Month: August 2016
Wednesday assorted links
1. An intuitive presentation of the fiscal theory of the price level (pdf).
2. New Zealand police investigate theft of one hundred cows. And how an ordinary New Zealand town became the steampunk capital of the world. The only thing is: Oamaru is anything but ordinary.
3. Should you be especially suspicious of inspirational stories in psychology?
4. “The origins of the treaty are unknown, but restaurateurs say it originally capped the number of noodle shops in a Hui village at one.” (NYT)
5. How dependent on state support are China’s provinces? And is China’s movie boom doomed?
Do lower-class mutual fund managers outperform those from wealthier backgrounds?
That is my latest Bloomberg column, here is one bit:
…new evidence on mutual fund managers suggests that the managers from poorer backgrounds beat the performance of wealthier peers. And it’s not a small effect: Managers from families in the bottom quintile of wealth appear to outperform those from families in the top quintile by 2.16 percent a year, in risk-adjusted terms.
That is one result from a new study by Oleg Chuprinin of University of New South Wales Business School and Denis Sosyura at the University of Michigan Business School.
Why might that be?:
Most individuals from less wealthy backgrounds don’t get to be mutual fund managers at all, and so as an entire class they do underperform. But if they do become fund managers, that may indicate superior smarts and hustle and eventually higher returns. Those from wealthier families, in contrast, maybe had to work less hard and be less smart to get those posts, and that may be reflected in their subsequent performance.
This hypothesis is supported by several features of the data. For instance, the managers from wealthier families had a higher dispersion of returns. In other words, some of them did very, very well but others were lemons. That distribution is a classic sign of a relatively loose quality filter, and on strictly meritocratic grounds some of those managers probably didn’t deserve to be there.
Along those lines, the data show also that the fund managers from the wealthier families were more likely to receive promotions when their returns were subpar. The returns of the managers from the poorer families were much more tightly bunched, which is consistent with the notion that they passed through much tougher quality filters.
There are some relevant caveats, however, so do read the whole thing.
The Art of Kal Mansur
I’m a fan of the work of Canadian artist, Kal Mansur (whom I have known since high school). Photos of his work look like paintings but they are more like sculptures. Underneath the surface are sculptural elements that refract and diffuse the light. In person these pieces have a glow and they look subtly different at different angles or in different light.
Kal has an exhibition at George Billis in New York, Sep 1-Oct 1, 2016, with opening reception Sept. 1, 6-8 pm if you are interested or see the link above. Tell him Alex said hello.
How democratic was Southern secession?
Perhaps less than you might think. There is a new paper by Mario L. Chacon and Jeff I. Jensen:
We use the Southern secession movement of 1860-1861 to study how elites in democracy enact their preferred policies. Most states used specially convened conventions to determine whether or not to secede from the Union. We argue that although the delegates of these conventions were popularly elected, the electoral rules favored slaveholders. Using an original dataset of representation in each convention, we first demonstrate that slave-intensive districts were systematically overrepresented. Slaveholders were also spatially concentrated and could thereby obtain local pluralities in favor of secession more easily. As a result of these electoral biases, less than 10% of the electorate was sufficient to elect a majority of delegates in four of the six original Confederate states. We also show how delegates representing slave-intensive counties were more likely to support secession. These factors explain the disproportionate influence of slaveholders during the crisis and why secessionists strategically chose conventions over statewide referenda.
Not entirely unlike the first American secession!
For the pointer I thank the excellent Kevin Lewis.
Ecstatic over bad news sentences to ponder
Conatus Pharmaceuticals Inc. has several patents for emricasan. Some don’t expire until 2028. A third party wanting to sell the molecule would need to license it from Conatus, according to Joseph O’Malley, global chair for intellectual property at Paul Hastings LLP.
“Assuming that drug were to be found to treat Zika,” Mr. O’Malley said, “it would be bad news for the company. It would be under tremendous pressure to license it for little or no money.”
Alfred Spada, Conatus’s chief scientific officer, said if emricasan “were effective in the treatment of such a devastating disease, I think we would be ecstatic.”
