Month: September 2016

*A Notable Woman*

The descriptive subtitle is The romantic journals of Jean Lucey Pratt.  She was a British woman who started keeping a journal in 1925 at the age of fifteen, and continued until her death in 1986.  Usually books like this bore me after fifty pages (or less), but this one I am finding consistently entertaining.  Here is one bit from her cruise ship voyage at age 23:

My physical needs as a normal woman are badly wanting fulfillment.  I’ve got to somehow make them understand that I have no anchor; that an ordinary and full-sexed woman must centre her interests on one man, otherwise she must inevitably go to pieces.

I’ve learnt a lot from this voyage, and one thing from Nev which is forceful and important — that platonic friendships are impossible.  To show my trust in my little boyfriends I left my door unbolted; although they had drunk too much, I knew I could trust them.  But I’ve bolted it again.

She lost her virginity eight years later, at age 31:

When he had played with me in the French manner (too long I think) to work me up to the Crisis, the Big Moment Passionate and so on, I left him to make my preparations and then lay back on the bed and said in a sepulchral voice, “Now I’m ready for the worst!”  Well, it was damned painful, though I didn’t know it was going to be.

I have quite recovered from my pain in the stomach and am in a rare good humour, have been all day.  It is such a relief to feel one is no longer completely ignorant.

Here is one good review of the book, with a photo of the diarist as well.  Here is another review.

Why do people play chess again?

According to Donner: “The whole point of the game [is] to prevent an artistic performance.” The former world champion Garry Kasparov makes the same point. “The highest art of the chess player,” he says, “lies in not allowing your opponent to show you what he can do.” Always the other player is there trying to wreck your masterpiece. Chess, Donner insists, is a struggle, a fight to the death. “When one of the two players has imposed his will on the other and can at last begin to be freely creative, the game is over. That is the moment when, among masters, the opponent resigns. That is why chess is not art. No, chess cannot be compared with anything. Many things can be compared with chess, but chess is only chess.”

That is Stephen Moss at The Guardian.  Along related lines, I very much enjoyed Daniel Gormally’s Insanity, Passion, and Addiction: A Year Inside the Chess World.  It’s one of my favorite books of the year so far, but it’s so miserable I can’t recommend it to anyone.  It’s a book about chess, and it doesn’t even focus on the great players.  It’s about the players who are good enough to make a living — ever so barely — but not do any better.  It serves up sentences such as:

Surely the money in chess is so bad that this can’t be all you do for a living?  But in fact in my experience, the majority of chess players rated over 2400 tend to just do chess.  If not playing, then something related to it, like coaching or DVDs.  That’s because we’re lazy, so making the monumental effort of a complete change in career is just too frightening a prospect.  So we stick with chess, even though the pay tends to be lousy, because most of our friends and contacts are chess players.  Our life is chess.  As a rough estimate, I would say there are as many 2600 players making less than £20,000 a year.

And:

Stability. I had this conversation with German number one Arkadij Naidisch at a blitz tournament in Scotland about a year ago. (there I go, name-dropping again.)  He suggested that a lot of people don’t achieve their goals because they just aren’t stable enough.  They’ll have a fantastic result somewhere, but then that’ll be let down by a terrible tournament somewhere else.

…The problem is it’s hard to break out of the habits of a lifetime.  Many times at home I’ve said to myself while sitting around depressed about my future and where my chess is going, “tomorrow will be different.  I’ll get up and study six-eight hours studying chess.”  But it never happens.

Overall biography and autobiography are far too specialized in the lives of the famous and successful.

Scientists are gushing too much

Equally, in a world where academics are obliged to offer up each piece of work to be evaluated as internationally significant, world leading etc., they will seek to signal such a rating discursively. A study by Vinkers et al. in the British Medical Journal uncovered a new tendency towards hyperbole in scientific reports. They found the absolute frequency of positive words increased from 2.0% (1974-80) to 17.5% (2014), which amounts to a relative increase of 880% over four decades. 25 individual positive words contributed to the increase, particularly the words “robust,” “novel,” “innovative,” and “unprecedented,” which increased in relative frequency up to 15 000%”). The authors comment upon an apparent evolution in scientific writing to ‘look on the bright side of life’.

