Month: September 2014

China blood for grades markets in everything

by  Tyler Cowen in

It’s one thing for parents to shell out for cram schools or private tutors for their children, but parents in China’s Zhejiang province are taking it a step further. There, parents can give their own blood to earn some extra points on their child’s zhongkao, or high school entrance exam.

Four liters of donated blood will get your child one extra point; 6 liters adds two points; and 8 liters, three. One 28-year-old man on Weibo, China’s version of Twitter, posted that he had surpassed the 4-liter mark, a gift to his unborn child: “[I] want to tell my future son: No worries with the high school entrance exams, Dad has already got you bonus marks!” the man said, quoted in the South China Morning Post. The policy began this July, but parents are able to take into account the blood they donated in the past. The 28-year-old had started donating when he was 18.

That is from Jeanne Kim, there is more here.

Assorted links

by  Tyler Cowen

1. Things that cost more than space exploration.

2. Tim Harford on why Parisian food is getting worse.

3. The Mercedes-Benz driverless truck.

4. Steven Pinker on why academic writing stinks.

5. Bill Gross’s Straussian take on his deceased pet cat, CAPM, the disrepair of economic models, his personal pet history, and the future of asset returns.  It is strange how they concluded from this letter that he was erratic: “I often asked her about her recommendations for pet food stocks, and she frequently responded – one meow for “no,” two meows for a “you bet.” She was less certain about interest rates, but then it never hurt to ask.”  I say he was spot on, and knew no other way of communicating the bad news.  I suppose he needed to be Straussian about his Straussianism.

How to make beer a natural monopoly?

by  Tyler Cowen in

Bruges is trying something different:

The Belgian city of Bruges has approved plans to build a pipeline which will funnel beer underneath its famous cobbled streets.

Locals and politicians were fed up with huge lorries clattering through the cobbled streets and tiny canal paths of the picturesque city and decided to connect the De Halve Maan brewery to a bottling factory 3.2km (two miles) away.

It is estimated that some 500 trucks currently motor through Bruges each year on their way to the brewery, which is a famous tourist attraction.

Now they will be kept out of the city limits, as the pipe pumps 1,500 gallons of beer per hour. Construction is set to begin next year.

“The beer will take 10 to 15 minutes to reach the bottling plant,” said brewery CEO Xavier Vanneste. “By using the pipeline we will keep hundreds of lorries out of the city centre. This is unique in the brewing industry with exception of one German brewery that has installed a similar system.”

There is more here, and for the pointer I thank Samir Varma.

On-line classes really do work, at least sometimes

by  Tyler Cowen in

There is a new report of interest, admittedly MIT physics-specific only:

…for the first time, researchers have carried out a detailed study that shows that these classes really can teach at least as effectively as traditional classroom courses—and they found that this is true regardless of how much preparation and knowledge students start out with.

The findings have just been published in the International Review of Research in Open and Distance Learning, in a paper by David Pritchard, MIT’s Cecil and Ida Green Professor of Physics, along with three other researchers at MIT and one each from Harvard University and China’s Tsinghua University.

“It’s an issue that has been very controversial,” Pritchard says. “A number of well-known educators have said there isn’t going to be much learning in MOOCs, or if there is, it will be for people who are already well-educated.”

But after thorough before-and-after testing of students taking the MITx physics class 8.MReVx (Mechanics Review) online, and similar testing of those taking the same class in its traditional form, Pritchard and his team found quite the contrary: The study showed that in the MITx course, “the amount learned is somewhat greater than in the traditional lecture-based course,” Pritchard says.

A second, more surprising finding, he says, is that those who were least prepared, as shown by their scores on pretests, “learn as well as everybody else.” That is, the amount of improvement seen “is no different for skillful people in the class”—including experienced physics teachers—”or students who were badly prepared. They all showed the same level of increase,” the study found.

For the pointer I thank Samir Varma

China fact of the day

by  Tyler Cowen in

…the size of the Chinese government and party bureaucracy is surprisingly modest…In this respect, the Chinese communist Party is similar to previous Chinese dynasties as far back as the Han, which ruled the vast Chinese empire with a modestly sized civil service.

…China has only 31 government and party employees per thousand residents.  The number of civil servants per thousand residents in France is 95, in the United States, 75, and in Germany 53.

You will note that these numbers exclude state-owned enterprises, which in China are extensive although shrinking in relative terms.

