Month: January 2017

China Laos fact of the day

Laos will be the recipient of a high-speed railway expected to cost about $7bn — or more than half the impoverished Southeast Asian country’s gross domestic product.

China, by the way has lent $65 billion to Venezuela.  Here is the FT article, interesting throughout, mostly on One Belt, One Road.  Also on the China front, the nation is spending $4.8 billion this year in “football transfer fees” [huh?], non-gated article on the Chinese soccer boom here, and:

International use of the renminbi dropped sharply in 2016 as capital controls and dollar strength reduced the attractiveness of China’s currency, according to new payments data released on Thursday. The Society for Worldwide Interbank Financial Telecommunication (Swift) said the value of international renminbi payments fell 29.5 per cent compared with 2015.

Link here, FT again.

Does government need to be based on geographic contiguity?

That is my rewording of this request from Thijs:

At which point does technology allow another model of social organization than that based on shared territory?

I am reminded of Estonia’s e-citizenship model, but taken much further.  To flesh this out, imagine EU citizens could choose to which government they would pay their taxes.  So you could live in Lyon, but pay taxes to Germany and have your pension set by German policy and your legal disputes settled by German courts and so on.

What can’t be done this way, even say twenty years from now?  Well, your water supply, your primary education system, your electricity, your local police, and your roads, to name a few government services.  For those you have to deal with Lyon or some other local provider.  Germany can’t step in, except perhaps for some on-line parts of education but even then it wouldn’t mesh well with your local face-to-face provider, even putting aside differences of language.

Given all that, should Lyon and Germany let you peel off your potentially portable pension choice to the government provider of your choice?  It seems the wealthy people would cluster their fiscal and pension obligations with governments that were not so progressive in their fiscal policies.  In this regard it would be like a partial privatization of pension schemes.  But it would be a funny privatization rule: “allow pension choice, but only from local infrastructure-producing entities.”  You still would have the usual problems of selection, namely that the wealthy would opt for the pension and tax schemes of Luxembourg and Monaco — hey, wait, isn’t that the status quo?

Well, not quite.  In essence this plan would be further reducing the residency requirements for locales and tax havens such as Luxembourg, Monaco, the Cayman Islands, and so on.  You wouldn’t have to live there at all.  I suppose this is a way of privatizing the redistributive services of the state, without having to say you are doing so.  Does that make it more politically stable or less?

I suspect a lot of “local” pension schemes would stay in place for reasons of familiarity, nationalism, and the gravity equation.  (Just think how long it took many Greeks and Cypriots to withdraw their euros from their domestic banking systems.)  So many middle class Danes will stick with the Danish system, which they know and the like, though many of the Danish wealthy would secede from it and opt for Monaco.

Overall I think of this policy as one way to improve the lot of the wealthy.  Is it the way and the framing that will most induce additional effort and creativity from them?  I don’t see that case has been made.

Friday assorted links

A new idea

Don’t you wish every blog post had that title?  Dream on.  Here goes:

The key intuition is that the rise in relative earnings of wives increased competition between spouses for the love and affection of their children while the decline in family size reduced competition between children for resources from their parents. The combined effect has empowered children within the household and allowed them to capture an increasing share of the household surplus over the past hundred years.

That is from Galiani, Staiger, and Torrens, it is new to me at least.

The Power of Online Education

One of the best things about teaching at Marginal Revolution University is the emails that Tyler and I receive from our students all over the world. Here’s a recent email we got from Rasim Mollayev, a student in Azerbaijan.

Sir! I’m writing this from Baku, Azerbaijan. I am studying at ADA University in Baku. Due to my personal and health problems I couldn’t attend my lectures properly in previous Fall 2016 semester. I missed most of my “Principles of MicroEconomics” class.

And then I found your videos on YouTube and prepared for all my midterm and final exams with your videos and quizzes. And passed that course successfully. I just wanted to say thanks for your great help.


What accounts for misery?

Sarah Flèche and Richard Layard have a new paper on this topic, and they suggest a focus on mental illness:

Studies of deprivation usually ignore mental illness. This paper uses household panel data from the USA, Australia, Britain and Germany to broaden the analysis. We ask first how many of those in the lowest levels of life-satisfaction suffer from unemployment, poverty, physical ill health, and mental illness. The largest proportion suffers from mental illness. Multiple regression shows that mental illness is not highly correlated with poverty or unemployment, and that it contributes more to explaining the presence of misery than is explained by either poverty or unemployment. This holds both with and without fixed effects.

I don’t like the term “mental illness,” yet at the same time I reject the Szaszian rejection of the concept.  I would say that mental processes can deviate from procedural rationality in especially disadvantageous (and sometimes systematic) ways, and that this is something above and beyond merely having “different preferences.”