That is by Liz Morrish, via Mark Carrigan.

Firms that Discriminate are More Likely to Go Bust

Discrimination is costly, especially in a competitive market. If the wages of X-type workers are 25% lower than those of Y-type workers, for example, then a greedy capitalist can increase profits by hiring more X workers. If Y workers cost $15 per hour and X workers cost $11.25 per hour then a firm with 100 workers could make an extra $750,000 a year. In fact, a greedy capitalist could earn more than this by pricing just below the discriminating firms, taking over the market, and driving the discriminating firms under. The basic logic of employer wage discrimination was laid out by Becker in 1957. The logic implies that discrimination is costly, especially in the long-run, not that it doesn’t happen.

discriminationA nice test of the theory can be found in a paper just published in Sociological Science, Are Business Firms that Discriminate More Likely to Go Out of Business? The author, Devah Pager, is a pioneer in using field experiments to study discrimination. In 2004, she and co-authors, Bruce Western and Bart Bonikowski, ran an audit study on discrimination in New York using job applicants with similar resumes but different races and they found significant discrimination in callbacks. Now Pager has gone back to that data and asks what happened to those firms by 2010? She finds that 36% of the firms that discriminated failed but only 17% of the non-discriminatory firms failed.

The sample is small but the results are statistically significant and they continue to hold controlling for size, sales, and industry.

As Pager notes, the cause of the business failure might not be the discrimination per se but rather that firms that discriminate are hiring using non-rational, gut feelings while firms that don’t discriminate are using more systematic and rational methods of hiring.

As she concludes:

…whether because of discrimination or other associated decision making, we can more confidently conclude that the kinds of employers who discriminate are those more likely to go out of business. Discrimination may or may not be a direct cause of business failure, but it seems to be a reliable indicator of failure to come.

Bot wars

In particular, Yasseri and co focus on whether bots disagree with one another. One way to measure this on Wikipedia is by reverts—edits that change an article back to the way it was before a previous change.

Over a 10-year period, humans reverted each other about three times on average. But bots were much more active. “Over the 10-year period, bots on English Wikipedia reverted another bot on average 105 times,” say Yasseri and co.

And this:

Bots and humans differ significantly in their revert habits. The most likely time for a human to make a revert is either within two minutes after a change has been made, after 24 hours, or after a year. That’s clearly related to the rhythms of human lifestyles.

Robots, of course, do not follow these rhythms: rather, they have a characteristic average response time of one month.  “This difference is likely because, first, bots systematically crawl articles and, second, bots are restricted as to how often they can make edits,” say Yasseri and co.

Nevertheless, bots can end up in significant disputes with each other, and behave just as unpredictably and inefficiently as humans.

Many of the bots seem to be designed to make varyin- language versions of the same Wikipedia pages consistent with each other, yet the bots do not always agree.  Solve for the equilibrium, as they say…

Here is the article, via Michelle Dawson.

Does varying rainfall make people collectivists?

Lewis Davis has a newly published paper on that topic with the more elegant title “Individual Responsibility and Economic Development: Evidence from Rainfall Data.”  Here is the abstract:

This paper estimates the effect of individual responsibility on economic development using an instrument derived from rainfall data. I argue that a taste for collective responsibility was adaptive in preindustrial societies that were exposed to high levels of agricultural risk, and that these attitudes continue to influence contemporary social norms and economic outcomes. The link between agricultural risk and collective responsibility is formalized in a model of optimal parental socialization effort. Empirically, I find a robust negative correlation between rainfall variation, a measure of exogenous agricultural risk, and a measure of individual responsibility. Using rainfall variation as an instrument, I find that individual responsibility has a large positive effect on economic development. The relationships between rainfall variation, individual responsibility and economic development are robust to the inclusion of variables related to climate and agricultural and institutional development.

