Month: September 2016

Innovation is less concentrated than it used to be

Might growing deconcentration possibly be either a partial cause or symptom of the Great Stagnation? Yasin Ozcan and Shane Greenstein report:

Using patents as indicators of inventive activity, this article characterizes the concentration of origins of invention from 1976 to 2010, and how these changed over time. The analysis finds pervasive deconcentration in virtually every area related to ICT, but it can explain only a small part of this trend. Deconcentration happens despite the role of lateral entry by existing firms. New firm entry drives part of the deconcentration, but this alone cannot explain the change. A single supply factor in the market for ideas, such as the breakup of AT&T, also cannot explain the trend. Finally, eleven percent of patents change hands through mergers and acquisitions activity, but this does not make up for the declines in concentration in the origins of invention.

Worth a ponder…

Monday assorted links

1. Which body part hurts the most when stung by a bee?

2. The cinematic culture that is North Korea.

3. Should you just stop worrying about your clutter?

4. Does cash in the bank predict happiness better than does wealth?  Oddly, I find this somewhat intuitive.

5. Might we be able to watch Carlsen vs. Karjakin live in virtual reality?

6. Google Maps now seems to feature the nine-dash line.  Here is background on the nine-dash line.

7. The Politico 50 reading list.

My Bloomberg debate with Noah Smith

Here is one of my bits:

Cowen: Now, let me make a bit of a separate point, but this is an important one. I think we would agree that activist fiscal policy isn’t massively popular with American voters. The attitude of “let’s just try some, it might work out,” or “it’s fine to waste resources, if we boost demand” contributes to that unpopularity. Support for fiscal stimulus is pretty scarce. Let’s save it up for the really important times. Taxpayers do in fact think that government is always ready to spend on its own priorities rather than the priorities of the taxpayers — let’s not make that more true than it has to be.

Here is the full (edited) dialogue.

United States inflation fact of the day

…just as the bulk of the growth in employment can be attributed to a few sectors where productivity is either low or unmeasurable, a whopping 88 per cent of the total rise in the price level boils down to four sectors of the US economy…

How did you guess it was health care, higher education, real estate, and prescription drugs?

…In January 1990, those four product categories only accounted for 30 per cent of the money spent on consumption by the average American. (Housing was about half that.) Even after more than a quarter-century in which prices of these goods and services rose significantly faster than everything else, these four sectors still account for less than 40 per cent of total consumer spending.

Within health care, dentistry has seen the highest rate of price inflation.  Televisions, however, have been falling in price at the rate of about 12 percent a year since 1990.  Luggage, “dishes and flatware,” and household linens are all down in price dramatically, as are telephone and communication services.  Durable goods are down in price by about a third.

That is from Matthew C. Klein at FT Alphaville.

What I’ve been reading

1. Against Everything, Essays, by Mark Greif.  The worst of these are still well-written and interesting, and the best are among the best essays being written today.  There are many good sentences: “Were “In the Penal Colony” to be written today, Kafka could only be speaking of an exercise machine.”

2. The Blind Photographer, edited by Julian Rothenstein and Mel Gooding.  Here is an article on Pedro Martinez, one such photographer from Oaxaca.  An excellent book, thought-provoking about both the nature of disability and photography, and also the mind’s eye.  Here is a good National Geographic article on the volume.

3. Harvey Cox, The Market as God.  Harvard theologian argues that economists have started to argue as theologians do.  The closing sentence is “When The Market does not have to be God anymore, it might be a lot happier.”

4. William Domnarski, Richard Posner.  This biography focuses on Posner the infovore, and is itself a big pile of information.  We should not forget Posner’s role in founding the Journal of Legal Studies and Lexecon when awarding him a much-deserved Nobel Prize.  Every page of this book has information, recommended, even if (because?) it is a bit of a splat.  Here is one cited account of Judge Posner: “One of my favorite lines is when he would characterize a lawyer’s answer as “mere words” when in fact he wanted a “real reason.”

