Month: October 2015

Ho-fung Hung’s *The China Boom*

So many books on China recycle the same stories and historical anecdotes, but this one tells the story from the point of view of economic history.  It is scholarly yet readable, interesting throughout but best in the first half, runs up through contemporary times, and does not have too much overlap with any other China book.  Here is one excerpt:

The urban entrepreneurial elite in eighteenth-century England benefited from absolute and unconditional support from the state, which shielded them against resistance from below.  This support was justified by the increasingly dominant ideology of classical political economy…The dominance of this ideology can be understood against the backdrop of Europe’s interstate conflict that urged state makers to ally with capital in building up its military capacity…The entrepreneurial elite in eighteenth-century China, in contrast, enjoyed only relative and conditional support from the state.  It is true that the Qing state elite never saw the mercantile elite as their antinomies and were diligent in facilitating their business and helping them secure their property rights in merchant-merchant or merchant-official disputes…But when it came to managing conflict between entrepreneurial profits and subsistence of the poor, the state elite often favored the latter at the expense of the former.

File under capitalist oppression is underrated.

Definitely recommended, you can buy the book here.

Obamacare rate increases in Mississippi

Mississippi will be ground zero for ObamaCare’s individual mandate to buy coverage or pay a tax penalty.

The state already is near the bottom when it comes to the percentage of the subsidy-eligible individuals who are enrolled via — just 38%. Now Mississippi’s subsidized premiums are about to jump far more than any of the 36 other states using

For 30-year-olds in Yazoo City earning about $25,000 (214% of the poverty level), the after-subsidy cost of the cheapest bronze plan will spike by $554, or 60%, in 2016.

There is more here.  To be sure that is lemon picking from the data, but in politics the people who suffer the most often end up with the biggest say.  Furthermore the reported seven percent average rate hike is not so small either, so perhaps the Mississippi story will resonate.  Here is more on the ambiguity in the numbers on reported rate increases.  Still, this is not developing in a favorable manner.

Will we meet or measure life tomorrow?

NASA’s mantra for finding alien life has long been to “follow the water,” the one ingredient essential to our own biochemistry. On Wednesday, NASA will sample the most available water out there, when the Cassini spacecraft dives through an icy spray erupting from the little Saturnian moon Enceladus.

…in 2005, shortly after starting an 11-year sojourn at Saturn, Cassini recorded jets of water squirting from cracks known as tiger stripes near the south pole of Enceladus — evidence, scientists say, of an underground ocean kept warm and liquid by tidal flexing of the little moon as it is stretched and squeezed by Saturn.

And with that, Enceladus leapfrogged to the top of astrobiologists’ list of promising places to look for life. If there is life in its ocean, alien microbes could be riding those geysers out into space where a passing spacecraft could grab them. No need to drill through miles of ice or dig up rocks.

As Chris McKay, an astrobiologist at NASA’s Ames Research Laboratory, said, it’s as if nature had hung up a sign at Enceladus saying “Free Samples.”

It is sad the American public is not more excited about this, but kudos to the NYT for making it a feature story.

Apple Should Buy a University

Apple has more than $205 billion in cash. What should they do with the money? Apple should buy a university and rebuild it from the ground up.

In recent years, some private equity firms have bought universities and turned them into for-profits. The for-profit model, however, has yet to produce a world-class university. But consider Jerry Falwell’s Liberty University, it was only established in 1984 and yet today with its online students it’s the largest private, non-profit university in the United States. Liberty University doesn’t get accolades but it is a technology leader and it shows what is possible starting from a small budget.

Apple_Campus_2_renderingApple is a for-profit corporation not a charity but there are plenty of ways to make money from a non-profit university. Aside from the tax breaks and other deductions, Apple University would be a proving ground for educational technologies that would be sold to every other university in the world. New textbooks built for the iPad and its successors would greatly increase the demand for iPads. Apple-designed courses built using online technologies, a.i. tutors, and virtual reality experimental worlds could become the leading form of education worldwide. Big data analytics from Apple University textbooks and courses would lead to new and better ways of teaching. As a new university, Apple could experiment with new ways of organizing degrees and departments and certifying knowledge. Campuses in Delhi, Seoul, Shanghai, Berlin, and Sao Paulo could provide opportunities for studying abroad. Apple’s reputation would attract top students, especially, for example, if it started with a design and business school. Top students would lead Apple University to be highly ranked. The more prestigious Apple University became the greater would be the demand for Apple University educational products.

Apple already has the beginning of this model with iTunes U and its own internal Apple University for training in business and design. By buying a university, Apple would commit to a learning process to develop these technologies in entirely new ways.

