Month: August 2015

Are reading texts becoming harder or simpler?

Robert J. Stevens, have done a pretty serious study of this question, based on computer analysis of texts, and here is their key conclusion:

From about 1930 through 1960 or 1970, the cognitive demands of reading curricula changed little…

In the period of 1970 through 2000 we observed a fairly consistent increase in the difficulty of reading text and comprehension tasks, particularly at third grade.

For sixth graders, however, reading texts were somewhat more complex in the 1910-1930 period.

I also found this comparison interesting:

In the 1920s, 45% of all questions asked were explicit detail questions, whereas by 1990 and 2000 curricula, that had diminished to only 8% of the questions asked.

Alas I can no longer remember who deserves thanks for this pointer.  Here is an earlier Alex post about whether TV shows are becoming more complicated.

What is China’s Unemployment Rate?

What is China’s Unemployment Rate? 4.1% For what month, what year? Doesn’t matter the answer is still 4.1%. That’s a slight exaggeration but for the last 3 years the unemployment rate has been 4.1% almost every month. Indeed, since 2002 the official unemployment rate has varied between 3.9% and 4.3%, an absurdly smooth series.

In contrast to the unemployment rate, China’s GDP growth rate has had massive swings. As a piece in Quartz puts it the unemployment rate exhibits an eerie stillness.


A new NBER working paper uses a newly available household survey and finds a very different series–the China-UHS series shown in black below. According to these estimates China’s unemployment rate shot up to around 11% in 2002 and has been nearly that high at least until 2009 when unfortunately the new series ends.

UE Rate China

So how high is Chinese unemployment today? No one knows but it could well be closer to 10% than to 4.1%.

Keep an eye on China and don’t be surprised by the unexpected. In China it’s not just the unemployment rate that is more volatile than it appears.

The import of Donald Trump

It still seems quite unlikely to me that Trump survives much past Super Tuesday, much less wins anything.  Still, he has done far better than virtually anyone expected.

So in equilibrium I expect another embodiment of his ideas to surface politically, without all of the surrounding personal outrageousness.

Think of him as a trial balloon.  It’s still floating.

We might also see, for the next election cycle, further entry from rich people who mimic the outrageousness of Trump but not the particular ideas.  The signal extraction problem from Trump’s continuing float is not yet solved.

In these senses the media is not wrong to focus on him.  What he embodies — no matter how you interpret it — is what is new this election cycle.  And the multiplicity of possible interpretations make it all the more fodder for the media mill.

Observers expect forecasters to show high confidence

Observers seem to focus on the target event and not its complement.  Bagchi and Ince have a new paper on this question:

Consumers routinely rely on forecasters to make predictions about uncertain events (e.g., sporting contests, stock fluctuations). The authors demonstrate that when forecasts are higher versus lower (e.g., a 70% vs. 30% chance of team A winning a game) consumers infer that the forecaster is more confident in her prediction, has conducted more in-depth analyses, and is more trustworthy. The prediction is also judged as more accurate. This occurs because forecasts are evaluated based on how well they predict the target event occurring (team A winning). Higher forecasts indicate greater likelihood of the target event occurring, and signal a confident analyst, while lower forecasts indicate lower likelihood and lower confidence in the target event occurring. But because, with lower forecasts, consumers still focus on the target event (and not its complement), lower confidence in the target event occurring is erroneously interpreted as the forecaster being less confident in her overall prediction (instead of more confident in the complementary event occurring—team A losing). The authors identify boundary conditions, generalize to other prediction formats, and demonstrate consequences.

Of course this also has relevance for the evolutionary processes governing pundits.

Here is a related press release (pdf).  For the pointer I thank Charles Klingman.

Amazon employment and the tax wedge

A few points on the Amazon story everyone is talking about:

1. First, if the story is somewhat true but exaggerated (a plausible scenario for something anecdotally based), the story may help Amazon with its current (but not prospective) employees.   A lot of people suddenly are feeling better treated than the perceived average, and that may boost their morale and productivity.  Yet they still feel the surrounding pressures to succeed.  As a countervailing force, Amazon is now less of a high status place to work and that may lower productivity and also it may hurt recruiting.