Do not miss Posner’s descriptions of various (unnamed) colleagues on pp.193-195, for instance: “…certainly ambitious, but that cannot be rated a fault.  He has a vaguely cold and supercilious exterior; of the inner man I cannot speak because I do not know.  But I do have trouble seeing him actually marrying an outdoors girl [as was the rumor], as he is very definitely the hot-house intellectual plant.”  Another, from the philosophy department at Chicago, was “a timid, small-bore type.”  Also stunning are pp.249-250, when Posner discusses his own naivete when witnessing the behavior of others, most of all his colleagues in academia.  pp.251-256, which close the book, are just sublime.

I don’t think I will have time to get to Lynne B. Sagalyn’s Power at Ground Zero: Politics, Money, and the Remaking of Lower Manhattan, but it looks very good.

I read only a fragment of Chris Wickham’s Medieval Europe, but found it well-written, to the point, and illuminating for both the specialist and general reader.

Sunday musings

I hadn’t known Ed “Let’s take the con out of econometrics” Leamer was the VP on the Larry Kotlikoff ticket.

The quality, and popularity, of Sully raises anew the question of why Hollywood doesn’t make more such movies.  Which is the scarce input?  The script?  Yet virtually every Clint Eastwood movie seems to come up with a good script.  I suspect “a recognized auteur with bargaining clout” is what is scarce.

Insects are not so scarce, but the marketing is tough:

Aketta grows its crickets in the United States and fills orders on a first come, first serve basis with weekly harvests. The company sells cricket flour and whole-roasted crickets. Flour is made from 100% milled crickets and has a “deep, earthy, umami flavor with hints of raw cocoa.” Sold in small batches of 1 to 1.5 lbs. Order online.

Here are many more insect food sources, but the claim is that the most innovative insect-selling start-ups are in Europe.

This story has scary good photos:

The Bund reached the height of its prominence on February 20, 1939, when some 20,000 members held a “Pro-America Rally” in Madison Square Garden.

Inside, jackbooted Nazi supporters filled the aisles while speakers ranted against President “Frank D. Rosenfeld” and his “Jew Deal.”

Outside, some 80,000 anti-Nazi demonstrators furiously protested the event, clashing with police and attempting to gain entry to the arena and shut it down.

The Bund called George Washington “the first fascist.”

Chileans remain upset at their semi-privatized pension system (NYT), and I say that is now the country to sell short.

Sunday assorted links

1. The case for wooden skyscrapers.  And what is trending in Korean beauty?

2. Is the poverty rate rising for elderly Germans?

3. Noah Smith responds to me on parental leave; he doesn’t say if he also favors policies discouraging female labor supply to help keep families together.

4. How Britain might reform its National Health Service.

5. The Earned Income Tax Credit may be a better and more cost effect medical intervention than most medical interventions themselves.

6. The Uber deal with Quebec: among other features, surge pricing is capped at 1.5x.

Give money to the boss, status to the workers

Or so I am told!  Dubey and Geanakoplos argue that employers should use status incentives more for lower skilled workers, and monetary incentives more for higher skilled workers.  That sounds counterintuitive, but here is their explanation:

……status incentive derives from the change in status that effort can bring, not from the level of status one winds up with.

In this model, once you’re CEO, you can only feel so much better about yourself, so that is a relatively inefficient incentive.  (An alternative take is that the CEO is the one with the addiction to status.)  On the other hand:

The deeper explanation is that with meritocratic pay schedules, a wage hike between low and middling performance forces a higher wage for all superior performance, and is therefore very expensive, while the same wage hike between excellent and the best performance does not necessitate any further raises.  Thus the more that status incentives can substitute for pay hikes at low performance levels, the less the total wage bill.

If you give the CEO a raise, or maybe embedded stock options, you don’t have to give many other people a comparable boost to preserve ordinal parity.

Here are a few versions of the paper, somehow my pile ended up with a May 2016 version, though I don’t yet see that on-line.  I thank whoever sent me this, your name is lost in the dustbin of history.

Saturday assorted links

1. Review of the new Richard Posner biography.

2. How to read a closed book.

3. The blind astronomer of Nova Scotia.

4. “Patrick describes the success case for Atlas as being visible in global macroeconomic indicators, which is crazy.

