Assorted flawed Friday links

1. Are soil and phosphates the ultimate Malthusian constraint?  A long, rambling post but with some points of interest and importance.

2. Human-bird honey trust markets in everything.  A long, rambling story, but with some speculative points of interest, including for the very foundations of economic science.

3. Are Republican cities especially at risk from job automation?  A spurious correlation most likely, yet the true relationship may be interesting nonetheless.

4. Is there bond market discrimination against historically black colleges and universities? (Do they have the right measure of credit quality?  I doubt it.)

5. Do three-point shooters go bankrupt at higher rates? (speculative, plus the link makes some noise, lots of noise in fact.)


1: A very clear explanation of why Bretton Woods was abandoned, and the mechanics of the results, as well as a good illustration of what commodities, and money, fundamentally are.

Aside from a few sentences repeated in the introduction and conclusion, nothing at all about malthusian constraints.

Yeah, I kept waiting for him to get back to the part about phosphates for fertilizer in the introduction, but the essay just kind of ended without ever really discussing it.

Phosphorus: a surprisingly rare element which is deeply embedded in the warp & woof of life: it is essential to the helical backbone of DNA, various RNA's and the lingua franca of the energy economy of all life: Adenosine Tri Phosphate.

Since Nauru's phosphate has been exhausted, Morocco has the world's largest remaining reserves-calculated to run out ~ 2100, in 80 years.

See Jeremy Grantham's Quarterly GMO letter on this topic [Malthusian Constraints] last year.

Agreed, very strange that he ignored the phosphate issue.

Has this issue been discussed in depth elsewhere?

It is my understanding that we have processes for recycling human and animal waste to extract phosphorus but that we haven't bothered to invest in this yet because phosphorus is still so cheap.

+1 for Cooper's comment

Humans and other animals excrete almost 100% of the phosphorus we take in. (One of the several things we get from the ancient technique of using manure on crop fields.) If we were anywhere at all close to running low on phosphorus, we'd be starting to talk about recovery from poo.

Calling Julian Simon....$FILE/BC3%202013%20-%20p18.pdf

Was there anything in that article of substance at all? I read the 1st 20 or so paragraphs which said, essentially, nothing and then I glazed over the rest and then went to the conclusion which also said nothing.

What's the thesis of the post? It sounds like some green-conspiracy theorist wet dream.

I also learned an awful lot about commodities, intermediate commodities, Bretton Woods, and monetary policy from that article. Wow.

Szabo's point about malthusian constraints is that modern doomsayers have largely been motivated by rising commodity prices.
Modern-day malthusians exist due to commodity prices signals, but those signals were flawed. The market signaled that commodities were becoming harder to find, so lots of people found lots of reasons why - "peak oil! Chinese competition! Gaia hates us!" But, he says, commodity prices rose not due to scarcity, but as a hedge against inflation.

Maybe you could say the article had more to say about Malthusian people than Malthusian constraints - more analysis on why Malthusians were motivated by mistaken signals, and less analysis on why Malthusian constraints do/don't actually exist. I'd agree with that.

> doomsayers have largely been motivated by rising commodity prices.

This makes sense.

> commodity prices rose not due to scarcity, but as a hedge against inflation.

This does not. Where are the *massive* stockpiles of oil, and other commodities during the price expansions? Do we even have the technology to stockpile the amounts required to move the price violently? He's drunk. The usual explanation: that the price shocks in the 1970s were caused by the reduction in supply of an inelastic commodity and the price shocks of the 2000s were caused by a building boom larger than any other in history hold together under examination. The 2nd explanation also explains the over-investment we have made in commodity production and the subsequent massive price drop as that production came online as the construction boom faded.

So, yeah, I'm not sure what this guy is peddling.

4. As an investor, I'd assume that bonds from HBCUs are a riskier investment than bonds from colleges without a specific racial component. I'd also be more skeptical about investing in specialty art schools without a large name brand or for-profit institutions.

Enrollment at HBCUs has been declining for years. Many of these schools are at risk of closing.

Knowing that a college is considered an HBCU gives you additional information about its risk profile.

