Month: May 2016

Do witchcraft beliefs hurt economic progress?

Maybe so, here is the latest:

Where witchcraft beliefs are widespread, American University Economics Professor Boris Gershman found high levels of mistrust exist among people. Gershman also found a negative relationship between witchcraft beliefs and other metrics of relied upon for a functioning society, including religious participation and charitable giving.

It’s long been argued that witchcraft beliefs impede economic progress and disrupt social relations, and Gershman’s statistical analysis supports that theory. From a policy perspective, Gershman’s results emphasize the importance of accounting for local culture when undertaking development projects, especially those that require communal effort and cooperation. Gershman and other social scientists believe that education can help foster improved trust and decrease the prevalence of witchcraft beliefs.

Furthermore:

Parents in witchcraft-believing societies inculcate antisocial traits in children.

Second-generation immigrants from witchcraft-believing nations are less trusting.

Here is the summary statement, here is the full article.  Here are related papers by Gershman.  For the pointer I thank the excellent Samir Varma.

Tuesday assorted links

1. Xenoglossy.

2. Oxford lecture by Glenn Loury on race, his intellectual and personal background, and his intellectual migration, among other matters (pdf).

3. How to lose thirty calories a meal in Thailand just by changing your plate (speculative).

4. “Their primary difficulty is not necessarily one of healing emotional wounds; they thrived in combat. It is rather a matter of unlearning the very skills that have kept them alive: unceasing vigilance; snap decision making; intolerance for carelessness; the urge to act fast and decisively.  “I don’t even leave my house much,” said Jeff Ewert, who served with the Marines in Iraq and now lives in Utah. “I’m scared not because I’m an über-killer or anything. I just minimize my exposure because I know how easy it is to cross that line, to act without thinking.””  Story here, NYT.

5. Too much Airbnb in Iceland?

6. David Beckworth podcast with Greg Ip.

Ride sharing, vehicle accidents, and crime

That is a new paper from Sean E. Mulholland and Angela K. Dills.  Here is the abstract:

The advent of smart-phone based, ride-sharing applications has revolutionized the vehicle for hire market. Advocates point to the ease of use and lower wait times compared to hailing a taxi or pre-arranging limousine service. Others argue that proper government oversight is necessary to protect ride-share passengers from driver error or vehicle part failure and violence from unlicensed strangers. Using a unique panel of over 150 cities and counties from 2010 through 2013, we investigate whether the introduction of the ride-sharing service, Uber, is associated with changes in vehicle accidents and crime. We find that Uber’s entry lowers the rate of DUIs and fatal accidents. For most specifications, we also find declines in arrests for assault and disorderly conduct. Conversely, we observe an increase in vehicle thefts.

For the pointer I thank the excellent Kevin Lewis.

How well does the post-recession world scale?

The bumps we’ve seen over the past 12-18 months stem from a reality that the post-recession world we’ve built doesn’t scale beyond its current size. Consider the following:

-Chipotle wanted to be this era’s McDonald’s. Turns out scaling organic, freshly-prepared food isn’t as cheap or easy as they thought.

-Fintech lenders promised to disrupt big banks. Turns out the lending business requires a lot of capital, and that in jittery markets that capital doesn’t like funding a growing lending business. Maybe the big bank model isn’t so bad.

-The San Francisco Bay Area is the economic center of the early 21st century. But it’s finding that scaling housing and infrastructure for workers is a lot harder than scaling servers and storage. So jobs and people have to move to cheaper metros.

-On demand startups were the solution to mass unemployment and megacity renters who demand services immediately. But they’re finding that as the labor market tightens those workers are getting harder to find, and maybe the unit economics never worked to begin with.

-Tesla wants to disrupt the auto industry. But it’s never produced more than 50,000 cars in a year, and suddenly has to meet demand for as many as 500,000 cars a year. That won’t be cheap or easy, and it’s unclear how much shareholders and lenders will be willing to finance that growth. It’s not as cheap to scale atoms as it is to scale bits.

