Month: May 2017

Wednesday assorted links

The book culture that is Iceland should not surprise the Coasean

For Tunglið, how you publish is as important as what you publish. Named after the Icelandic word for the moon, the tiny publisher prints its books in batches of 69 on the night of a full moon. So far, so weird. But keen readers must also buy their books that same night, as the publisher burns all unsold copies. Weirder still.

Why? While most books can survive centuries or even millennia, Tunglið – as its two employees tell me – “uses all the energy of publishing to fully charge a few hours instead of spreading it out over centuries … For one glorious evening, the book and its author are fully alive. And then, the morning after, everyone can get on with their lives.”

Here is the full story, and here is background information on durable good monopoly and the returns to rendering output less durable, as a means of precommitting to not lowering the price in later periods.  Avoid remainders, in other words, so customers will buy it now.  Guess who first came up with those insights?

Travel sentences to ponder

“My favorite is when the ship docks somewhere I’ve already visited,” she said. “One time, we were on a ship that docked in Rome. I’ve been there a million times. So everyone else gets out, and it’s just me and my husband on the ship. It’s the perfect antidote to New York life.”

The article is about couples who would rather live on cruise ships.  For the pointer I thank the excellent Samir Varma.

Germany is the Silicon Valley of political innovation

That is the theme of my latest Bloomberg column, here is a snippet of the argument:

After the war, Germany undertook an extensive and largely successful campaign of denazification. Other defeated nations, such as Austria or Japan, didn’t attempt anything comparable, much less succeed. In a relatively short period of time, Germany really did turn into a largely tolerant, peace-loving nation, acutely aware of the extreme nature of its previous wrongdoing. For all the imperfections in this process along the way, it is difficult in world history to find a comparable switch in attitudes.

Or take German unification. It was hardly obvious this project to bring together East Germany and West after the fall of communism would succeed or even come to fruition, as there was plenty of talk at the time of a binational federation or perhaps a slowly phased evolution toward unity. Yet Chancellor Helmut Kohl and other German leaders, supposedly staid figures, had the vision to see unification could be achieved rapidly and relatively smoothly. They just went ahead and did it, even though many of the world’s leaders, such as U.K. Prime Minister Margaret Thatcher, were squeamish about the idea.

There are more arguments at the link, running up through the present day.  You also can count Germany’s role in the EU and also the construction of social welfare states.  Germany is in fact remarkably underappreciated as a political and also social innovator.

Why are there so few computer science majors?

That is a long and very interesting post by Dan Wang, it is hard to summarize, here is one tiny excerpt but better to read the whole thing:

2. You don’t need a CS degree to be a developer. This is another valid statement that I don’t think explains behaviors on the margin. Yes, I know plenty of developers who didn’t graduate from college or major in CS. Many who didn’t go to school were able to learn on their own, helped along by the varieties of MOOCs and boot camps designed to get them into industry.

It might be true that being a software developer is the field that least requires a bachelor’s degree with its associated major. Still: Shouldn’t we expect some correlation between study and employment here? That is, shouldn’t having a CS major be considered a helpful path into the industry? It seems to me that most tech recruiters look on CS majors with favor.

Although there are many ways to become a developer, I’d find it surprising if majoring in CS is a perfectly useless way to enter the profession, and so people shun it in favor of other majors.

And this, which runs close to my own thoughts:

Perhaps this is a good time to bring up the idea that the tech sector may be smaller than we think. By a generous definition, 20% of the workers in the Bay Area work in tech. Matt Klein at FT Alphaville calculates that the US software sector is big neither in employment nor in value-added terms. Software may be eating the world, but right now it’s either taking small bites, or we’re not able to measure it well.

Finally, a more meditative, grander question from Peter Thiel: “How big is the tech industry? Is it enough to save all Western Civilization? Enough to save the United States? Enough to save the State of California? I think that it’s large enough to bail out the government workers’ unions in the city of San Francisco.”

Here is Dan’s follow-up tweet on other answers to the puzzle.

Germany Russia fact of the day

When it comes to supporting the military alliance, it seems the German public agrees more with the American president than with its own government.