This kind of investigation is always going to be fraught with uncertainty and also controversy, given imperfections of data and methods.  Nonetheless I find this one of the more plausible macro-historical hypotheses, perhaps because of my own experience in central Mexico, where varying rainfall still is the most important economic event of the year, though it is rapidly being supplanted by the variability of tourist demand for arts and crafts.  And yes, they are largely collectivist, at least at the clan level, with extensive systems of informal social insurance and very high implicit social marginal tax rates on accumulated wealth.

Have you noticed it rains a lot in England?

Here are earlier and ungated/less gated versions of the paper.

Tuesday assorted links

1. Bill Cosby was once an important role model (pdf).

2. In fact, you can’t make that much money naming Chinese babies.

3. “But now there is a stochastic, episodic nature to many careers. As workers get older, potential employers become more suspicious of their skills, not more confident in them. As a result, you often meet people who had been happiest at work in middle age, and then moved down to a series of positions they were overqualified for and felt diminished in.”  That is from David Brooks.

4. Is Peter Thiel right about Chicago?

5. Explaining preferences for redistribution.

Let’s think again about Dodd-Frank

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

Looking at a broad swath of history, I see three major forces that can make financial systems safer: people being scared by recent events, solid economic growth and reduced debt in comparison to the value of equity. The financial crisis gave us the first on that list as perhaps its main “gift” (for now), but Dodd-Frank may have worsened economic growth problems.

On the plus side, we might like to think that Dodd-Frank improved the debt-equity balance by pushing banks to raise more capital. But that, too, now stands in doubt.

Last week Natasha Sarin and Lawrence H. Summers of Harvard University released a paper questioning whether Dodd-Frank has made big U.S. banks safer at all. The authors look at a variety of measures, including options prices, the ratio of market prices to book values, bank share volatility relative to overall market volatility, credit-default swap spreads and the value of preferred equity shares for banks. In every metric, it seems that the big banks are at least as risky as they were before the crisis, in part because they have lower capital values.

And this:

It’s a common economic prescription that regulation should insist that banks carry high levels of capital to withstand losses in bad times. But although Dodd-Frank raised statutory capital requirements, it may have drained banks of some of their true economic capital by regulating and sometimes prohibiting valuable banking activities. The ratio of market price to book value has declined for the biggest banks, and that is one sign of falling values for true economic capital, even though banks have met the letter of law by increasing capital as the regulations specified. Sarin and Summers note that measures of bank capital, as defined by regulators rather than the market, have little predictive power for bank failures.

Do read the whole thing.

Egalitarianism versus Online Education

The Department of Justice has sent a letter to UC Berkeley threatening a lawsuit unless the university modifies all of its free online educational materials to meet conditions of accessibility. In response the Vice Chancellor for Undergraduate Education writes:

…we have attempted to maximize the accessibility of free, online content that we have made available to the public. Nevertheless, the Department of Justice has recently asserted that the University is in violation of the Americans with Disabilities Act because, in its view, not all of the free course and lecture content UC Berkeley makes available on certain online platforms is fully accessible to individuals with hearing, visual or manual disabilities.

…We look forward to continued dialog with the Department of Justice regarding the requirements of the ADA and options for compliance. Yet we do so with the realization that, due to our current financial constraints, we might not be able to continue to provide free public content under the conditions laid out by the Department of Justice to the extent we have in the past.

In many cases the requirements proposed by the department would require the university to implement extremely expensive measures to continue to make these resources available to the public for free. We believe that in a time of substantial budget deficits and shrinking state financial support, our first obligation is to use our limited resources to support our enrolled students. Therefore, we must strongly consider the unenviable option of whether to remove content from public access.

