Month: December 2015

Friday assorted links

Economists don’t know what they are talking about

I am sorry, I would not have written that post title a few months ago, as it is not in general my style.  But I am disheartened by the recent Booth poll of economists, where the weight of opinion suggests that the Fed should raise rates this December.  Only seventeen percent say “uncertain,” when in my view that is obviously the correct answer.  I won’t myself say “don’t raise rates,” but there are enough good arguments for that view (see Krugman for instance) that it deserves more than 19% support.  In the space for comments, there was not a lot of talk about how outlining the broader path for monetary policy was a better and more important question.

This same group, in September, gave a lot of support to the idea of a $15 national minimum wage, a policy change which Alan Krueger himself rejects.  How many of those supportive economists were primed to first think of typical manufacturing wages in Mississippi?

You people on that panel, you are all better economists than I am.  Except when you are allowed to vote.

But quite seriously, my opinion of the professional consensus — on topics outside an individual’s research specialty — really has gone down as a result of these polls.  And, not to put too fine a gloss on it, but my opinion of myself has gone up.  Why should I not just come out and say it?

What is the best theory for the rise in mass shootings?

Keep in mind that overall shootings and murders are down, way down.  Yet here is Michael Rosenwald:

In 1975, someone walking up the street shooting people was such an alien idea that one of the officers who responded didn’t believe it and hadn’t been trained for it. The phrase “active shooter” had yet to enter the cultural lexicon. Now mass shootings are so common that the assailants draw inspiration from one another, and the degrees of separation between victims appear to be closing.

The 1966 U. Texas incident is seen as one turning point, Columbine in 1999 another.  The timing doesn’t exactly coincide with a social media hypothesis, although social media likely play a big role in the echo chamber and copycat effects.  Is there an increase in fame-seeking behavior of all kinds?

What other testable predictions can we come up with?  The frequency of the attacks is accelerating, again while violent crime and murder are largely falling.

Tom Schelling stressed a related point in his climate change talk

Vanishing glaciers raise urgent concerns beyond Tibet and China.

By one estimate, the 46,000 glaciers of the Third Pole region help sustain 1.5 billion people in 10 countries — its waters flowing to places as distant as the tropical Mekong Delta of Vietnam, the hills of eastern Myanmar and the southern plains of Bangladesh. Scattered across nearly two million square miles, these glaciers are receding at an ever-quickening pace, producing a rise in levels of rivers and lakes in the short term and threatening Asia’s water supply in the long run.

That treatment is from Edward Wong at the NYT.

Perhaps you’ve already read Alex’s report on Schelling.  It was remarkable that Tom was able to talk for an hour straight, without pausing, without mistakes, grammatical or otherwise, and with a perfectly conceived factual, dramatic, and narrative arc.  With excellent stories.  All without notes.  At the age of 94.

China in two stories

Here is one, by Adam Minter:

According to data released this week by the China Association of Automobile Manufacturers, sales of electric cars are poised to exceed those in the U.S. for the first time ever. Already, they’ve grown 290 percent year-on-year to 171,145 vehicles. They’re expected to reach 220,000 to 250,000 for the year, whereas the U.S. market is predicted to top out at around 180,000 cars.

What’s fueling the mainland’s electric-car surge? As with so many other things in China, cost is the main factor.

Here is the other, from Vanessa Piao at NYT’s Sinosphere blog:

Amid China’s Smog Worries, One More: Counterfeit Masks

Neither story, taken alone, leaves you with the right impression.

Thursday assorted links

Thomas Schelling on Adapting to Climate Change

Yesterday, Thomas Schelling gave a seminar on climate change here at the Center for Study of Public Choice. Schelling’s main argument was that lots of resources are going into predicting and understanding climate change but very little thought or resources are going into planning for adaptation.

If Washington, DC, Boston and Manhattan are to remain dry, for example, we are almost certainly going to need flood control efforts on the level of the Netherlands. It takes twenty years just to come up with a plan and figure out how to pay for these kinds of projects let alone to actually implement them so it’s not too early to beginning planning for adaptation even if we don’t expect to need these adaptations for another forty or fifty years. So far, however, nothing is being done. Climate deniers think planning for adaptation is a waste and many climate change proponents think planning for adaptation is giving up.

Schelling mentioned a few bold ideas. We can protect every city on the Mediterranean from Marseilles to Alexandria to Tel Aviv or we could dam the Strait of Gibraltar. Damming the strait would be the world’s largest construction project–by far–yet by letting the Mediterranean evaporate somewhat it could also generate enough hydro-electric power to replace perhaps all of the fossil fuel stations in Europe and Africa.

