Month: October 2015
Saturday assorted links
1. “Student lands a perfect kick and takes out a DRONE flying over a soccer pitch – but ruins the promotional video his school was trying to film…” Yet in Hollywood the drones are striking back.
2. Enceladus update: “A sensor on board the spacecraft has “tasted the eruptions of vapor and ice materials” and will identify any of the basic ingredients of life, he said. After past, higher-altitude journeys through the plume, Cassini has detected water vapor, methane, nitrogen, ammonia and other molecules associated with life. But Wednesday’s pass was the lowest ever, through a range more likely to hold heavier, more complex organic molecules.”
Indonesia fact of the day
So far this year, Indonesia’s fires have released more carbon dioxide into the atmosphere than all the fossil fuels burned annually in Germany. On at least 38 days in September and October, Indonesia’s fires were spewing more daily CO2 than the entire United States economy.
That is from Brad Plumer, and this remains an under-reported story. The lesson in Singapore — a victim of the toxic haze — is that the country could be brought to its knees rather readily. The more general lesson is that there are plenty of potential environmental catastrophes which we, in the ordinary course of debate, are barely aware of.
Markets Link the World
One of the themes of our textbook, Modern Principles, is that Markets Link the World. Here’s a great illustration of that theme showing how markets link China’s One Two Child policy to New Zealand dairy farmers and the New Zealand dollar. It’s also a great example of how quickly financial markets incorporate new information.
For another example see our MRUniversity video I, Rose and the discussion in our textbook.
Hat tip: Lars Christensen.
What is keeping single-family housing weak?
Surprisingly, two variables can explain 38% of the metro area variation in the single-family growth from 2000 to 2004 to today: the number of jobs today relative to 2000 to 2004, and single-family house prices relative to the prerecession peak. The change in the unemployment rate had no statistically discernable effect.
Both measures have an intuitive relationship with the housing market. What these results suggest is that net job growth may not be enough to drive a single-family recovery. Instead, long-lasting scars from the housing bubble remain an issue.
That is from Adam Ozimek.
But how exactly are they cheating?
A man who sold himself a $1,000,000 winning D.C. Lottery ticket is just one of many retailers a WUSA9 investigation found winning the lottery at rates statisticians say border on impossible.
At least three retailers won the lottery around 100 times according to an analysis of D.C. Lottery records obtained under the Freedom of Information Act.
“$10,000, $5,000,” Lounes Issaad said about some of his 27 payouts that averaged $30,000 each. “I don’t have nothing to hide.”
…Our investigation found lottery retailers make up at least three of the top five D.C. Lottery frequent winners – all with about 100 wins or more.
There is more here (the link makes some noise), via Michael Rosenwald.
My Grantland pieces with Kevin Grier
Friday assorted links
1. “…there are only a few ways to be liked but many ways to be disliked.”
2. “It’s also repugnant, and not just because it is degrading to faculty members.” He is talking about the Revenue Equivalence Theorem.
3. “Darwin had his Galapagos finches; Milot had his Quebecois islanders.”
On what grounds will Keynesians reject Marco Rubio’s fiscal policy?
I am myself of the belief that we are fairly close to full employment, with full employment likely on the way, and our growth problems stem from the supply-side, not from the demand-side in the Keynesian sense, at least not circa 2015. For those reasons, I am skeptical of any plan to cut taxes without offsetting spending cuts or some other kind of offsetting fiscal adjustment (how about selling off some federal land?).
But on what grounds should the prevailing Keynesian approach reject the fiscal policies of Marco Rubio? In the context of discussing Rubio, Paul Krugman writes:
So now we have candidates proposing “wildly unaffordable” tax cuts.
But what’s wrong with that? In most demand-side liquidity trap and secular stagnation models, there is a shortage of safe assets and that is a major problem which requires remedy. Rubio’s plan, as I understand it, would raise the budget deficit and by a lot because it is unlikely to prove self-financing in the Lafferian sense. By current Keynesian views, that should be a feature not a bug.
You might rather the deficit be increased by cutting taxes for the middle class, or by building productive infrastructure, but still the Rubio plan would be better than just sitting tight and doing nothing.