More than a century ago Stanford, Carnegie, and Rockefeller used their industrial-age fortunes to build some of our best universities. Isn’t it time for another great university built for the information age?

The German radical Left Party wishes to deregulate walking

From Greek bailouts to traffic signals, Germans pride themselves on respecting the rules. But on the latter point at least, even some here believe that fixation has gone too far. All this standing and waiting by cyclists and pedestrians is killing the appeal of muscle-powered locomotion, critics say.

Germany’s radical Left Party, the biggest opposition force in parliament, now wants to do something about this obsession. In November, the party plans to introduce a motion that would end red-light fines for pedestrians and bikers.

There is more here, via Samir Varma.

Three counterintuitive scenarios for driverless vehicles

The standard story is that traffic deaths will dwindle, cities will spread out magnificently, and you’ll all be reading MR on your morning commute rather than fighting the traffic.  Maybe so, but what other options are at least worth considering, if only out of contrarian orneriness?:

1. Driverless cars are not actually much better than the really good German streetcar systems.  Those come closer to door-to-door service than many people realize, and of course they have lower energy and congestion costs.

2. The need for exact mapping of streets will restrict driverless vehicles to well-known, well-trodden paths, much like bus lines.  There is nothing wrong with that, but ultimately it won’t do more than save the cost of the bus driver.  Or worse yet — some automobile lanes may be turned over to municipal driverless vehicles in a way which makes traffic problems worse.  It will end up as a way to push cars out of the picture, without building up the broader mass transit network very much.

3. Driverless cars will give governments a chance to “redo” the whole driving side of American life.  Is this so great?  (Imagine if we had to write a new Constitution today.)  Just think, with driverless cars and laissez-faire there will be so many car trips, a city might collapse under the weight of its own congestion.  So a quantity-rationed system will be introduced, and ultimately all of driving will end up more controlled and more regulated, based on licenses in fact and no I don’t mean drivers’ licenses.

Most generally, your predictions for driverless cars should depend heavily upon: a) will there be rational congestion pricing?, and b) how rapidly will cities rezone to take advantage of the new opportunities?  I am not sure we should be especially optimistic about either a) or b).

Or put it this way: the absence of congestion pricing in most major urban centers means we are already bad at running roads, for whatever public choice reasons.  So maybe we’ll get a bad version of driverless cars too.

For a conversation related to this post I am indebted to Alex Tabarrok and also Joe Bous.

*The Midas Paradox*

The author is Scott Sumner and the subtitle is Financial Markets, Government Policy Shocks, and the Great Depression.  Here is part of the Amazon summary:

Economic historians have made great progress in unraveling the causes of the Great Depression, but not until Scott Sumner came along has anyone explained the multitude of twists and turns the economy took. In The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression, Sumner offers his magnum opus—the first book to comprehensively explain both monetary and non-monetary causes of that cataclysm.

Drawing on financial market data and contemporaneous news stories, Sumner shows that the Great Depression is ultimately a story of incredibly bad policymaking—by central bankers, legislators, and two presidents—especially mistakes related to monetary policy and wage rates. He also shows that macroeconomic thought has long been captive to a false narrative that continues to misguide policymakers in their quixotic quest to promote robust and sustainable economic growth.


Professors on Corporate Boards Increase Profits

SSRN: Directors from academia served on the boards of around 40% of S&P 1,500 firms over the 1998-2011 period. This paper investigates the effects of academic directors on corporate governance and firm performance. We find that companies with directors from academia are associated with higher performance and this relation is driven by professors without administrative jobs. We also find that academic directors play an important governance role through their advising and monitoring functions. Specifically, our results show that the presence of academic directors is associated with higher acquisition performance, higher number of patents and citations, higher stock price informativeness, lower discretionary accruals, lower CEO compensation, and higher CEO forced turnover-performance sensitivity. Overall, our results provide supportive evidence that academic directors are valuable advisors and effective monitors and that, in general, firms benefit from having academic directors.

I blogged an earlier version of this paper several years ago but the result continues to hold with five more years of data so you know who to call.

Hat tip: Professor Bainbridge.

Puerto Rico fact of the day

Puerto Rico’s population and its economy are about 10 percent smaller than they were a decade ago.

That is from Peter Orszag, who outlines a plan for Puerto Rico.

By the way, I worry that his first two suggestions are more welfare for Puerto Rico.  Let’s for a moment put aside the question of how strong American obligations to Puerto Rico should be.  If our only goal is to maximize the well-being of Puerto Ricans, should we not encourage rather than discourage migration?

Tuesday assorted links

1.If you bought at the height of the housing bubble, in D.C. you still averaged a return of 46k.

