Month: August 2016

Thursday assorted links

1. Will I someday be a fan of Fan Bingbing?  And are index funds communist?

2. There is no great stagnation.  Whenever I give no further description with this header, it is usually something pretty good (bad), right?

3. Bombardment and dust when you fly at 20% of the speed of light.

4. The link between politics and personality maybe isn’t that strong.

5. “After all, labor market slack has now already declined to very low levels.

6. Given Hillary’s speech, I will re-up my earlier post on neo-reaction, which is related to “Alt Right.”

First self-driving taxis hit the road in Singapore

Singapore’s nuTonomy, founded by two researchers from the Massachusetts Institute of Technology, said Thursday it began testing a free taxi-hailing service in a small business district in Singapore called one-north, a campus-like space dominated by tech firms and biotechnology companies. Other tech companies including Chinese internet giant Baidu Inc. have been testing self-driving cars on the roads for years, but this is the first time the vehicles have been open to public use.

…Mr. Parker said the Singapore government had laid out a series of milestones for nuTonomy to achieve before it is allowed to extend its trials to other areas of the city. He declined to provide details on those milestones, but said the next stage would be to expand the service to a neighborhood adjacent to one-north.

Here is the WSJ piece, here are other articles.  I recall predicting about a year and a half ago that Singapore would be the first to do this.  A Singaporean countered me, and interjected they were very worried that their plans were falling behind.  I said: “That is exactly my point.  You are worried that you are falling behind.  Congratulations.”

Worry.  Singapore.  Think about it.

Poland fact of the day

When it comes to contingent government pension liabilities as a percentage of gdp, Poland appears to be above 350%.

France, Denmark, and Germany are next in line, with figures well over 300%.  For purposes of comparison, the United States is considered to have a serious pension problem but the corresponding number is only slightly above 100%.

Here is the John Authers and Robin Wiggelsworth FT story.  Australia seems to be doing best.

One reason for this high Polish sum is that the Polish government has semi-nationalized a lot of the private sector pension liabilities.  In 2014, this procedure (FT) did not receive much discussion:

As part of an overhaul of the country’s pension system, Warsaw will next week transfer from privately-managed funds to the state 150bn zlotys (€36bn) of Polish government bonds and government-backed securities, which will then be cancelled.

I believe this idea will reenter the broader policy debate sooner or later.

Nations can be start-ups, too

That is my latest Bloomberg column, here is one excerpt:

The virtues of business startups have led to many a success story. These enterprises start with clean slates. They embody the focused and often idiosyncratic visions of their founders. The successful ones grow faster than their competitors. Even after they become larger and more bureaucratic, these companies often retain some of the creative spirit of their startup origins.

It is less commonly recognized that some nations, including many of the post-World War II economic miracles, had features of startups. For instance, Singapore started as an independent country in 1965, after it was essentially kicked out of Malaysia and suddenly had to fend for itself. Lee Kuan Yew was the country’s first leader, and he embodied many features of the founder-chief executive: setting the vision and ethos, assuming responsibility for other personnel, influencing the early product lines in manufacturing and serving as a chairman-of-the-board figure in his later years.

Other start-ups nations have been UAE, Israel, Taiwan, Hong Kong, Cayman Islands, Estonia, South Korea, and of course way back when the United States.  You will note that many of these examples are imperfectly democratic in their early years, and they do not in every case grow out of it.  And this:

The world today seems to have lower potential for startup nations. This is in part because international relations are more peaceful and also because most colonial relationships have receded into the more distant past. Those are both positive developments, but the corresponding downside is not always recognized, namely fewer chances for reshuffling the pieces.

This is the close:

To paraphrase John Cleese from Monty Python, the startup nation concept isn’t dead, it’s just resting. Whether in business or in politics, the compelling logic of the startup just isn’t going away.

The best chances for future start-ups may be in Africa, around the borders of Russia, and perhaps someday (not now) Kurdistan.  Do read the whole thing.

Bravo to the University of Chicago

From the University of Chicago letter welcoming students:

…Earning a place in our community of scholars is no small achievement and we are delighted that you selected Chicago to continue your intellectual journey.

Once here you will discover that one of the University of Chicago’s defining characteristics is our commitment to freedom of inquiry and expression. … Members of our community are encouraged to speak, write, listen, challenge, and learn, without fear of censorship. Civility and mutual respect are vital to all of us, and freedom of expression does not mean the freedom to harass or threaten others. You will find that we expect members of our community to be engaged in rigorous debate, discussion, and even disagreement. At times this may challenge you and even cause discomfort.