In short, the DOJ is saying that unless all have access, none can and UC Berkeley is replying that none will. I sympathize with UC Berkeley’s position. The cost of making materials accessible can be high and the cost is extremely high per disabled student. It would likely be much cheaper to help each disabled student on an individual basis than requiring all the material to be rewritten, re-formatted and reprogrammed (ala one famous example).

An even greater absurdity is that online materials are typically much easier to access than classroom materials even when they do not fully meet accessibility rules. How many teachers, for example, come with captions? (And in multiple languages?) How about volume control? How easy is it for the blind to get to campus? In theory, in-class materials are also subject to the ADA but in practice everyone knows that that is basically unworkable. I guarantee, for example, that professors throughout the UC-system routinely show videos or use powerpoints that do not meet accessibility guidelines. Thus, by raising the costs of online education, the most accessible educational format, the ADA may have the unintended consequence of slowing access. Put simply, raising the costs of online education makes it more difficult for anyone to access educational materials including the disabled.

Addendum: By the way, if you are wondering, all of MRU’s videos for our Principles of Microeconomics and Principles of Macroeconomics courses are captioned in English and most are also professionally captioned in Spanish, Arabic and Chinese.

Paul Krugman on Gary Johnson, libertarianism, and pollution

Paul Krugman is upset that many Millennials are toying with the idea of voting for Gary Johnson rather than Hillary Clinton.  He offers a number of arguments, here is one of them:

What really struck me, however, was what the [Libertarian Party] platform says about the environment. It opposes any kind of regulation; instead, it argues that we can rely on the courts. Is a giant corporation poisoning the air you breathe or the water you drink? Just sue: “Where damages can be proven and quantified in a court of law, restitution to the injured parties must be required.” Ordinary citizens against teams of high-priced corporate lawyers — what could go wrong?

That is the opposite of the correct criticism.  The main problem with classical libertarianism is that it doesn’t allow enough pollution.  Under libertarian theory, pollution is a form of violent aggression that should be banned, as Murray Rothbard insisted numerous times.  OK, but what about actual practice, once all those special interest groups start having their say?  Historically, under the more limited government of the 19th century, it was big business that wanted to move away from unpredictable local and litigation-driven methods of control, and toward a more systematic regulatory approach at the national level.  There is a significant literature on this development, starting with Morton Horwitz’s The Transformation of American Common Law.

If you think about it, this accords with standard industrial organization intuitions.  Established incumbents prefer regulations that take the form of predictable, upfront high fixed costs, if only to limit entry.  And to some extent they can pass those costs along to consumers and workers.  The “maybe you can sue me, maybe you can’t” regime is more the favorite of thinly capitalized upstarts that have little to lose.

So under the pure libertarian regime, big business would come running to the federal government asking for systematic regulation in return for protection against the uncertain depredations of the lower-level courts.  It is fine to argue the court-heavy libertarian regime would be unworkable for this reason, or perhaps it would collapse into a version of the status quo.

That would be a much more fun column: “Libertarian view untenable, implies too high a burden on polluters.”  I’m not sure that would sway the Bernie Brothers however.

Some of the criticisms of libertarianism strike me as under-argued:

And if parents don’t want their children educated, or want them indoctrinated in a cult…Not our problem.

Rates of high school completion were below 70% for decades, until recently, in spite of compulsory education.  Parents rescuing children from the neglect of the state seems at least as common to me as vice versa.

And what is the status quo policy on taking children away from parents who belong to “cults”?  Unusual religions can be a factor in contested child custody cases (pdf), but in the absence of evidence of concrete harm, such as beatings or sexual abuse, the American government does not generally take children away from their parents, cult or not.  Germany and Norway differ on this a bit, for the most part this is, for better or worse, the American way.  That’s without electing Gary Johnson.

By the way, Gary Johnson slightly helps Hillary Clinton.  Although probably not with New York Times readers.

