Month: October 2016
I had heard the rumors for years, but I didn’t think it actually would happen. My takes on a few Dylan albums:
FreeWheelin’ Bob Dylan: One of his most listenable and underrated albums, the same is true for Another Side of Bob Dylan.
Bringing It All Back Home: The album I fell in love with as a kid. Some of it is overwrought but mostly still amazing, perhaps his highest peaks.
Highway 61 Revisited: Half of it is wonderful, but it contains excess and some so-so judgment.
Blonde on Blonde: Many see this as Dylan’s peak, but I don’t listen to it much. Somehow the sound is a little harsh for my taste.
The Basement Tapes: The most overrated, too much murky slush and slosh.
Bob Dylan’s Greatest Hits, vol.II: The perfect medley.
Blood on the Tracks: Maybe the most consistent and listenable album, though it’s not pathbreaking in the way that the mid-sixties work was.
Time Out of Mind: An amazing “late career” work.
Dylan’s memoir is excellent, and his most underrated contribution outside of creating music is the CDs he edited for satellite radio, many hours of Dylan selecting and playing classics from early American musical history, blues, country, mixed styles, perhaps the single best look at the early evolution of American popular music. Many hours of listening pleasure. Bob Dylan Radio Hour. And the Martin Scorsese four-hour bio-documentary on Dylan is one of the better movies ever made, No Direction Home it is called.
If I recall correctly, three of the Conversations with Tyler turned to the topic of Bob Dylan. Camille Paglia loves the song “Desolation Row,” Cass Sunstein is a big fan, especially of some of the early period work, and Ezra Klein feels he is overrated, I guess that means especially overrated now.
Congratulations to Bob Dylan, polymath!
In 1980, 66% of high-skilled men worked in cognitive occupations. Over the next 20 years, this proportion fell by 3 percentage points (pp) to 63%. Interestingly, this fall in the probability of working in a COG job was accompanied by a 3 pp rise in the fraction of college educated men not working (unemployed or out of the labor force).
That is from recent research by Cortes, Jaimovich, and Siu (pdf). You will note that the chance of a woman working in those jobs rose over the same period, even though the supply of educated women relative to the supply of educated men went up a great deal over that same time period. They find that the increasing importance of “female-oriented” social skills is a major reason for why women have so increased their presence in cognitive occupations.
Similar claims are very much a theme in my last book, Average is Over, so I am happy to see them verified in a more definitive manner.
1. Stephen M. Bainbridge and M. Todd Henderson. Limited Liability: A Legal and Economic Analysis. One of this year’s sleeper books, it is probably the best extant treatment of corporate limited liability and one of the best books on the corporation from a law and economics point of view. I do not understand how it ended up at $133 from Edward Elgar.
2. William F. Buckley, edited by James Rosen, A Torch Kept Lit: Great Lives of the Twentieth Century. Obituaries penned by WFB, fascinating throughout. One forgets what a lucid writer he was, and some of the more unsettling entries (MLK, John Lennon) are some of the most interesting.
3. Afghan Modern: The History of a Global Nation, by Robert D. Crews. The history of globalization in Afghanistan and of Afghanistan, highly intelligent and good material on just about every page. A model for how to take a now somewhat cliched topic and make something original out of it.
4. Morton H. Christiansen and Nick Chater, Creating Language: Integrating Evolution, Acquisition, and Processing. Have you ever wondered what is the actual professional status of Chomskyian linguistics and other claims you read in popular science books? This is the go-to work to address that question, it is written at the right level of serious rigor yet readability for a non-linguist such as myself.
Frank Ahrens, Seoul Man: A Memoir of Cars, Culture, Crisis, and Unexpected Hilarity Inside a Korean Corporate Titan. A fun take on exactly what the subtitle promises.
I can apply that same description to Joseph Turow, The Aisles Have Eyes: How Retailers Track Your Shopping, Strip Your Privacy, and Define Your Power.
Rabbi Mark Glickman, Stolen Words: The Nazi Plunder of Jewish Books. I found this moving and extremely well-presented.
On any given day in the United States, at least 137,000 men and women sit behind bars on simple drug possession charges, according to a report released Wednesday by the American Civil Liberties Union and Human Rights Watch.
Nearly two-thirds of them are in local jails. According to the report, most of these jailed inmates have not been convicted of any crime: They’re sitting in a cell, awaiting a day in court which may be months or even years off, because they can’t afford to post bail [TC addendum: this latter part no longer seems plausible to me].