Our commitment to academic freedom means that we do not support so called ‘trigger warnings,’ we do not cancel invited speakers because their topics might prove controversial, and we do not condone the creation of intellectual ‘safe spaces’ where individuals can retreat from ideas and perspectives at odds with their own….

Wednesday assorted links

My Conversation with Margalit Fox

Here is the summary:

The stereotypical obituary is a formulaic recitation of facts — dry, boring, and without craft. But Margalit Fox has shown the genre can produce some of the most memorable and moving stories in journalism. Exploiting its “pure narrative arc,” Fox has penned over 1,200 obituaries, covering well-known and obscure subjects with equal aplomb.

In her conversation with Tyler Cowen, Fox reveals not only the process for writing an obituary, but her thoughts on life, death, storytelling, puzzle-solving, her favorite cellist, and how it came to be that an economist sang opera 86 times at the Met.

Here are the transcript, video, and podcast versions of the dialogue.  Here is one excerpt:

FOX: …Things happen. But in general, we try to have a certain level of preparedness with the major figures. We do indeed have the advance obits — all but the top, as it were — written, edited, on file. We have about 1,700.

That said, the vast majority of what my colleagues and I down in the trenches do, probably 90 percent of our working life, are daily obits that are found out about, reported, written, edited, copyedited, put in the paper all in the space of a single day, just like any other article in the paper.

And this:

COWEN: Are there obituaries of economists that stand out in your mind? Or maybe some you’ve written?

FOX: Well, interestingly, there is one. As I said, my original training was in classical music, so my editors almost jumped out of their skins with excitement when they discovered they could assign me the obituary of a Harvard economist named Richard T. Gill.

Now, why did they give that to me? Because as we say in the lede of the obit, “Richard T. Gill, in all statistical probability the only Harvard economist to sing 86 performances with the Metropolitan Opera, died,” etc., etc.

COWEN: Yes, I remember reading that one. That was before I knew that you were you.

FOX: I was me then. You just didn’t know it.

COWEN: Correct.

Do read the whole thing.  I asked her about privacy concerns, how well a famous person is really known by his or her family and friends, whether there should be affirmative action in the obituaries section, who is chosen for this exclusive club and why, what one learns reading obituaries (“death sucks”), what is underrated in life (“silence”), why British obituaries are different, and about her very good books on linguistic code cracking from antiquity and Bedouin sign language.  And more.

Here is the Conversations with Tyler series.  Here is basic information on Margalit Fox.  Here is Margalit Fox on Twitter.

The Efficient Markets Hypothesis

In the first video in the Personal Finance section of our Principles of Macroeconomics course we pointed out that mutual fund managers do not beat the market on average. Why is this? In the second video, we take a look at the efficient markets hypothesis.

I’m rather fond of this video as it has some good story-telling elements, features Einstein in an important cameo (do you know why?) and yet also covers important ideas in an intuitive yet deep way.

The Return of Glass-Steagall???

The Atlantic writes:

Hillary Clinton and Donald Trump, have included plans to reintroduce the [Glass-Steagall] bill in their economic platforms. The argument for the act is that it could have prevented (or at least dampened) the 2008 financial crisis, and that reinstating it could ward off future ones. Is that the case?

The Atlantic’s editors reached out to economists and experts in financial regulation to ask them why Glass-Steagall is seeing renewed popularity right now, and what they think would make America’s financial system safer in the future.

Here’s part of what I had to say:

When Black Lives Matter calls for a restoration of the Glass-Steagall Act we know that the Act has exited the realm of policy and entered that of mythology. No, restoring the Glass-Steagall Act would not end racism. Nor would restoring Glass-Steagall have done much, if anything, to have avoided the 2008-2009 financial crisis. Secretary of the Treasury Timothy Geithner was correct when he said the problems at the heart of the financial crisis had “nothing to do with Glass-Steagall.”

The financial crisis is best understood as a run on the shadow banking system, that collection of financial intermediaries who based their credit creation not on deposits but on repo, money market funds, structured investment vehicles, asset-backed securitizations and other financial structures. Separate commercial and investment banking? Please. The problem was that by 2007 the shadow banking system had become so separated from commercial banking that the Federal Reserve didn’t know that a majority of credit was being generated by the shadow banks.

…“Nothing has been done!” may play well in some quarters but the Obama administration has in fact imposed systematic reform on the financial system. Most importantly, capital requirements have been increased (leverage has been reduced), forcing financial intermediaries to have greater skin in the game and to provide a cushion in the event of a fall in asset prices. Moreover, capital requirements have been extended far into the shadow banking system. Most recently, the Fed has imposed a capital surcharge on the biggest institutions i.e. the too big to fail institutions.