For the pointer I thank the excellent Kevin Lewis.

The top bestsellers of 1916

Will there be more countries?

Scott Sumner asks that question, I say this is an overrated pseudo-trend.  Quebec secession didn’t happen, Scotland said no, Catalonia limps along but the smart money is betting against actual secession, and Belgium is still together.  A weaker EU, NATO, and American hegemon lower the rate of return to striking out on one’s own.  China, India, Indonesia, and Nigeria probably are more unified than they ever have been in their histories.  Even Iraq is still holding together, sort of.  Brazil and Mexico are two pretty large countries that show zero signs of splitting up.  The two Yemens ended up back together again, albeit in a disastrous situation.  An Irish reunion, while unlikely, is no longer so unthinkable post-Brexit. Some of Africa still could splinter, but that wouldn’t make this much of a global trend, especially not in gdp-weighted terms.

So where is the trend?  Here is a list of ten possible new countries.  South Ossetia and Transnistria and West Papua are not impressive entries!  I do give some chance to Scotland and Catalonia, but nothing close to 50-50 odds.

How about the United States?  No way, we are…united.  The hatreds and polarizations don’t match up with state lines so simply, and it is hard to imagine an actual process of secession with focal boundaries and sufficient consent.  Neither “racists, unite!” nor “pearl clutchers, unite!” is going to carry this one across the finish line.

I thank Noah Smith and Ben Casnocha for a useful conversation related to this point.

Criminal Politicians

In India, a whopping 21% of the Members of Parliament have serious criminal cases against them. Why are criminals successful in politics? Writing in the FT, David Keohane reviews Milan Vaishnava’s excellent new book, When Crime Pays: Money and Muscle in Indian Politics.

Vaishnav’s main explanation for the continued electoral success of criminally tainted politicians is quite simple: They provide services the state does not.

In short, the state has failed to keep up with its voters’ expectations and that failure — of the rule of law along with many basic services — has allowed criminal politicians to serve in lieu of the state: providing protection, social welfare of a sort since the state makes it hard to get even a drivers license without paying a bribe, dispute resolution in the absence of a functioning court system etc. As Vaishnav says, the corrupt politician becomes “the crutch that helps the poor navigate a system that gives them so little access” in the first place….

In no time, Dagdi Chawl became ground zero for Mumbai’s notorious underworld. From his fortress-like compound, Daddy dispensed patronage, protection, and even justice to local residents. Journalists who came to interview Gawli wrote of the hundreds of men and women — unemployed youth, ageing widows, aspiring gangsters, and established politicians — who queued up on a daily basis in front of the iron gates of Gawli’s compound just for a few minutes of face time in the hopes of being showered with Daddy’s munificence. They came seeking building permits, ration cards, welfare payments, employment — a things the state was meant to provide but was either unable or unwilling to.

So, “a reputation as a matabhare (literally, ‘heavy handed’) person is considered to be an asset” in India because the state is so absent in so many ways.

My Conversation with Mark Miller

Mark is the most brilliant food mind I have met, here is the opening summary:

Mark Miller is often called the founder of modern southwestern cuisine, but his unique anthropological approach to food has led him to explore cuisines in over 100 countries around the world. He joins Tyler for a conversation on all that he’s learned along the way, including his pick for the most underrated chili pepper, palate coaching, the best food cities in Asia, Mexico, and Europe, the problems with sous-vide, why the Michelin guide is overrated, mezcal versus tequila, the decline of food brands, how to do fast food well, and why the next hipster food trend should be about corn.

Here is the text, audio, and video.  Mark is a blizzard of information density, and I don’t know anyone else who has his experience with the food world, most of all with Asia, Mexico, and the American Southwest.  (You may recall he was an interlocutor in my dialogue with Fuchsia Dunlop, and so we recorded this session with Mark afterwards.)

I thought the highlight was Mark’s six-minute riff on tasting chiles, it really shows Mark in his glory — this is one of those cases where I definitely recommend the video over the text:

Elsewhere in the conversation, see why he picks Seoul, Tokyo, and Bangkok as the three best world cities for food tours.  And:

COWEN: You don’t need brands, right?

MILLER: You don’t need brands anymore. The consumer used to have brands as guide and trust. Today there are other ways of developing that. We’re in consumer level 3. Consumers are defining brands, and how brands get used. I think that the idea of brand is probably — you’re an economist — dated. [laughs]

There is this:

MILLER: You go to a bus station in Monterrey: you can see a hundred of the best tacos in the world.

The questioner was Megan McArdle.  I enjoyed the entire exchange immensely, and hope you do too.

Wednesday assorted links