…In fact, police make more arrests for marijuana possession alone than for all violent crimes combined.
The plummeting pound is threatening UK households’ supplies of Ben & Jerry’s ice cream and Marmite spread, as Tesco, the country’s biggest supermarket, pulled dozens of products from sale online in a row over who should bear the cost of the weakening currency.
Unilever has demanded steep price increases to offset the higher cost of imported commodities, which are priced in euros and dollars, according to executives at multiple supermarket groups.
But Tesco signalled it would fight the rises, removing Unilever products from its website and warning that some of the items could disappear from shelves if the dispute dragged on. Other supermarkets have warned that they could follow suit.
Here is the full FT story.
So it’s official. As of today we are no longer a libertarian think tank. We’re neoliberals. And maybe you are too.
Here is the link. Here Sam Bowman, the Executive Director, explains:
And I think to most people in Britain the word libertarian connotes a sort of unflexible extremeness – a preoccupation with hard-and-fast rules over policies that actually make people’s lives better. It was this misconception that allowed the Prime Minister get away with equating the libertarian right with the socialist left, as if the two were somehow comparable…
So in embracing the term neoliberal, we’re hoping that we’re being a little clearer about what we already believe in and do. We fight for free markets, property rights, globalisation and an open society, all based on real-world evidence. Those are what have given us the rich, peaceful, prosperous world we live in, and with more of them we can help to make things even better. It’s time for us neoliberals to start going on the offensive and fight for the world we have helped to create.
I do not have sufficient background on the situation to parse this, but perhaps it is also one way of signaling that they are anti-Brexit, and the word libertarian would not do that, and might even suggest they favored Brexit as a means for arriving at a more libertarian society (which by the way is not how things are running). A neoliberal one would think favors arrangements for free trade and migration.
Addendum: Here is their home page.
Maybe so, but I have a sneaking suspicion they are not about to get much of it, not anytime soon. Corina Ruhe reports, and I say put on your Bayesian thinking cap for this bit:
Bundesbank board member Andreas Dombret…said in an interview with Boersen-Zeitung that the revised rules, due by year-end, mustn’t disproportionately affect European banks. “Not significant means an increase of zero percent or near to zero percent; that has to be the starting point for all negotiations,” he said.
I like to negotiate that way too, when I can. What might the French be saying?:
“We are in favor of Basel III, but we think it is unhelpful, even dangerous, to want to add layer upon layer of obligations on banks, in particular on European banks,” French Finance Minister Michel Sapin said on Monday.
Are you starting to see a pattern? Neither the governments nor the banks would find it very simple to cough up the extra resources to boost capital. And cross-border or other mergers would lead to higher capital requirements yet, given the way the regulations are written to penalize increases in bank size.
Did you know that the ECB gave Deutsche Bank special treatment in its recent stress tests? Still, I think it is more likely that Deutsche Bank is a slow wasteful drain rather than the next explosive Lehman Brothers, if only because the level of financial risk paranoia is so high.
The more fundamental point is that there is significant excess capacity in European banking. That makes it hard for DB to get back on its feet, and it may send other European banks to a similar fate, creating a chronic problem though probably not a dramatic crisis. The bank-dependent EU economies don’t have a simple way to make their banking sectors shrink a lot more. Whether or not this is necessary right now or rather later, either way it will feel a lot like that ill-defined concept “austerity.”
“Global banks are international in life but national in death,” former Bank of England governor Mervyn King once noted.
More fundamentally, there is excess capacity when it comes to EU governments as well, a less frequently recognized point. There is more and more governance, some of it good in fact, but it never goes away. There are whole new levels of governance, connected to the EU. Somewhere in the system, governance too needs to shrink. Losing a few countries through consolidation is not possible, but in terms of the pure logic (divorced from actual fact and possibilities), there is something to be said for the idea. And yet we are relying on governance to get the banks to shrink. And relying on the banks to boost growth so that governance can shrink. Relying on relying.
Get the picture?
This sprawling, 2 hour, 42 minute movie likely will be seen as one of the important creations of the decade. Variety described it as “femme-driven corrective to…”Spring Breakers””, and “Part dreamy millennial picaresque, part distorted tapestry of Americana and part exquisitely illustrated iTunes musical,” the phrase “Midwestern America Walpurgis Night” came to my mind. “…Almost ridiculously full of life…” was another account. Most of all, it is a story of how a post-Christian America can go awry, told through the classic medium of a road trip. Instead of the blood and flesh of Christ at Holy Communion, here the serving is toxic mezcal and eating the worm inside the bottle, for cash of course. The other parallels I do not wish to give away.