Here is the full WSJ story, via the excellent Kevin Lewis.
Tuesday assorted links
2. Is Jacob Neusner the most-published man? Is Jacob Neusner underrated?
3. Are the minimum wage and EITC complements?
4. Has Vanguard saved investors $1 trillion?
5. Dog owners already knew this.
6. George Soros’s campaign to elect better prosecutors.
7. China regulation of the day: “TV stations must play down shows’ casts and limit celebrities’ appearances on reality shows.”
My dialogue with Bob Zoellick on Trump and trade
What if Donald Trump actually won the election? What would happen with trade and the economy?
Here is part one, all nice and pretty with photos, part two will come tomorrow. Zoellick suggests that if Trump abrogated various trade deals, the legal default would be a return to…Smoot-Hawley! As former USTR, he should know. Anyway, here is one part of the dialogue:
Cowen: I expect a somewhat slightly more optimistic scenario. I think a President Trump would give us a reality-TV version of a tariff hike. I don’t necessarily think he wants to experience the pain of tariffs going up, markets crashing and all the political fallout early in his time in office.
Yet he’s promised he would do something and he loves to spar with people and claim he’s being done wrong and rail against elites rather than own problems and solve them. So I think what he would probably do is announce that he had abrogated these treaties, not actually do it. There would be a very high level of uncertainty but I don’t think the laws on the books would necessarily change.
The biggest thing at stake here is uncertainty. Under all of these scenarios, the real impact would be on services, which often rely more on the regulatory system. Uncertainty would result in a higher implicit tax on exports of services to the U.S. than on exports of goods.
Zoellick: I think that’s an extremely optimistic interpretation. Remember, he has the authority to act. He can raise tariffs and create havoc.
I agree on your uncertainty point, but I think you may be a little blithe about the risk to markets. Other countries aren’t just going to stand for the U.S.’s blustering.
This is serious stuff. I worked on German unification. I’ve done a bunch of trade deals. I’ve had some experience internationally. If you act the way Trump talks you’re going to pull down a 70-year-old system that got us out of the Great Depression and helped the U.S. become the strongest economy in the world. This isn’t for fooling around with.
Here is the full, raw text with no formatting. Eleven full pages, that is for me the best version! There are many, many points of interest, I really liked this exchange.
The FDA and the EpiPen Shock
I haven’t written much about the massive increase in the price of the EpiPen because I’ve said it all before–mostly this about FDA costs and delay and some bending of various laws to favor cronies and, as with the infamous Shkreli and Daraprim case, one solution would be a reciprocity system that allowed importation of epipen-like devices approved abroad.
I’m glad, however, that I didn’t go into this in detail because SlateStarCodex has knocked one out of the park on this issue:
…when was the last time that America’s chair industry hiked the price of chairs 400% and suddenly nobody in the country could afford to sit down? When was the last time that the mug industry decided to charge $300 per cup, and everyone had to drink coffee straight from the pot or face bankruptcy? When was the last time greedy shoe executives forced most Americans to go barefoot?
…[lots of stuff about FDA and EpiPen specifically]…
Imagine that the government creates the Furniture and Desk Association, an agency which declares that only IKEA is allowed to sell chairs. IKEA responds by charging $300 per chair. Other companies try to sell stools or sofas, but get bogged down for years in litigation over whether these technically count as “chairs”. When a few of them win their court cases, the FDA shoots them down anyway for vague reasons it refuses to share, or because they haven’t done studies showing that their chairs will not break, or because the studies that showed their chairs will not break didn’t include a high enough number of morbidly obese people so we can’t be sure they won’t break. Finally, Target spends tens of millions of dollars on lawyers and gets the okay to compete with IKEA, but people can only get Target chairs if they have a note signed by a professional interior designer saying that their room needs a “comfort-producing seating implement” and which absolutely definitely does not mention “chairs” anywhere, because otherwise a child who was used to sitting on IKEA chairs might sit down on a Target chair the wrong way, get confused, fall off, and break her head.