2. Given the existence of a tax wedge, Amazon employees are perhaps treated better than they would be in an optimum.  There is in general an inefficient substitution into non-pecuniary means of reimbursing workers because workplace income is taxed but workplace perks are not.  So arguably Amazon is treating its workers too well.  Think of this as another form of corporate tax arbitrage.

3. There is no right to an upper middle class lifestyle.  And for a large number of people, getting one is not easy.

Tuesday assorted links

1. Interview with Campbell Harvey.

2. Common knowledge and Aumann’s agreement theorem.

3. “I don’t know much about tiger logistics, but we were told to be this huge blue tarp monster with the weedwhacker and try to be scary and make loud noises. That just made him angry. You could say he got tiger rage, so we retreated.

4. Research advice from David Weil.  Follow it.

5. Tesla.  And human leather (is it a fake site?)  What is the Bitcoin civil war aboutTim Lee on the same.

6. By how many has Obamacare reduced the number of the uninsured?

Why Elon Musk Wants to Go to Mars

Tim Urban at Wait but Why has a fascinating longform series on How and Why SpaceX Will Colonize Mars which itself is part of a longer series on Elon Musk and his companies. Here’s just one bit:

The Scary Thing About the Universe

Species extinctions are kind of like human deaths—they’re happening constantly, at a mild and steady rate. But a mass extinction event is, for species, like a war or a sweeping epidemic is for humans—an unusual event that kills off a large chunk of the population in one blow. Humans have never experienced a mass extinction event, and if one happened, there’s a reasonable chance it would end the human race—either because the event itself would kill us (like a collision with a large enough asteroid), or the effects of an event would (like something that decimates the food supply or dramatically changes the temperature or atmospheric composition). The extinction graph below shows animal extinction over time (using marine extinction as an indicator). I’ve labeled the five major extinction events and the percentage of total species lost during each one (not included on this graph is what many believe is becoming a new mass extinction, happening right now, caused by the impact of humans):1


…Let’s imagine the Earth is a hard drive, and each species on Earth, including our own, is a Microsoft Excel document on the hard drive filled with trillions of rows of data. Using our shortened timescale, where 50 million years = one month, here’s what we know:

  • Right now, it’s August of 2015
  • The hard drive (i.e. the Earth) came into existence 7.5 years ago, in early 2008
  • A year ago, in August of 2014, the hard drive was loaded up with Excel documents (i.e. the origin of animals). Since then, new Excel docs have been continually created and others have developed an error message and stopped opening (i.e gone extinct).
  • Since August 2014, the hard drive has crashed five times—i.e. extinction events—in November 2014, in December 2014, in March 2015, April 2015, and July 2015. Each time the hard drive crashed, it rebooted a few hours later, but after rebooting, about 70% of the Excel docs were no longer there. Except the March 2015 crash, which erased 95% of the documents.
  • Now it’s mid-August 2015, and the homo sapiens Excel doc was created about two hours ago.

Now—if you owned a hard drive with an extraordinarily important Excel doc on it, and you knew that the hard drive pretty reliably tended to crash every month or two, with the last crash happening five weeks ago—what’s the very obvious thing you’d do?

You’d copy the document onto a second hard drive.

That’s why Elon Musk wants to put a million people on Mars.

On a related note the latest Planet Money podcast is How to Stop an Asteroid. It’s funny and informative and yours truly makes an appearance. Worth a listen.

Don’t test drive a new car before buying it

Why should you?  They want you to do it, which is already reason to be suspicious.

It makes you all the more emotionally committed to buying a car whose immediate feel you enjoy.  You might save a few hundred dollars on the bargaining by refusing to take that step of commitment.

Furthermore you might expect that every plausible new car can in fact survive a test drive from a potential customer.  Let others test drive it for you.

