Month: June 2014
Assorted links
Why you should not confuse sympathy with policy
I was disappointed but not surprised by this passage by Gary Silverman:
What I like about Obamacare is that it shows some respect for “those people” – as Hudson called them in Giant – who are good enough to work the fields and mow the lawns, and build the roads and sew the clothes, and diaper the babies and wash the dishes, but somehow aren’t good enough to see a doctor from time to time to make sure there is nothing wrong inside.
That is in fact what most of politics is about, namely debates over which groups should enjoy higher social status and which groups should receive lower social status. Of course critics of Obamacare have their own versions of desired status reallocation, typically involving higher status for the economically productive.
Here is another example of the argument from sympathy, by Norman Podhoretz, applied to a very different field of discourse:
Provoked by the predictable collapse of the farcical negotiations forced by Secretary of State John Kerry on the Palestinians and the Israelis, I wish to make a confession: I have no sympathy—none—for the Palestinians. Furthermore, I do not believe they deserve any.
I am not in this post seeking to adjudicate ACA or U.S. policy in the Middle East. The easy target is to go after these two authors, but I am interested in different game. The deeper point is that virtually all of us argue this way, albeit with more subtlety. A lot of the more innocuous-sounding arguments we use all the time come perilously close to committing the same fallacies as do these quite transparent and I would say quite obnoxious mistaken excerpts. One of the best paths for becoming a good reader of economics and politics blog posts (and other material) is to learn when you are encountering these kinds of arguments in disguised form.
Where did the productivity slowdown come from?
John Fernald has a new NBER paper on this question. Here is the abstract:
U.S. labor and total-factor productivity growth slowed prior to the Great Recession. The timing rules out explanations that focus on disruptions during or since the recession, and industry and state data rule out “bubble economy” stories related to housing or finance. The slowdown is located in industries that produce information technology (IT) or that use IT intensively, consistent with a return to normal productivity growth after nearly a decade of exceptional IT-fueled gains. A calibrated growth model suggests trend productivity growth has returned close to its 1973-1995 pace. Slower underlying productivity growth implies less economic slack than recently estimated by the Congressional Budget Office. As of 2013, about ¾ of the shortfall of actual output from (overly optimistic) pre-recession trends reflects a reduction in the level of potential.
The ungated version is here (pdf).
Assorted links
1. Are fish smarter and more sentient than we think?
2. The rental housing shortage.
3. Reddit forum on what’s the most ****ed up thing you’ve ever done for money.
4. Mystery object (?) on Titan, Saturn’s moon.
5. Francisco Goldman is skeptical about Mexico’s reforms. And the economics of the paywall at the FT.
6. Is Western civilization hardy or fragile? And how often do men think about sex?
Peter Lindert on Piketty
He has an NBER review essay on the book. Here is one bit:
Piketty’s “r > g” device, for all its amazing rhetorical power, does not take us very far. Our task of explaining and predicting inequality movements is not made any easier by the requirement that we must first predict both a “rate of return” and the growth rate of the economy. The formula r – g takes us no further than we were transported fifty years ago by the concept of total factor productivity as a “source” of growth. It will be another “measure of our ignorance.”
Here is more:
Oddly, however, for the twentieth century trends that he and his collaborators have documented so well, the relevance of the wealth/income and capital/income ratios for the income distribution is less compelling. Across countries, the levels and movements of this ratio do not correlate well with those in income inequality. Over time, there is more correlation, within Britain, or France, or Germany, or the United States. Yet, as we shall see later, the same overall movements will show up when we look at the inequality movements in incomes that have little to do with wealth, such as wage rates or in middle/lower income ratios.
The essay is interesting throughout and you will see at the end that Lindert is no friend of inequality and no enemy of highly progressive taxation. By the way, here is a Lindert essay on three centuries of inequality in Britain and America (pdf). Here is Lindert, with Williamson, on whether globalization makes the world more unequal. He knows this area very well.
How good a climate change solution do we need?
Responding to the recent Henry Paulson piece, Paul Krugman writes today:
In policy terms, climate action — if it happens at all — will probably look like health reform. That is, it will be an awkward compromise dictated in part by the need to appease special interests, not the clean, simple solution you would have implemented if you could have started from scratch. It will be the subject of intense partisanship, relying overwhelmingly on support from just one party, and will be the subject of constant, hysterical attacks. And it will, if we’re lucky, nonetheless do the job.
I would put it this way: climate change is like neither the financial crisis nor the Obama health care plan, but above all it is an international problem requiring an international solution. And it’s not like banning land mines, where most countries have little reason to continue with the practice. It is also not like ozone, where a coordinated solution is relatively low cost, more or less invisible to voters, threatens few jobs, and involves few incentives for defection. A climate change solution requires a lot of countries to turn their back on coal-generated pollution long before we did (as measured in per capita income terms) and long before the Kuznets curve suggests they otherwise are going to. A climate change solution, if done the wrong way, will look to China like a major attempt to unfairly deindustrialize them and, if it is backed by trade sanctions, it will look like an act of war. Trade agreements do best when most or all of the countries already wish to act cooperatively toward much lower tariffs. For a green energy solution, China (among others) in fact has to want to solve the problem, as do we. And the already-installed or in-process coal base in China is…forbidding.
The problem isn’t just coming up with “something better.” Think of today’s fossil fuels as a stock in the ground. The problem is coming up with something “better than the lower and falling prices for the fossil fuel stock once some countries start going green.” That’s really tough, because it means competing against a lower fossil fuel price than what we see today. What will Africa choose?
In other words, a climate change solution has to involve a relatively cheap form of energy, relative to the status quo. Not just cheap to citizens because it is subsidized, but cheap to governments and cheap at the national level too. Alternatively, you could regard all of this as reason to be pessimistic. But in the meantime, it is entirely reasonable to insist on solutions which can generalized, and that means solutions which are relatively cost-effective.