Schelling didn’t mention it but in the 1920s German engineer Herman Sörgel  proposed such a project calling it Atlantropa (more here). In addition to power, damming the strait would open up a huge swath of valuable land. Gene Roddenberry and Phillip K. Dick were fans but needless to say the idea never got very far. A cost-benefit analysis, however, might show that despite the difficulty, damming the strait would be cheaper than trying to save Mediterranean cities one by one. But, as Schelling argued, no one is thinking seriously about these issues.

I argued that capital depreciates so even many of our buildings, the longest-lived capital, will need to be replaced anyway. Here, for example, is a map showing the age of every building in New York City. A large fraction, though by no means all, are less than one hundred years old. If we let the areas most under threat slowly deteriorate the cost of moving inland won’t be as high as one might imagine–at least if the water rises slowly (not guaranteed!). Schelling agreed that this was the case for private structures but he doubted that we would be willing to let the White House go.

If we are going to save cities, especially buildings not yet built, should we not start taxing land today that is under threat of future flood? Act now to mitigate future moral hazard problems. John Nye and Robin Hanson raised this issue. See Robin’s post for more.

It was an enjoyable seminar. At 94, Schelling remains sharp, provocative, and in command of the facts.

How martial a country should the United States be? #guncontrol

Chris Blattman cites a recent estimate that Americans own 42% of the civilian guns in the world.

You’ll also see estimates that America accounts for about half of the world’s defense spending.  I believe those numbers are a misuse of purchasing power parity comparisons, but with proper adjustments it is not implausible to believe that America accounts for…about 42% of the defense spending.  Or thereabouts.

I see those two numbers, and their rough similarity, as the most neglected fact in current debates about gun control.

I see many people who want to lower or perhaps raise those numbers, but I don’t see enough people analyzing the two as an integrated whole.

I don’t myself so often ask “should Americans have fewer guns?”, as that begs the question of how one might ever get there, which indeed has proven daunting by all accounts.  But I do often ask myself “should America be a less martial country in in its ideological orientation?”

Note that the parts of the country with the most guns, namely the South, are especially prominent in the military and support for the military.

More importantly, if America is going to be the world’s policeman, on some scale or another, that has to be backed by a supportive culture among the citizenry.  And that culture is not going to be “Hans Morgenthau’s foreign policy realism,” or “George Kennan’s Letter X,” or even Clausewitz’s treatise On War.  Believe it or not, those are too intellectual for the American public.  And so it must be backed by…a fairly martial culture amongst the American citizenry.  And that probably will mean a fairly high level of gun ownership and a fairly high degree of skepticism about gun control.

If you think America can sustain its foreign policy interventionism, or threat of such, without a fairly martial culture at home, by all means make your case.  But I am skeptical.  I think it is far more likely that if you brought about gun control, and the cultural preconditions for successful gun control, America’s world role would fundamentally change and America’s would no longer play a global policeman role, for better or worse.

So who’s in this debate?

1. There are the anti-gun modern Democrats, who want Americans to own many fewer firearms, and who maybe favor slight cuts in defense spending, in order to spend more on redistribution.  They don’t come to terms with the reality that their vision for America’s international state requires a fairly martial supporting culture at home, including strong attachments to gun ownership.

By the way, citations of the Australian gun control experience are a good indicator of this position and its partial naivete; Australian pacifism can to some extent free ride upon American martial interest.  Another “warning sign” is if someone is incredulous that the San Bernardino attack is strengthening America’s attachment to a relatively martial internal culture, rather than leading to gun control.  That person is out of touch, even if he or she is right about the substance of the issue.

2. There is the radical, anti-war, anti-military-industrial complex, semi-pacifist, anti-gun Left.  Their positions on these issues are quite consistent, though this branch of the Left has disappeared almost entirely.

3. There are the libertarians, who hate martial culture on the international scene, but who wish to allow it or maybe even encourage it (personally, not through the government) at home, through the medium of guns.  They are inconsistent, and they should consider being more pro-gun control than is currently the case.  But I don’t expect them to budge: they will see this issue only through the lens of liberty, rather than through the lens of culture as well.  They end up getting a lot of the gun liberties they wish to keep, but losing the broader cultural battle and somehow are perpetually surprised by this mix of outcomes.

I except non-American libertarians from these charges, and indeed many of them, albeit under the table, in fact support gun control as a libertarian and indeed pro-peace position.

4. There are the “right-wing conservatives.”  They support a martial ethic, they support America’s active foreign policy abroad, and they are anti-gun control for the most part.  And they find their greatest strength in the relatively martial American South.  Like the old anti-war Left, their positions are consistent, and their positions are rooted in a cultural understanding of the issue.  They see the gun control movement as a war on America’s greatness, America’s martial culture and the material embodiments of said culture.  They don’t understand why “the world’s greatest nation” should give up its superpower role, and its supporting internal martial culture, all for the sake of limiting the number of suicides and maybe stopping a few shootings too.  To them it’s not close to being worth it.

