Month: July 2014
Economists sign petition asking Congress to contain fallout from Argentina debt ruling
The notice is here, signers include Bob Solow and Dani Rodrik. I agree with their arguments, and you will find my slightly different but still consistent earlier critique here. Here is one bit from the press release:
“It’s a widely shared opinion among economists that the court’s attempt to force Argentina into a default that nobody – not the debtor nor more than 90 percent of creditors – wants, is wrong and damaging,” said Mark Weisbrot, economist and Co-Director of the Center for Economic and Policy Research, who helped circulate the letter.
Matt Levine has a good post on the situation here.
Assorted links
1. Further evidence for political insider trading, this time for hedge funds.
2. You call it “3-D printing optimism,” I call it “order transmission and cheap delivery pessimism.” Amazon enters the game.
3. Google search and stock prices, further results.
4. Indian monkey costume markets in everything, Parliamentary edition. And lingerie for Chinese peaches.
5. China will liberalize its internal passport system. And The Woman in Black settles in Winchester,VA.
6. Broody octopus keeps four-year vigil.
7. In which we learn that Neel Kashkari is very good at impersonating a zero marginal product worker. That skill usually does not operate in reverse.
8. Brad DeLong on Jeff Faux and NAFTA. I mostly agree, but also think rural Mexican corn farmers need to be leaving that sector in any case.
Private Schools vs. Caste Discrimination
Nearly 30% of children in India (ages 6-14) attend private schools and in some states and many urban regions a majority of the students attend private schools. Compared to the government schools, private schools perform modestly better on measures of learning (Muraldiharan and Sundararaman 2013, Tabarrok 2011) and much better on cost-efficiency. Moreover, even though the private schools are low cost and mostly serve very poor students they also have better facilities such as electricity, toilets, blackboards, desks, drinking water etc. than the government schools (e.g. here and here).
In an op-ed Vipin Veetil and Akshaya Vijayalakshmi argue that the private schools may also reduce caste discrimination:
It’s no secret that government schools in India are of poor quality. Yet few know that they are also breeding grounds for caste-based discrimination, with lower-caste students in government schools often asked to sit separately in the classroom, insulted in front of their peers and even forced to clean toilets. This despite the fact that caste discrimination is illegal in India.
…Government-school teachers aren’t necessarily more prejudiced than their private-school counterparts. But private-school teachers find it more costly to discriminate. In a survey of over 5,000 children, academic researchers James Tooley and Pauline Dixon found that students in private schools felt more respected by their teachers than children in government schools.
Caste discrimination in the government schools is also one of the reasons why the private schools focus on teaching English. Among the Dalits, English is understood as the language of liberation not just because it offers greater job prospects but even more because Hindi, Sanskrit and the regional languages are burdened by and interwoven with a history of Dalit oppression. As one Dalit put it, “No one knows how to curse me as well as in Tamil.”
Why not put a firm on your board?
State corporate law requires that “natural persons” provide director services. This Article puts this obligation to scrutiny, and concludes that there are significant gains that could be realized by permitting firms (be they partnerships, corporations, or other business entities) to provide board services. We call these firms “board service providers” (BSPs). We argue that hiring a BSP to provide board services instead of a loose group of sole proprietorships will increase board accountability, both from markets and from courts. The potential economies of scale and scope in the board services industry (including vertical integration of consultants and other board member support functions), as well as the benefits of risk pooling and talent allocation, mean that large professional director services firms may arise, and thereby create a market for corporate governance distinct from the market for corporate control. More transparency about board performance, including better pricing of governance by the market, as well as increased reputational assets at stake in board decisions, means improved corporate governance, all else being equal. But our goal in this Article is not necessarily to increase shareholder control over firms; we show how a firm providing board services could be used to increase managerial power as well. This shows the neutrality of our proposed reform, which can therefore be thought of as a reconceptualization of what a board is rather than a claim about the optimal locus of corporate power.
That is from a Stanford Law Review piece by Stephen M. Bainbridge and M. Todd Henderson. For the pointer I thank Kevin Lewis.
Interview on inequality, with Eduardo Porter
Eduardo Porter interviewed me in addition to his column, here is one excerpt:
What about other consequences of inequality? There is evidence that it hurts mobility, sapping young men’s incentives to succeed. Some have suggested it corrupts our political system and could fuel social unrest.
