Month: April 2015
Gary B. Gorton, The Maze of Banking: History, Theory, Crisis. This volume collects his best articles.
Arnold Thackray, David C. Brock, and Rachel Jones, Moore’s Law: The Life of Gordon Moore, Silicon Valley’s Quiet Revolutionary. Appears to be the most thorough and comprehensive treatment to date.
Vishaal Kishore, Ricardo’s Gauntlet: Economic Fiction and the Flawed Case for Free Trade.
For decades, the road had its own rules. The most important was to drive on its left side. That allowed down-bound motorists to peer out their windows and get a better look at how close their wheels were to the abyss.
Amid fog, rain and landslides, accidents killed 200 to 300 people per year.
You can read more about it here. I was once in La Paz, and unwilling to leave because it would have meant traversing this road. Nor did I have enough time to fly somewhere and back.
1. 12 Communist buildings that are still standing; I like most of them. A lot.
3. Partisan nudge bias (pdf).
4. An argument that TPP isn’t so good for the global poor. I would note a few points: first, trade diversion arguments, if applied consistently, would in practice leave us with pretty high levels of protectionism. There are plenty of estimates TPP will lead to more trade, not just diverted trade. Also, if Vietnam doesn’t gain that much from this trade, how can the trade diversion effect be so significant? Second, to the extent “trade” is not so important, bad IP law should not be so costly either. I find many trade skeptics suddenly start gushing over the benefits of trade once the topic of trade-limiting IP comes up. A lot of the critics wish to have their cake and eat it too.
That is the new Keynes biography by the renowned Richard Davenport-Hines. It’s not like most biographies I know. The font is fairly large, and the presentation is non-comprehensive and fairly subjective. It is more like reading the transcript of some very good talks on Keynes, and less of a trudge than many bios. There is even a chapter on Keynes as lover, but actually quite serious and good, as it helps set the man in context. For Davenport-Hines, Keynes was most of all a Cambridge Apostle. This book will help you get inside the mind of Keynes, definitely recommended.
I’m passing through Baltimore on the train today (a talk at U. Penn and chatting with Ashok Rao), so I have license to do this. Here goes:
1. Author: There is plenty to choose from here, including Poe, James Cain, Dashiell Hammett, Frank O’Hara, and H.L. Mencken. I do not love F. Scott Fitzgerald as many do, same with Upton Sinclair, but they deserve mention. I’ll opt for Poe, with Gold-Bug as my favorite story. Hammett’s Red Harvest I also enjoy and have taught a few times, delicious incoherence. Anne Tyler has a few good books, but stop reading after one or two of them.
2. Philosopher: John Rawls, though since we’re talking about Baltimore I feel I should call him Jack.
3. Painter: Morris Louis or Grace Hartigan? I feel I can do better, help out people.
4. Popular music: Tori Amos grew up in Baltimore, I like her Little Earthquakes and various singles, live cuts, and cover versions, available only in scattered form as far as I know. Is Dan Deacon popular? Frank Zappa is a remarkable musical talent, but I don’t actually enjoy listening to him.
5. Jazz: Eubie Blake, there is also Bill Frisell and Billie Holiday.
6. Classical music: Philip Glass was born there, though I associate him with NYC.
7. Baseball: I still remember that old Orioles rotation with Cuellar, McNally, Palmer, and Dobson, all twenty-game winners in the same year.
8. Soviet spy: Alger Hiss.
9. Movie, set in: I don’t love Diner or Avalon, how about The Accidental Tourist, or Twelve Monkeys? The first half of Silence of the Lambs is excellent.
For good measure toss in Thurgood Marshall, Tim Page, Babe Ruth, The Wire, Walters Art Museum, the underrated BSO, and Brooks Robinson. Who or what else am I forgetting?
The bottom line: Lots for one city! Let’s hope it gets better soon.
Which VPNs are working these days? What other advice do you have for me, when it comes to accessing the internet? Is accessing some sites easier with a Mac? Can GMU email be accessed without a VPN? WordPress? MR? Is there a difference between iPhones and iPads and laptops in these regards?
I thank you all in advance for your assistance.
A new Brookings study by Rothwell and Kulkarni attempts to do just that. The list of ratings for two-year institutions puts NHTI’s-Concord Community College at the top, followed by a large number of institutions you mostly haven’t heard of. For four-year institutions the list starts with:
4. Rose-Hulman Institute of Technology,
with other surprises to follow. The Colorado School of Mines does better than Princeton, for instance. Here is the report itself, here is a story on the report. I am finding the web site for the rankings is still a little glitchy, let’s hope they fix that soon, or maybe it is just the current volume of traffic.
Not for Greece, that is clear, rather for everyone else. Given bank recapitalization, the introduction of the European Stability Mechanism, European QE, a more general flood of liquidity to European banks, and a burgeoning European economic recovery — by European standards that is — it seems Grexit stands a good chance of being a non-event at the global or even the European level. After all, Greece is only a small sliver of EU gdp; a few years ago it was only two percent, now presumably it is less. On top of that, most of the remaining Greek debt is to public sector institutions, not private banks, which ought to limit contagion effects. Indeed, as Greek bond yields rise, these days the bond yields of the periphery nations do not rise in tandem; some in fact have been falling.
