Month: November 2015
Against a financial transactions tax
Maria Coelho, job market candidate at UC Berkeley, studied this topic and came up with this:
This paper analyzes the effect of the introduction of financial transaction taxes in equity markets in France and Italy in 2012 and 2013, respectively, on asset returns, trading volume and market volatility. Using two natural experiments in a difference-in-differences design, I identify bounds on elasticity estimates for three categories of avoidance channels: real substitution away from taxed assets, retiming (anticipation of transaction realizations and portfolio lock-in), and tax arbitrage (cross-platform and financial instrument shifting). I find large responses on all margins, that account for significantly lower revenues than projected. By far the strongest behavioral response comes from high-frequency trading lock-in on regulated exchanges, with a high tax elasticity of this type of turnover in the order of -9. The results shed light on overlooked features of optimal FTT design, suggesting they may be poor instruments for both revenue-raising and Pigouvian objectives.
The paper is called “Dodging Robin Hood.” This is consistent with earlier findings on Sweden’s transactions tax, and that proposal continues to be one of the more overrated ideas in American Progressive political discourse.
Monday assorted links
1. Liquidity premium > carrying costs, all of a sudden.
2. Debt to gdg ratios, and the distribution of how they change (China fact of the day).
3. The aging of the NPR audience.
4. Why doesn’t NYC know where its subway trains are?
5. “Lord’s Prayer advert banned before ‘Star Wars’…In a snub to the Church of England, an advert that was planned to coincide with the new film “The Force Awakens,” has been rejected by most UK cinemas due to fears it could be offensive.” I call that one Ross Douthat bait…
New Course: Principles of Macroeconomics!
Principles of Macroeconomics, the new course by Tyler and myself, has just launched at MRUniversity. We will be covering unemployment, inflation, business cycles, growth and much more. The first section which is up now covers GDP including
- What is GDP?
- Nominal versus Real GDP
- Real GDP per capita and the Standard of Living
- and the many ways of Splitting GDP (such as the spending and factor income approaches).
As usual, all the videos are free and will work with any textbook although of course they go best with the best textbook, Modern Principles.
Here is the introduction to GDP:
Best non-fiction books of 2015
These are in the order I read them, more or less, not in terms of preference. And I would say this year had more good entries than ever before. Here goes, noting that most of the links go to my earlier reviews of them:
First, here are the economics books:
Mastering ‘Metrics: The Path from Cause to Effect, by Joshua D. Angrist and Jörn Steffen-Pischke, technically late 2014 but it was too late to make that list.
Dani Rodrik, Economics Rules.
Richard H. Thaler, Misbehaving: The Making of Behavioral Economics. Self-recommending.
Garett Jones, The Hive Mind. Why national IQ matters.
Scott Sumner, The Midas Paradox. Boo to the gold standard during the Great Depression.
Greg Ip, Foolproof: Why Safety Can be Dangerous, and How Danger Makes Us Safe.
And the rest, more or less the non-economics books:
Robert Tombs, The English and Their History.
R. Taggart Murphy, Japan and the Shackles of the Past. The last section is brilliant on current Japanese politics.
Michael Meyer, In Manchuria: A Village Called Wasteland and the Transformation of Rural China. Adam Minter has a very good and useful review of a good book.
Ian Bostridge, Schubert’s Winter Journey. Will improve your listening.
The Mahabarata, by Carole Satyamurti. Rewritten and edited to be easier to digest, intelligible and rewarding. As “an achievement,” this book does have some claim to be number one.
Avivah Gottlieb Zornberg, Bewilderments: Reflections on the Book of Numbers. You can never read enough commentary on the Torah.
Daniel Tudor and James Pearson, North Korea Confidential, how things really work there (speculative), rain boots for instance are a fashion item and black markets are rife.
Serhii Plokhy, The Gates of Europe: A History of Ukraine, a good general history of the country.
Guantánamo Diary, by Mohamedou Ould Slahi. He’s a very smart guy.
Ashlee Vance, Elon Musk: Tesla, Space X, and the Quest for a Fantastic Future.
Sebastian Strangio, Hun Sen’s Cambodia. Goes deep into a place most people are ignoring.
Michael Booth, The Almost Nearly Perfect People. The Nordics, that is.
