Month: June 2017

The new Charles C. Mann book, *The Wizard and the Prophet*

by  Tyler Cowen in

I am of course excited about this, as his 1491 and 1493 are two of my favorite books:

The Wizard and the Prophet: Two Remarkable Scientists and Their Dueling Visions to Shape Tomorrow’s World

Here is the Amazon summary:

In forty years, Earth’s population will reach ten billion. Can our world support that? What kind of world will it be? Those answering these questions generally fall into two deeply divided groups–Wizards and Prophets, as Charles Mann calls them in this balanced, authoritative, nonpolemical new book. The Prophets, he explains, follow William Vogt, a founding environmentalist who believed that in using more than our planet has to give, our prosperity will lead us to ruin. Cut back! was his mantra. Otherwise everyone will lose! The Wizards are the heirs of Norman Borlaug, whose research, in effect, wrangled the world in service to our species to produce modern high-yield crops that then saved millions from starvation. Innovate! was Borlaug’s cry. Only in that way can everyone win! Mann delves into these diverging viewpoints to assess the four great challenges humanity faces–food, water, energy, climate change–grounding each in historical context and weighing the options for the future. With our civilization on the line, the author’s insightful analysis is an essential addition to the urgent conversation about how our children will fare on an increasingly crowded Earth.

I pre-ordered mine but a moment ago.

Beijing notes

by  Tyler Cowen

To consider the delta, for all the talk of lactose intolerance, dairy products are booming.  Taxi drivers seem to have lost their reluctance to pick up Westerners.  More and more hutongs have been removed from downtown (duh).  There is a street with three different outlets selling Mexican-style churros.  Overall it feels nicer and more normal.

I am the odd bird who prefers Beijing to Shanghai.  The food is more representative of China as a whole, the faces show more drama, you are more likely to see “weird random ****” driving around in a cab, and the core culture is less chi-chi.  It’s the most important city in the world.  Let’s hope Washington does nothing to reclaim that mantle, New York never will.

My podcast with Ed Luce

by  Tyler Cowen in

It was a forty-minute chat (podcast, no transcript), most of all about the decline of liberalism, based around Ed’s new and very well-received book The Retreat of Western Liberalism.  We also covered what a future liberalism will look like, to what extent current populism is an Anglo-American phenomenon, Modi’s India, whether Kubrick, Hitchcock, and John Lennon are overrated or underrated, and what it is like to be a speechwriter for Larry Summers, among other topics.  Here is the opening bit:

COWEN: Having a taste for the esoteric, I’d like to start with a question. If we go back to the 1680s and James II takes the throne, then, William of Orange comes over from what we now call the Netherlands and pushes him out — was that a liberal development or an illiberal development?

LUCE: At the time, it was very much a liberal development. Of course, we then get the bill of rights. We then get a further restriction of the power of the monarchy that comes with this new Dutch co-monarchy, William and Mary.

In retrospect, given the fact that this is very much the Protestant fundamentalist, the Battle of the Boyne, the victory of the Orange forces, William of Orange. In retrospect, I think it’s being celebrated in a pretty illiberal manner.

Of course, that’s very germane right now in Britain, given that Theresa May is trying to form a government in which the DUP, the Ulster Unionist Party are going to make up the difference between being a minority government and majority government.

It depends which bit of history you’re looking at it from is my answer.

And then I toss him this question:

COWEN: Let’s say we take the British election that was just held. So many people are calling it a mess, chaos, no-good results but, say, I offered you a revisionist view, how would you respond?

I would say it’s the first real election where voting by class has essentially fallen away. You even have Kensington in London going Labour for the first time since 1974.

Voting is now much more by age. You’ve more female representatives than ever before. You’ve 15 Muslims elected, 7 of those being female. More LGBT individuals. Maybe the new liberalism is reflected by that kind of elevation.

Then on top of that, the election definitely thwarted Scottish independence. It probably helped a soft border for Ireland. We hope it’s helping a soft Brexit.

No Corbyn, no UKIP. Wasn’t it exactly the vote we needed and the most liberal outcome you could have imagined, at least relative to all the initial constraints? Or not?

Ed is extremely interesting and articulate throughout.