I wonder if they made any attempt to control for institutional quality. Changes in public policy and social relations have robbed those colleges of much of their potential clientele. They have fixed costs though, and have evidently tried to pick up the slack by lowering admissions standards; it's not at all abnormal in that set of schools to see 4-year completion rates in the single digits. See Coppin State in Maryland, Harris-Stowe in Missouri, York and Medgar Evers in New York. Many institutions need to close before the quantum of physical plant is appropriate to the size of the clientele who are both college material and interested in that sort of milieu.

So I wonder if there is a divide between municipal bonds between Black majority and White majority cities. Actually I don't. Detroit alone would push the average to the left. However I wonder if you ignore the obvious headline cases, there is a systemic difference. And if anyone would claim that is down to racism.

Which also leads to another question - are three-point shooters more likely to be Black as well?

Off the top of my head, HBCU have relatively small endowments.
Looking it up and going by US News rankings:

Spelman has $367 million for 2200 students, which is respectable. Howard has $586 million for 10,000 students. Not so good. Hampton has $288 for 5000. Morehouse: $130 for 2200. Tuskegee: 131 for 3100. Xavier: $160 for 2900.

Ok, I'm done with that. Anyway, a ctrl+f of "endowment" gets no results in the paper.

Oh, and there's this bit of idiocy in there "We rank states by various measures of racial animus, including survey responses (e.g., to questions about affirmative action)"

Then they say that the differences are larger in Mississippi, Louisiana, and Alabama (the most "racist" states by their measure). Ok, so I looked at every HBCU in those three states. Only two of the top 10 (#5 and #6) were in those three states. Tougaloo college, #11 HBCU (not even ranked among all liberal arts colleges), has an $8 million endowment. Lake Forest college, to pick a random sub-100 (#108) liberal arts college, has an $89 million endowment. Emory and Henry College, to pick at the very bottom of ranked LA colleges (#174) has an $87 million endowment, which would apparently place it at 6 or 7 if it were an HBCU. Fisk, #7 HBCU, apparently drew its endowment to below $0.

So none of the top 11 HBCU colleges in endowment are in any of those states

note that HBCUs are much more likely to purchase insurance – 80% versus 55% for non-HBCUs – a finding that explains, in part, their superior distribution of credit ratings. Where 54% (69%) of deals issued by HBCUs are rated AAA (AA or better), these same figures are 41% and 58% for those issued by non-HBCUs. Only 2% of rated HBCU deals have credit ratings lower than AA, compared to 14% for other issuers

I like this series. "Flawed Links" indeed.

I appreciate brevity in writing the older I get. Maybe I've just read too many books and articles where the author could have established their argument in one-fifth the time they end up taking.

We can't very well expect Malcolm Gladwell to make a name and living as a pamphleteer, can we?

@Brett, enjoy my commentary, just reading the headlines and using my superior IQ and encyclopedic knowledge.

1. Are soil and phosphates the ultimate Malthusian constraint? A long, rambling post but with some points of interest and importance.

ANSWER: Peak Soil, like Peak Oil, Peak Water,Peak Population. The 'solution' (no pun) is hydroponics.

2. Human-bird honey trust markets in everything. A long, rambling story, but with some speculative points of interest, including for the very foundations of economic science.
ANSWER: possibly a symbiosis story involving a 'honey bird', which bonds with a certain bee hive. Possibly a Mandeville "Fable of the Bees" analogy. Since TC says speculative, not worth reading.

3. Are Republican especially at risk from job automation? A spurious correlation most likely, yet the true relationship may be interesting nonetheless.
ANSWER: A "white collar automation" story. Old news.

4. Is there bond market discrimination against historically black colleges and universities? (Do they have the right measure of credit quality? I doubt it.)
ANSWER: title says it all.

5. Do three-point shooters go bankrupt at higher rates? (speculative, plus the link makes some noise, lots of noise in fact.)
ANSWER: a sort of Laffer curve for three-point shooters. If the opposing team knows a certain shooter will always shoot, like perhaps an Allan Iverson, then they will guard him more, he'll become fatigued, and his total points scored will plateau, as Iverson's did.

I actually took much longer to type this than I did to digest the info in the titles. You're welcome.