In terms of cinematography and especially soundtrack, it’s as strong as any movie in recent times. Scene after scene felt special and memorable, and only about ten minutes or so dragged. I kept on thinking it couldn’t keep up its pace of quality, but it did and in fact kept surpassing itself. Sasha Lane deserves the Best Actress Oscar, and in her film debut at that. I just ordered everything I can by British director Andrea Arnold.
Recommended (re)reading for a viewing includes Genesis, most of all the story of Jacob, his family, and his wrestle with the angel. But don’t expect the reviews to mention any of that — Ross Douthat, telephone!
Remember people, the influential thinkers of the next generation will be the religious ones…whether you like it or not.
1. Luigi Zingales on the Laureates. And the full 49-page report on the Laureates, from Sweden. And David Warsh on Holmström on debt and banking. Cardiff Garcia on Bengt on money. Kling on the prize. Boettke on the prize. A Fine Theorem on Oliver Hart, and how he changed his mind, recommended. And where Nobel Laureates come from.
3. Tim Harford on man-machine interaction, adopted from his new book Messy.
5. Paul Krugman on Brexit and the pound. I don’t agree with those arguments, but I think they are more consistently Krugmanian than his earlier posts on Brexit. If an economy is in demand-side secular stagnation, and then a government taxes production and trade, and takes finance down a peg, but boosts exports through a lower currency, I am not sure the model will predict significantly negative consequences. His arguments are also consistent with a more general New Old Keynesian neglect of wealth effects.
One of Nobel prize-winner Oliver Hart’s most influential papers (co-authored with Andrei Shleifer and Robert Vishny) is on incentive design and private prisons (see Tyler’s post covering Hart’s work). Yesterday was not the day for a critique but Tyler and I do critique this paper in our principles textbook, Modern Principles. I believe that our textbook is the only principles textbook to have a chapter on contract design and we make this modern material accessible to undergraduates! Here is our explanation and critique:
Should the management of prisons be contracted out to the private sector? The
owners of a private firm have a strong incentive to cut costs and improve productivity because they get to keep the resulting profits. If a public prison cuts
costs, there is more money in the public treasury but no one gets to buy a yacht so the incentive to cut costs is much weaker.
In 1985, Kentucky became the first state to contract out a prison to a for profit firm. Private prisons today hold about 120,000 prisoners in the United
States, about 5 percent of all prisoners. Should efficient private prisons replace
inefficient public prisons? Three economists—Oliver Hart, Andrei Shleifer, and
Robert Vishny (HSV)—say no. HSV don’t question that the profit motive gives
private prisons stronger incentives than public prisons to cut costs—HSV say
that’s the problem! Suppose that we care about costs but we also care about
prisoner rehabilitation, civil rights, and low levels of inmate and guard violence.
What we pay for is cheap prisons, but what we want is cheap but high quality
prisons. If we can’t measure and pay for quality, then strong incentives could
encourage cost cutting at the expense of quality.
The principle is a general one, a strong incentive scheme that incentivizes
the wrong thing can be worse than a weak incentive scheme. One car dealer in
California advertises that its sales staff is not paid on commission. Why would
a store advertise that its sales staff do not have strong incentives to help you?
The answer is clear to anyone who has tried to buy a car. High-pressure dealers
who pounce on you the moment you enter the showroom and bombard you
with high-pressure sales tactics (“I can get you 15 percent off the sticker, but
you have to act NOW!”) may sell cars to first-time buyers, but the strategy is
too unpleasant to win many repeat customers. Car dealers who rely on repeat
business usually prefer a low-pressure, informative sales staff….In theory, a car dealer could have strong incentives and repeat business by
paying its sales staff based on their “nice” sales tactics, but in practice it’s too
expensive to monitor how salespeople interact with clients. Cheating by the
sales staff would be difficult to detect and thus would be common.
…What about prisons? Are HSV correct that weak-incentive public prisons
are better than strong incentive private prisons? Not necessarily. HSV assume
that cutting quality is the way to cut cost. But sometimes higher quality is also
a path to lower costs. Low levels of inmate and guard violence, for example, are
likely to reduce costs. And respect for prisoner’s civil rights? That can save on
legal bills. When quality and cost cutting go together, a private firm has a strong
incentive to increase quality.