OK, now look at who is winning this debate in terms of actual policy changes.  It is the conservatives, for the most part.  No matter how much you may disagree with them, they have the most coherent cultural and intellectual position, apart from the old anti-war Left.  And in a fight between the right-wing conservatives, and the old anti-war Left, for the hearts and minds of the American people, we already know that, for better or worse, the conservatives usually will win.

I find that pro-gun control Democrats, and libertarians, are incapable of understanding the issue in these cultural terms.  But if you read something by a “really stupid conservative” on gun control, the more emotive and manipulative the text the better, it is often pretty close to the mark on the actual substance of what is at stake here.

Here is my earlier post, The culture of guns, the culture of alcohol.

The Moral Character of Cryptographic Work

Here is a new and interesting paper by Philip Rogaway at UC Davis (pdf), here is the abstract:

Cryptography rearranges power: it configures who can do what, from what. This makes cryptography an inherently political tool, and it confers on the field an intrinsically moral dimension. The Snowden revelations motivate a reassessment of the political and moral positioning of cryptography. They lead one to ask if our inability to effectively address mass surveillance constitutes a failure of our field. I believe that it does. I call for a community-wide effort to develop more effective means to resist mass surveillance. I plea for a reinvention of our disciplinary culture to attend not only to puzzles and math, but, also, to the societal implications of our work.

Recommended, the paper has a good deal of substance, via Vitorino Ramos and Will Wilkinson.

Will investment banks institute a meaningful blockchain?

I’ve been saying “no, not really” for a while now. Here is a good Philip Stafford FT story on the question, excerpt:

With an internal blockchain “all you’ve done is set up an interbank liability”, says Peter Randall, chief executive of Setl, a UK blockchain start-up, and the former head of the Chi-X Europe share trading venue. “True settlement is where you never have to see the other party again. Settlement can only take place in central bank money.”

Any such system would have to be grafted on to banks’ existing IT and payment systems, some of which have been in place for decades, and meet the requirements of market watchdogs. Regulatory issues include anti-money laundering and trade reporting laws.

“In theory it could bring benefits,” says Mr Swanson. “But if we’re not rigorous in issues like switching costs and all the ‘boring stuff’, it won’t go anywhere.”

Many in the industry say expectations are too high, and favour a long-term, phased approach to putting asset classes on the blockchain. It could start with central bank transfers in the payments system and then move on to settlement of various types of security.

And this:

“In terms of total R&D at banks, it’s a drop in the ocean,” says Virginie O’Shea, an analyst at Aite. “They don’t see it as going to revolutionise their business. It’s more speculative than anything. Blockchain is this year’s ‘big data’.”

I’m going to stick with my prediction.

The marginal value of health care and hospital admission

Here is the job market paper of Nathan Petek, from the Booth School of Business, University of Chicago:

Abstract: The marginal benefit of health care determines the extent to which policies that change health care consumption affect health. I use variation in access to hospitals caused by nearly 1,300 hospital entries and exits to estimate the marginal benefit of inpatient care. I show that hospital entries and exits cause sharp changes in the quantity of inpatient care, but there is no evidence of an effect on average mortality with tight confidence intervals. I find suggestive evidence of an effect on mortality in rural areas and for the over-65 population with magnitudes that imply the marginal benefit of inpatient care is significantly higher for these populations than for the average patient.

Even for rural areas and the elderly, an effect is not seen until more than a year after the event.

By the way, $900 billion is spent annually at U.S. hospitals.

For the pointer I thank David, a loyal MR reader.

Three paragraphs of Larry Summers

A number of considerations make me doubt the US economy’s capacity to absorb significant increases in real rates over the next few years. First, they were trending down for 20 years before the crisis started and have continued that path since. Second, there is at least a significant risk that as the rest of the world struggles there will be substantial inflows of capital into the US leading to downward pressure on rates and upward pressure on the dollar, which in turn reduces demand for traded goods.

Third, the increases in demand achieved through low rates in recent years have come from pulling demand forward, resulting in lower levels of demand for the future. For example, lower rates have accelerated purchases of cars and other consumer durables and created apparent increases in wealth as asset prices inflate. In a sense, monetary easing has a narcotic aspect. To maintain a given level of stimulus requires continuing cuts in rates.

Fourth, profits are starting to turn down and regulatory pressure is inhibiting lending to small and medium sized businesses. Fifth, inflation mismeasurement may be growing as the share in the economy of items such as heathcare, where quality is hard to adjust for, grows. If so, apparent neutral real interest rates will decline even if there is no change in properly measured rates.

I already had read the FT piece, but Neil Irwin on Twitter directed my attention to the importance of those paragraphs in particular.  I do not always agree with Summers, but pondering his conundrums is never a mistake.