Thank You!

I don't think 3 is spurious, I think it is a secondary effect of a well-known relationship: population density vs party registration.

Riverside-San Bernardino in California is not high density, and is more warehouses and manufacturing than anything else.

3: The party of the elites and the non-working poor has elite jobs, and the party of the working class has working-class jobs.


Middle income folk are actually more likely to be Dem or independent. The wealthy more likely to be independent.

Note that your graph is from 2012, and the trend lines. Even in 2012 the rich had more D than R.

Trump, the leading candidate for Red Team, is the candidate of the white working class. His supporters wear it as a badge of pride, his detractors repeat that as a sneer.

Sanders, the leading candidate of the Blue Team, is the candidate of educated coasters. Once again his supporters wear it as a badge of pride and his detractors repeat that as a sneer.

"Trump, the leading candidate for Red Team, is the candidate of the white working class."

Can we please stop using "working class" and "people who lack college degrees" as synonyms? They aren't. Also, Sanders seems to do fairly well among union members.

That report used 2009 as the baseline.

That year was probably the lowest point for the Republican Party since 1974 in terms of national popularity.

Not disagreeing that the educational elite have tended towards the Democratic party over the last decade, just saying that using 2009 as the baseline for the study might be misleading.

If you pardon the mixed metaphor, I think you are both missing the independent elephant in the room.

By the latest data they are still the largest group, though by a smaller margin.

2) Must be pretty smart to figure out how to make use of a bird's natural habits to find your honey. Doubt that one shows up on any IQ tests though.

3) An "s" is missing at the end of "Republicans".

Also, if true, would this imply benefits for the Democrats, whose policy preferences tend to be more beneficial to the poor and unemployed, at least in the short run? Or perhaps support for unionization among Republicans might rise?

#2 seriously?? The bird flies around finding beehives and you just follow it there.

For some reason I was thinking of it as almost training. But yeah, maybe it doesn't take a genius to figure that one out. Cool tricks though.

They probably learned the trick from honey badgers -

That article seems to be claiming that honey badgers do not, in fact, follow honey guide birds to hives. If so that is a very interesting claim because humans are not stepping into a pre-existing evolutionary strategy.

I am willing to believe that the humans are cheap enough to stiff the birds. But I find it hard to believe they are capable of making sure the birds get nothing. Destroying a hive is very messy. Sharks don't go out of their way to feed their fellow travelers but they get scraps anyway.

So Much For Subtlety writes:

"That article seems to be claiming that honey badgers do not, in fact, follow honey guide birds to hives."

What little I know about the matter largely stems from Jamie Uys' classic "Animals are beautiful people" (cf the youtube clip to which I linked). I guess it is not inconceivable that he somehow cheated in filming the scenes with the badger and the bird. If so, I'd be curious to know how he cheated.

"I am willing to believe that the humans are cheap enough to stiff the birds."

Wouldn't surprise me either if that was true.

"But I find it hard to believe they are capable of making sure the birds get nothing"

Moreover, even if they are capable of it, in principle, it is hard to see how it could be worth the effort, in practice.

“But I find it hard to believe they are capable of making sure the birds get nothing”

Remember slavery?

On the matter of phosphates as the ultimate limit to growth, I have argued that for decades. Fortunately, we seem to be some distance away from running into that constraint, and others appear to be more salient to many observers in the near term.

Phosphates as the ultimate limit to growth? Didn't you study economics at some point?

And what "others are more salient"? Peak oil again?

Note, Todd, that I said we are some distance away from that limit. I may never have studied economics (although I am Professor of that subject0, but you seem not to have learned how to read, or maybe just to think.

What constraints appear to be more salient in the near term?

5) is looking at 9 bankruptcies among 190 players. That's an awful thin data set. Henry also has a really basic error that causes me to doubt the rest of the data -- the paper lists the overall make rate for 3-point-shots as 22.4%. While you might get something like 22.4% if you totaled up all the 3-point percentages of all the players in the league, the overall percentage of 3-pointers made is much higher, ~33%, because the players who are good at shooting them take the vast majority of the shots.

