Month: October 2015

Thursday assorted links

1. How many bullets can the economy dodge?

2. I favor micro-wealth transfers, but it is funny how many observers, especially on the left, think they are counterproductive when done systematically.  At least if they are called tipping.

3. If SPECTRE were a start-up.  And the economist who was traded in a spy exchange.

4. E. Glen Weyl leaves Chicago for Microsoft.

5. Now Stanford is in Vanity Fair.

6. Paul Krugman on the economics of food (video).

If Uber works, you might be less happy with your transport options

Let’s say you are optimistic about the long-run prospects for Uber to transform society, as I am.  Counterintuitively, that could mean the perceived quality of an Uber ride goes down.

The better Uber gets, the more people can do without cars and the more taxis will go out of business.  In contrast, we are currently living in a world where there is excess capacity of automobiles, especially for short-term rental.  The stocks of taxis, rental cars, and personal automobiles mostly have been determined by past considerations which did not take the existence of Uber into account.  Those stocks will decline over time as idle vehicles are used more efficiently.  There will be fewer circulating vehicles and perhaps the price of a short-term ride will be higher, once the excess capacity disappears.  Waiting time might be higher too.

(Admittedly these results could go in either direction.  Think of this as being a race between two adjustments: cutting back on the stock of vehicles, and using the extant stock of vehicles more effectively.  Arguably we already have reaped the latter economies, at least short of driverless vehicles, but with time the former adjustment will kick in more and more, and so the flow of “available vehicle time” into the market already may have peaked.)

That is precisely the scenario where Uber is probably doing the world the most good.  Resources put into automobile production can be diverted to other purposes, with potential environmental benefits as well.  The beneficiaries would be consumers in non-ride industries, who will enjoy lower prices and better selection.

Yet the lower consumer surplus from the Uber experience may decrease the political popularity of the service.  More of the social benefits would be invisible to riders and instead dispersed across a wide range of consumers elsewhere.

Here are related comments from Izabella Kaminska.  It is an interesting piece but I do not agree with her conclusions, and you can think of this post as an attempt to state what I think she should have argued.

*Winter is Coming*, by Garry Kasparov

That new book has the subtitle Why Vladimir Putin and the Enemies of the Free World Must be Stopped.  In addition to its critique of Putin, there is a good deal of political economy in this book, including some hypotheses which are worthy of further investigation.  For instance:

Unfortunately, Putin, like other modern autocrats, had, and still has, an advantage the Soviet leadership could never have dreamed of: deep economic and political engagement with the free world.  Decades of trade have created tremendous wealth that dictatorships like Russia and China have used to build sophisticated authoritarian infrastructures inside the country and to apply pressure in foreign policy.  The naive idea was that the free world would use economic and social ties to gradually liberalize authoritarian states.  in practice, the authoritarian states have abused this access and economic interdependency to spread their corruption and fuel repression at home.

And this:

It is no coincidence that right-wing autocracies have a much better track record of emerging from political repression and achieving democratic and economic success.  Chile, Portugal, Spain, South Korea, Taiwan — their regimes were about power for the sake of power, without a deeper ideology.  When their regimes fell, with elections in most cases, the roots, the human values of individual freedom, were still healthy enough to flourish.

It is easy enough to criticize Kasparov for being “too hawkish,” but the reality is that virtually all of his earlier predictions about Putin and Russia have come true, including ones which I have heard but he may not have published directly.


The rise and fall of the Chinese economy

In this new video, The Rise and Fall of the Chinese Economy, I discuss problems and prospects for the Chinese economy, given the latest developments.  This is the most recent addition to the Everyday Economics series from MRUniversity, and it also will be part of our forthcoming macroeconomics course.  It is done in a slightly new style, I hope you enjoy it.

The Learn More page features additional resources about this topic.

By the way, here is your China (Africa) fact of the day:

China’s investment into Africa appears to be another casualty of the slowdown in the world’s second-largest economy. Chinese cross-border investment in greenfield projects and in expansion of existing projects in Africa fell by 84 per cent in the first half of this year compared with a year earlier, from $3.54bn to $568m.

The FT article is here.

You know he’s great

Here are two sentences about Raj Chetty:

“The unintended consequence of Chetty’s work is a tremendous demoralization of teachers,” said New York University educational historian Diane Ravitch.

It’s funny how you don’t need to know more there.  And this one:

He says he won’t register to vote because he thinks that could bias his “laboratory science” approach to economic research.

Both are from this WSJ Bob Davis profile of Chetty, or Google to the ungated link if you wish.

Politically Incorrect Paper of the Day: So Sue Me!

Gender Gaps in Performance: Evidence from Young Lawyers

Abstract:  This paper documents and studies the gender gap in performance among associate lawyers in the United States. Unlike other high-skilled professions, the legal profession assesses performance using transparent measures that are widely used and comparable across firms: the number of hours billed to clients and the amount of new client revenue generated. We find clear evidence of a gender gap in annual performance with respect to both measures. Male lawyers bill ten percent more hours and bring in more than twice the new client revenue than do female lawyers. We demonstrate that the differential impact across genders in the presence of young children and differences in aspirations to become a law firm partner account for a large share of the difference in performance. We also show that accounting for performance has important consequences for gender gaps in lawyers’ earnings and subsequent promotion. Whereas individual and firm characteristics explain up to 50 percent of the earnings gap, the inclusion of performance measures explains a substantial share of the remainder. Performance measures also explain a sizeable share of the gender gap in promotion.