-Uber and Facebook are the 800-pound gorillas in their respective industries. But as they grow, they’re running into problems of scale. For Uber, it’s finding drivers and fighting regulation. For Facebook, it’s eating too much of the revenue pie for content, and maybe as it grows it’s going to come under greater and greater scrutiny given its media clout. Both will argue they’re not utilities, but the vision and scale they aspire to would make them exactly that.

-Conservatism is finding that the demographic groups that believe in conservatism no longer scale to form a viable national party. Trump will soon find the same to be true for his white working class coalition. The Republican Party needs a new ideology or constituency that can scale to compete with Democrats.

It’s time to let Steve Jobs and Ronald Reagan rest in peace, and find new leaders who can build the world of the 2020′s.

That is from @conorsen, link here.

Coloring book markets in everything

There are coloring books for every imaginable interest group, including “Game of Thrones” and “Harry Potter” ones, Hillary Clinton and Donald J. Trump versions, and, in a new and surprisingly durable trend, “sweary” coloring books. Because how better to demonstrate that your coloring book is not for kids than by incorporating lots of four-letter words?

Here is the Alexandra Alter NYT piece, I have yet to see a good essay on the broader implications or causes of the coloring book trend.

New issue of Econ Journal Watch

I cannot easily adjust the indentation, but this is all text from the journal issue, not from me:

In this issue (.pdf):

Symposium:
My Understanding of Adam Smith’s Impartial Spectator

The mysterious impartial spectator is addressed by leading Smith scholars: What is the impartial spectator, in Smith’s highest sense of that expression? Does the impartial spectator have knowledge that is super-human? Is it universal? How does the impartial spectator relate to “the man within the breast”? To the being whose hand is invisible? To God?

Contributions:

Other articles:

CIA Interventions, Tariff Changes, and Trade During the Cold War: Bruno Ćorić tests the robustness of results of an American Economic Review article, using a different data set, and finds that increases in imports from the United States can be explained by changes in tariffs that are unrelated to CIA interventions.

Follow-up on the left orientation of industrial relations:Bruce Kaufman reflects on Mitchell Langbert’s January 2016 article, and Langbert replies.

On the perfect ploy against free enterprise: Friedrich Hayek’s classic essay The Meaning of Competition.

EJW Audio

Samuel Fleischacker on Adam Smith’s Impartial Spectator

Pavel Kuchař on Liberalism in Mexico

Again, here is the general link to the issue.

Monday assorted links

Mexico body ratio fact of the day

In many forms of combat between armed groups, about four people are injured for each person killed, according to an assessment of wars since the late 1970s by the International Committee of the Red Cross. Sometimes, the number of wounded is even higher.

But the body count in Mexico is reversed. The Mexican Army kills eight enemies for every one it wounds.

For the nation’s elite marine forces, the discrepancy is even more pronounced: The data they provide says they kill roughly 30 combatants for each one they injure.

The government stopped reporting such figures in 2014 — model this!

How the Chinese run monetary policy

Here is a good short explanation from macro(il)logic:

That leaves interest rates, which are not a main means of transmitting monetary policy in China. It’s that simple. Monetary policy is managed by managing liquidity provisioned to banks, which then affects outright lending and then interbank/onshore interest rates (I think looking at onshore IRS rates tied to the benchmark 7-day repo are the best signal) and then filters through to the cost of capital in other parts of the economy. China’s mostly fixed bank deposit rate regime speaks to a monetary policy constrained by the Impossible Trinity: while still controlling the exchange rate and the Swiss cheese-style capital account, China via the PBOC manages liquidity as best it can to manage onshore lending AMOUNTS, and by virtue RATES. On the liquidity front, hot money flows matter BIG. Hot money inflows/outflows affect both the FX side of the equation and the liquidity side. Over the past decade, we’re ultimately talking about inflows. Inflows add to onshore liquidity, unless sterilized by the PBOC. Therefore the surge in Chinese FX reserves is a combination of sucking up the USD coming into the country via the trade surplus and hot money inflows, and then provisioning as much RMB in return as it sees fit under the economic circumstances. That’s why bank RRRs have also been linked closely to monetary policy: to manage liquidity in a country that receives so much foreign exchange from its trade surplus, high RRRs ultimately tie up the liquidity that is swelling foreign reserves. Thus RRR changes still are the main policy signal. When deposit rates are sticky, well, most interest rates are sticky. Minor cuts here are there do not feed through into big changes of saving/investment/spending that would really change the economic picture. China’s massive wealth management product (WMP) and shadow banking industry has grown out of the forced low returns on savings imposed by low, fixed deposit rates (shadow banking being a result of financial repression in many ways, US financial crisis included). When WMPs became an easy way for out-of-favor sectors to roll over loans for dodgy investments borne out of the 2009 stimulus plan and offer returns that could not be offered elsewhere (certainly not in China’s until-recently listless stock market, the property market is obviously another issue), well the PBOC had little choice but to act – it was losing control of monetary policy. Bank deposit rate liberalization was one of the underlying motives of the last rate cut and is the NEXT BIG THING in China’s financial evolution, beyond a nearly open capital account. (UPDATE: The draft rules on a bank deposit insurance scheme issued Sunday are setting the stage for further liberalization of deposit rates next year). Just to reinforce the point, banks in China have never had to compete for funds via deposits, only having done so recently and indirectly via their sponsorship of WMPs. The WMP problem would probably disappear it banks could offer competitive bank deposit rates. But of course, competitive bank deposit rates might mean some banks go out of business or that market interest rates could be much higher than the PBOC wants, all potential problems the PBOC/CBRC don’t really want to deal with now. The result: as Stephen Jen of SLJ Macro Partners and others have argued, China’s interest rate regime has played a prime role in the misallocation of resources and needs to change. Thus, rate moves do not necessarily have a clear cut monetary policy impact in the way most folks are used to thinking about with major economies and even some of the bigger EM ones. Liquidity provisions are more important. Which is why the reaction among some Chinese FX traders to the PBOC rate cut this month was not “Great a rate cut!” but “Shucks, why not a bank reserve requirement (RRR) cut?”. Welcome to monetary policy with Chinese characteristics. Those buying AUD/commodities on the rate cut headlines clearly don’t understand this interplay.

The piece is from late 2014 but still of interest more generally.

Sunday assorted links

1. Larry Summers on why Americans don’t trust government: “Though the bridge took only 11 months to build in 1912, it will take close to five years to repair today at a huge cost in dollars and mass delays.”

2. Men who live as dogs.  And this man lived as a goat: “So in the Alps, I had to use a pressure cooker at night to cook the grass I’d chewed up during the day, and spat into my not-quite artificial rumen.”

3. Prototype markets in everything: prosthetic foot designed for high heels.

4. U.S. nuclear force still uses eight inch floppy disks.

5. How masculine are millennials?  And why has Chicago stayed so violent? (NYT)

6. More on DAO, which is (sort of) a bot which runs a company.

7. Cass Sunstein on Star Wars, don’t forget June 15 is my conversation with Cass.

Could a neuroscientist understand a microprocessor?

The Visual6502 team reverse-engineered one of the chips used in the early Atari video game system:

…we exposed the silicon die, photographed its surface at high resolution and also photographed its substrate.  Using these two highly detailed aligned photographs, we created vector polygon models of each of the chip’s physical components – about 20,000 of them in total for the 6502.  These components form circuits in a few simple ways according to how they contact each other, so by intersecting our polygons, we were able to create a complete digital model and transistor-level simulation of the chip.

This model is very accurate and can run classic 6502 programs, including Atari games.

By the way, this is the same idea that Robin Hanson argues will be used to create Ems of human brains.

Eric Jonas and Konrad Kording then applied the same types of techniques which neuroscientists use to try to understand the human brain to the simulation–including lesion studies, analysis of spike trains, and correlation studies. Could the tools of neuroscience be used to understand the much simpler Atari brain? The answer is mostly no. The authors, for example, looked at three “behaviors”, Donkey Kong, Space Invaders and Pitfall (!) and they are able to find transistors which uniquely crash one of the games but not the others.

We might thus conclude they are uniquely responsible for the game – perhaps there is a Donkey Kong transistor or a Space Invaders transistor.

