Month: January 2017

Computer bot sentences to ponder

…as pricing systems become ever more autonomous, aspiring monopolists like Mr Topkins eventually will not even need to speak to their competitors to fix prices. Computers will do the colluding for them, either by using the same algorithm or learning from their interactions with other machines — all without leaving behind trails of incriminating emails or voicemails.

“Finding ways to prevent collusion between self-learning algorithms might be one of the biggest challenges that competition law enforcers have ever faced,” said a recent paper by the OECD, the Paris-based club of mostly rich nations.

These digital tools automatically calculate prices based on instantaneous assessments of supply and demand and a seller’s own instructions, such as specific profit or price targets.

…It [the OECD] added: “Particularly in the case of artificial intelligence, there is no legal basis to attribute liability to a computer engineer for having programmed a machine that eventually ‘self-learned’ to co-ordinate prices with other machines.”

That is from David J. Lynch at the FT.  Will this prove more or less stable than traditional, human-based collusion?  Here are comments from Henry.  Can the bots send buyers “we are breaking the collusion now” alerts?  Will monitoring third party bots perform that function?  Or will collusion reign supreme?

Monday assorted links

When should the federal government own land?

Public land would be interesting.

That was a request for topic coverage from Ryan, from last night.  Here is a 2014 CRS survey piece with good background information.

I can think of a few reasons for federal government ownership of public land:

1. For some specific purpose, such as a national park or a nuclear weapons facility or the White House.

1b. There is a conservation argument for land holdings, but again I think it has to be for a specific purpose, thus collapsing into #1 proper.

2. As a revenue-maximizing strategy, a’la Irvine Company, so the government can sell off pieces of land successively, over time, to take in more revenue than if it sold off everything all at once.

3. To hold land off the market and thus force more people to squeeze into cities, thereby reaping extra returns to scale and density, shades of Edward Gibbon Wakefield.

4. To limit rent-seeking games, since much of the land might be low value in the present, but a race to homestead it would consume resources.  In the longer run, that homesteading race would lead to suboptimal owners, since we don’t now know exactly what the land will be good for.

5. It’s the only way we can run an asset surplus, since cash would be grabbed by the political process and redistributed.  Think of it as akin to those poorer villages where you save in the form of cows or pigs, because your uncle cannot come to you when he needs to fund a wedding and demand a piece of the pig.

I say #1 is unproblematic and can be decided on a case-by-case basis.  #2 is fine if the government were doing that, but they’re not.  #3 would seem to require much more federal ownership of land than what we have.  It’s still much, much cheaper to live in Idaho.  #4 is an OK argument, but I don’t see why it would apply to properly done land auctions, which is indeed how federal disposal of the land has evolved.

So #5 is actually the main argument, at least once we get past #1.

Overall, I don’t see why the federal government needs to own about 28% of the country.  Nonetheless, in the meantime the government does allow grazing and mining to take place on those lands, often at below-market rents.  (By the way, for now I am putting on hold a possible #6: “federal land ownership is the most efficient way to regulate mining and fossil fuel extraction.”  It raises issues far beyond the scope of the current discussion, though it is significant.)

You will note that the federal government owns 47% of the land in “the West,” but only 4% of the land east of the Mississippi.  Unfortunately:

Congress in 1976 passed a law declaring that “the remaining public domain lands generally would remain in federal ownership.”

Though note a few days ago the House acted to ease land giveaways, so this may be changing.  Yet I feel no great thrill at simply giving this land to the state governments, though that may be an intermediate step toward privatization.

