Month: June 2016

Who has risen and fallen in status due to Brexit?

Risen:

Scots

Those predicting Irish unity within a generation

The Irish

David Goodhart

Pollsters

Fallen:

David Cameron and Co.

Angela Merkel

Jeremy Corbyn

The Governor of Gibraltar

Advocates of economic self-interest theories of voting

Julien Benda

Those who pooh-poohed “backlash” objections to open borders

Those long the zloty

Prime Minister Abe

Old people

People

Still unknown

Boris Johnson

Central bankers

Vladimir Putin

Zhou En-Lai

Brexit reactions from Twitter

Heard in Baghdad: “I never thought Britain would break up before .”

That was from Ben Wedeman

I’m afraid we are about to find out that most, if not all, the Remain economic warnings were true

That was from John Gapper

CNH at 6.65. Forget Brexit. If PBOC piggybacking on this, this will be the new story

That was from Christopher Balding

worth remembering that no European country has had an election/referendum explicitly pitting national vs EU where EU won. None.

That was from Austan Goolsbee

Weird night for Netflix to drop the first live episode of Black Mirror.

That was from Le Vine

ITV now reporting that Sinn Fein calling for new vote on united Ireland. Brexiters were adamant that this wouldn’t happen.

That was from Simon Nixon

Thank goodness the world economy has the steady hand of the American voter to steer it to calmer waters.

That was from Justin Wolfers

My sympathies with Mexicans out there wondering why their currency has been smashed by 5.6% on a UK election result.

That was from Toby Nangle

No political change was ever postponed because it would freak out traders.

That was from Kristi Culpepper

Though I don’t drink, some nights I need to stay up a little later.

That was from me

Molenbeek notes

Molenbeek is the “Islamist” section of Brussels which recently became well-known as a breeding ground for terror attacks; it is sometimes described as a kind of desperate hell hole.  The Time Out guide for Brussels doesn’t mention it at all.  Naturally I wanted to see it.

I visited yesterday morning and saw the fruit, vegetable, and clothing market, and then walked around for another two hours.  It was charming, everyone was friendly to me, and I never felt threatened.  I bought some excellent cherries at a very good price (“cheap cherries,” and the surrounding streets offer “cheap charcuterie” as well).

Most of the people seem to be either Moroccan or Turkish.  The high ratio of Muslim women to Muslim men in the market was striking.

On the vegetable but not the clothing end of the stalls, I saw a fair number of blond Belgian women pushing their baby strollers and buying produce.  On my way in from the airport, my (white) Belgian cab driver told me he lived in Molenbeek and loved it, including the low rent — my apologies to Thomas Friedman of course.

Inside the boundaries of the market is a well-known Art Deco church from the 1930s, which upon first glance appeared to be an old mosque tower.  At that moment I was surrounded by hundreds of Muslims, and so was primed for the mosque look I suppose.  I walked up the stairs of the church to the door, and found it was barred and showed no signs of life.

One plaintive-looking Belgian man was standing on the steps, and he asked me quietly (in French) “Are you here for Mass?”  “Yes,” I said, not wanting to end the conversation.  “You’ll have to wait, then,” was his dead pan response.

Molenbeek

Here are ten reasons you should never visit Molenbeek.

Whose inflation?

There is a new and very important paper on this topic by Greg Kaplan and Sam Schulhofer-Wohl (pdf), emanating from the Minneapolis Fed:

We use scanner data to estimate inflation rates at the household level. Households’ inflation rates are remarkably heterogeneous, with an interquartile range between 6.2 to 9.0 percentage points on an annual basis. Most of the heterogeneity comes not from variation in broadly defined consumption bundles but from variation in prices paid for the same types of goods — a source of variation that previous research has not measured. The entire distribution of household inflation rates shifts in parallel with aggregate inflation. Deviations from aggregate inflation exhibit only slightly negative serial correlation within each household over time, implying that the difference between a household’s price level and the aggregate price level is persistent. Together, the large cross-sectional dispersion and low serial correlation of household-level inflation rates mean that almost all of the variability in a household’s inflation rate over time comes from variability in household-level prices relative to average prices for the same goods, not from variability in the aggregate inflation rate. We provide a characterization of the stochastic process for household inflation that can be used to calibrate models of household decisions.

For the pointer I thank David Levey.  One wonders of course what this means for various propositions in macroeconomics, such as the Fisher effect, or the use of monetary stimulus to alter the meaning of a given nominal reservation wage.  This is also of note: “…observable household characteristics have little power overall to predict household inflation rates.”  By the way, note that the data measure recorded prices, and not prices plus search costs, so the bargain hunters are paying higher net prices than these results would indicate, thus narrowing the differences in inflation rates across persons.