Of course, this conclusion would be very misleading but what are we then to make of similar brain lesion studies? The authors conclude:

…we take a simulated classical microprocessor as a model organism, and use our ability to perform arbitrary experiments on it to see if popular data analysis methods from neuroscience can elucidate the way it processes information. We show that the approaches reveal interesting structure in the data but do not meaningfully describe the hierarchy of information processing in the processor. This suggests that current approaches in neuroscience may fall short of producing meaningful models of the brain.

I was surprised to read this:

Granger causality [37] has emerged as a method of assessing putative causal relationships between brain regions based on LFP data.

Scott Alexander on Robin Hanson

There are some people who are destined to become adjectives. Pick up a David Hume book you’ve never read before and it’s easy to recognize the ideas and style as Humean. Everything Tolkien wrote is Tolkienesque in a non-tautological sense. This isn’t meant to denounce either writer as boring. Quite the opposite. They produced a range of brilliant and diverse ideas. But there was a hard-to-define and very consistent ethos at the foundation of both. Both authors were very much like themselves.

Robin Hanson is more like himself than anybody else I know. He’s obviously brilliant – a PhD in economics, a masters in physics, work for DARPA, Lockheed, NASA, George Mason, and the Future of Humanity Institute. But his greatest aptitude is in being really, really Hansonian.

He really likes the book.

Where is freedom in the world contracting? Advancing?

Contracting:

America, China, Hong Kong, Russia, Ukraine, Austria, Hungary, Poland, Slovakia, Turkey, Syria, Libya, Iraq, Yemen, Kosovo, Afghanistan, Philippines, Venezuela, Nigeria, South Africa, Malaysia, and Brazil, though the latter may be in flux.  Tunisia and Iran are problematic, but arguably hard to call.  Saudi may be headed toward collapse, but I don’t think you can say they are less free just yet.  Ethiopia is losing more political freedom, though still making very real economic progress.

Advancing:

Mexico and Colombia, if only by consolidating previous gains, and still there is a chance of a turnaround in Argentina at some point.  Latvia?  Where else?  You could make a (modest) case for India and some of the smaller African countries.

Neutral:

Japan, South Korea, Canada, and much of Western Europe though many of these cases appear fragile to me.

Overall this is not a thrilling ledger.  I haven’t listed most of the smaller countries, but in the longer run they often follow the lead of their larger neighbors.

File under Not Good.

The wisdom of Nicholas Kristof

…when scholars cluster on the left end of the spectrum, they marginalize themselves. We desperately need academics like sociologists and anthropologists influencing American public policy on issues like poverty, yet when they are in an outer-left orbit, their wisdom often goes untapped.

In contrast, economists remain influential. I wonder if that isn’t partly because there is a critical mass of Republican economists who battle the Democratic economists and thus tether the discipline to the American mainstream.

Here is more.

Premature deindustrialization proceeds apace

The South China Morning Post reports that iPhone maker Foxconn has replaced more than half of its workforce with robots since the launch of the iPhone 6. The figures were provided by the local government in Kunshan, where the company is based.

“The Foxconn factory has reduced its employee strength from 110,000 to 50,000, thanks to the introduction of robots. It has tasted success in reduction of labour costs,” said the department’s head Xu Yulian … 

Since September 2014, more than 500 companies in the Chinese province of Dongguan have spent a total of $630M on robot and AI technology to replace human workers. It was reported back in January that Foxconn had received a $12M government subsidy to help minimize layoffs in response to reduced iPhone orders.

Here is more, via Kurt Busboom.  And, via “anon from cl”, there is this from Adidas:

Adidas, the German maker of sportswear and equipment, has announced it will start marketing its first series of shoes manufactured by robots in Germany from 2017.

More than 20 years after Adidas ceased production activities in Germany and moved them to Asia, chief executive Herbert Hainer unveiled to the press the group’s new prototype “Speedfactory” in Ansbach, southern Germany.

The 4,600-square-metre plant is still being built but Adidas opened it to the press, pledging to automate shoe production – which is currently done mostly by hand in Asia – and enable the shoes to be made more quickly and closer to its sales outlets.

Here is my recent paper on premature deindustrialization.