And let’s say you didn’t so much like the test drive.  Is that a bad sign or a good sign about the car?  Does your dislike very well predict you will dislike it a month from now?  I doubt that.  In fact if you are somewhat typical and others dislike the test drive too, that might mean the car is all the more a bargain.  And you are letting a mere mediocre test drive persuade you away from exploiting that bargain.

I readily admit this advice does not apply to very tall people and other outliers.

Question: to how many other spheres of life might this reasoning apply?

Further results in Austro-Italian business cycle theory

You may think this is from the Journal of Masonomics, but no it is an NBER Working paper:

Following the introduction of the euro in 1999, countries in the South experienced large capital inflows and low productivity. We use data for manufacturing firms in Spain to document a significant increase in the dispersion of the return to capital across firms, a stable dispersion of the return to labor across firms, and a significant increase in productivity losses from misallocation over time. We develop a model of heterogeneous firms facing financial frictions and investment adjustment costs. The model generates cross-sectional and time-series patterns in size, productivity, capital returns, investment, and debt consistent with those observed in production and balance sheet data. We illustrate how the decline in the real interest rate, often attributed to the euro convergence process, leads to a decline in sectoral total factor productivity as capital inflows are misallocated toward firms that have higher net worth but are not necessarily more productive. We conclude by showing that similar trends in dispersion and productivity losses are observed in Italy and Portugal but not in Germany, France, and Norway.

The authors are Gita Gopinath, Sebnem Kalemli-Ozcan, Loukas Karabarbounis, and Carolina Villegas-Sanchez.  You don’t have to be a hard-core Austrian to think that malinvestment is the most under-used word in contemporary macroeconomics.

The greatest stagnation, the economy that is Japan

From the 4th quarter of 2013 to the 2nd quarter of 2015 the Japanese economy grew by a grand total of 0.1%.  And the unemployment rate continued to fall, from 3.7% to 3.4%.  That’s right, over the past 6 quarters the Japanese economy has been growing at above trend.  But that blistering pace can’t go on forever.  The unemployment rate is down to 3.4%, and unless I’m mistaken there is a theoretical “zero lower bound” on unemployment that is even more certain than interest rates. The Japanese economy is like a Galapagos tortoise that has just sprinted 20 meters, and needs a long rest.

That is from Scott Sumner, there is more at the link.

Monday assorted links

1. A new study of health insurer consolidation.

2. TSA pre-crime.

3. Using drones to capture whale snot (warning: link sets off a video, so that is a sign the article is interesting, given that I linked to it anyway).

4. “…the average salary of a doctor in China is 72,000 yuan a year (US$11,600)…

5. Actual unemployment rates for China.  And photo-essay on China’s deserted amusement parks.

6. Did the dissolution of the monasteries matter?

Can China rebalance growth toward consumption?

No, not really.  Rebalance, yes, but the growth part…not quite.

It’s not an aggregate demand problem where C + I + G is the useful way of thinking of the causal determinants of national income.  So a lower I and a higher C will not leave future Y unchanged, even if the boost in C picks up the slack in the very short run.

China has been growing a lot because it has been investing a lot, and investing relatively well, at least compared to where it had been.  Putting a given amount of yuan toward a well-placed road helps an emerging economy more than does spending that money on a bagel.

Turning more of that investment into consumption will mean a lower growth rate.

China of course can and should rebalance toward more consumption, because their investment has been growing increasingly wasteful.  But that is not a path toward maintaining or restoring a seven percent growth rate.  It is an admission that a seven percent growth rate will never be possible again.

China (Singapore) fact of the day

…the [Singapore] water transport segment…contracted on the back of a decline in sea cargo handled. On quarter, the sector contracted 10.3 percent, after gaining 6.5 percent in the first quarter.

There is more on the Singaporean economy here, finance and IT had robust growth, 7.1 and 4.5 percent respectively for the year.  Retail grew five percent.

I wonder why that water transport figure was down?  The manufacturing sector was strongly down too.