HSV may also underestimate how well quality can be measured. Measuring
output pays off more when incentives are high. Unsurprisingly, therefore,
private prison companies and government purchasers have made extensive
efforts to measure the quality of private prisons.
Finally, don’t forget that weak incentives reduce the incentive to cut costs
but they don’t increase the incentive to produce high quality! Public prisons
might use their slack budget constraints to offer high-quality rehabilitation
programs, or they might instead offer prison guards above-market wages.
Which do you think is more likely?
Nevertheless, whether HSV are right or wrong about private prisons, their
argument is clever. The usual argument against government bureaucracy is that
without the profit incentive, public bureaucracies won’t have an incentive to
cut costs. HSV suggest this is exactly why public bureaucracies may sometimes
be better than private firms.
Addendum: We don’t go through the empirical literature in the text but overall it’s not supportive of HSV. As HSV predict, private prisons appear to be cheaper than public prisons but they are not significantly cheaper and the quality of private prisons is comparable to that of public prisons and maybe a little bit higher (faint praise). Basically the government gets what it pays for.
Sebastian Galiana and Gustavo Torrens have a new NBER paper on this underappreciated question:
Why did the most prosperous colonies in the British Empire mount a rebellion? Even more puzzling, why didn’t the British agree to have American representation in Parliament and quickly settle the dispute peacefully? At first glance, it would appear that a deal could have been reached to share the costs of the global public goods provided by the Empire in exchange for political power and representation for the colonies. (At least, this was the view of men of the time such as Lord Chapman, Thomas Pownall and Adam Smith.) We argue, however, that the incumbent government in Great Britain, controlled by the landed gentry, feared that allowing Americans to be represented in Parliament would undermine the position of the dominant coalition, strengthen the incipient democratic movement, and intensify social pressures for the reform of a political system based on land ownership. Since American elites could not credibly commit to refuse to form a coalition with the British opposition, the only realistic options were to maintain the original colonial status or fight a full-scale war of independence.
You may recall that Adam Smith wanted to see a continuing empire, but with North America as essentially the more powerful partner, though he did not quite use those words.
Holmstrom’s work has provided me with a great deal of understanding of why innovation management looks the way it does. For instance, why would a risk neutral firm not work enough on high-variance moonshot-type R&D projects, a question Holmstrom asks in his 1989 JEBO Agency Costs and Innovation? Four reasons. First, in Holmstrom and Milgrom’s 1987 linear contracts paper, optimal risk sharing leads to more distortion by agents the riskier the project being incentivized, so firms may choose lower expected value projects even if they themselves are risk neutral. Second, firms build reputation in capital markets just as workers do with career concerns, and high variance output projects are more costly in terms of the future value of that reputation when the interest rate on capital is lower (e.g., when firms are large and old). Third, when R&D workers can potentially pursue many different projects, multitasking suggests that workers should be given small and very specific tasks so as to lessen the potential for bonus payments to shift worker effort across projects. Smaller firms with fewer resources may naturally have limits on the types of research a worker could pursue, which surprisingly makes it easier to provide strong incentives for research effort on the remaining possible projects. Fourth, multitasking suggests agent’s tasks should be limited, and that high variance tasks should be assigned to the same agent, which provides a role for decentralizing research into large firms providing incremental, safe research, and small firms performing high-variance research. That many aspects of firm organization depend on the swirl of conflicting incentives the firm and the market provide is a topic Holmstrom has also discussed at length, especially in his beautiful paper “The Firm as an Incentive System”; I shall reserve discussion of that paper for a subsequent post on Oliver Hart.
That is A Fine Theorem on the work of Bengt Holmstrom, do read the whole thing.
2. “Why, then, shouldn’t we have an official inquiry into abuses during the Bush years?” (NYT) Me, thee, etc. Personally, I don’t favor any of these suits and prosecutors and the like, not for either side, and I was one of the very first to warn about this with respect to Trump. But please don’t think Trump just pulled this idea out of some kind of personal fascist cookbook.
Read it here, this is one short bit:
They’ve built a technical framework for other researchers to build on, which is much harder to do than to throw off useful insights. So don’t be underwhelmed if some of their work, when conveyed in sound bites, seems like something you heard last week at the water cooler.
Overall a simpler take than what you can read on MR below.