Month: August 2015

Oil falls below $42 a barrel (the paradox of Julian Simon)

Yes, I call it the paradox of Julian Simon.  He is right about resource prices falling mostly when his optimism about emerging economies is wrong, and vice versa.  The Ultimate Resource was published in 1981, much of the resource price spike didn’t start until the early 1990s, and when Simon published the emerging economies hadn’t yet done so much to emerge.  The world where Simon is wrong about resource prices — think Chinese peak growth years — is probably the more optimistic scenario.  Another way to put this is that manufactured goods are more likely subject to increasing returns to scale than is resource production.

The Bloomberg news report on oil is here.

Geoff Colvin, *Humans are Underrated*

Here is my Washington Post review of that book, which I very much liked.  Here is one bit from the review:

My favorite parts of the book are about the military, an area where most other popular authors on automation and smart software have hesitated to tread. In this book you can read about how much of America’s military prowess comes from superior human performance and not just from technology. Future gains will result from how combat participants are trained, motivated, and taught to work together and trust each other, and from better after-action performance reviews. Militaries are inevitably hierarchical, but when they process and admit their mistakes, they can become rapidly more efficient.

The subtitle of the book is What High Achievers Know That Brilliant Machines Never Will.

FDA approval at what price?

There is plenty of debate over whether the FDA should be looser or tougher with new drug approval, but I rarely hear the question posed as “approval at what price?”

One option would be to approve relatively strong and safe drugs at full Medicare and Medicaid reimbursement rates, if not higher.  Drugs with lesser efficacy or higher risk could be approved at lower reimbursement prices.  It is possible or perhaps even likely, of course, that private insurance companies would follow the government’s lead.

Dr. Peter Bach has promoted one version of this idea, and produced a calculator for valuing these drugs.  In essence the government would be saying to lower quality producers “yes, you can continue to try to improve this drug, but not at public expense.”

I believe proposals of this kind deserve further attention, and in general the notion of regulatory approval need not be conceived in strictly binary, yes/no terms.

If you could know only one thing about a city’s food scene…

No, it is not knowledge of the city’s best dish, nor is it access to all the Yelp reviews, or even an understanding of how the spices in that cuisine work together.

I have a simple nomination.  If you could only know one thing about a city, you would like to know what time the best and most popular restaurants fill up.

If you know that time, you can walk around a restaurant-rich area.  Wait for the best places to start filling up, and then make your move and muscle your way through the door.  Voila, the wisdom of crowds!

If you come too early, you cannot glean information from watching the customer flow because there isn’t any.  If you come too late, the best places are already full, or they have lines which are too long.  But if you are there at just the right time, and attentive to the movement of the crowds, what really can go wrong?

In Singapore the best time to start stalking the hawker centres is about 10:30 a.m., certainly no later than 11.  Otherwise the lines at the best stalls are simply too long.  Just show up at the right time, and assume the Singaporeans know what they are doing.  It works.  In Paris you must be looking for a good lunch restaurant before 12:30.

It is a common theme in food economics that knowledge of people, or knowledge of social mechanisms, is often more valuable than knowledge of food.  Knowing whom to ask and also how to ask is also often more valuable than a detailed knowledge of a cuisine per se.

Measuring innovation by job quantities

From Greg Ip:

Quantifying innovation is difficult: Government statistics don’t adequately measure activities that only recently came into existence. Mr. Mandel circumvents this problem by surmising that innovation leaves its mark in the sorts of skills employers demand. For example, the shale oil and gas revolution is apparent in the soaring numbers of mining, geological and petroleum engineers, whereas the ranks of biological, medical, chemical, and materials scientists have slipped since 2006-07.

Screening job postings on Indeed, a job website, Mr. Mandel finds that the proportion mentioning “Android” (Google’s mobile operating system), “fracking” and “robotics” has risen notably in the past four to six years. But the proportion mentioning “composite materials,” “biologist,” “gene” or “nanotechnology” has trended down. His conclusion: Today’s economy is “unevenly innovative.”

You can find the whole article here.  Does anyone have a link to the study itself?

Thursday assorted links

1. Was 1917 the start of modern political discourse?  If so, what does that say about us?

2. The Chipotle hack.

3. Survey on the use of videos in economic research dissemination.  And I like the Demon Sheep ad.

4. Glenn Weyl’s start-up.

5. Why the current shortage of cooks?

6. Michael Orthofer reviews the Great Singaporean Novel.

7. Millennium Villages Project will seek to gauge its success.

8. “It’s the first sequenced genome from something like an alien…”

9. SXSW Panelpicker, please vote for us, thank you.  Free registration is required, our panel is The Science of Learning II.