…Ironically, despite the political power of the financial sector it seems that more has been done to raise bank capital ratios than to require homeowners to raise their capital ratios by requiring larger down payments. There is a lesson there.

Robert Reich, Sheila Bair, Lawrence White, Stephen G. Cecchetti and others also comment. Only Reich, with some support from Blair, is enthusiastic.

China politics fact or estimate of the day

This is perhaps the best and most instructive one I have heard:

…Mr Xi’s authority remains hemmed in. True, his position at the highest level looks secure. But among the next layer of the elite, he has surprisingly few backers. Victor Shih of the University of California, San Diego, has tracked the various job-related and personal connections between the 205 full members of the party’s Central Committee, which embodies the broader elite. The body rubber-stamps Mr Xi’s decisions (there have been no recent rumours of open dissent within it). But the president needs enthusiastic support, as well as just a show of hands, to get his policies—such as badly needed economic reforms—implemented. According to Mr Shih, the president’s faction accounts for just 6% of the group.

That is from The Economist.  Along related but not identical lines, here is a good story of the weak control of the Chinese central government:

Through July, claimed capacity reductions were less than half the target for the year (and less than 40% of the target for coal capacity reduction).  Some provinces were reported by the NDRC to have achieved only 10% of their annual targeted cuts.

…This resistance has led to more and more shrill directions from Beijing to act on instructions.  Now Beijing is sending out 10 inspection teams across the country to check on claimed capacity removal and to require follow through on additional closures.  I have one suggestion for them: The only way to ensure a closed plant remains closed is to physically destroy or remove key pieces of equipment.  Otherwise don’t be surprised when it starts back up again.

Don’t forget this:

Many steel mills are the key employer and tax payer in their city. In boom times, they might have provided as much as 30% of the tax revenue for local government.  Workers from the steel mill were at the forefront of buying property in the town, creating a positive cycle of additional demand for housing and steel.  If these workers are now laid off, even with one-time transfers from the center, local government faces an enormous challenge in trying to find new jobs for people who have been in a steel mill all their life.  They can’t all become part-time Uber/Didi drivers. Many government officials see delay as the most logical course of action.

That is from Gordon Orr.

The economics of Hong Kong kung fu

Hong Kong’s streets are safer, with fewer murders by the fierce crime organizations known as triads that figured in so many kung fu films. And its real estate is among the world’s most expensive, making it difficult for training studios to afford soaring rents.

Gone are the days when “kung fu was a big part of people’s cultural and leisure life,” said Mak King Sang Ricardo, the author of a history of martial arts in Hong Kong. “After work, people would go to martial arts schools, where they’d cook dinner together and practice kung fu until 11 at night.”

With a shift in martial arts preferences, the rise of video games — more teenagers play Pokémon Go in parks here than practice a roundhouse kick — and a perception among young people that kung fu just isn’t cool, longtime martial artists worry that kung fu’s future is bleak.

High studio rents are of course a big problem:

…According to Mr. Leung’s organization, the International WingTsun Association, former apprentices have opened 4,000 branches in more than 65 countries, but only five in Hong Kong…

“Kung fu is more for retired uncles and grandpas.”

That is from Charlotte Yang at the NYT, interesting throughout and yet I hear the author is only a summer intern.

Tuesday assorted links

Why nominal gdp targeting is an especially good idea right now

I’ve been hearing plenty of calls for a higher inflation target, perhaps four percent.  I do understand the case for this, and furthermore it is not obvious that the higher rate of inflation would bring significant social costs.

The thing is this: whether rationally or not, the American public hates higher rates of price inflation.  Perhaps they mis-sample or mis-estimate prices, or perhaps the higher prices really do erode their real wages in a way they can’t get back through a new labor market bargain.

So a higher price inflation target would mean that everybody would hate the central bank.  It would not shock me if the first thing they did was to dismantle…the higher price inflation target.

Under nominal gdp targeting, the rate of price inflation would not have to significantly rise until worse times were upon us.  That is precisely when such upward price pressures would be most useful.

China Australia fact of the day

In 2015 our iron ore exports alone were four times the value of all of our combined services exports to China. And in services the only things that really count are tourism and education. That’s not going to change for a long, long time.

The alas now gated article, by Greg Sheridan, is of interest more generally and concerns some myths about China and Australia.

Addendum: To read the piece, try here.