Monday assorted links

1. The beer pipe conditional public goods assurance game culture that is Belgium (NYT).

2. How meaning varies between speech and its typed transcript.

3. Dani Rodrik Op-Ed on how to do globalization right (NYT).

4. The classic books are making a commercial comeback.

5. $30 markets in everything.

6. Who favors free movement of labor within the EU?  This tweet and graph makes a good point, but given status quo bias I don’t find the numbers as overwhelming as does O’Rourke.  p.s. Luxembourg and Latvia are the top two in support.

Straight thinking about Bayer and Monsanto

That is my latest Bloomberg column, hardly anyone has a consistent and evidence-based view on this deal.  Here is one bit:

Critics who dislike Monsanto for its leading role in developing genetically modified organisms and agricultural chemicals shouldn’t also be citing monopoly concerns as a reason to oppose the merger — that combination of views doesn’t make sense. Let’s say for instance that the deal raised the price of GMOs due to monopoly power. Farmers would respond by using those seeds less, and presumably that should be welcome news to GMO opponents.

Yet on the other side:

What does Bayer hope to get for its $66 billion, $128-a-share offer? The company has argued that it will be able to eliminate some duplicated jobs and expenses, negotiate better deals with suppliers and invest more funds in research and development. Maybe, but the broader reality is less cheery. There is a well-known academic literature, dating to the early 1990s, showing that acquiring firms usually decline in value after tender offers, especially after the biggest deals. Mergers do not seem to make companies more valuable or efficient.

And this:

The whole Bayer-Monsanto case is a classic example of how a vociferous public debate can disguise or even reverse the true issues at stake. If Bayer fails to close the deal for Monsanto, Bayer shareholders may be the biggest winners. The biggest losers from a failed deal may be its opponents, who will spend the rest of their lives in a world where misguided judgments of corporate popularity have increasing sway over laws and regulations.

Do read the whole thing.

Theory of the umpteenth best, a classic New York parable

In two separate cases, thieves snatching bags from city streets and train stations inadvertently helped law enforcement get the upper hand in an ongoing bomb spree that’s hurt dozens of people and spans both sides of the Hudson River, sources said.

The day Ahmad Khan Rahami allegedly planted two bombs in Chelsea  — one of which detonated on West 23rd Street — two thieves accidentally helped to disable his second pressure cooker bomb left inside a rolling suitcase on West 27th Street, sources said.

The young men, who sources described as being well-dressed, opened the bag and took the bomb out, sources said, before placing the explosive into a garbage bag and walking away with the rolling suitcase.

In doing so, investigators believe they inadvertently disabled the explosive, sources said. That allowed investigators to examine the cellphone attached to the bomb intact and discover that it was connected to the family of Rahami.

From there, they were able to identify pictures on social media of Rahami’s family and of him, and they matched one of his photos to surveillance footage captured in Manhattan.

Here is the full story, via David Montgomery.  This somehow relates to Hume’s Dialogues on Natural Religion and the watchmaker analogy, but I’m still pondering that one…

Robert Shiller on Open Borders

Nobelist Robert Shiller writes that the next revolution will be an anti-national revolution:

For the past several centuries, the world has experienced a sequence of intellectual revolutions against oppression of one sort or another. These revolutions operate in the minds of humans and are spread – eventually to most of the world – not by war (which tends to involve multiple causes), but by language and communications technology. Ultimately, the ideas they advance – unlike the causes of war – become noncontroversial.

I think the next such revolution, likely sometime in the twenty-first century, will challenge the economic implications of the nation-state. It will focus on the injustice that follows from the fact that, entirely by chance, some are born in poor countries and others in rich countries. As more people work for multinational firms and meet and get to know more people from other countries, our sense of justice is being affected.

Oddly, however, Shiller’s argument focuses not on immigration but on trade agreements. Trade agreements, he argues, will equalize wages through the factor price-equalization theorem but to do this we need a strengthening of the welfare state. The latter part of the argument and how it resolves with the former is, shall we say, underdeveloped.