Month: September 2014

Germany is pioneering commercial drone delivery (of life, not death)

Logistics firm DHL is using a drone to fly parcels to the German island of Juist, in what it says is the first time an unmanned aircraft has been authorized to deliver goods in Europe.

The company, owned by Germany’s Deutsche Post, joins the likes of Amazon.com and Google in testing the potential for drones to deliver parcels and packages.

Its drone – the “parcelcopter” – can fly at up to 65 km (40 miles) an hour. It will deliver medication and other urgently needed goods to the car-free island of Juist, off Germany’s northern coast, at times when other modes of transport such as flights or ferries are not operating.

There is more here, via Eli Dourado.

The robust demand for safe assets

Pan-national borrowers such as the European Investment Bank, World Bank and Inter-American Development Bank have raised $219bn on global debt markets so far this year, the largest sum raised year to date since records began, according to data from Dealogic.

From Elaine Moore at the FT, there is more here.   The world as a whole of course is richer than ever before, most of all in the emerging economies, so I do not take this borrowing to be an encouraging sign.

Assorted links

Hiring Women and the Moral Inversion of Economics

In my post on why economics is detested I quoted Arnold Kling:

The intention heuristic says that if the intentions of an act are selfless and well-meaning, then the act is good. If the intentions are self-interested, then it is not good.

In contrast, economics evaluates an act not by its intentions but by its consequences. Since “bad” intentions can lead to good consequences (“as if by an invisible hand”). It’s not surprising that economists often praise what others denounce. Here’s a case in point:

At a Sydney technology startup conference, Evan Thornley, an Australian multimillionaire and co-founder of online advertising company LookSmart (LOOK), gave a talk about why he likes to hire women. “The Australian labor market and world labor market just consistently and amazingly undervalues women in so many roles, particularly in our industry,” he said. When LookSmart went public on Nasdaq in 1999, he said, it was one of the few tech companies that had more women than men on its senior management team. “Call me opportunistic; I thought I could get better people with less competition because we were willing to understand the skills and capabilities that many of these woman had,” Thornley said.

Thornley went on to say that by hiring women, he got better-qualified employees to whom he was able to give more responsibility. “And [they were] still often relatively cheap compared to what we would’ve had to pay someone less good of a different gender,” he concluded. To illustrate his point he showed a slide that said: “Women: Like Men, Only Cheaper.”

For his comments, Thornley’s was labelled a sexist and loudly denounced, especially so by furious women. Strange? Not according to the intention heuristic which judges self-interested actions as bad.

If we judge actions by consequences, however, Thornley should be encouraged, perhaps even praised. Accepting for the sake of argument the truth of the story, it’s Thornley who has overcome prejudice (his or his society’s), recognized the truth of equality and taken entrepreneurial action to do well while doing good. It’s Thornley who is broadcasting the fact of equality to the world and encouraging others to do likewise. Most importantly, the consequence of Thornley’s actions are to increase the demand for women executives thereby increasing their wages.

Women’s wages aren’t pushed down by employers who hire women but by employers who don’t hire women. So why does Thornley get the blame? Instead of denouncing Thornley, whose actions push up the wages of women he hires and the wages of the women he does not hire, why not ask, How can we encourage employers not to overlook talented women and minorities?

For those wanting to break the bonds of discrimination whether they be women, blacks or Dalits, lower wages and a competitive market aren’t the cost of discrimination but the cure. It’s the lower wages that give employers an incentive to overcome prejudice, seek out talent, and experiment with new ways of doing business. And it is the self-interested pursuit of profit that is the surest means to increase the wages of the unjustly ignored and overlooked.

*Trillion Dollar Economists*

That is the new book by Robert E. Litan and it is the single best attempt to answer the question of what good economists have done the world (I am also a big fan of Alex’s earlier edited volume, Entrepreneurial Economics on this topic, the Litan is more current).  The subtitle is How Economists and their Ideas have Transformed Business.

Every chapter is clear and convincing, and the topics include optimization, regression, Moneyball, experimental economics, auctions, consulting, matchmaking (romantic and otherwise), finance, deregulation, the telecommunications revolution, Hal Varian at Google, prediction markets, and much more.