Timothy Snyder, Black Earth. He succeeded in writing an original book about the Holocaust, which is hard to do.
Emmanuel Todd, Who is Charlie? Background on France being screwed up.
Niall Ferguson, Henry Kissinger, vol. I. Background on America being screwed up.
Landmarks, Robert Macfarlane. How to talk, think, and write about the British countryside.
Andrea Wulf, The Invention of Nature: Alexander von Humboldt’s New World. The best of the various recent books on Humboldt.
Frank McLynn, Genghis Khan. Background on a whole bunch of other places being screwed up.
Daniel P. Todes, Ivan Pavlov: A Russian Life in Science. I didn’t have time to read all of this book, but it seemed very good in the fifth or so I was able to read. By the way, the whole salivating dog at the bell story is a fiction.
Pierre Razoux, The Iran-Iraq War, readable and useful.
Charles Moore, Margaret Thatcher: At her Zenith: In London, Washington, and Moscow, vol.2 of the biography, 1984-1987. This one I haven’t finished yet. I ordered my copy advance from UK Amazon, it doesn’t come out in the U.S. until early January. There is some chance this is the very best book of the year.
I don’t quite see a clear first prize. If I had to pick, I would opt for a joint prize to the biographies of Musk, Kissinger, Thatcher, and Genghis Khan. This was the year of the biography.
Sorry if I forgot yours, this list is imperfect in various ways! And the year isn’t over yet, so I’ll post an update on the very good books I read between now and the end of the year, probably on December 31.
Sunday assorted links
1. Is the last known antibiotic beginning to fail? (speculative)
3. Austan Goolsbee is blogging again, this time on the Bernie Sanders budget. And Kling on Summers.
What can be named after whom?
There is an ongoing controversy at Princeton over whether it should still be called the Woodrow Wilson School of Public Policy. Wilson was a notorious racist and segregationist, bad even by the standards of his time, plus he was a terrible President to boot. At Yale there are murmurings about a house named after John Calhoun.
Of course there is a slippery slope. There are plenty of American institutions named after slaveholders, and for that matter was Amerigo Vespucci such a great guy? For one thing, he helped Columbus commit genocide by provisioning one of his voyages.
Should George Washington stay on the dollar bill? If you’ve decided that no university or other positive-sum institution should be named “School of Simon LeGree Satan,” it seems hard to draw a line in a meaningful, non-arbitrary manner. Most famous people, especially in politics, have some pretty significant blemishes. Yet we cannot open every can of worms in this regard, or so it seems.
No one seems to mind that the Nazi Party is called…the Nazi Party. No one says “we can’t call the party that, those Nazis were the people who killed the Jews. Can’t name anything after them. Not even their own party.” In fact calling them Nazis is designed to remind people of what they did, appropriately I would add.
I don’t mind if an institution names itself after a person of mixed moral quality, or allows such a name to persist, provided the institution, in both its framing of the name and its pursuit of its broader mission, is self-conscious about that person’s drawbacks and invests resources toward that self-consciousness beyond the usual rhetorical statements. That said, others may mind more than I do, so it would be nice if we had a graceful way out of a slightly complicated situation.
I also would not be disturbed if they had kept the city names at Leningrad and Stalingrad. Lenin and Stalin were evil guys, but it seems appropriate to remind people what a big role they played in the histories of those cities. (At least for another hundred years, probably not forever.) Of course if the citizens of the cities don’t want those names, I would not force the matter.
Perhaps in the longer run everything, including the Woodrow Wilson School, will be named after donors.
Why do we name things after people at all?
When I look at countries which are periodically renaming buildings, cities, and institutions, I get a little uncomfortable. The renaming probably isn’t causing their bad or unstable qualities, but pushing for a world of constant renaming does not strike me as a useful goal. It is not governed by a desirable feedback process, too much voice and not enough exit and competitive constraints.
There should be some kind of intermediate process where institutions can indicate that they take very seriously the moral failings of their namesakes, and publicize that message. And then over time they can try to raise enough money so as to have a convenient excuse to rename the Wilson School after a wealthy donor, taking constructive action but not ending up in an endless game of renaming.
A simple concrete step would be to cut the price of the naming rights on the Wilson School by fifty percent.
That also could prove an efficient form of price discrimination, by selling the naming rights to one school for less, yet with a special circumstance so donors do not feel that every naming right now should sell for less.