Wednesday assorted links

1. How your junk mail shows if you are rich or poor.

2. My remarks on the humanities at the OECD Singapore meeting.

3. “Ms. Gruenfeld, 53, focused on how power leads people to do stupid things.

4. Trick or treat for economists (cartoon).

5. Profile of George Scialabba, the private intellectual who never had tenure or anything close to it, well physically he was close to it.

6. A lengthy, analytical Paul Krugman post on what it would take for Abenomics to still work.  If I understand him correctly, he wants to increase fiscal policy so that monetary policy can become potent again, so that fiscal policy can then be consolidated; otherwise it seems difficult for Japan to achieve “escape velocity.”  My view is that with low unemployment there simply isn’t that much more water to be squeezed from the turnip, thus no escape velocity.  Preventing any pending tax hike/spending cut from being a macro problem is a real concern, I say let the Japanese central bank purchase a wider range of assets than is currently the case.

The culture that is Taiwan

They are starting to talk about pulling down Chiang Kai-Shek statues:

Fears over increased Chinese influence have grown since 2008 under President Ma Ying-jeou’s (馬英九) KMT government, which has forged a rapprochement with Beijing.

Chiang’s authoritarianism has outweighed his Nationalist credentials and his image is wrapped up in that concern, with young people in particular feeling strongly that his memory should not be celebrated.

“Chiang was a dictator. For a long time, freedom of speech in Taiwan was suppressed,” said Peter Chu, 23, a graduate student at National Taiwan University of Science and Technology. “Why should his statues be allowed to remain on any campus?”

“There have been calls for removing the statue [at my school], but the school authorities have done nothing about it,” said student and former Anti-Curriculum Changes Alliance convener Chu Chen (朱震), 18, who attends the prestigious Taipei Municipal Jianguo High School. “Every year, graduates decorate the statue mocking it.”

The full article is here, and for the pointer I thank Mark Thorson.  Here is Richard Bernstein about how Chiang’s reputation is falling in Taiwan and rising on the Mainland.

*The Peregrine*

That is a classic and beautifully written nature book by J.A. Baker, here is my favorite passage:

The peregrine swoops down towards his prey.  As he descends, his legs are extended forward till the feet are underneath his breast.  The toes are clenched, with the long hind toe projecting below the three front ones, which are bent up out of the way.  He passes close to the bird, almost touching it with his body, and still moving very fast.  His extended hind toe (or toes — sometimes one, sometimes both) gashes into the back or breast of the bird, like a knife.  At the moment of impact the hawk raises his wings above his back.  If the prey is cleanly hit — and it is usually hit hard or missed altogether — it dies at once, either from shock or from the perforation of some vital organ.  A peregrine weights between 1 1/2 and 2 1/2 lbs.; such a weight, falling from a hundred feet, will kill all but the largest birds.

Here is my earlier essay “Policing Nature.”

The economics of the Bronx

One reason the projects planned for the edge of the South Bronx aren’t likely to spread inland, gentrifying as they go, is that the area has the highest density of public housing in the nation. The Bronx has 44,000 such units, while Brooklyn, with nearly twice the population, has 58,000. “It’s harder for high-end gentrification to happen anyplace where the density of public housing is high,” says Gecan, who headed a project that built some of the first affordable housing in the post-1970s Bronx. “They just don’t go together.”

There is this too:

“Public housing is in a state of catastrophic decline,” Torres says, “due to a perfect storm of disinvestment. In 1998, the state cut off all operating subsidies; the city did the same in 2003. If a private landlord cut off funding for the operation and maintenance of his building, there would be legal consequences.” Federal funding has been greatly reduced as well. “The New York City Housing Authority [the city’s public housing agency] has capital needs of $17 billion to bring all its housing stock into good repair over the developments’ life expectancy. It gets $300 million a year from Washington.”

Those are from Harold Meyerson’s very good piece on the Bronx.

Not exactly the fiscal theory of the price level

Zambia will hold a day of prayer and fasting on Sunday, with bars shut and football matches cancelled, to seek divine help over the country’s currency collapse and dire economic woes.

President Edgar Lungu last month ordered the national prayer session after the kwacha fell 45 percent against the dollar since the start of the year due to a sharp drop in the price of copper, the country’s main export.

Food prices have soared and crippling power shortages have also been triggered by low water-levels in Lake Kariba, where hydropower plants supply much of the country’s electricity.

“God is a god of miracles and if we ask him, he will bless us and the kwacha shall be restored to its former strength and the prices of goods shall again go down,” Bishop Simon Chihana, president of the International Fellowship of Christian Churches in Zambia, told AFP.

“Let’s pray to God to have mercy on us. God has done that before and he can do it again.”

There is more here, via Peter Metrinko.

Payday Lending

Here is the opening to a delightfully combative post on payday lending at Liberty Street Economics, the blog of New York Fed:

Except for the ten to twelve million people who use them every year, just about everybody hates payday loans. Their detractors include many law professors, consumer advocates, members of the clergy, journalists, policymakers, and even the President! But is all the enmity justified? We show that many elements of the payday lending critique—their “unconscionable” and “spiraling” fees and their “targeting” of minorities—don’t hold up under scrutiny and the weight of evidence. After dispensing with those wrong reasons to object to payday lenders, we focus on a possible right reason: the tendency for some borrowers to roll over loans repeatedly. The key question here is whether the borrowers prone to rollovers are systematically overoptimistic about how quickly they will repay their loan. After reviewing the limited and mixed evidence on that point, we conclude that more research on the causes and consequences of rollovers should come before any wholesale reforms of payday credit.

Read the whole thing.