According to the latest 2017 Global Attitudes survey conducted by the Pew Research Center, 53 percent of German respondents said Berlin should not take military action “if Russia got into a serious military conflict with one of its neighboring countries that is our NATO ally.” Yet Article 5 of the North Atlantic Treaty, which created NATO in 1949, commits member countries to come to the assistance of a fellow NATO member if that ally is attacked.

Here is the full article, via Bob Cottrell.

Companies by revenue per employee

I was surprised by some of this:

We found that Energy companies have the highest average Revenue per Employee, while Industrials and Consumer Discretionaries perform worst on this metric.

Technology companies performed at the lower end of the range on Revenue per Employee; part of the reason for this however, is other companies in spaces like Energy and Healthcare have large non-employee costs that Technology companies do not have.

AmerisourceBergen, a pharmaceutical distributor, tops the list, generating more than $7.9M per employee in 2016. With a reported team of 19,000, which is less than half the workforce of Cardinal Health (37,300) and McKesson (68,000), the company compares favorably to its peers on revenue per employee. Cardinal Health and McKesson‘s RPE were $3.3M and $2.8M, respectively. Overall, Healthcare companies score well on revenue per employee, though they have other huge costs (the costs of administering drugs and health services).

As for the lowest revenue per employee:

It is perhaps unsurprising that Restaurant and Hotel chains make up the majority of the list. What is more striking is that IT providers Cognizant and Accenture have among the lowest revenue per employee in the Index.

There are several useful tables at the link.  I do not think this is making any adjustment for independent contractors.

For the pointer I thank the estimable Chug.

Should the government guarantee jobs for people?

Adam Ozimek has a very good post on that question, here is one part of it:

(By the way, can you be fired from a guaranteed job? If you’re guaranteeing everyone can be hired, and nobody can be fired or even it’s very difficult to fire them, then that’s creating quite the management headache for whoever participates in this program.)

Crowd out is also a problem on the supply side of the labor market as well, and failing to accurately consider this means the estimated program costs are way too low. The goal of the program is to create 4.4 million jobs that will cost $36,000 a year each. CAP says this will only cost $158 billion. But this assumes there is no crowd out from people who already have jobs. If these are going to be “good jobs with good wages”, then why wouldn’t people who currently have jobs that aren’t as good or have lower wages from trying to get them? About a third of all workers earn less than $15 an hour, and EPI estimates that a $15 an hour minimum wage by 2024 would directly affect 22.5 million workers. So it’s easy to imagine that there would be 20 million people or more who want one of these guaranteed “good” jobs today. How do we decide who gets these jobs, and do we set a cap?

So it seems clear the $158 billion estimated cost is way, way too low. I don’t know if advocates know that this plan would result in a large scale nationalization of the economy and don’t care, perhaps even seeing this as a benefit, or if they are just making a mistake.

Do read the whole thing, Adam makes many good points.

Monday assorted links

1. Is Japan suffering from a ninja shortage?

2. Complacent Class on PBS.

3. Is China on the cutting edge of AI? (NYT)

4. Some snakes hunt in packs.

5. Cyprus reunification talks have collapsed.  As I’ve said before, the relative absence of size-expanding political unions is a significant feature of our time, reflecting the power of vested interests and the inability to see through major changes.

6. Eagle swoops on drone the drone wars continue.

7. Finland fact of the day.

The Italian Job

Each year there are more bank robberies in Italy (approximately 3,000) than in the rest of Europe combined, with a 10 percent chance of victimization on average.

…The average robbery lasts 4.27 minutes and leads to a haul of approximately 16,000 euros. Given that more than half of all bank robberies involve two or more perpetrators, the average haul per criminal is approximately equal to 8,700 euros.

…only about 40 percent of all bank robbers disguise themselves when robbing a bank.

Those are a few interesting facts from a bold new paper, Optimizing Criminal Behavior and the Disutility of Prison. The authors, Mastrobuoni and Rivers, use extensive data on bank robberies to model bank robbery as a second by second optimization problem:

The key insight of our model is that bank robbers face a trade-off when deciding how long to stay in the bank. By staying an extra minute, the robbers can collect more money, but they also run the risk of getting caught and sent to prison. The cost of being apprehended is a function of the disutility each individual places on going to prison. By equating the marginal benefit with the marginal cost of time spent in the bank, we can back out the unobserved disutility that robbers assign to prison.