So what’s the problem?
I think 80-20 that Grexit would not become a major macroeconomic problem for other countries, with the possible exception of small Cyprus. But where does that 20% come from?
If Greek deposit flight forces a form of Grexit, whether whole or partial (capital controls plus scrip?), there is a good chance that markets will in essence “ask” the ECB again just how firmly it stands behind the other troubled eurozone member nations, such as Portugal. The danger is that the current “creative ambiguity” cannot be disturbed in a useful way. It might be hard for the ECB to announce that it stands fully behind the other eurozone nations, and in effect promise to monetize any pending default. The incentive for moral hazard would be too destructive, and besides governments such as that of Spain don’t want to encourage the anti-austerity opposition. The ECB is therefore likely to make a public commitment less extreme than that.
But neither will “we don’t really stand behind these governments at all” do the trick. That probably would induce contagion along some other parts of the periphery, maybe more.
The ECB therefore must choose some intermediate point to signal — “we are committed, but member nations still bear fiscal risk.” In part that is why they have rearranged the ex ante guarantees to fall so firmly upon national central banks, a move which some have compared to turning the euro into a currency board system. Ex post, of course, the ECB or EU still has the discretionary option of bailing out those central banks, if and when it chooses to do so. And, following Grexit, they could credibly say “The EU would have bailed out Greece, had an agreement on structural adjustment been reached and previous commitments honored.” That’s basically a repeat of previous messages and maybe it is good enough. That is where the 80% comes from.
So which ingredients will shape the new (old) message?: an intelligent but constrained ECB with a highly restrictive charter, a Europe-dedicated and wishing to atone for Grexit but electorally cautious Germany, a bunch of periphery nations which basically want any and all guarantees reserved for themselves and not for opposition parties, and lots of other voices, all mixed into a more or less unprecedented shock surprise in modern financial history.
So will the ECB get the signal right? Did I say 80-20? Can I change that to…um…70-30?
In Seattle, where a dozen officers started wearing body cameras in a pilot program in December, the department has set up its own YouTube channel, broadcasting a stream of blurred images to protect the privacy of people filmed. Much of this footage is uncontroversial; one scene shows a woman jogging past a group of people and an officer watching her, then having a muted conversation with people whose faces have been obscured.
“We were talking about the video and what to do with it, and someone said, ‘What do people do with police videos?’ ” said Mike Wagers, chief operating officer of the Seattle police. His answer: “They put it on YouTube.”
In a specifically Vietnamese context, there is good evidence that more trade with Vietnam will bring more FDI. A more general political science study shows the same, namely that joining trade agreements boosts FDI and also growth.
Here is an argument (circa 2005) that Vietnam still has too much trade protection. Here is a good general piece that trade boosts poverty reduction in poorer nations. Here is supporting evidence specifically on rural Vietnam.
Dogfish Head, for example, has Chicha – a native corn beer that is chewed by the brewers and spit out before being brewed (and boiled – so it’s sterile). The saliva, say the brewers, has enzymes that convert the starches in the corns to sugar.
Earlier this month, Barrels and Bottles Brewery in Golden, CO offered an extra special bitter that was brewed with Peeps, the colored marshmallow candy that marks the Easter season. (90 of them, to be specific.) And just last week, New Belgium teamed up with Ben & Jerry’s ice cream to announce plans to produce a Salted Caramel Brownie Brown Ale (which will go on sale this fall).
…The newly crowned king of stunt beers is Iceland’s Brugghús Steðja. In January, the microbrewery introduced Hvalur 2 – a 5.2% ABV seasonal ale that incorporates the testicles of fin whales into the brewing process. And, believe it or not, that’s not the weirdest part of the ingredient list.
“We consider this beer to be in perfect style of [the Thorri] season,” says Dagbjartur Arilíusson, Steðji’s co-owner. “We get fresh whale testicles from a fin whale and we smoke it in an old Icelandic tradition way, smoked with dry sheep dung.”
There is more here, via the excellent Samir Varma.
One of the least-convincing tropes of financial journalism is the article explaining how business firms can increase profits and at the same time engage in some conventional, culturally-approved, do-good activity such as improving the environment, saving energy, or helping the poor. The latest version is how to increase profits by increasing wages.
Here is James Surowiecki writing in the New Yorker:
A substantial body of research suggests that it can make sense to pay above-market wages—economists call them “efficiency wages.” If you pay people better, they are more likely to stay, which saves money; job turnover was costing Aetna a hundred and twenty million dollars a year. Better-paid employees tend to work harder, too. The most famous example in business history is Henry Ford’s decision, in 1914, to start paying his workers the then handsome sum of five dollars a day. Working on the Model T assembly line was an unpleasant job. Workers had been quitting in huge numbers or simply not showing up for work. Once Ford started paying better, job turnover and absenteeism plummeted, and productivity and profits rose.
Walter Frick writing in the Harvard Business Review agrees:
The theory of efficiency wages…suggests that firms sometimes have an incentive to pay workers more than the going rate because doing so attracts better candidates, motivates them to work harder, and encourages them to stay at the company longer.