Sentences to ponder

We did not observe any individual protein-altering variants that are reproducibly associated with extremely high intelligence and within the entire distribution of intelligence.

That is from “a whole bunch of guys” writing in Molecular Psychiatry, via Michelle Dawson.  In other words, the prospect of straightforward genetic engineering for smarter babies probably won’t be a reality anytime soon.  Technology remains pretty far behind the matchmaker.

The strange musical histories of the GOP presidential candidates

Loyal MR readers will know that I deliberately avoid a lot of topics related to political candidates, if only because they bore me and they are covered too much elsewhere.  But I did enjoy this article.  First prize goes to Carly Fiorina:

Before heading off to UCLA law school, Carly Fiorina once toyed with the idea of becoming a concert pianist.

I don’t have to tell you who comes in last

Ad-blocking software markets in everything

…Adblock Plus has become the internet’s advertising sheriff. That’s because its software, by default, allows some ads through its firewall—ads it deems “acceptable,” meeting a series of strict criteria it came up with in conversation with internet users around the world. The criteria essentially eliminate most of the ads on the market today, rolling back ad technology to the 1990s: text only, no animations, no popovers, no placement in the flow of text. In the two months since I’ve installed the software, I don’t recall seeing any ads that meet the criteria.

Websites must apply to get “whitelisted,” and an Adblock Plus employee then works with the site to make sure that the selected ads comply with the criteria. Ben Williams, a spokesman for Eyeo, told me that 700 publishers and bloggers have been whitelisted. The whitelist is how the company makes money. Eyeo charges large for-profit publishers a cut of ad revenues to be on the list, a scheme some critics have called extortion. Williams declined to say who is paying or how much, but the Financial Times recently reported that Google, Microsoft, and Amazon were among those paying Eyeo for their acceptable ads to appear to Adblock Plus users.

There is more here, from Michael Rosenwald.

Will ad-blocking, over time, decimate the free web?

Facts about real wages

What was lacking — in July, as in every other month in the past several years — was any appreciable growth in wages. Average hourly earnings for all private-sector employees rose by 0.5 cents, to $24.99. Take away the minority of employees who are bosses, and the increase was just 0.3 cents, to $21.01 an hour, or $42,000 a year for a full-time job.

Over all, the average annualized growth rate for wages over the past three months comes to 1.9 percent, barely outpacing inflation.

There is more here, from Teresa Tritch.  And here is a good article on real wages in Spain.  Spain has a well above average recovery in Europe, in part because it is allowing its Great Reset to proceed:

The desperation among job seekers is now so acute that many accept work contracts that pay less than the country’s reduced minimum wage — often by agreeing on paper to work two days a week, but actually working many more unpaid hours, experts say. And some, returning to their old jobs, are finding that they must take huge pay cuts.

“A new figure has emerged in Spain: the employed person who is below the poverty threshold…”

Tuesday assorted links

1. The advent of artisanal cash.

2. The early Mediterranean monolith.

3. Discounting government projects.

4. “China’s firms have borrowed a trillion dollars of USD denominated debt. That makes it risky to devalue the RMB more”  And David Beckworth on China’s peg and the impossible trinity.  Here is Izabella Kaminska.

5. What will greater transparency bring to the innovativeness of Alphabet [Google]?

6. Is lion hunting the way to save lions?

Six thoughts about the Yuan devaluation

1. The Australian and Singaporean dollars are weakening, as are many emerging market currencies.  Take this to be a signal of Chinese weakness.  Overall this is a sign of surrender to the market.

2. Offshore-RMB is down more than the size of the devaluation, a clear sign the market believes the currency will continue to decline in value.  Take this to be a signal of Chinese weakness.

3. “Gold related stocks” are being called “the biggest winner.”  Take this to be a signal of global weakness.  Commodity prices are falling and there is a general flight to safety.

4. A panicky flight of capital still is not the most likely scenario for China.  Still, the chance of that scenario just went up, and the leadership knows this, thus the negative signal about underlying economic conditions.  That exchange rate “currency wars” stimulus really must be needed.

5. There has never been a better time to visit China.  As for Chinese leaving the country to finance Paris and Bangkok, the index of Chinese airline stocks just fell 9.6 percent.

6. U.S. monetary policy just got harder, that is the dollar is up once again.

A summary of the currency move is here, I believe it is the single biggest drop in the modern history of the Chinese currency.

Addendum: Here are thoughts from Christopher Balding.