Definitely recommended.

Should we hope to live to very ripe old ages?

I say yes.  A number of you have been asking me for comments on this now-famous Atlantic piece by Ezekiel Emanuel.  You should read his whole argument, but here is one bit:

…here is a simple truth that many of us seem to resist: living too long is also a loss. It renders many of us, if not disabled, then faltering and declining, a state that may not be worse than death but is nonetheless deprived. It robs us of our creativity and ability to contribute to work, society, the world. It transforms how people experience us, relate to us, and, most important, remember us. We are no longer remembered as vibrant and engaged but as feeble, ineffectual, even pathetic.

Ezekiel basically wishes not to live beyond age 75.  Not that he will do himself in, but he regards that as a limit past which it is probably not desirable to go.  Just to be clear, I don’t read Emanuel as wishing to impose or even “nudge” this view on others, he is stating a personal vision.  Still, it strikes me as a somewhat strange approach to understanding the value of a life or estimating when that value ends.  The value of an individual life is to be sure somewhat ineffable, but for that same reason it is difficult for a life to lose so much of its value.

It is easy for me to see how a person could be a valuable role model for others past the age of seventy-five.  I expect Ezekiel in particular to fulfill this function superbly.  I still think frequently of the late Marvin Becker, the Princeton (later UM) Renaissance historian, who for me was an important role model at the age of seventy-seven.  Marvin often used to say “Oh, to be seventy again!”  He had more than his share of aches and pains, but he was always a comfort and joy to his wife Betty, and most likely to his children and grandchildren as well.

Or visit the list of words in Emanuel’s paragraph, cited above.  Many people are “disabled” to begin with, and many other lives are “deprived” to begin with, for one thing most of the lives in the world’s poorer countries.   But they are still, on the whole, extremely valuable lives.  I don’t just mean that external parties should respect the rights and lives of those persons, but rather internally and individually those lives are of great value.

To pick another word from that paragraph, “creativity” is overrated and most of us do not have it in the first place.  And if one does have it, perhaps its passing is in some ways a liberation rather than a personal tragedy.

I would rather be remembered as “that really old guy who hung on forever because he loved life so much” than as vibrant.  At some points I felt this piece needed a…marginal revolution.

And to sound petty for a moment, I don’t want to pass away during the opening moments of a Carlsen-Caruana match, or before an NBA season has finished (well, it depends on the season), or before the final volumes of Knausgaard are translated into English.  And this is a never-ending supply.  The world is a fascinating place and I fully expect to appreciate it at the age of eighty, albeit with some faculties less sharp.  What if the Fermi Paradox is resolved, or a good theory of quantum gravity developed?  What else might be worth waiting for?

I cannot help but feel that Emanuel is overrating some key aspects of what are supposed to be making his current life valuable, and thus undervaluing his future life past age seventy-five.  (See David Henderson too on that point.)

It was Dan Quisenberry who once said: “The future is much like the present, only longer.”

More to the point, and coming from the marginalist camp, there is Art Buchwald, who noted: “Whether it’s the best of times or the worst of times, it’s the only time we’ve got.”

Assorted links

Jeremy Waldron on Nudge

Waldron is one of my favorite contemporary philosophers, here is one bit from his NYRoB essay:

More reassuring, I think, would be a candid assessment of what might go wrong with nudging. One of Sunstein’s many books (from before his time in the White House) is entitled Worst-Case Scenarios. Could we please have something like that as a companion to Nudge?

I am afraid there is very little awareness in these books about the problem of trust. Every day we are bombarded with offers whose choice architecture is manipulated, not necessarily in our favor. The latest deal from the phone company is designed to bamboozle us, and we may well want such blandishments regulated. But it is not clear whether the regulators themselves are trustworthy. Governments don’t just make mistakes; they sometimes set out deliberately to mislead us. The mendacity of elected officials is legendary and claims on our trust and credulity have often been squandered. It is against this background that we have to consider how nudging might be abused.

The full piece is here.  By the way, there is a new Cass Sunstein book out, which I have not yet read, Valuing Life: Humanizing the Regulatory State.