That is from the new and excellent Nicholas Lardy book Markets Over Mao: The Rise of Private Business in China.  In my view the truth lies somewhere between the arguments of Lardy and the thesis of Joe Zhang, see the first Amazon review for Zhang’s critique of Lardy, plus Zhang’s comments here.  Here is Scott Sumner criticizing Zhang.

Food is cheaper in large cities

by  Tyler Cowen in

Eliminating heterogeneity bias causes 97 percent of the variance in the price level of food products across cities to disappear relative to a conventional index. Eliminating both biases reverses the common finding that prices tend to be higher in larger cities. Instead, we find that price level for food products falls with city size.

That is part of an abstract and new paper from Jessie Handbury and David E. Weinstein, via Kevin Lewis.  They have two additional interesting papers on the cost of living here.

Is stopping climate change a free lunch?

by  Tyler Cowen in

We’re again seeing the return of magical thinking in the economics profession and elsewhere.  Limiting climate change is indeed worth doing, but it is not close to a free lunch.  Eduardo Porter makes the relevant point quite nicely:

“If the Chinese and the Indians found it much more economically efficient to build out solar, nuclear and wind, why are they still building all these coal plants?” asked Ted Nordhaus, chairman of the Breakthrough Institute, a think tank focused on development and the environment.

China’s CO2 emissions increased 4.2 percent last year, according to the Global Carbon Project, helping drive a global increase of 2.3 percent. China now accounts for 28 percent of the world’s total emissions, more than the United States and the European Union combined.

“I don’t think the Chinese and the Indians are stupid,” Mr. Nordhaus told me. “They are looking at their indigenous energy resources and energy demand and making fairly reasonable decisions.”

For them, combating climate change does not look at all like a free lunch.

Note that doing something about air pollution and doing something about carbon emissions are two distinct issues.  America did a great deal to clean up its air, for instance when it comes to the dangerous Total Particulate Matter, but has done much less to lower its carbon emissions.  It is no accident that the former is a national public good, the latter is mainly a global public good.  China, India, and other developing nations may well go a similar route and simply keep emitting carbon at high and perhaps even growing rates.   If you lump everything together into a general “the benefits of getting rid of air pollution,” you will be missing that nations can and probably will make targeted clean-up attempts that leave carbon emissions largely intact.

By the way, here is yesterday’s report from India:

“India’s first task is eradication of poverty,” Mr. Javadekar said, speaking in a New York hotel suite a day after a United Nations climate summit. “Twenty percent of our population doesn’t have access to electricity, and that’s our top priority. We will grow faster, and our emissions will rise.”

India is the world’s third-largest carbon polluter, behind China and the United States, and Mr. Javadekar’s comments are a first indication of the direction of the environmental policies of the new prime minister, Narendra Modi…

In coming decades, as India works to provide access to electricity to more than 300 million people, its emissions are projected to double, surpassing those of the United States and China.

If you haven’t tried crossing the street in India, you don’t know much about how hard it is to fix the problem of carbon emissions.

“Big Data” is going to raise some awkward normative questions

by  Tyler Cowen in

From Joe Palazzolo at the WSJ:

There is no research yet on whether the use of risk evaluations in sentencing has aggravated, for example, the gap between sentences for black and white men for similar crimes.

Ms. Starr said the disparities created by risk measures are evident. “When it comes down to it, these assessments stand for the proposition that judges should sentence people longer because they were in foster care as children or had too many bouts of unemployment,” she said.

Christopher Slobogin, a Vanderbilt University law professor, said the alternative was potentially worse. “At least these risk-assessment instruments don’t explicitly focus on race or poverty, unlike what might occur in a sentencing regime where judges are making risk assessments based on seat-of-the-pants evaluations,” he said.

Some observers, such as U.S. District Judge Richard Kopf in Nebraska, say age or race should be considered if doing so yields a more accurate measurement of risk. He wrote in a blog post last month: “If race, gender or age are predictive as validated by good empirical analysis, and we truly care about public safety while at the same time depopulating our prisons, why wouldn’t a rational sentencing system freely use race, gender or age as predictor of future criminality?”

There is more here.

Does New Zealand have the best-designed system of government in the world?

by  Tyler Cowen in

Dylan Matthews says yes.  He cites their mixed-member proportional representation, their unicameral legislature, and monarchy.  He left out the biggest advantage of New Zealand government — not very much federalism!  Admittedly, more populous countries cannot achieve that same outcome with equal ease.