I would prefer to lower the percentage of federal land ownership in the West, but in the meantime I don’t see this as an incredibly pressing issue.  The government can either waste some of your land or some of your money, take your pick.  I do think the gdps of Nevada and Idaho could be higher, just not by that much.  Alaska may be a story of its own.

map_of_all_u-s-_federal_land

Larry Summers on the new Republican tax plan

He summarizes the plan as follows:

The central concept put forward by Mr Ryan, which appears to have the support of Mr Trump, is to turn corporate income tax from a tax on the return to capital into a tax only on extraordinary profits. This would be done by taxing corporate cash flows. In addition to the major reduction of the overall rate, the system would change in three fundamental ways. First, all investment outlays can be written off in the year they occur rather than over time. Second, interest payments to bondholders, banks and other creditors will no longer be deductible. Third, companies will be able to exclude receipts from exports in calculating their taxable income and will not be permitted to deduct payments to foreign suppliers or affiliates from income.

I found this to be the paragraph I had not seen elsewhere:

Second, the tax change will capriciously redistribute income, increase uncertainty and place punitive burdens on some sectors. Think of a retailer who imports goods from abroad for 60 cents, incurs 30 cents in labour and interest costs, and then earns a 5 cent margin. With a 20 per cent tax, and no ability to deduct import or interest costs, the taxes will substantially exceed 100 per cent of profits even if there is some offset from a stronger dollar. Businesses that invest heavily, hire extensively and export a large part of their product will have negative taxable income on a chronic basis. It is hard to imagine that the political process will allow annual multibillion-dollar refunds, so they too may be victimised. Then there are the still unresolved questions of what the rules will be on interest deductibility for banks and of the treatment of businesses organised as partnerships that do not pay corporate taxes.

Here is the FT link, probably gated for most of you, WaPo link here.  Summers also argues the plan will worsen inequality, strengthen the dollar (possibly leading to EM crises), lead to a trade war, and erode the long-term tax base.

Just to refresh your memories here is Jared Bernstein on the same plan (mixed but mostly negative), and Martin Feldstein (positive).

Might The Great Stagnation end with The Great Medication?

That is the topic of my latest Bloomberg column, here is the last bit:

I don’t mean to say that technological stagnation is a good thing. But sometimes the biggest advances lead to more tragedy than comfort, especially in the short run, before we learn how to adjust to their challenges. To paraphrase Peter Thiel, they promised us flying cars, and what we got was a bunch of stoned characters, and more than 140 of them. Beware the end of the productivity slowdown.

Do read the whole thing.

Faux Quebec village markets in everything

Canadiana Village, about an hour north of Montreal near Rawdon, Que., has been on the market since the fall. The nearly 60 hectares of land and 45 buildings are going for $2.8 million.

The village is designed to resemble a pioneer settlement from the 19th century, and includes a church, a general store, a mill, a cemetery, a saloon and 22 houses.

However, most of the buildings are just for show.

…”There’s only one livable home.”

Kaija said most of the buildings were shipped to the village over the years.

In its heyday, the village welcomed close to 30,000 tourists per year and was a popular destination for school field trips.

It was also featured in more than 110 film and TV productions, including Radio-Canada’s Pays d’en haut and I’m Not There, a Bob Dylan biographical drama.

Here is the full story, with photos, and for the pointer I thank Michelle Dawson.

Saturday assorted links

Why did the British economy do OK after Brexit?

One argument is “the higher trade barriers haven’t kicked in yet.”  Another is “the decline in the value of sterling shows the British people already have taken big wealth losses.”  Another approach focuses on consumption, Chris Giles at the FT has some good insights:

…rather than rising, household savings fell throughout 2016. The savings ratio dropped to an exceptionally low level in the third quarter as consumers went on a borrowing and spending binge not seen since before the financial crisis.

The interesting question is why households acted in this way. There are three plausible reasons. First, households correctly thought Brexit would improve their personal finances and borrowed and spent accordingly. Second, they were deceived into expecting economic gains from Brexit and still went out to spend. And, third, households watched sterling tumble, understood the likely effect on prices and brought forward their consumption, so they were spending in the knowledge their money would buy less in future.

Economic analysis allows us to set out these possibilities; it tells us only the last of the three options is sustainable; but it does not yet inform us which is correct.