2. Good slides on Chinese corporate debt and other problems (pdf).  And here is China’s Chinese economy video, a little different from mine.

3. Walmart now wants in on drones (NYT).

4. If the equilibrium price of your book is a penny, perhaps you should feel good (NYT).

5. “Pavlok uses vibration, beep and electric stimulation to help you change your habits.”  And a summary of the budget deal.

6. How they rank the “world’s fifty best restaurants.”

What personality makes a programmer?

…the personality trait most strongly correlated with programming ability was not introversion or conscientiousness, but openness: a trait that’s related to being creative and imaginative. What’s more, over time to the present day, openness has become a more important correlate of programming ability, while conscientiousness has become less important. This is speculation, but perhaps more creative people are today drawn to careers in programming because of all the opportunities for imaginative expression in a world of apps, video games, snazzy websites, and social networks. Finally, the traits of agreeableness (essentially how friendly someone is) and neuroticism (how anxious and emotionally unstable) were not correlated with programming ability, pretty much refuting the tired stereotype of the socially awkward programming geek.

A final thought: knowing someone’s personality and mental ability doesn’t actually tell you a great deal about their likely computer programming skills. Personality traits and IQ in fact only accounted for around 12 per cent of the difference between people in their programming abilities, which just goes to show that the very idea that there is such a thing as a computer wiz “personality type” is nonsense anyway.

There is more here, original research here.  I would put more weight on the second excerpted paragraph than the first.

Why are nominal wages so flexible in Ireland?

I am struck by the paper Wage Flexibility and the Great Recession: The Response of the Irish Labour Market (pdf), by Aedín Doris, Donal O’Neill, and Olive Sweetman.  The abstract is this:

Despite the importance of wage rigidity in macroeconomic models, no consensus has emerged in the empirical literature on the extent of wage rigidity. Previous attempts to measure wage rigidity have been hampered by small samples and measurement error. Moreover, results relating to earlier periods may not be relevant in the context of the large macroeconomic shocks that have hit many countries in recent years. In this paper we examine nominal wage flexibility in Ireland both in the build up to, and during the Great Recession, using tax return data that are free of reporting error and cover the entire population of workers. The Irish case is particularly interesting because it has been one of the countries most affected by the crisis. We find a substantial degree of downward wage flexibility in Ireland in the pre-crisis period. Furthermore, we observe a significant change in wage dynamics since the crisis began; the proportion of workers receiving wage cuts more than trebled, rising from 17% in 2006 to 56% at the height of the crisis. Given the large number of workers receiving pay cuts it seems unlikely that wage rigidity played an important role in unemployment dynamics in Ireland over this period.

One question is what then caused so much Irish unemployment.

A second question is why Ireland seems to have higher than normal nominal wage flexibility.

Could it be a greater than average willingness to endure living standard cuts without complaining?  The Irish after all didn’t protest austerity as much as did most of the other Europeans in a comparable position.  Maybe that means their wages can be cut without incurring the same morale costs.

Or could it have something to do with the “dual” nature of the Irish economy, namely that you either work for a multinational or you don’t?  If you work for a multinational, maybe they can lower your wages and still you will work hard to keep that job.

Any takers on these questions?

Marxian markets in everything, cemetery edition

On a summer visit to the grave of Karl Marx, Ben Gliniecki found that he would have to pay £4, or about $6, to pay respects to the man who sounded the death knell for private property.

Mr. Gliniecki, a Marxist, said no.

“Personally, I think it is disgusting,” the 24-year-old political activist said. “There are no depths of irony, or bad taste, to which capitalists won’t sink if they think they can make money out of it.”

The charity that looks after this cemetery has long taken swipe at a different irony: Karl Marx’s decision to buy a burial plot in a private London graveyard over the then state-provided alternatives. They say their cover fee subsidizes the upkeep of a cemetery where 170,000 other people rest.

And note this:

The German philosopher…once predicted the “hot tears of noble people” would be shed over his ashes…

The WSJ article is here, via Vic Sarjoo.

China fact of the day

The number of people sitting the 2015 qualification exam for broadcasters and TV hosts more than doubled from the previous year as China has tightened the ban on hosts without a certificate.

A total of 13,311 people sat the test on Sunday, compared with 5,908 in 2014. Some well-known hosts also took Sunday’s test, according to the State Administration of Press, Publication, Radio, Film and Television.

The soaring number of examinees was believed to be resulted from a circular the administration issued in June. The circular banned guest hosts in any TV shows, including news, commentary and interview panels, reiterating that all TV hosts must have vocational qualifications.

The article is here, via Adam Minter.