Perhaps not coincidentally, it's not taking 3-point-shots that the paper ends up focusing on, it's taking many 3-point-shots when you are not a good 3-point-shooter that has the link to bankruptcies.

"In a study of National Basketball Association players drafted from 1990 to 1996, Henry found that, when controlling for things like a player’s shooting percentage, education, age and position, every 3-pointer a player heaved up per 36 minutes of court time increased his odds of going bankrupt by a factor of three."

This is insane and Henry did not find this.

How about just showing a scatter-plot of 3 point rate vs success rate with bankrupted players as X's and non bankrupted players as O's ?

3. I agree with anon, above, that population density is the likely culprit. PD is a significant explanatory variable in almost every social deviation.

The GOP favored areas also tend to be Right to Work states, meaning there are fewer artificial barriers to jobs requiring repetitive tasks.

Cost of living and cost of industrial space might also be a factor.

More generally, why would any educated person put much credence in a two-variable association when there are obviously omitted variables? Also, why imply a causal relationship from a weak test of association?

Prediction: Steph Curry and Klay Thompson will not follow the trend, and considering how many threes they take, may well change it.

In looking at #3 (both the article and linked paper) what I did not see is actual examples of desk-bound occupations that are performed by routine application of concrete rules -- anybody else have better luck?

I had similar problems. Also, even worse, in the article linked they refer to truck driving as a "routine task" and yet in the paper they site in that very sentence, truck driving is defined to be a nonroutine task. If that can't even read the tables in their sources, I have questions about their ability to come to any meaningful conclusion.

Democrats tend to be in private and public sector rent-seeking.

Increasing automation can be good for Republicans by increasing capital stock relative to labor and increasing wages. Of course increasing centralization, which is strongly favored by the private and public sector rent-seekers dominated by Democrats, militates against this.

Those tech entrepreneur rent seekers!! Did you even look at the list?

There's tremendous rent-seeking in the so-called "tech" industry.

For example, Melissa Mayer isn't just a well-meaning ditz who got in over her head, she's a glorified thief who's wasted billions of dollars of Yahoo's money on things that raise her public profile and enrich herself and her friends.

Mayer used to work for Google; she's notorious for using Yahoo's money to buy companies that her Google co-workers founded at inflated prices. One of her underlings at Google founded an online retailer called Polyvore that raised ~20mm in venture capital and was widely considered a failure. She had Yahoo buy it for 230mm-- over 10x invested capital for a company that was close to the edge.

There are lots of other examples: she spent $7mm of Yahoo money on a Great Gatsby-themed Christmas party last year as the company was tanking, she has spent millions more for Yahoo to be a Davos sponsor, and she acquired Tumblr for over a billion dollars even though it has no hope of making money or even earning much ad revenue.

She also gets more than a quarter billion dollars over five years as part of her employment contract. She's been paid all that for running Yahoo into the ground.

It's interesting how private sector and government patronage schemes seem to dominate the "tech" sector and private corporations in general now. These sound like the antics of a black mayor in a post-industrial American city.

There's also of course the rent-seeking involved via Fed money printing inflating the current tech bubble and H1B visas and immigration policy.

If you misspell a ditz's first name, does that make you a ditz as well?

Rent seeking is not equivalent to things you don't like.

Likely the board was involved in a number of these decisions and agreed.

Trying to turn around a company is difficult. Trying to make optimal decision with incomplete information is hard. It isn't rent-seeking.

You should look at the composition of the board before deciding that. Most of the tech sector boards (heck, all large corporate boards) are a pretty incestuous club of mutual back-scratching. They tend to make the best decisions for their own short-term profit rather than the long-term of the firm.

#1 - "What does it mean to say a commodity is part money? For this we need to turn to economist Carl Menger's theory of the origins of money. Menger's theory is less an accurate account of how money did historically originate among humans (which happened long before the dawn of the efficient commodity markets postulated by Menger), as a good theory and reasonably accurate set of predictions about how a free barter market economy does behave whenever it does arise."