By the end of 2017, we will know whether historically low levels of saving have persisted through the year, and this will provide a pretty good answer to the question of why spending held up so well after the EU referendum. If spending was merely brought forward, there will be a nasty jolt in the economy.

Here are some figures for consumer credit.  Do stay tuned…

Franz Kafka, failed travel entrepreneur

How about calling the series “Lonely Planet”?

Years before penning Metamorphosis, considered by some to be the greatest short story ever written, Franz Kafka hoped to make his fortune writing a series of budget European travel guides.

Kafka conceived a business plan for the books, dubbed “on the cheap”, while travelling across the continent with his friend Max Brod in the summer of 1911. This detail was revealed in volume three of Reiner Stach’s biography, Kafka: The Early Years, published in translation (by Shelley Frisch) last month.

The ahead-of-its-time idea (considering the popularity of budget travel tips today) sought to take on the traditional Baedeker travel guides, which then consisted primarily of hotel and restaurant listings, but lacked the insider knowledge Kafka felt was truly valuable to a traveller.

Questions that his guides proposed to address are ones that tourists still seek answers for now. On which days do museums have reduced fees? Are there any free concerts? Should you travel by taxi or tram? How much should you tip? There was also a suggestion to include advice on where to find erotic and sexual entertainment for a fair price.

Stach writes: “Kafka and Brod were convinced that a travel guide that answered all these questions candidly and supplied a select few reasonable and reliable recommendations would instantly beat out the competition … With a series of this kind, they could earn millions, especially if it was published in several languages.”

Yet it seems they were a wee bit clueless on their own travels:

For example, after discovering that Zurich’s city library was closed on Sundays, the pair believed they could still gain entry by asking at the tourist office.

And:

…the pair were so afraid that their idea would be stolen that they wouldn’t reveal the full details of their pitch to a publisher without first securing an advance.

I would have enjoyed hearing the Swiss travel office response.  Here is the full story, via Ted Gioia.

It’s not easy trying to be a newspaper monopsonist

At first, Joseph Talbot was charged with DUI.  Then he undertook a plan:

As the Times of Wayne County was distributing its weekly edition on Saturday, Holdraker started receiving calls from newsstands that a man — Talbot, according to Holdraker — was buying up all the copies of the paper. “We got in the car and restocked newsstands as far as we could,” says Holdraker, noting that he prints only 350 extra copies per week.

Some helpful numbers: Talbot’s extra-newspaper purchases, according to Holdraker, were limited to the village of Newark. There, he gobbled up about 900 to 1,000 copies at $1.25 a pop from at least eight places. Surely the outlays suppressed the news to some degree. However: The Times of Wayne County has a circulation of just north of 12,000, a number that consists of newsstand sales and subscription via mail (about 5,000, says Holdraker). So the buy-up plan addressed barely one-twelfth of the newspaper’s print distribution.

And, this being about 20 years after the rise of newspaper websites, there was another means of circulation as well. The Times of Wayne County, says Holdraker, puts its top news stories on its site without restriction. As to whether this particular story qualified for this status, Holdraker says, “It wasn’t gonna be, but obviously he pushed it.”

That is via Jack Shafer and Clive DavisThe article has other humorous points of interest.  Perhaps this is a new business model for media looking to expand their print sales?

Friday assorted links

1. What if U.S. importers and exporters are the same?

2. More on religious tolerance in Lagos: “We’re too busy trying to make money”

3. Now declassified CIA maps.

4. For the median working age male, measured median income growth since 1962 (!) is zero.  We need more economic theories where wages rise only through some consumer good innovation at the fringes.

5. Anti-surveillance clothing aims to hide wearers from facial recognition.

The polity that is Denmark, Bryan Caplan (!) edition

The Danish parliament on Monday passed a bill that will bar students from taking a second university degree.

The bill restricts individuals who already have a higher education degree from pursuing a degree in another field at the same or a lower level.

The bill was supported by the three government parties as well as the Danish People’s Party and the Social Democrats. Its backers say the move is a matter or priorities.

Here is the full story, via Anecdotal.