The Twitter pointer is from Michael Clemens.

Indian average is over

The richer states have, on average, experienced relatively faster per capita GDP growth than the poorer states, despite the strong performance of low income states such as Bihar, Orissa and Uttarakhand. The reality is that the pace at which richer states are pulling away appears to be increasing.

That is from David Keohane at the FT, two excellent maps at the link as well.

Hedge fund rats

Why should trading be the province of humans only?:

One project is Michael Marcovici’s Rat Trader. The book describes the training of laboratory rats to trade in foreign exchange and commodity futures markets. Marcovici says the rats “outperformed some of the world’s leading human fund managers.” The rats were trained to press a red or green button to give buy or sell signals, after listening to ticker tape movements represented as sounds. If they called the market right they were fed, if they called it wrong they got a small electric shock. Male and female rats performed equally well. The second generation of rattraders, cross-bred from the best performers in the first generation, appeared to have even better performance, although this is a preliminary result, according to the text. Marcovici’s plan, he writes, is to breed enough of them to set up a hedge fund.

I don’t myself like the electric shock idea, but there you go.  That is from Diane Coyle, and for the pointer I thank Michael Gibson.

What I’ve been reading

Ruth Towse, Advanced Introduction to Cultural Economics.  She remains the definitive presenter of this material.

I very much enjoyed Ian Leslie’s Curious, a polyglot look at being…curious.

Richard Flanagan, The Narrow Road to the Deep North.  A moving and vibrant novel about an Australian in a prisoner of war camp in WWII and his escapades surrounding that time in his life.

Edward D. Kleinbard’s We are Better Than This: How Government Should Spend Our Money is a well-done progressive take on the expenditure side of fiscal  policy.

Andrea Louise Campbell, Trapped in America’s Safety Net: One Family’s Struggle.  A good anecdotal but also analytical study of how means-tested welfare programs can make life very difficult for the poor.  Recommended.

Partyism in America is getting worse

In 1960, 5 percent of Republicans and 4 percent of Democrats said that they would feel “displeased” if their son or daughter married outside their political party. By 2010, those numbers had reached 49 percent and 33 percent. Republicans have been found to like Democrats less than they like people on welfare or gays and lesbians. Democrats dislike Republicans more than they dislike big business.

And this:

To test for political prejudice, Shanto Iyengar and Sean Westwood, political scientists at Stanford University, conducted a large-scale implicit association test with 2,000 adults. They found people’s political bias to be much larger than their racial bias. When Democrats see “joy,” it’s much easier for them to click on a corner that says “Democratic” and “good” than on one that says “Republican” and “good.”

To find out whether such attitudes predict behavior, Iyengar and Westwood undertook a follow-up study. They asked more than 1,000 people to look at the resumes of several high-school seniors and say which ones should be awarded a scholarship. Some of these resumes contained racial cues (“president of the African American Student Association”) while others had political ones (“president of the Young Republicans”).

Race mattered. African-American participants preferred the African-American candidates 73 percent to 27 percent. Whites showed a modest preference for African-American candidates, as well, though by a significantly smaller margin. But partisanship made a much bigger difference. Both Democrats and Republicans selected their in-party candidate about 80 percent of the time.

That is from Cass Sunstein.

Assorted links

Are stock buybacks too high?

Edward Luce writes in The Financial Times:

According to William Lazonick, a scholar at the University of Massachusetts Lowell, seven of the top 10 largest share repurchasers spent more on buybacks and dividends than their entire net income between 2003 and 2012. In the case of Hewlett-Packard, which spent $73bn, it was almost double its profits. For ExxonMobil, which came top with $287bn in buybacks and dividends, it amounted to 83 per cent of net income. Others, such as Microsoft (125 per cent), Cisco (121 per cent) and Intel (109 per cent) were even more extravagant. In total, the top 449 companies in the S&P 500 spent $2.4tn – or more than half their profits – on buybacks in those years. They spent almost the same again in dividend payouts. Taken together, they came to 91 per cent of net income.

There is more here.  I would read the data this way: the rents earned by those companies stem from their preexisting intellectual property, rather than from their current managerial talents.