Sentences to ponder under-discussed markets in everything
Kenya Hathaway, a musician and vocal coach for television shows, has never talked with her husband about celebrity nannies, even in light of the unraveling marriages of the Afflecks and Rossdales.
There is more here, via the sharp-eyed Felix Salmon. The NYT article is interesting throughout, with many good bits.
Best fiction of 2015
I thought it was a stellar year for fiction, even though most of the widely anticipated books by famous authors disappointed me. These were my favorites, more or less in the order I read them, not in order of preference:
Michel Houellebecq, Soumission/Submission. The correct reading is always a level deeper than the one you are currently at.
Larry Kramer, The American People. Epic, reviewed a lot but then oddly overlooked in a crowded year.
The Seventh Day, by Yu Hua. Perhaps my favorite of all the contemporary Chinese novels I have read: “Lacking the money for a burial plot, he must roam the afterworld aimlessly, without rest.”
Chris Adrian and Eli Horowitz, New World, “An innovative story of love, decapitation, cryogenics, and memory by two of our most creative literary minds.”
Vendela Vida, The Diver’s Clothes Lie Empty. Fun without being trivial.
Elena Ferrante, volume four, The Story of the Lost Child. See my various posts about her series here, one of the prime literary achievements of the last twenty years.
The Widower, by Mohamed Latiff Mohamed. My favorite novel from Singapore.
The Meursault Investigation, by Kamel Daoud. I’ll teach it this coming year in Law and Literature.
Eka Kurniawan, Beauty is a Wound. It’s been called the Garcia Marquez of Indonesia, and it is one of the country’s classic novels, newly translated into English. Here is a good NYT review.
Nnedi Okorafor, Binti. Okorafor is American but born to two Nigerian parents, this science fiction novella is creative and fun to read. Ursula K. Le Guin likes her too.
Of those, Houllebecq and Ferrante are the must-reads, the others are all strong entries, with New World being perhaps the indulgence pick but indulgences are good, right?
And here are three other new books/editions/translations which I haven’t had any chance to spend time with, but come as self-recommending:
The Poems of T.S. Eliot, volume 1 and volume 2, annotated. Rave reviews for those.
Tale of Genji, by Murasaki Shikibu, translated by Dennis Washburn.
Homer’s Iliad, translated by Peter Green. Also gets rave reviews.
*The Iran-Iraq War*
Oddly this war isn’t discussed much any more, even though it is arguably the breakthrough event for the ongoing collapse of parts of the Middle East. And by many metrics it was the worst and most brutal war since WWII, with the Congo clashes in the running too.
I found Pierre Razoux’s The Iran-Iraq War to be a highly readable and useful account, translated from the French, Harvard Belknap Press. I can’t judge the details of the substance, but I never had the feeling it was overreaching or implausible. Here is one quick excerpt, of relevance to contemporary events:
For his part, Hafez al-Assad saw Saddam Hussein as an even more ruthless rival now that he supported the Syrian Muslim Brotherhood. The moment hostilities broke out between Iran and Iraq,Assad decided to provide military assistance to Teheran…Syria also provided Iran with numerous pharmaceutical and food products and allowed it to deploy several hundred Pasdaran in London. This gave Irana foothold in the land of the Cedar, allowing it access to the Mediterranean and an opportunity tighten its grip on the Lebanese Shiite community.
Recommended.
Saturday assorted links
1. Is there hope for America in men’s tennis?
2. Mary Gaitskill by the book. I am enjoying her new novel The Mare.
3. Hardball questions for the next debate. And Corey Robin on Woodrow Wilson.
4. American landlords seem to prefer refugee tenants.
5. 13 women who transformed the world of economics.
6. How breweries survived the age of Prohibition (pdf, job market paper from UCLA).
7. Why recent productivity growth is taking a scary form, shedding inputs rather than increasing outputs.
Perusing job market papers
GMU isn’t hiring this year, but I still enjoy going through the job market candidates to see what is new in the profession. I’ll be blogging a few of the more interesting pieces I found, in the meantime here are some summary remarks from my investigations. Keep in mind these are highly subjective impressions for the most part:
1. MIT students had the most interesting papers overall, Harvard second.
2. Job market papers seem to be getting longer. I was surprised how many 60-90 pp. papers I saw.
3. The concentrated distribution of students among a few advisors, within a department, seems to be increasing.
4. There are plenty of good but not interesting to me papers on economic development going around. The “dairy farmers in Kenya” sort of paper, fine work of high quality, but I look for something more general to read and report on.