Again, you can subscribe to the whole series here, we will be doing more bonus offerings of this nature.

[soundcloud url=”https://api.soundcloud.com/tracks/329287475″ params=”color=ff5500&auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false” width=”100%” height=”166″ iframe=”true” /]

Is the 100-year Argentine bond good news or bad news?

by  Tyler Cowen in

Mr Costa explained that long-duration bonds are the best way for real money investors to place bets on Argentina, given that they are unable to leverage themselves like a more nimble hedge fund. “If you are an investor with a constructive view on Argentina, what you want is duration,” he said.

Argentina sold $2.75bn of the debt with a coupon of 7.125 per cent, equating to an annual yield of 7.9 per cent, according to a statement from the Argentine finance ministry late on Monday. The bond attracted $9.75bn in orders from investors.

But don’t focus on the 100 years:

Given the bond was sold at a yield of almost 8 per cent an investor would recoup their initial investment in around 12 years.

Yields could fall by at least 150 basis points, moving more in line with other major economies in the region such as Brazil — implying capital gains on such bonds in the double digits. “Those are pretty good returns. At a rate of 8 per cent or higher, it’s a buy,” Mr Costa said.

The bad news is what you must endure to have a crack at the 8 percent:

Argentina has defaulted on its sovereign debt eight times since independence in 1816, spectacularly so in 2001 on $100bn of bonds — at the time the world’s largest default — and most recently in 2014 after clashing with Elliott Management, an aggressive hedge fund.

But Mr Macri’s government “cured” the latest default in 2016, and times have changed, said Joe Harper, a partner at Explorador Capital Management, an investment fund focused on Latin America. “The policy pendulum in Argentina has shifted to the centre, and the country’s next 100 years will be very different than the last century.”

Here is the full FT story, by Benedict Mander and Robin Wigglesworth.

Shakespeare in an age of Trump is a little disconcerting

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, here is just one excerpt:

I see Trump as not a ruler but rather akin to the various fools, jesters or, in the case of Lear, the character of Edgar, who appears before the king in disguise and warns him of his enemies. Don’t interpret the word “fool” too literally here. The most common features of these characters is that they speak between the cracks in the action and utter sentiments that no one else dares  to voice. That’s Trump on Twitter. Would the word “covfefe” be so out of place in one of those poetic rants?

And:

And looking forward, what might a study of Shakespeare tell us to watch for in the evolution of the Trump administration? How’s this for a start?:

  • Blood may be thicker than water, but nonetheless power struggles can break family bonds rather easily.
  • Power cannot be given away and still retained.
  • Don’t overweight legitimacy and birth order in determining succession.
  • Love is a wild card.
  • There is no maximum limit to chaos.

Do read the whole thing.

The Return of the Jitney

by  Alex Tabarrok in

Lyft’s new service, Lyft Shuttle, works on a fixed route for a fixed fee during commute hours. Salon mocks this as a “glorified city bus with fewer poor people.” In fact, Lyft Shuttle and Uber Pool, which is moving in a similar direction, are an improved form of jitney. Jitneys were very popular in the early history of the automobile because they were cheaper, safer and more flexible than public transit but the transit companies lobbied to have them made illegal or burdened with heavy costs.

In many less developed economies, however, jitneys remain a popular form of transit. In New York City, jitneys never quite went away but have continued to operate, mostly illegally, under the name jitneys or shared taxis or dollar vans. Moreover, contrary to Salon, the jitney has always been a form of transit appreciated by the poor. Here’s wikipedia on New York City’s dollar vans:

Dollar vans are typically modified passenger van, and often operate in urban neighborhoods that are under-served by public mass transit or taxis. Some of the dollar vans are licensed and regulated, while others operate illegally. Passengers may board them at designated stops along their route or hail them as share taxis….Dollar vans are often owned and used by members of inner-city communities, such as African/Caribbean American, Latino, and Asian-American populations.

The transit companies did have a legitimate beef with the jitneys. The jitneys would often free-ride on the market making of the transit companies by swooping in just before a bus’s scheduled arrival. Without passengers the transit company wasn’t profitable but without a transit company to ease coordination the jitneys weren’t as profitable or as efficient as they might be–jitneys were subject to what Al Roth calls market unraveling which led in turn to market thinness.