The authors create a sophisticated model of optimizing behavior which they estimate using extensive data. In their conclusion, they focus attention on their finding that higher ability bank robbers have a higher disutility of prison. Thus higher ability offenders can be (especially) deterred by longer sentences. The authors focus attention on high-ability offenders because those are the offenders most likely to fit the assumptions of their rational-actor model. I think it’s actually better to focus on the contra-positive conclusion: its hard to deter idiots.

Moreover, there are plenty of idiots:

Not surprisingly, traveling to the robbery by foot and targeting a bank with a security guard are both consistent with lower ability offenders….

The existence of idiots, however, calls into question the optimizing assumptions of the model. As I argue in What was Gary Becker’s Biggest Mistake? the poorly-socialized-child theory of crime can suggest other approaches to combatting crime (e.g. cognitive behavioral therapy):

Here’s a simple test for whether crime is in a person’s rational interest. In the economic theory if you give people more time to think carefully about their actions you will on average get no change in crime (sometimes careful thinking will cause people to do less crime but sometimes it will cause them to do more). In the criminal as poorly-socialized-child theory, in contrast, crime is often not in a person’s interest but instead is a spur of the moment mistake. Thus, even a small opportunity to reflect and consider will result in less crime.

The guy who robs a bank that has a security guard and then attempts to run away seems like a poor fit for a rational actor model. Perhaps more thinking would have led a better planned bank robbery but more plausibly it would have led to no robbery at all. Thus, I’d frame the author’s contributions in this path-breaking paper as telling us not just about rational bank robbery but about the limits and bounds of rational bank robbery.

Net neutrality isn’t as big a deal as you might think

That is an unpopular point — with both sides — but it might just well be true.  Here is a newly published study by Robert W. Crandall:

More than a year after a court invalidated its “net neutrality” rules on broadband Internet service providers (ISPs), the Federal Communications Commission (FCC) decided to extend public-utility (Title II) regulation on broadband services. This paper uses traditional event analysis of the movements in the values of major communications and media companies’ equities at key moments in the FCC’s path to this decision to estimate the financial market’s assessment of the likely effects of regulation on ISPs, traditional media companies, and new digital media companies. The results are surprising: the markets penalized only three large cable companies to any extent, and even these effects appear to have been short-lived. The media companies, arguably the intended beneficiaries of the regulations, were unaffected.

That is via the excellent Kevin Lewis.

Proust as speculator

Through a fast alternation of buying and selling, orders and counterorders, the end of 1911 marked Proust’s fastest plunge into debt exposure in his fifteen-year-long investing career. His patrimony amounted to about 1,522,000 francs, but more than 40 percent of it, precisely 640,000 francs, was tied up in forwards contracts—a crazy level of exposure for an amateur investor. In terms of American dollars, at this time Proust owned a personal fortune of $6,864,000 and had about $2,900,000 tied up in obligations to buy.

That is from Proust and His Banker: In Search of Time Squandered, by Gian Balsamo, via Ray Lopez.  Ray also passes along this from the book summary:

Focusing on more than 350 letters between Proust and Hauser and drawing on records of the Rothschild Archive and financial data assembled from the twenty-one-volume Kolb edition of Proust’s letters, Balsamo reconstructs Proust’s finances and provides a fascinating window into the writer’s creative and speculative process. Balsamo carefully follows Proust’s financial activities, including investments ranging from Royal Dutch Securities to American railroads to Eastern European copper mines, his exchanges with various banks and brokerage firms, his impetuous gifts, and the changing size and composition of his portfolio. Successes and failures alike provided material for Proust’s fiction, whether from the purchase of an airplane for the object of his affections or the investigation of a deceased love’s intimate background. Proust was, Balsamo concludes, a master at turning financial indulgence into narrative craftsmanship, economic costs into artistic opportunities. Over the course of their fifteen-year collaboration, the banker saw Proust squander three-fifths of his wealth on reckless ventures and on magnificent presents for the men and women who struck his fancy. To Hauser the writer was a virtuoso in resource mismanagement. Nonetheless, Balsamo shows, we owe it to the altruism of this generous relative, who never thought twice about sacrificing his own time and resources to Proust, that In Search of Lost Time was ever completed…
This sounds like a book I should read.

Sunday assorted links