And this:

A couple of months ago, Patrick Collison came to me with another crazy idea. He said Stripe wanted to make “simple incorporation as a service”, so that any entrepreneur worldwide could have a corporate entity and a bank account spun up about as easily as they could get an EC2 server.

This idea is crazy. I’ve incorporated four companies and opened business bank accounts for all of them. The most recent required over a hundred pages of documentation and six weeks of negotiation to assuage a risk department’s concerns about foreign tech entrepreneurs. (Thanks, Bitcoin.) You’re not supposed to be able to do this.

Stripe did it. With crazy speed: the project was in beta within 11 weeks of conception. It can take that long to form a single company in much of the world. Stripe solved the problem like an engineer: establishing one company requires an annoying amount of form-filling so instead of buckling down and doing it you just make a company-establishing web application and abstract away form-filling for all time.

And they’re crazily ambitious about where it ends up: not simply incorporating companies, but eating all of the crufty back office work which distracts Internet businesses from getting more real products into the hands of real customers. Payments, contracts, invoices, bookkeeping, incorporation, taxes, etc etc, all things you have to do even if what you’re actually doing is selling bingo cards to elementary schoolteachers.

Crazy!  But stay tuned…

5. Meanwhile, the surf wars are growing more violent.

Facts about Jane Jacobs

1. Jacobs was born in Scranton, PA, but moved to NYC in 1932 and as early as 1935 she had published some of her impressions of the city in a multi-part series in Vogue magazine.  Earlier, she had written poetry for the Girl Scouts’s magazine, American Girl.

2. She published a 1941 book on the intellectual foundations of the American Constitution, with Columbia University Press under her maiden name Jane Butzner and the title Constitutional Chaff.  At about the same time her manuscript was being accepted, she was kicked out of Columbia for taking too many extended studies classes, and not allowed admission to Barnard.

3. In 1940 she wrote an article based on her study of the embossed acronyms on manhole covers.

4. She then worked as writer during WWII for the Office of War Information and the State Department.  Before Pearl Harbor, she had been an isolationist.

5. Henri Pirenne’s work on medieval cities was one of the biggest influences on her.

6. In the 1940s, she also worked for a metals industry magazine, and smoked a pipe in her office.  They started to wonder whether she was a troublemaker.

7. She married an architect in 1944, then taking the name Jacobs.  They enjoyed bicycling and sociometry together.  She had sons in 1948 and 1950.

8. Alger Hiss had been her superior at the State Department, and in the late 1940s Jacobs was investigated for possible Communist ties, in part because she had tried to apply for a visa to Siberia, using Hiss as her contact.  She stated in response that she abhorred communism and favored radical decentralization.

There is much more!  But that is a taste from the new and excellent Becoming Jane Jacobs, a runs-up-through 1972 biography by Peter L. Laurence, definitely one of the best books of the year.  This is the biography of Jacobs I have wanted to read for forty years.

Addendum: There is a new Jane Jacobs movie coming to the Toronto film festival.

Friday assorted links

1. Compared to other consumption expenditures, the U.S. is not a significant health care outlier.

2. Enjoy famous artworks without gluten.

3. “The man said he was hired by the airport to keep track of the precise location of every car in the lot, explaining that the data is most often used by the airport when passengers returning from a trip forget where they parked their vehicles.”  Link here.

4. You get what you measure: millions of fake accounts at Wells Fargo.

5. Not all Chinese companies are paying off on the Taylor Swift boyfriend break-up.

6. One way to rank World Bank presidents, not the way I would choose.

7. John R. Coleman, RIP: “In his abbreviated career as a blue-collar worker, he concluded that academia was not quite as artificial as he had thought and manual labor not nearly as satisfying.”

Artificial Intelligence and Machine Learning

Susan Athey will discuss machine learning, government and policy analysis in her keynote on Monday morning (Sept. 12) at Artificial Intelligence: The Economic and Policy Implications a mini-conference sponsored by the Technology Policy Institute at the National Press Club in Washington, DC. I will then moderate one of two panels featuring computer scientists and AI experts. More information and reservations here. Should be fun.