China bank spank

The trainer, Jiang Yang, has issued an apology, saying the spanking was “a training model I have tried for years” and had not been instigated by executives at the bank…

The video, which first surfaced on Monday, appears to have been taken by someone in the audience on a smartphone.

Mr Jiang is seen reprimanding eight bank employees on stage, asking them why they received the lowest scores in a training exercise.

The employees give answers including “I did not exceed myself”, “I did not co-ordinate with my team” and “I lacked courage”.

Mr Jiang then says “get your butts ready” and proceeds to spank them with what appears to be a thick piece of wood.

Here is more along with the video.  It seems the spanker focused his apology toward the bank executives rather than those who were spanked.

For the pointer I thank Ray Lopez.

Thursday assorted links

Brexit fact of the day

“The betting is just massive,” says Mike Smithson, founder and editor of PoliticalBetting.com, a website that is something like a Bloomberg terminal for people who wager on political events. He characterizes the referendum as “the biggest political betting event of all time, anywhere.”

On Tuesday and Wednesday alone, the Brexit vote attracted wagers worth more than £3 million ($4.4 million), most of it via online transactions, and three-fourths landing on remain, Mr. Smithson estimated.

Yet in contrast:

William Hill estimates that the bookmaking industry will rack up wagers of £500 million ($735 million) on the European Championships. A World Cup final alone tends to attract £200 million ($294 million) in wagers to William Hill’s books.

That is from the NYT.  Last I saw the odds on Brexit were down to about 12 percent.  I also walked by the European Commission in Brussels, and saw not the slightest sign of panic or for that matter interest.  Nor was anyone in Molenbeek this morning gazing at the Brexit odds on their smart phones — most were too busy selling vegetables.

The proposed Elon Musk merger: the market speaks

…note that Solar City’s stock, after jumping up 12% at yesterday’s open, ended the day only up 3%; both are well below the 25%~34% premium offered by Tesla, suggesting the market is very skeptical of this deal happening. The problem, though, is that Tesla dropped 9.2% at open (representing a market cap loss that was double Solar City’s worth), but instead of moving back up in the opposite direction of Solar City’s drop, the stock actually closed down even further for a 10.5% decline. This suggests that a good portion of the drop is not due to the possibility of Solar City being acquired, but a loss of confidence in the company.

That is from Ben Thompson’s Stratechery newsletter, worth paying for or so I find at least.  Here is basic background on the proposed deal.

My Conversation with Cass Sunstein

There is audio, video, and transcript at the link.  I introduced Cass like this:

The Force is strong with this one. Cass is by far the most widely cited legal scholar of his generation. His older book, Nudge, and his new book on Star Wars are both best sellers, and he was head of OIRA [Office of Information and Regulatory Affairs] under President Obama from 2009 to 2013. Powerful, you have become.

So tonight I’d like to start with a survey of Cass’s thought. We’re going to look at legal theory and then go to Nudge and then consider Star Wars, how it all ties together, and then we’re going to talk about everything.

On every point Cass responded clearly and without evasion.  We talked about judicial minimalism, Bob Dylan’s best album, the metaphysics of nudging, Possession, the ideal size of the Supreme Court, the wisdom of Yoda, Hayek, why people should choose their own path, the merits of a banned products store, James Joyce, why the prequels are underrated, and which of the first six movies is the worst of the lot.  Here is one bit:

COWEN: Let’s take a concrete example from real life: Jedi mind tricks. Obi-Wan comes along and says, “These aren’t the droids you’re looking for.” And what does the stormtroooper do? He goes away. Now, is that a nudge?

SUNSTEIN: No, it’s a form of manipulation. So — .

[laughter]

COWEN: OK, but how do you draw the metaphysical categories? It seems like a nudge that just happens to work all the time.

SUNSTEIN: OK. I’ll give you a quick and dirty way of getting at that…

Here is another:

COWEN: If you were to pick one character from Star Wars who would nudge you — you get to elect them; you’re the only vote. Even Samantha doesn’t get a vote, just Cass — not your children — which character would you pick? Whom would you trust with that nudge? It’s a universe full of Jedi here, right?

SUNSTEIN: Yoda.

COWEN: Yoda?

SUNSTEIN: I trust that guy.

COWEN: But I worry about Yoda.

SUNSTEIN: I trust him.