Are land mines a thing of the past?
It seems so:
Despite the conflicts in Syria, Iraq and Afghanistan, the armed uprising in Ukraine and turmoil in other hot spots in the Middle East and Africa, one of war’s most insidious weapons — antipersonnel land mines — have been largely outlawed and drastically reduced, a monitoring group said in a report released Monday.
In the 15 years since a global treaty prohibiting these weapons took effect, the use and production of the mines has nearly stopped, new casualties have plummeted, and more than two dozen countries once contaminated by land mines buried since old wars have removed them, said the report by the group, the International Campaign to Ban Landmines.
“The Mine Ban Treaty remains an ongoing success in stigmatizing the use of land mines and mitigating the suffering they cause,” said Jeff Abramson, the project manager of Landmine Monitor, the group’s research unit.
There is more here. The United States, however, still has not signed the treaty.
Are IPOs collusive and value-destroying?
A new paper says yes, and then maybe sort of:
By modeling the market for IPOs as a repeated game with imperfect monitoring, we establish that collusion among underwriters explains the concentration of spreads at 7%, along with other characters of the data on spreads. Furthermore, the structure of optimal spreads in the model explains the existence and quantitative characteristics of underpricing in the market for IPO shares. We estimate the model by deriving moment conditions from both underpricing and spreads. Our estimates indicate that IPOs destroy value on average over the sample period 1985-2007. This result, however, is driven primarily by the dot-com era. Excluding this period, IPOs appear to increase value.
That is from Lowery and Kang at UT Austin, a few years old but I had not seen it before, the link is here. For the pointer I thank Samir Varma. He also points me to this paper on why the reputations of individual star employees may be eclipsing the reputations of institutions at the level of the investment bank.
What book changed the life of Elizabeth McCracken? (very good answers)
What book changed your life?
The Guinness Book of World Records. I mean that earnestly. It was the book that taught me that the world was full of passionate, peculiar human beings.
And these parts:
Where do you feel most free?
In airport bars.
How do you relax?
In movie theatres.
A longer FT interview is here. The pointer is from @HugoLindgren.
Assorted links
1. Hachette, Amazon, and lock-in effects through DRM.
4 The economics of transition for a new Scottish state (pdf).
5. Two professional soccer players vs. 55 children (video, recommended).
Measuring worker value: the new Average is Over
This trend is accelerating:
When Jim Sullivan began working as a waiter at a Dallas restaurant a few years ago, he was being watched — not by the prying eyes of a human boss, but by intelligent software.
The digital sentinel, he was told, tracked every waiter, every ticket, and every dish and drink, looking for patterns that might suggest employee theft. But that torrent of detailed information, parsed another way, cast a computer-generated spotlight on the most productive workers.
Mr. Sullivan’s data shone brightly. And when his employer opened a fourth restaurant in the Dallas area in 2012, Mr. Sullivan was named the manager — a winner in the increasingly quantified world of work.
Here is some of what goes on behind the scenes:
Ben Waber is chief executive of Sociometric Solutions, a start-up that grew out of his doctoral research at M.I.T.’s Human Dynamics Laboratory, which conducts research in the new technologies. Sociometric Solutions advises companies using sensor-rich ID badges worn by employees. These sociometric badges, equipped with two microphones, a location sensor and an accelerometer, monitor the communications behavior of individuals — tone of voice, posture and body language, as well as who spoke to whom for how long.
Sociometric Solutions is already working with 20 companies in the banking, technology, pharmaceutical and health care industries, involving thousands of employees. The workers must opt in to have their data collected. Mr. Waber’s company signs a contract with each one guaranteeing that no individual data is given to the employer (only aggregate statistics) and that no conversations are recorded.
The article by Steve Lohr is here.
Who are the wealthiest artists?
Here are two examples you don’t usually think of:
Then there are a couple of names who are totally unknown to most people, even in the art world. These are the richest artists you’ve never heard of: graffiti artist David Choe painted the Facebook headquarters in 2007 and was rewarded with stock, which now makes him worth about $200m. The Welshman Andrew Vicari has made an estimated $142m from supplying portraits and paintings of horses, battle and genre scenes to Middle Easterners, particularly in Saudi Arabia.
The longer article, by Georgina Adam, cites the Thompson estimate that there are about seventy-five “superstar” artists who regularly earn in seven figures. And here is the new Georgina Adam book Big Bucks: The Explosion of the Art Market in the 21st Century.
Assorted links
2. Are libertarians rediscovering public goods?
3. The economics of ISIS. Mobile or stationary bandit?
4. The top ten (finance) peeves of Clifford S. Asness.
The Anti-Nanny State
A new report from the Migration Policy Institute calculates that:
The US government spends more on its immigration enforcement agencies than on all of its principal criminal federal law enforcement agencies combined. In FY 2012, spending for CBP, ICE and US-Visit reached nearly $18 billion. This amount exceeds by nearly 24% total spending by the FBI, Drug Enforcement Agency (DEA), Secret Service, US Marshals Service, and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) which stood at $14.4 billion in FY 2012.
In other words, the Federal government spends more on preventing trade than on preventing murder, rape and theft. I call it the anti-nanny state. It’s hard to believe that this truly reflects the American public’s priorities.
Very good sentences
…the UK government should have pressed much harder for the 800,000 Scots who live in England – the natural pro-union constituency – to get a vote. Allowing the break-up of the country to be passed by a simple majority also looks careless. The bar for constitutional change in the US is set much higher.
The rest of the Gideon Rachman FT piece, on Cameron’s UK, is excellent throughout and here.