We know very little about what income inequality tends to cause in politics. We do see that income inequality is up considerably and crime is down considerably. We do know that older societies, as we are becoming, tend to be more peaceful and stable. We also see that a rising middle class often leads to political instability, such as in Thailand or Turkey or Brazil or for that matter the United States in the 1960s. Many young American men may be experiencing a crisis of confidence these days, but the problem lies in the absolute quality of their opportunities, not the gap between them and Bill Gates.
And this:
If we are looking for a remedy, a greater interest in strict religions would help many of the poor a lot — how about Mormonism for a start? Just look at the data. Many other religions prohibit or severely limit alcohol, drugs and gambling. That said, this has to happen privately rather than as a matter of state policy.
Here is the whole thing.
Is genetic risk aversion rational?
As the conflict rages, displacing hundreds of thousands, U.N. and Palestinian officials say some families have made a macabre calculation: to split up, with each group seeking refuge in different parts of Gaza. If one part of the family gets killed, others will live on to help the survivors and keep their dynasty alive.
But most families, officials say, still move together as a source of strength and comfort. Some are now living with other relatives, further increasing their familial size, while others have taken shelter in U.N.-run schools and other refuges.
From Sudarsan Raghavan, there is more here. Note that if there is a “single (cost-adjusted) safest perceived place,” splitting up the family into two or more locations is increasing the net expected danger to some family members, without making any members safer.
“In a data-chic world, a chief economist is the new marketing must-have.”
The rest of the WaPo story, by Lydia DePillis, is here. Here is one excerpt:
The market for consumer-facing economists is certainly getting crowded. Big Internet companies have had chief economists for years now; Google’s Hal Varian is an oft-quoted exponent of his employer’s capabilities and worldview. Microsoft recently hired Yahoo’s former chief economist to push a more “data-driven culture” at the tech dinosaur.
But they’re not just looking for super-wonks. More importantly for Richardson, rival real estate sites Zillow, Trulia, and CoreLogic have offered their chief economists as media-friendly talking heads, always available to explain national trends: Stan Humphries, Jed Kolko, and Mark Fleming have essentially become their companies’ most visible employees, speaking at conferences and testifying on Capitol Hill. That’s why Apartmentlist.com’s recent listing for a chief economist includes the following in its job description: “Act as the face of the company with key journalists for both print and tv interviews with leading publications,” “work closely with our PR and branding teams,” and have “excellent stage presence.”
File under “Those New Service Sector Jobs.”
Assorted links
Ukraine fact of the day
The Ukrainian economy shrank 4.7 per cent annually in the second quarter, far deeper than expected and casting a cloud over the assumptions that underpin the International Monetary Fund’s $17bn bailout.
That follows a 1.1 per cent year-on-year contraction in the first quarter. Given the ongoing unrest in eastern Ukraine, where much of the industrial base can be found, economic growth is unlikely to pick up later this year.
There is more here.
Eduardo Porter on me on inequality
He has a very good column on this topic today, here is one excerpt:
“The returns to growth are going to people in other countries, most notably China, and generally to people with high I.Q., no matter where they live,” said Tyler Cowen, a professor of economics at George Mason University and a contributor to the Economic View column in The New York Times. “I don’t really know how you could undermine this dynamic, short of wrecking the world. Trying to deny that logic is going to fail or worse, backfire.”
Mr. Cowen, who describes himself as a libertarian with a lowercase “l,” is the author of “Average Is Over: Powering America Beyond the Age of the Great Stagnation,” (Dutton, 2013), which posits that technology and globalization have essentially split the labor market in two: high and low earners. Far fewer stable jobs are left over in the middle to support what through much of the 20th century we called the middle class.
In his view, the defining challenge of our era is that workers in the bottom half of the distribution can no longer trust that their living standard will double every generation. “The right moral question is ‘are poor people rising to a higher standard of living?’ Inequality itself is the wrong thing to look at,” he told me. The real problem is slow growth.
“The best way to address rising inequality is to focus on increasing educational attainment,” Professor Mankiw said. Mr. Cowen adds other potentially useful policies, like expanding the earned-income tax credit or using urban policy to, say, make it easier for people who are not rich to live in San Francisco.
The full story is here, interesting throughout.
What is the strategy of Hamas?
David Brooks writes:
But when the Muslim Brotherhood government fell, the military leaders cracked down. They sentenced hundreds of the Brotherhood’s leadership class to death. They also closed roughly 95 percent of the tunnels that connected Egypt to Gaza, where the Brotherhood’s offshoot, Hamas, had gained power.