Finally:

SUNSTEIN: Thank God for libertarian paternalism, that Luke has a choice. The Sith, by the way, like the Jedi, respect freedom of choice. In the crucial scene in Episode III where the question is whether Anakin is going to save the person who would be emperor, he says, “You must choose.” And so there’s full respect for freedom of choice. Nudgers have that. Good for them.

COWEN: Bad guys always tell you the deal, and then they say, “Choose evil.” It seems the good guys always mislead you.

There’s this funny tension. Star Wars makes me more nervous about nudge. I’m not like this huge anti-nudge guy, but when I look at Obi-Wan and Yoda lying to Luke — “Ben, Ben, Ben, why didn’t you tell me?” How many times have I heard that in these movies?

SUNSTEIN: It’s fair to ask whether Obi-Wan and Yoda had it right.

There is much, more more…self-recommending!

View at Medium.com

How important are book superstores anyway?

The old take:

Book superstores such as Barnes & Noble cause risk-averse publishers to double down on celebrity authors and surefire hits.

The new take:

In a world without Barnes & Noble, risk-averse publishers will double down on celebrity authors and surefire hits.

The first of the two is my memory, the latter of the two is a quotation.  I found this claim, by author Alex Shephard, interesting:

Big-name authors, like Malcolm Gladwell or James Patterson, will probably be fine. So too will writers who specialize in romance, science fiction, manga, and commercial fiction—genres with devoted audiences, who have already gravitated to Amazon’s low prices. But Barnes & Noble is essential to publishers of literary fiction—the so-called “serious” works that get nominated for Pulitzers and National Book Awards. Without the initial orders Barnes & Noble places, and the visibility its shelves provide, breakout hits by relative unknowns—books like Anthony Doerr’s All the Light We Cannot See or Emily St. John Mandel’s Station Eleven—will suffer.

Could it be that without book superstores fewer books will be sold, but a higher percentage of those sold will be read?

Wednesday assorted links

The Sotomayor and Kagan Dissents in Utah v. Strieff

In Utah v. Strieff, the Supreme Court has again weakened Fourth Amendment rights. The Sotomayor and Kagan (joined by Ginsburg) dissents are excellent and important. Sotomayor summarizes the basic issue in the case:

The Court today holds that the discovery of a warrant for an unpaid parking ticket will forgive a police officer’s violation of your Fourth Amendment rights. Do not be soothed by the opinion’s technical language: This case allows the police to stop you on the street, demand your identification, and check it for outstanding traffic warrants—even if you are doing nothing wrong. If the officer discovers a warrant for a fine you forgot to pay, courts will now excuse his illegal stop and will admit into evidence anything he happens to find by searching you after arresting you on the warrant. Because the Fourth Amendment should prohibit, not permit, such misconduct, I dissent.

If outstanding warrants were few and far between and distributed more or less randomly the case would have been wrongly decided but of little practical importance. Outstanding warrants, however, are common and much more common in some communities than others. As I wrote in 2014, in Ferguson, MO a majority of the population had outstanding warrants and not because of high crime:

You don’t get $321 in fines and fees and 3 warrants per household from an about-average crime rate. You get numbers like this from bullshit arrests for jaywalking and constant “low level harassment involving traffic stops, court appearances, high fines, and the threat of jail for failure to pay.”

Sotomayor and Kagan understand all this and the incentives the case now creates for bad policing. Here’s Kagan (who cites some of my work):

…far from a Barney Fife-type mishap, Fackrell’s seizure of Strieff was a calculated decision…As Fackrell testified, checking for outstanding warrants during a stop is the “normal” practice of South Salt Lake City police….And find them they will, given the staggering number of such warrants on the books.

…The majority’s misapplication of Brown’s three-part inquiry creates unfortunate incentives for the police— indeed, practically invites them to do what Fackrell did here….Now the officer knows that the stop may well yield admissible evidence: So long as the target is one of the many millions of people in this country with an outstanding arrest warrant, anything the officer finds in a search is fair game for use in a criminal prosecution. The officer’s incentive to violate the Constitution thus increases: From here on, he sees potential advantage in stopping individuals without reasonable suspicion—exactly the temptation the exclusionary rule is supposed to remove.

