Month: February 2016

The Logic of Closed Borders

Bloomberg: At least 100 workers at the construction site for Tesla Motors Inc.’s battery factory near Reno, Nevada, walked off the job Monday to protest use of workers from other states, a union official said.

Local labor leaders are upset that Tesla contractor Brycon Corp. is bringing in workers from Arizona and New Mexico, said Todd Koch, president of the Building and Construction Trades Council of Northern Nevada.

“It’s a slap in the face to Nevada workers to walk through the parking lot at the job site and see all these license plates from Arizona and New Mexico,” Koch said in an interview. Those who walked out were among the hundreds on the site, he said.

Erik Brynjolfsson tweeted “Build a wall! And make New Mexico pay for it.” Or perhaps require that Nevada carpenters be licensed.

The smart wi-fi water pitcher

The new pitcher, called the Brita Infinity pitcher, will be able to track how much water is flowing through the pitcher. When approximately 40 gallons of water have passed through the pitcher’s purification filter, the pitcher will then send a signal to the Dash Replenishment Service to reorder more filters.

The new Brita Infinity pitcher will sell on Amazon for $44.95. A three-pack of replacement filters costs between $15 and $20. Brita says the pitcher’s two lithium metal (non-rechargeable) batteries should last nearly five years, even if stored in a cold environment. You know, like your fridge. The pitcher holds up to eight cups of water, and is BPA-free.

Here is more, with a photo, via the excellent Samir Varma.

Monday assorted links

Occupational Licensing Reduces Mobility

Brookings has a good memo on four ways occupational licensing reduces both income and geographic mobility. Here is point 1:

Since state licensing laws vary widely, a license earned in one state may not be honored in another. In South Carolina, only 12 percent of the workforce is licensed, versus 33 percent in Iowa. In Iowa, it takes 16 months of education to become a cosmetologist, but just half that long in New York. This licensing patchwork might explain why those working in licensed professions are much less likely to move, especially across state lines:

mobility-and-occ-licThe graph, is from the excellent White House report on occupational licensing. The first blue column says that workers in heavily licensed occupations are nearly 15% less likely to move between states than those in less licensed occupations–this is true even after controlling for a number of other variables that might differ across occupations and also influence mobility such as citizenship, sex, number of children, and education.

The orange column provides another test. An occupational license makes it difficult to move across states but not within a state. If workers in licensed occupations had lower rates of mobility for some other reason than the license then we would expect that workers in heavily licensed occupations would also have lower rates of within state mobility. The orange bars show that workers in heavily licensed occupations do have slightly lower rates of within state mobility but not by nearly enough to explain the dramatically lower rates of between state mobility.

Lower rates of worker mobility mean that workers are misallocated across the states in a similar way that price controls or discrimination misallocate resources and reduce total wealth. Lower rates of workforce mobility also increase the persistence of unemployment.

To its credit, the Federal government is investing in efforts to make licenses more portable including encouraging “cross-State licensing reciprocity agreements to accept each other’s licenses.” Cross-state reciprocity agreements sound like an excellent idea.

Should we ban the $100 bill?

Ashok Rao has an excellent post on this question, and it is not obvious that a ban is in order.  Here are a few parts of his multi-faceted argument:

  • There is an information tradeoff. Imagine if criminals transacted only in $10,000 notes. It would be reasonably easy for intelligence agencies to sneak a traceable note to probe criminal networks. This would be close to impossible with a $20 note (not the least because this is a high velocity note used by normal people).
  • Citing the high use of $100 among criminals doesn’t mean much. Of course criminals use the lightest / most compact / highest denomination currency at their disposal. Therefore suggestions along the lines of “n% of criminal activity is transacted in $100 bills” mean little because if we got rid of the $100 and managed to avoid the problems noted in point (1) it would be the case that “n% of criminal activity is transacted in $20 bills”.

I found this information on premia interesting, note the premia serve as an implicit tax for trading in $100 bills, though I wonder who exactly reaps that surplus?:

  • Screenshot 2016-02-27 18.02.18.png

Finally, Ashok tells us this:

Would we not be hurting innocent people in oppressive regimes? Aren’t there autocracies in Africa and Eastern Europe that use HDN [high denomination] dollars as a means of trade in otherwise embargoed necessities?

Recommended.

Sunday assorted links

Apple-Samsung Patent War Grinds On

The latest court decision in the Apple-Samsung patent war was a resounding defeat for Apple. Whatever you think about the merits of the case, however, Tim Worstall points out that the system isn’t working:

It’s easy enough to forget that the smartphone patent wars are still rumbling along. The actual competitive issues were all settled some years ago, the market has entirely moved on from the issues that were being discussed. However, the court cases over those patents carry on: and that’s exactly what is wrong with the system that we’ve got at present.