Furthermore the wealthy will take their new surplus of funds and invest most of it and maybe spend some of it too. That boosts aggregate demand, and…if you think the multiplier still is high…well, you can see where this is heading.
Are we all ready to turn “C + I + G” into a mere “C + G”? I hope not.
And while the Fed is legally constrained from buying corporate bonds and other non-zero-ROR assets, wealthy people most certainly are not, so they could spend their Rubio tax cuts on equity, venture capital, and the like. In essence we would be using wealthy people, and fiscal policy, to make asset swaps which the central bank cannot. So liquidity trap arguments should not make this tax cut impotent and arguably they should necessitate it all the more. You might even (heaven forbid) wish to target the tax cut toward the wealthy, if they are the most likely to take cash and buy relatively risky assets with it. Right?
So by the standards of the current New Old Keynesianism, what exactly is wrong with Marco Rubio’s fiscal plan? Except that some other plan might be better yet. Inquiring minds wish to know.
Does India Need a New Constitution?
Writing in Quartz, Atanu Dey and Rajesh Jain have a very interesting argument that historically slow growth and many of India’s other problems can be traced back to its extractive constitution, which was largely inherited from the British.
For nearly a century, India was under comprehensive colonial British rule. As can be rationally expected, the government that the British imposed on India was not primarily directed towards development, but rather towards extraction. That is only reasonable because wealth extraction is the rationale for colonial rule.
The British, therefore, created the institutional structures, which necessarily includes the government that controlled India through comprehensive government control of the economy. This structure administration and control was left intact when the British decided to leave India, and was taken over by the government of Independent India. Although India attained political independence from the British raj, Indians did not become free of a controlling—and extractive—government.
…The conclusion has to be that India’s problem is structural and systemic, and not idiosyncratic. If the constitution were to change, the ultimate rules of the game would change, the policies (the derived rules) will change, and thus the action on the ground (the play of the game) will change, and therefore the outcome will change.
India needs a new constitution that is consistent with a nation of free individuals living in a complex, modern, large economy. This modern constitution has to be one that guarantees economic freedom to the individual, prohibits the government from making any laws that discriminate among citizens, guarantees freedom of speech and the press, prohibits the government from entering into businesses that are properly the domain of the private sector, and so on. In other words, India needs a constitution that protects the comprehensive freedom of the individual: economic, social and political.
What would be the best form of constitution for India? Westminster or Presidential? First past the post or proportional rule? Single-member or mixed-member districts? Plurality rule or Borda count? Federalism? Certainly. But what kind of federalism enforced in what way? A Supreme court? How appointed? And what would be the most important rights to codify in a bill of rights?
The drone wars have begun, a continuing series
A man dubbed the Drone Slayer for shooting a miniature aircraft out of the sky has had a criminal case against him thrown out.
William Meredith drew his shotgun and took out a Phantom 3 drone after spotting it above his home in Hillview, Kentucky, this summer – landing him in jail and prompting legal proceedings.
Mr Meredith was charged with criminal mischief and wanton endangerment for destroying the $900 drone in July – but this week had both of them thrown out by a judge.
Cargo cruise markets in everything
In recent years, big cruise operators such as Carnival, Royal Caribbean, and Star Cruises have spent heavily on soaring atriums, sushi bars, cabaret shows, and on-deck water slides to woo vacationers. Don’t tell that to John McGuffick, who’s spent months at a time at sea on cargo vessels—happily ensconced in quarters more suited to a Trappist monk than a Caribbean cruiser.
“The food can be pretty ordinary, and you have to be prepared to go with the flow,” says the 72-year-old retired farmer from Australia whose 10 trips via ocean freighter have taken him to dozens of ports across Asia, Europe, and North America. His personal maritime endurance record: 110 days nonstop from Dunkirk, in northern France, to Singapore. Explains McGuffick: “I like the solitude.”
Shipping companies like the dollars passengers such as McGuffick can bring aboard. In a slowing global economy, freight prices have fallen so far that hauling a person from Shanghai to Rotterdam brings in at least 10 times more revenue than a 20-foot container full of flat-packed furniture.