There are two problems with this story, one obvious and one not-so obvious. The not so-obvious problem is that the economists who developed the theory of efficiency wages (including Shapiro and Stiglitz, Akerlof and Yellen and Yellen) had no illusions that they were helping business firms to discover a new way to increase profits. The economists who developed efficiency wage theory were trying to explain persistent unemployment. Hence the title of Janet Yellen’s famous survey, Efficiency Wage Models of Unemployment.
The question that motivated efficiency wage theory was not why firms should raise wages but why firms don’t cut wages when they should. The answer they gave was that firms don’t cut wages despite unemployment because they fear that workers will respond to lower wages with reduced productivity. Thus, here is Akerlof and Yellen explaining that when workers demand “fair” wages they create unemployment.
…according to the fair wage-effort hypothesis, workers proportionately withdraw effort as their actual wage falls short of their fair wage. Such behavior causes unemployment…
In the original efficiency wage literature there is no wishful thinking–no idea that we can have more of everything that we want without tradeoffs. Instead of being desirable, the efficiency wage is a problem because lower wages would reduce unemployment and be better for the economy as a whole.
Instead of letting us bask in wishful thinking the real efficiency wage theory suggests unpleasant tradeoffs. Yellen, for example, suggests that if it were cheap, greater monitoring of workers would lower unemployment as would allowing workers to take low-pay or no-pay internships for trial periods. In our paper on asymmetric information, Tyler and I make such unpleasant tradeoffs clear:
When employers do not easily observe workers, for example, employers may pay workers unusually high wages, generating a rent. Workers will then work at high levels despite infrequent employer observation, to maintain their future rents (Shapiro and Stiglitz 1984). But those higher wages involved a cost, namely that fewer workers were hired, and the hires that were made often were directed to people who were already known to the firm. Better monitoring of workers will mean that employers will hire more people and furthermore they may be more willing to take chances on risky outsiders, rather than those applicants who come with impeccable pedigree. If the outsider does not work out and produce at an acceptable level, it is easy enough to figure this out and fire them later on.
Notice that the efficiency wage theorists took it for granted that to the extent that firms can increase profits by raising wages they have already done so (hence the persistent unemployment). Firms don’t typically leave $100 bills lying on the ground so the Stiglitz, Akerlof, Yellen assumption makes perfect sense. Thus the more obvious problem with the journalistic account of efficiency wages is that it makes it sound as if the idea that productivity might increase with wages is a revelation that firms have never considered. (See Frick for some implausible stories of why firms might not raise wages even when it is profitable to do so.) In fact, firms routinely track turnover and productivity and they are well aware that higher wages are a possible means to reduce turnover and increase productivity although, as it turns out, not necessarily the most effective means. Indeed, the whole field of workforce science deals with retention, turnover and job satisfaction and the relationship of these to productivity and it does so with more nuance than do most economists. Thus, it’s simply not plausible that large numbers of firms on the existing margin can increase wages, profits and productivity. TANSTAAFL.
In summary, the real theory of efficiency wages is an important and useful theory of persistent unemployment–one that helped earn Stiglitz and Aklerof Nobel prizes and Yellen a plum government job–but the journalistic proponents of “efficiency wages” are false prophets peddling false profits.
I have read and heard many times that TPP will bring harsher intellectual property law than is appropriate for the poorer Asian countries, noting that over time we can expect more of them to join the agreement. In general poorer countries often benefit from weaker IP enforcement, more copying, and lower prices. This is standard stuff.
It is less commonly recognized by the critics, however, that tougher IP protection may induce more foreign direct investment. Why for instance invest in a country which might subject your patents and copyrights to an undesired form of compulsory licensing? Trade agreements are likely to rule out or restrict such risks. There will be more cross-border licensing activity as well, if there is tougher IP enforcement. A company might even set up an R&D facility in a upper-tier developing country.
IPRs are quite important for multinational firms making location decisions among middle-income countries with strong abilities to absorb and learn technology.
You will note however that the effect is not there for poorer countries. But in general:
…stronger IPRs have a significantly positive effect on total trade.
The study’s findings support a positive role for IPRs in stimulating enterprise development and innovation in developing countries.
I would say the volume, and the surrounding literature, as a whole provides some positive support for how IP rights may boost economic development, though not overwhelming or unambiguous support. And the literature does not support a “one size fits all” approach to IP law; in this sense TPP is far from ideal. But still, the literature does find some very real development benefits when a country moves to tougher IP rights.
But here’s the thing: TPP opponents simply tell us that bad and too tight IP law will be foisted upon the world’s economies. I see talk of Aaron Schwartz and Mickey Mouse extensions, but I don’t see enough of the critics weighing the costs and benefits, or for that matter even mentioning the possible benefits of extending IP regimes. I think the benefits of this IP extension may well outweigh the costs, when it comes to the developing nations involved in TPP. At the very least it seems to me up for grabs. And I certainly don’t think that voting down TPP this time around is going to lead to a more favorable redo of the agreement, not on IP for sure.
So IP considerations are not weighing nearly as much against TPP as you might think.