5. Industrial Organization continues to be a mostly boring field. Development economics and health care economics are still “in.” There are a variety of good papers on financial intermediation.
6. There are hardly any theory papers coming out of the top schools.
7. The differences in student quality, within a department, seem to be narrowing.
8. Harvard economics has the best and easiest to use web site for their job market candidates, some other very good schools still have very low quality web sites.
Skill mismatch unemployment is real and significant
Even during demand-driven recessions. Part of the problem is that cyclical and structural causes of unemployment interact and magnify each other. Here is the job market paper of Pascual Restrepo, one of the stars from MIT currently on the job market. I turn the floor over to him:
To study the effect of structural change on labor markets, I build a model in which structural change creates a mismatch between novel jobs skill requirements and workers’ current skills. When the mismatch is severe, labor markets go through a prolonged adjustment process wherein unemployment is amplified and job creation is low. Due to matching frictions, firms find less workers with the requisite skills for novel jobs and they respond by creating fewer jobs. The paucity of novel jobs creates an external amplification effect that increases unemployment for all workers—including those who already hold the requisite skills—and discourages rapid skill acquisition by workers. Structural change is not only a secular process; it also interacts with the business cycle, causing a large and long-lasting increase in unemployment that concentrates in recessions. I demonstrate that the decline in routine-cognitive jobs outside manufacturing—a pervasive structural change that has affected U.S. labor markets since 2000—caused a severe skill mismatch that contributed to the long-lasting increase in unemployment observed during the Great Recession. My evidence suggests that this external amplification effect is important. Moreover, I find that the skill mismatch amplified and propagated demand shocks at the local labor market level.
How many times during the last five years have I read or heard critiques of structural theories which neglect their more sophisticated forms? (“What, did everyone in 2008 simply forget…?” etc. Be very suspicious of the structure of that argument.)
Here are two other interesting papers by Restrepo, including one on how to share income with the robots, co-authored with Acemoglu. I agree with their conclusion: “We find that inequality increases during transitions, but the self-correcting forces of the economy limit the increase in inequality over longer periods.”
Larry Summers on technological unemployment in history
This bit is from the Q&A session:
LS: So, I guess I think there is both a, you know, Keynes as usual I think was pretty smart and you know, Keynes began his essay on economic possibilities for our grandchildren by saying that there was this really pressing cyclical problem that had to do with demand which was really important but not all that profoundly fundamental. And there was this more fundamental thing which was that technology was marching on and he thought the dis-employment effects would show up as everybody working 15 hour weeks. And it doesn’t look like that’s quite what they’re showing up as. But the basic idea that technological progress comes with reduced labor input, sometimes it’s early retirement, sometimes it’s people who aren’t able to get themselves employed, sometimes, it’s lower hours, but that is basically the story of the last 150 years.
So, I would not back off of my putting a lot of weight on technology as something important here.
The talk and dialogue (pdf) are on macro more generally, interesting throughout. In general I believe there should be more transcribed and summarized dialogues, both the NBER and Brookings have had intellectual success with that format.
China prediction of the day
While the total amount of debt issued to pay interest is projected by Hua Chuang Securities to increase, it’s taking up a smaller portion of overall new credit. The firm predicts such borrowing will account for 45 percent of new total social financing — which includes bank loans, shadow banking credit and corporate bonds — down from 50 percent last year, according to a Nov. 4 report.
Well…it’s falling. I guess that’s good news…sort of…
That is from Bloomberg News, via HaidiLun and Christopher Balding.
Friday assorted links
1. Arnold Kling’s books of the year. And Scott Sumner outlines his forthcoming book on the Great Depression.
2. “Arguably the least appreciated resource for Islamic State is its fertile farms.” (noisy video at that link, sorry, but the content is interesting)
3. Historical estimates of Chinese gdp. And where in the world is the greatest economic exposure to China?
4. Who says education is just signaling? Only bird brains?
5. “Some teams are accusing other teams of cheating, but there’s no cheating because there’s no rules,” (the culture that is curling).