power. That was in 1938. In his message he said that whenever the government is controlled by private economic power, that’s facism. Now, there isn’t a department or agency in Washington where anyone has more power—over it and in it, through their appointees, and on Congress, through lobbyists and political action committees. Nobody comes close. There’s no organized force that comes close to the daily power to twist government in the favor of Wall Street and corporatism, and to disable government from adequately defending the health, safety and economic well-being of the American people.
TC: Let’s say we look at the U.S. corporate income tax. The rate on paper is 35 percent, which is quite high. When you look at how much they actually pay after various forms of maneuvering or evasion, maybe they pay 17–18 percent, which is more or less in the middle of the pack of OECD nations. So if corporations have so much political power in the United States, why is our corporate income tax still so high?
…Sweden, a country you cited favorably, taxes capital income much more lightly than the United States does—not just on paper but in terms of what’s actually paid.
I also ask him about the Flynn effect, whether America needs a new kind of sports participation, and how much American churches have resisted corruption through corporatization, among a variety of other topics. I tried to avoid the predictable questions.
By the way, you can buy Nader’s new book, Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State. I very much enjoyed my preparation for this interview, which involved reading or rereading a bunch of his books and also a few biographies of him.
Cross-national intelligence and the cross-bureaucratic Coase theorem
The sharing of intelligence information has exploded since 9/11, so one way to avoid national restrictions on your intelligence service is to have someone else’s intelligence service do the actual spying. Henry Farrell reports:
There’s been relatively little discussion of whether there is a problem in principle with international surveillance, and most of what there has been has concerned the question of whether or not privacy is a universalhumanright. But the recent Der Spiegel revelations combined with some earlier material points to a narrower but very troubling set of problems for liberal democracies. Cross national cooperation between intelligence services has exploded post-September 11. This cooperation is not only outside the public space but, very often, isn’t well known to politicians either. Such cooperation in turn means that intelligence services are in practice able to evade national controls on the things that they do or do not do, directly weakening democracy.
Henry concludes:
This implies that national security liberalism, to the extent that it ever was a credible position, isn’t any more. Liberals who embrace national security and extensive foreign intelligence gathering do so on the rationale that there is a clear distinction between national politics (where we owe obligations to our fellow citizens not to torture them or invade their privacy) and international politics (where they believe that at best a much weaker set of rights and obligations applies). But if national intelligence agencies are working across borders, creating a pool of shared information that systematically undermines national protections, then national security liberalism is at best incoherent, and at worst active apologetics on behalf of measures that not only corrode global rights, but the national level rights that they claim to care about too.
There is more here.
Arrived in my pile
Morten Jerven, Poor Numbers: How We Are Misled by African Development Statistics and What To Do About It.
This seems to be the place to start on this topic.
Peter de Keyzer, Growth Makes You Happy: An Optimist’s View of Progress and the Free Market.
Steven D. Gjerstad and Vernon L. Smith, Rethinking Housing Bubbles: The Role of Household and Bank Balance Sheets in Modeling Economic Cycles. They present a bank balance sheet account of the Great Recession, with a good deal of background coming from the experimental economics direction.
In 100 Years, Leading Economists Predict the Future, edited by Ignacio Palacios-Huerta.
Robert Howse, Leo Strauss: Man of Peace.
Sentence to Ponder and Ponder and Ponder
Does any sentence better illustrate the human condition in all its political, social and biological complexities than this sentence?
New York state lawmakers have passed a bill banning residents from taking “tiger selfies” — a rising trend on dating websites in which single men post photos of themselves posing with the ferocious felines in hopes of impressing potential mates.
Dissertations are waiting to be written.