(You’re going to say this is an unfair comparison because drugs are potentially dangerous and chairs aren’t – but 50 people die each year from falling off chairs in Britain alone and as far as I know nobody has ever died from an EpiPen malfunction.)
Imagine that this whole system is going on at the same time that IKEA donates millions of dollars lobbying senators about chair-related issues, and that these same senators vote down a bill preventing IKEA from paying off other companies to stay out of the chair industry. Also, suppose that a bunch of people are dying each year of exhaustion from having to stand up all the time because chairs are too expensive unless you have really good furniture insurance, which is totally a thing and which everybody is legally required to have.
And now imagine that a news site responds with an article saying the government doesn’t regulate chairs enough.
Read the whole thing.
Addendum: Steve in the comments reminds me that there is a case of a big increase in the price of chairs. Of course, it proves the rule.
The deindustrialization of Boydton, Virginia
Microsoft did not dispute reports that it would spend $1.1 billion on the Boydton data center, and said that “on average, data centers employ tens to several dozen people,” in a mixture of corporate and contracted positions. It declined to let a reporter tour the site.
“They talked about 100 jobs, but it’s a slow process,” said Thomas C. Coleman III, the mayor of Boydton. So far, he says, the biggest impact “has been a couple of lunch tables at the Triangle gas station.”
That is from Quentin Hardy at the NYT.
“Clinton economist trusts government too much”
Being a reticent fellow myself, I enjoyed that Bloomberg-given headline. That is for my latest column, on the recent book and ideas of Heather Boushey. She wishes government to take a much larger hand in sick paid leave, parental leave, and care for the elderly, among other issues. Here is one excerpt:
Most likely, there is a big difference between short-run and long-run effects. For instance, employers value the workers they have, and are reluctant to fire them when labor costs go up. A lot of “pro-worker” policies thus seem to be a kind of magical free lunch. Over time, however, as a generation of workers turns over and is replaced, mandatory benefits represent a real added cost, evaluated anew, and employers will respond accordingly. They will cut the paid dollar wage, cut other job benefits, require more hard work, automate more, or cut back on plans for growing the business. The downward-sloping demand curve is the best established empirical regularity in all of economics, and in this context that means some laborers — maybe most laborers — will pay a price for their new benefits, one way or another.
Note that if firms have better bargaining power than do workers, workers can in the short run claw some of that back through the law. Yet that superior bargaining power simply will be reestablished one generation of workers later, albeit with jobs at a new higher-mandated-benefit, lower-something-else equilibrium. Hardly anyone gets that. And:
Boushey doesn’t estimate or indicate the expense of her proposed mandatory benefits, although she does suggest on page 1 that the cost would be “very small.” She is developing a new kind of supply-side economics, this time on the left, but like her right-wing counterparts she is running the risk of excess optimism about how much her suggested improvements will boost productivity in the system.
Give them cash I say, do read the whole thing.
Here is Heather Boushey’s new book from Harvard University Press, Finding Time: The Economics of Work-Life Conflict. I disagree with it fundamentally, but still many of you will find it of considerable value. She is also the chief economist for Hillary Clinton’s transition team, and I would trust her with nuclear weapons.
Most Important News of Your Day/Lifetime?
An international team of scientists from the Search for Extraterrestrial Intelligence (SETI) is investigating mysterious signal spikes emitting from a 6.3-billion-year-old star in the constellation Hercules—95 light years away from Earth. The implications are extraordinary and point to the possibility of a civilization far more advanced than our own.
The safe bet is against but stranger things have happened.
Here and more information here.
Hat tip: Next Draft.
Monday assorted links
2. Miss Hokusai anime film coming out. And new information about Elizabeth Bishop.
3. Italy’s poop museum (NYT).
4. Megan McArdle on what we should have done instead of Obamacare.
Obit of Sir Anthony Jay, co-creator of Yes Minister
This is from the Telegraph obit:
“However, not many, perhaps, were aware that the serial was commissioned with a serious political purpose: to popularise public choice theory. It is because it succeeded spectacularly that Jay received a knighthood in 1988.”