..taking 5 years to decide (assuming that there won’t be yet more appeals) in a market with a new generation of devices at least every year simply isn’t timely. Those competitive issues over who gets to sell what based upon copying or innovation have receded way back into the mists of time. None of the products under discussion are still on sale and haven’t been for a couple of years now. Whatever market opportunity either party had, either Apple or Samsung, is dead and gone now. But we’re still trying to decide over who should have that market opportunity? It’s just not working.

Why did the Whig Party collapse?

The Whigs were also badly hurt by the short-lived Native American or Know-Nothing party, which was primarily anti-immigrant and anti-Catholic.

That is just part of the answer of course. Here is another account, again too simplistic:

  • For a brief time, many Americans supported the nativist Know-Nothing Party, concerned that the Know-Nothings might represent the only truly national party possible, largely united by a general fear of Catholic immigrants.
  • But in the end, the issue over slavery proved stronger than fears over non-protestant immigrants, and southerners lined up behind the Democratic party and northerners behind the Republican party.
  • Sectional party systems replaced a national party.

This seems to be the definitive detailed account.  Try this book too.  Most of the time, however, parties do not collapse but rather party members fall in line, fearing the costs of the alternatives, including the costs to their careers.

Here is my previous post Why did the Federalist Party collapse?

Why did the Federalist Party collapse?

I am not sure what prompted me to read up on this topic, but here is part of one of the dizzying answers I found:

When the votes were counted, Jefferson and his running mate Aaron Burr had both received seventy-three electoral votes; John Adams had obtained sixty-five, while Pinckney, his running mate, had sixty-four. The one remaining vote had gone to John Jay. The Federalists had denied one vote to Pinckney to insure that he would not obtain the presidency instead of Adams. The Republicans, however, had blundered in this respect. The Constitution provided merely that the candidate with the largest number of electoral votes should become President. As it was, Jefferson and Burr were tied. The election went into the House of Representatives where the Constitution provided that a state’s vote would be cast by a majority decision of its representatives. Since the Federalists controlled six states and had divided control in two states, they could prevent the election of either Republican – and over the bitter opposition of Hamilton they contemplated throwing their support behind Burr. They hoped to break the Republican ranks and secure themselves from “the fangs of Jefferson.” Hamilton pressed for the election of Jefferson, his old rival, insisting that Burr had the inclinations of a Caesar whereas Jefferson, despite his democratic fanaticism, would conserve the established order. But the Federalists, ignoring the urgent protests of Hamilton, persisted in a course that threatened to complete the Federalist debacle. Hamilton saw himself in “the awkward situation of a man who continues sober after the company are drunk.” Burr did nothing to simplify their task, to cooperate by private word or deed.

And that is only part of the story.  Here is a simpler and indeed too simplistic account:

The Federalist party had the perception of favoring the upper class, and as a result they began to lose support of the general population. The Democratic and Republican parties started focusing on issues that appealed more to the “common man”, and as a result began to sway voters away from the Federalist party until it finally ceased to exist.

I’ll let you know what else I learn about this topic.

Arrived in my pile

Thomas Rid, Rise of the Machines: A Cybernetic History.  Lots on Timothy Leary and the Whole Earth Catalog, among other topics, my browse of it was interesting.

Stephen S. Cohen and J. Bradford DeLong, Concrete Economics: The Hamiltonian Approach to Economic Growth and Policy; “And so America needs another redesign — and it needs it right now.”  My browse impressions are all positive, although perhaps I see larger roles for spontaneous order, and luck, in any new Hamiltonian redesign.

Aileen M. Kelly, The Discovery of Chance: The Life and Thought of Alexander Herzen.  A “fully-rounded” study of a thinker who is not read enough by Anglo-Americans.

Dennis Hale, The Jury in America: Triumph and Decline.  Appears to be a quite good survey and overview, from the beginning of the republic up through the present day.

Todd G. Buchholz, The Price of Prosperity: Why Rich Nations Fail and How to Renew Them.  This one I haven’t pawed through yet.

How Berkshire Hathaway thinks about climate change

From their new report (pdf, pp.25-26):

…insurance policies are customarily written for one year and repriced annually to reflect changing exposures. Increased possibilities of loss translate promptly into increased premiums.

Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire’s insurance business would be to make it larger and more profitable.

As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.

The pointer is from Joseph Weisenthal.

The declining labor force participation rate for middle-aged males

Here is for ages 40-44, since 1976:

LFPR4044MenJan2016

You sometimes hear there is no evidence of automation putting people out of work, but arguably the automation of manufacturing, plus IT-enabled foreign competition, are significant factors behind this trend.  This picture also casts doubt on the common view that there are hidden real wage increases, not picked up by standard data and wage deflators and the like.  You would expect higher real wages, if indeed they were in place, to be reflected in a more positive labor supply response, but we don’t see that.

That picture is from Bill McBride.