As intended, the Egyptian move was economically devastating to Hamas. Hamas derived 40 percent of its tax revenue from tariffs on goods that flowed through those tunnels. One economist estimated the economic losses at $460 million a year, nearly a fifth of the Gazan G.D.P.
Hamas needed to end that blockade, but it couldn’t strike Egypt, so it struck Israel. If Hamas could emerge as the heroic fighter in a death match against the Jewish state, if Arab TV screens were filled with dead Palestinian civilians, then public outrage would force Egypt to lift the blockade. Civilian casualties were part of the point. When Mousa Abu Marzook, the deputy chief of the Hamas political bureau, dismissed a plea for a cease-fire, he asked a rhetorical question, “What are 200 martyrs compared with lifting the siege?”
The eminent Israeli journalist Avi Issacharoff summarized the strategy in The Times of Israel, “Make no mistake, Hamas remains committed to the destruction of Israel. But Hamas is firing rockets at Tel Aviv and sending terrorists through tunnels into southern Israel while aiming, in essence, at Cairo.”
The full column is here.
Al Qaeda kidnapping markets in everything
While European governments deny paying ransoms, an investigation by The New York Times found that Al Qaeda and its direct affiliates have earned at least $125 million in revenue from kidnappings since 2008, of which $66 million was paid just in the past year.
In various news releases and statements, the United States Treasury Department has cited ransom amounts that, taken together, put the total at around $165 million over the same period.
These payments were made almost exclusively by European governments, who funnel the money through a network of proxies, sometimes masking it as development aid, according to interviews conducted for this article with former hostages, negotiators, diplomats and government officials in 10 countries in Europe, Africa and the Middle East. The inner workings of the kidnapping business were also revealed in thousands of pages of internal Qaeda documents found by this reporter while on assignment for The Associated Press in northern Mali last year.
In its early years Al Qaeda received most of its money from deep-pocketed donors, but counterterrorism officials now believe the group finances the bulk of its recruitment, training and arms purchases from ransoms paid to free Europeans.
The full story is here. by Rukmini Callimachi. Oh, and don’t forget this:
Negotiators take a reported 10 percent of the ransom, creating an incentive on both sides of the Mediterranean to increase the overall payout, according to former hostages and senior counterterrorism officials.
It turns out that Al Qaeda hardly ever executes prisoners any more.
For the pointer I thank Michael Rosenwald.
Assorted links
When OKCupid abolished photos for one day
These were the results:
1. People responded to first messages 44% more often.
2. “conversations went deeper”
3. Contact details were exchanged more quickly.
Furthermore:
When the photos were restored at 4PM, 2,200 people were in the middle of conversations that had started “blind”. Those conversations melted away.
That said, the people who actually used the “Blind Date App” if anything seemed slightly happier with their dates. The full report from OKCupid is here. Yet here is the combined chart drawn from when people score “looks” and “personality” separately.
By the way, I would never try to match you up with a book I fear you may not like, at least not without telling you or otherwise signaling that incompatibility in advance.
Stratfor on Israel and Gaza
Israel’s major problem is that circumstances always change. Predicting the military capabilities of the Arab and Islamic worlds in 50 years is difficult. Most likely, they will not be weaker than they are today, and a strong argument can be made that at least several of their constituents will be stronger. If in 50 years some or all assume a hostile posture against Israel, Israel will be in trouble.
Time is not on Israel’s side. At some point, something will likely happen to weaken its position, while it is unlikely that anything will happen to strengthen its position. That normally would be an argument for entering negotiations, but the Palestinians will not negotiate a deal that would leave them weak and divided, and any deal that Israel could live with would do just that.
What we are seeing in Gaza is merely housekeeping, that is, each side trying to maintain its position. The Palestinians need to maintain solidarity for the long haul. The Israelis need to hold their strategic superiority as long as they can. But nothing lasts forever, and over time, the relative strength of Israel will decline. Meanwhile, the relative strength of the Palestinians may increase, though this isn’t certain.
Looking at the relative risks, making a high-risk deal with the Palestinians would seem prudent in the long run. But nations do not make decisions on such abstract calculations. Israel will bet on its ability to stay strong. From a political standpoint, it has no choice. The Palestinians will bet on the long game. They have no choice. And in the meantime, blood will periodically flow.
There is more here, of interest throughout, via Eric Reguly.