It’s not luxurious and not exactly cheap: About $115 a day secures travelers a bed and three meals on some of the largest vessels ever built. The handful of paying passengers—ships typically take no more than a dozen at a time—dine with the crew, have the run of most of the ship, and can chat up the captain on the bridge or engineers below deck.
The story is here, and I thank Stu Harty for the pointer. But beware: you have to wash your own clothes, and your window view might be blocked by shipping containers.
Thursday assorted links
1. Rapid chicken evolution. And the invention of pad thai.
2. My 2013 post on why short-term interest rates are so persistently low these days.
3. Using prediction markets to forecast research evaluations.
4. The accent that is Australian (speculative, boozy).
5. Puffins are at risk of extinction.
6. Ending China’s one-child policy won’t matter much at this point.
Did China’s one-child policy have benefits?
As a leader I would never institute a one-child policy, which I consider to be an immoral restriction on personal liberty. But if we ask whether this policy had benefits for China, it absolutely did.
For instance the policy made China a more educated society more rapidly. It is simple economics that putting a lot of money into the education of each child is easier to do with a single child than with three or for that matter seven kids. The effects of the one-child policy are illustrated through a natural experiment of sorts. Chinese children who ended up born into twin pairs showed significantly slower rates of schooling progress, worse grades, lower chances of college enrollment, and worse health. These differences do not follow mainly from the lower birth weight of twins or other birth-related problems (though that is one factor), but rather they stem from the lower resources which are invested in children in larger families.
See Rosenzweig and Zhang, Review of Economic Studies 2009.
By the way, the one-child policy was not the main reason why Chinese fertility fell. Between 1970 and 1979, before the policy was put in place, the total fertility rate fell dramatically from 5.9 to 2.9. After the policy was introduced, the total fertility rate actually fell more gradually than during that earlier stretch, settling into 1.7 by 1995. The best estimate we have is that the one-child policy lowered Chinese births by an average of 0.33 per woman, which is a noticeable but not drastic change.
Even in purely practical terms, it is highly likely the policy has been obsolete for some while.
See Therese Hesketh, Li Lu, and Zhu Wei Xing. “The Effect of China’s One-Child Family Policy after 25 Years.” New England Journal of Medicine, September 15, 2005, 1171-1176, and Marjorie McElroy and Dennis Tao Yang. “Carrots and Sticks: Fertility Effects of China’s Population Policies.” American Economic Review, May 2000, 389-392.
What I’ve been reading
1. C.E. Cubitt, A Life of Friedrich August von Hayek. How come you don’t hear of this book more often? It is an extensive, rambling meditation on Hayek’s last years, full of anecdotes about Hayek’s medical ailments, arguments with his wife, and which groups he did not like. It is also short on any kind of formal documentation. But what could be more of a document than this book itself? Self-published by Hayek’s last private secretary, it seems too detailed and too strange to be entirely made up. You can pull out a random sentence and get something like “He [Hayek] liked women, he told me, providing they were not hirsute and did not offend his sensitive nose, and on one occasion even told me that he was “a little in love” with one of the waitresses in the Colombi Hotel.” Or we read that Hayek was obsessed with euthanasia, and in his last years carried around a razor blade in case it might be needed on short notice. It’s like absorbing a Thomas Bernhardt novel without the literary skill but with real stakes in the history of ideas. Ultimately I found this one unreadable, though it is consistent with my view that intellectual history is first and foremost a matter of biography. And what about the biography of Charlotte Cubitt herself? That is the real mystery here.
2. Jim Baker, Crossroads: A Popular History of Malaysia and Singapore. I loved this book and found every page gripping, it is hard to see how it could be better than it is. One of the best books of last year, it turns out.
The new novels by Orhan Pamuk and David Mitchell appear to be serious efforts, but so far neither one is grabbing me.
What should I ask Cliff Asness?
I will be doing a Conversations with Tyler with Cliff this November 11, 3:30 at the Arlington campus (do come!). If you don’t already know, Cliff studied mathematical finance with Eugene Fama at Chicago and is renowned for demonstrating the excess returns from “momentum” trading strategies, among his other contributions to financial economics. He is cofounder of the highly successful AQR Capital, and he blogs here, and tweets here.
What should I ask him?