A more modern and technical definition might be found in the [Kephart, Friedman, Baumer 15] working paper that uses a rich barter dataset to provide a new definition of money in terms of network theory. "Emergence of Networks and Market Institutions in a Large Virtual Economy"

3. Are Republican[s] especially at risk from job automation?
Stupid people are more likely to lose their jobs.

In the warm months, last thing of an evening I'll walk down our garden and pee in the compost heap. That's me doing my bit to recycle phosphorus. When I was a boy I did the same thing onto my raspberry patch, but our present raspberry canes are overlooked by neighbours, so the compost heap it is.

1. Am I the only person confused by Szabo's essay? In particular, what is his point? That we never should have left the gold standard? That technology solves Malthusian scares? That owners of capital speculate in commodities? That the world is running out of phosphate? If I were to rewrite the essay in one sentence it would be thus: Markets are (almost) perfect; people aren't.

I think you should just read the essay a bunch more times but I'll try to help. We never should have left the gold standard. Under that standard, you have one commodity bubble, in gold, and it doesn't pop. Now we have lots of inflated commodity prices, like oil and phosphate. This is bad for several reasons, just one of which is that it makes it look like we're running out of oil and phosphate, which we're not.

There are only two problems with the gold standard: 1) you have to pay more for industrial and artistic uses of gold than non-monetary supply and demand would have it. 2) Political entities powerful enough to take the world off of gold might take it off of gold, which they have—this has not worked out well—and power being what it is, there's nothing which can be done about this problem per se except to have a smarter government with less in the way of internal conflict of interest.

Note if you could solve no. 2, solving no. 1 would be easy and hopefully obvious. Alas.

1. As for phosphate, since my neighborhood produces the stuff, I would point out that (1) mining it leaves indelible scars on the earth, (2) it's radioactive (in mild amounts) for those dumb enough to live near it, (3) mining leaves a byproduct (gypsum) that lasts, well, for ever, and is stored in enormous man-made mountains ("gypsum stacks") scattered about, (4) contrary to guarantees from the phosphate companies, the gypsum mountains are not impervious and millions of gallons of gypsum have leaked into the aquifer, (5) phosphate (i.e., phosphorus) glows in the dark (although one wonders if it's the radiation rather than the phosphorus), and (6) the price of phosphate has been volatile - like all commodity prices - and several of the largest phosphate mining companies have been in bankruptcy (avoiding creditors as well the clean-up costs for the mess they make). My New City has a man-made island in the Bay that now has thousands of high priced housing units and is the place for the upwardly mobile who can afford it, the twenty somethings and thirty somethings oblivious to the fact that the island was created by and for the phosphate companies as a place to store phosphate before being put on ships and transported to far off places; those people are living on a phosphate stack and don't know it. Szabo may know Bitcoin but he knows nothing about phosphate.

Szabo says nothing about your points 1-5. Further, he does not say, or imply, that phosphate prices won't be volatile. In fact, he implies that phosphate prices will stay volatile. Oil prices should become less volatile, since the fracking revolution has made it less valuable as a hedge against inflation. But since phosphate isn't replaceable the way oil is, it will remain valuable as part-money (an intermediate commodity).

I'm sure you're right about points 1-5, and Szabo indicates that he would also be concerned about the environmental impact of mining. I'm not sure why Szabo's use of phosphate as an example has provoked your hostility.

If it's not phosphate, it's something else. Even sand:

We are running out of sand. Believe it or not.

And fish.

Face it. There are too many humans. Why do we need more? We've proved beyond doubt that we are the apex predator. We've proved we can break all known limits. Now let's prove that we can live within the earth's bounty.

Let's have some more refugees and wars. It's our past and our future.

rayward February 19, 2016 at 2:38 pm

Indelible scars? I could show you mines that are indistinguishable from natural features. In fact the Romans operated fairly large scale iron mines in the south of England which are literally indistinguishable from Nature.

Phosphate is not radioactive although it is often found with uranium which is.

I am not sure many people find piles of blackboard chalk a problem. Gypsum is a valuable fertilizer in its own right - valuable enough for the US to have fought a little war with Canada over it. I am not sure why anyone would think a small amount of leakage is a problem.

Some types of phosphorus oxidize rapidly in air. Hence the glow. Not radioactive at all.

Why would anyone care if they lived on a phosphate stack or not?