I also would make a case for preferring the earlier New Zealand Westminster system to proportional representation.  What is really the advantage of giving those small parties — not all of which have a fully responsible sense of governing — leverage over their pet issues?  The process of coalition formation decreases accountability and blurs what elections are really about.  PR makes more sense in fractious or ethnically split countries, where various groups require a sense of representation.  New Zealand has long had separate arrangements for special Maori representation, and in any case Kiwi PR has not evolved to be primarily about giving Maori added voice (the ostensibly “Maori party” holds only two seats).  To the extent such additional voice is desirable, it can best be done other ways.

Why so few Venice-like cities?

by  Tyler Cowen in

So asks Sam Wilson on Twitter.  You can parse this question a few different ways, but I take it to be about location theory and, indirectly, topology.  That is, why are there so few cities with multiple water connections between different independent nodes?

First we might check the historical premise.  Stockholm used to be called “Venice of the North,” a variety of Dutch cities are based on canals, check out the (now largely defunct) Marsh Arabs from southern Iraq, plus a variety of arrangements in southeast Asia over the centuries, such as kelong, or the Pang uk of Hong Kong.  There is a long history of stilt houses on water, including but not restricted to Chiloe, Chile and Nipa huts in the Philippines, some of which are designed for wet areas.

But I digress.

In any case, many cities seem to have a much smaller number of nodes connecting to the water.  Check out Duluth, Minnesota.  There is a dominant port, with most local connections to that port running overland rather than by water.   And if a goods shipment is headed into Duluth, you pretty much know where it will arrive.  The same is true for Rotterdam, as no one is angling to reach those inner, smaller canals of Dordrecht with their bananas.

The greater the anonymity of exchange, and the greater the distance involved, the stronger is the role of a formal port as a centralized supplier of trust and also buyer-seller coordination.  That will imply a small number of water nodes, all the more so as globalization and specialization proceed.

But if you are a Marsh Arab wishing to trade some rice for some coriander with your neighbor, and the next day lend a sowing needle in return for some gossip, to a different neighbor, such idiosyncratic bilateral yet multiple exchange nodes and networks may work pretty well.  You can think of multiple node cities as doing a great deal to enable non-regular, non-standardized barter, but that becomes less valuable with economic growth.

A related approach is to ask when it is more efficient to settle nearly contiguous islands, as opposed to dry land next to water.  In earlier times non-monopolized access to fish, trade, and water transport were main reasons, plus Malthusian conditions elsewhere, such as in the resource-sparse, low-yield Veneto.  Venice was settled long before a mix of accident and leadership skill led to it becoming a primary conduit between East and West and thus a wealthy and powerful commercial republic.

For a variety of propositions about monetary economics, there are corresponding propositions about topology and location theory, the trick is to see them.

Village_of_the_Marsh_Arabs

Why should employers ever suspend workers?

by  Tyler Cowen in

Why not just fire them or cut their pay?  As you may know, ESPN just suspended Bill Simmons for three weeks.

One possibility is that a fined but still active worker may continue to “shoot off his mouth” and thus increase the ongoing collateral damage.  (Simmons called the NFL commissioner a “liar” and I believe he works for one of the network’s revenue sources.)  The suspension is a kind of cooling off period.

Another possibility is that ESPN wishes to shift the long-run bargaining equilibrium.  They wish to signal to Simmons that he isn’t as valuable to them as he may think he is, in the hope of either cutting his pay relative to trend or inducing him to be more careful with his future words.  They wish to show they can go without his output for three weeks, without (perhaps) a major loss of business.  Fining him would not shift the long-run balance of power in the same manner because ESPN is continuing to rely on the traffic which Simmons brings in and thus signaling that they really need him.

I do not know if the suspension is with or without pay, but a version of the above argument can work either way, with some modifications required.

If I were the commissioner, I would be insulted by the suspension of Simmons.  It suggests these are words which cannot be said, perhaps because they will elicit audience assent.  The suspension also signals that ESPN regards the commissioner as quite thin-skinned and presumably — especially if he is indeed thin-skinned! — he could be offended by that too.

In sticky nominal wage models, it remains an interesting question why more workers are not suspended rather than fired outright.  Indeed this used to be closer to the norm in many manufacturing labor markets.