Sotomayor is at her most scathing in explaining the indignity and serious consequences of an arrest even without a conviction (citations removed for clarity):

The indignity of the stop is not limited to an officer telling you that you look like a criminal. The officer may next ask for your “consent” to inspect your bag or purse without telling you that you can decline. Regardless of your answer, he may order you to stand “helpless, perhaps facing a wall with [your] hands raised.” If the officer thinks you might be dangerous, he may then “frisk” you for weapons. This involves more than just a pat down. As onlookers pass by, the officer may “‘feel with sensitive fingers every portion of [your] body. A thorough search [may] be made of [your] arms and armpits, waistline and back, the groin and area about the testicles, and entire surface of the legs down to the feet.’”

The officer’s control over you does not end with the stop. If the officer chooses, he may handcuff you and take you to jail for doing nothing more than speeding, jaywalking, or “driving [your] pickup truck…with [your] 3-year-old son and 5-year-old daughter…without [your] seatbelt fastened.” At the jail, he can fingerprint you, swab DNA from the inside of your mouth, and force you to “shower with a delousing agent” while you “lift [your] tongue, hold out [your] arms, turn around, and lift [your] genitals.” Even if you are innocent, you will now join the 65 million Americans with an arrest record and experience the “civil death” of discrimination by employers, landlords, and whoever else conducts a background check. And, of course, if you fail to pay bail or appear for court, a judge will issue a warrant to render you “arrestable on sight” in the future.

…[all of this, AT] implies that you are not a citizen of a democracy but the subject of a carceral state, just waiting to be cataloged.

Why isn’t more economics taught in high school?

Todd, a loyal MR reader, writes to me:

My kids are 11, 8, and 5. They go to the great [redacted] School. So far, they’ve been exposed to zero economic ideas. None. Why is this? Why do they learn about Beowulf, the Underground Railroad, and Spanish, but no basic economics? In fact, looking back at my own primary education, I had no exposure either. What explains the absence of basic economics education in primary education? Wouldn’t giving every kid an intuitive grasp of econ 101 at a very early age work a profound improvement on the state of private and public decision making in this country? Are we just a really good textbook (aimed at maybe 4th – 6th graders) away from big social gains?

I have heard related tales from others, so what are the possible explanations?

1. K-12 teachers do not themselves understand economics.

2. It is much easier to teach and test historical facts and Spanish grammar than economic concepts.  Note that many high school economics classes seem to devote a lot of attention to business taxonomy rather than actually thinking like an economist.

3. K-12 administrators may be hostile to economic reasoning, since said reasoning may paint some of them in a less than flattering light.

Anything else?  That all said, AP economics seems to be growing at a decent clip over the last twenty years, and in some states such as Texas senior-level economics is now required.  But at lower levels?  The progress is much less evident.

Here are some not always so useful discussion threads on this query.

Alexa may soon know how irritated you are

It can be incredibly frustrating when a virtual assistant repeatedly misunderstands what you’re saying. Soon, though, some of them might at least be able to hear the irritation in your voice, and offer an apology.

Amazon is working on significant updates to Alexa, the virtual helper that lives inside the company’s voice-controlled home appliance, called Amazon Echo. These will include better language skills and perhaps the ability to recognize the emotional tenor of your voice.

Researchers have long predicted that emotional cues could make machine interfaces much smarter, but so far such technology has not been incorporated into any consumer technology.

Rosalind Picard, a professor at MIT’s Media Lab, says adding emotion sensing to personal electronics could improve them: “Yes, definitely, this is spot on.” In a 1997 book, Affective Computing, Picard first mentioned the idea of changing the voice of a virtual helper in response to a user’s emotional state. She notes that research has shown how matching a computer’s voice to that of a person can make communication more efficient and effective. “There are lots of ways it could help,” she says.

The software needed to detect the emotional state in a person’s voice exists already. For some time, telephone support companies have used such technology to detect when a customer is becoming irritated while dealing with an automated system. In recent years, new machine-learning techniques have improved the state of the art, making it possible to detect more emotional states with greater accuracy, although the approach is far from perfect.

Here is the full story.  Here is my recent New Yorker piece on how talking bots will affect us.

Colorado does not seem to be turning into a state of potheads

Rates of marijuana use among Colorado’s teenagers are essentially unchanged in the years since the state’s voters legalized marijuana in 2012, new survey data from the Colorado Department of Public Health and Environment shows.

In 2015, 21 percent of Colorado youths had used marijuana in the past 30 days. That rate is slightly lower than the national average and down slightly from the 25 percent who used marijuana in 2009, before legalization. The survey was based on a random sample of 17,000 middle and high school students in Colorado.

That is from Christopher Ingraham at Wonkblog.  Those are surveys, yes, but even the continuing feeling that one needs to lie and say no should count for something.