The price is likely to be volatile. But the planet is not even remotely close to running out. It is abundant enough that we will have supplies for years. I think at current rates we have over 200 years worth:

In 2012, the USGS estimated 71 billion tons of world reserves, where reserve figures refer to the amount assumed recoverable at current market prices; 0.19 billion tons were mined in 2011.[27] Critical to contemporary agriculture, its annual demand is rising nearly twice as fast as the growth of the human population.[6]

Recent reports suggest that production of phosphorus may have peaked, leading to the possibility of global shortages by 2040.[28] In 2007, at the rate of consumption, the supply of phosphorus was estimated to run out in 345 years.[29] However, some scientists now believe that a "peak phosphorus" will occur in 30 years and that "At current rates, reserves will be depleted in the next 50 to 100 years."

That ignores new finds which are made all the time.

In December 2012, Cominco Resources announced an updated JORC compliant resource of their Hinda project in Congo-Brazzaville of 531 Mt, making it the largest measured and indicated phosphate deposit in the world.

It is just not important or expensive enough for people to spend a lot of time looking for it. When it starts to run out that will change.

#1) To what extent does aquaculture depend on soil and phosphates? Then you have lab grown meat with dropped to about $12 for a burger patty sized hunk of meat. What would be the chemical requirements to 3D print a starch, like a potato?

3: Given the strong Dem tilt of schoolteachers, gov't employees, and big sectors of healthcare that will be hard to automate (all of which employ a lot of people), the converse correlation would seem to hold by default

Betteridge's Law, looks like it's four for four here.

An exception to Betteridges Law that has been a headline in recent years: "Can we Live to 150?"

Those articles interview those like biologist David Sinclair among others who think this will happen

Article about 3-point shooters, shows picture of Dennis Rodman...

3. This goes a long way of explaining Trump's success.

(1) phosphate is quite common in soil. It just tends not to dissolve well in water. But we also don't breed plants for phosphate uptake... so there's lots of room for improvement. Eventually we could mine it from the ocean.

There is an an insane amount of phosphate out there in economic size deposits, but it is just not as convenient as what we are mining now. Think of existing phosphate formations as surface coal deposits.

Right now we are just mining the phosphate deposits that are reachable with a bulldozer, and only if they are close to bulk transportation. Even with our current techniques the only reports I have read say at the current growth curve we have 1400 years supply ahead of us of large easy to access deposits. Then we can just augment by treating municipal waste where almost all of the consumed phosphate ends up in sewers.

As to Soil, that too is just a factor of how much soil do we have that we can treat like dirt before have to put effort into it. Answer a lot.

Now I am a big believer in Soil conservation, because we barely grasp soil processes yet and thus have a lot of difficulty building it up. But go to your local land grant school, VTech, NC State and grab some random faculty member in Soil Science and ask him or her how to restore ANY piece of eroded and degraded farmland, as long as it isn't a superfund site, and even then, and you will get a pile of good advice that will actually do it.

So if you wear a deep rich topsoiled field down into the B or C horizon it will not be a beautiful perfect Mollisol again, but it will still produce if you just stop abusing it, and it will produce well.

I would never "grab some random faculty member in soil science...." What would a guy like that possibly know about this?

A lot of my undergraduate work was directed to understanding soil processes (mostly I was in political theory and genetics/biology though), and graduate work directed to understanding them economically. A lot of people would be stunned to discover how incomplete this knowledge is.

I think you overestimate currency abilities/knowledge in the field. Eventually, however, such knowledge could be useful in such crazy ideas as terraforming Mars.

re: 1#, glad to see some commentary on phosphates, aka, the finite resource that dooms humanity to a zero-sum game perpetuity for ever more. Like that the author quoted Carl Menger, his short synopsis on money transports you to a world you're not familiar with, clearing away, in short time and with a minimum of verbiage, 10000 years of folklore.

#5 I hate that the 3 point shot was added to basketball (I just like to say that as often as possible).
#1 Julian Simon is still right we have a long way to go before we run out of phosphate and soil. Yield per acre is going up faster than human population. Never the less relative to other things, phosphate does seem to be getting more difficult to obtain.

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