There are numerous interesting points in the obituary, for instance:
In Zimbabwe, Robert Mugabe was said to be a No 1 fan.
For the pointer I thank David Stein. And here is my earlier Conversation with Margalit Fox, senior obituary writer for The New York Times.
Tim Harford’s *Messy*
The subtitle is The Power of Disorder to Transform Our Lives, and it is Tim’s best and deepest book. You’ll be hearing more about it in due time, the publication date is October 4, you can pre-order it here.
Tyler Cowen’s guide to Enlightenment
No, that is not enlightenment about life, that is enlightenment about Enlightenment, as in the eighteenth century phenomenon. P., a loyal MR reader, wrote to me with such a request, noting correctly that “I usually find that broad, ambitious survey books are not the answer.”
That survey would be Peter Gay, recently a bestseller in China by the way, and then Ernst Cassirer, Jonathan Israel, and Roy Porter, but let me outline an alternative program of study. The goal here is to be practical, engaging, and vivid, not comprehensive or scholarly per se:
Books:
Geoffrey Clive’s short book The Romantic Enlightenment.
James Boswell, Journals, selected excerpts, he was an early blogger by the way, and David Hume, An Enquiry Concerning Human Understanding. I find that to be one of the wittiest of books. Plus Hume’s Essays.
Diderot, Rameau’s Nephew, and Rousseau’s Second Discourse. Condorcet, Essay on the Progress of the Human Mind. Voltaire I consider overrated.
Swift, Gulliver’s Travels, yes I know it is arguably “anti-Enlightenment,” better yet. If you insist on another Irishman, Bishop Berkeley is an entertaining writer as well.
Founding documents of the United States, and Ben Franklin, Autobiography.
Kant, Perpetual Peace, “What is Enlightenment?”, and Lessing, Nathan the Wise.
Beccaria, Of Crimes and Punishments.
If you have the time to tackle longer books, start with Smith’s Wealth of Nations and Boswell’s Life of Johnson and then Casanova and Tristram Shandy (there is by the way a splendid book on the postmodern in the Enlightenment but I can no longer remember the cite). Leave Montesquieu to the Straussians, although the returns are high if you are so inclined.
For history, read up on eighteenth century scientific societies, Robert Darnton on the rise of publishing and the book trade, Habermas on the coffeehouse debate culture and the public sphere, and Brewer and McKendrick on the rise of consumer society in England. Try Wikipedia for Catherine the Great, Frederick the Great, and other rulers of the time. There is also Margaret C. Jacob, The Radical Enlightenment, and books on 18th century Freemasonry. The French Revolution seems to require its own blog post, as does the Industrial Revolution, slavery too, in a pinch resort to the MR search function box on this blog. Foucault will give you a sense of the dark side of the Enlightenment, his history is unreliable but read him on Discipline and Punishment and on ideology try the rather dense The Order of Things.
That all said, I would start with music and the arts first.
Music:
Haydn, the London symphonies and late piano sonatas and string quartets Op.76.
Mozart, the major operas, including reading through the libretti while listening. If you can only do one thing on this list…
Gluck, assorted operas, noting he is not nearly the equal of Haydn or Mozart as a composer but he did capture the spirit of Enlightenment.
C.P.E. Bach, the Prussian Sonatas.
Painting:
Study French painting from Chardin through David, picture books will do if you can’t visit the original works. Focus on Watteau, Boucher, Fragonard, Vigée-Le Brun, Boilly, Hubert Robert, and others, how their works tie into the history of the period and how the styles transformed over time. Visit Paris, Huntington Gardens, and Tiepolo’s work in the Residenz in Würzburg. Do a tour of Georgian architecture in England, in a pinch visit the derivative works at Harvard, Yale, and Alexandria, Virginia. Study Tiepolo more generally, Goya, and also Antonio Canova.
Movies:
Why not? I’ll toss up Dangerous Liaisons (Vadim and Malkovich versions), Barry Lyndon, Casanova, Amadeus, A Royal Affair (can’t forget Denmark!), Marie Antoinette, Ridicule, and The Madness of King George.
What did I leave out that is of utmost importance?