Klein, Moore and Reja came up with a clever solution to the unraveling problem, curb rights (see also my book Entrepreneurial Economics). Curb rights are rights to pickup passengers allocated by curb location and hour.

Will the new form of jitneys be subject to unraveling? Will curb rights be necessary? Probably not. Lyft has moved the location of coordination from the unowned streets to owned cyberspace. Thus the privatization of coordination has solved a market thinning problem that has plagued jitneys for over a hundred years.

Public transit still has useful features, especially the economies of scale available with subways. Economies of scale also make subways, as of yet, a natural monopoly for which regulation may be useful. It’s difficult to see, however, what market failure exists in the market for road transit. We might want to subsidize people but there’s little reason to subsidize buses or other forms of road transit.

*Little Soldiers*

by  Tyler Cowen in

The author is Lenora Chu and the subtitle is An American Boy, a Chinese School, and the Global Race to Achieve.  It’s about what the Shanghai public school system really is like, from an American/Chinese-American point of view.  Here is one bit:

“Self-esteem” doesn’t exist in the Chinese lexicon, at least not in the way Americans use it.  In China, a child’s regard for herself is rarely as important as a stark evaluation of performance.  Almost as if child-rearing were an Olympic sport, the Chinese rank children on everything from work ethic to Chinese character recognition and musical skill.

Comparisons can be informal and conversational.

“He’s not as smart as his brother, but he’s a better singer,” my acquaintance Ming said to me once, nodding at one of her boys, in earshot of the less-smart brother.  Sometimes the desire to rank is combined with a threat. “Does your father love your brother more?” a Chinese teacher once asked my friend Rebeca’s daughter.  The question came after the girl had a bad showing on an in-class assignment.

By the way, according to the author:

Nearly half of all children outside of China’s large cities are high school dropouts.

An interesting read.

The true Thomas Bayes

by  Tyler Cowen in

Rational or irrational?

Thomas Bayes was a Presbyterian minister.

Bayes’s first publication was a theological work, entitled Divine Benevolence ([Bayes], 1731). Since no author appears on the title page of the book, or anywhere else, it is sometimes considered to be of doubtful authorship. For example, the National Union Catalog of the United States ascribes authorship to Joshua Bayes. However, Thomas Bayes was the author of this work. Bayes’s friend, Richard Price refers to the book in his own work A Review of the Principal Questions in Morals (Price, 1948, p. 248) and says that it was written by Thomas Bayes. In Divine Benevolence Bayes was trying to answer the question of the motivating source of God’s actions in the world.

The essay dealt with how to handle the problem of evil in the world.  It is also believed that Bayes was an Arian.

That is from a D.R. Bellhouse paper (pdf), with a relevant pointer from Asher Meir.

The musical culture that is China

by  Tyler Cowen in

What’s bad for [the now trade-restricted] K-pop is excellent for Chinese musicians, who are seizing on the opportunity. One group skyrocketing in popularity in the absence of K-pop “idols” is SNH48, a Shanghai-based girl band that has a rotating cast of members—somewhere around 220, depending how you count the generations—and just raised more than $150 million from investors last month. If the idea of girl-band investors seems odd, you should know that SNH48, whose performers are voted in and out by fans, is far more of a corporate business than a music group. Per the Financial Times (paywall):

“Unlike western pop, which trades on authenticity and the idea of performers singing from the heart, SNH48 is run more like a tech start-up than a musical group. Taking its inspiration from Japanese group AKB48, instead of a core group it runs on teams of interchangeable singers—a strategy managers hope will allow it to build generations of young female stars and longer-lasting revenue streams.”

Fans use a mobile app to track their favorite singers, send notes to them, and watch their livestreams. The band’s managers carefully curate new teams of performers every year, which is similar to how South Korea’s massive K-pop factory is run.

Here is the full story, by Amy X. Wang, via George Chen.

Amazon’s new customer, and the economics of scale in groceries

by  Tyler Cowen in

Ben Thompson writes:

…you can see the outline of similar efforts in logistics: Amazon is building out a delivery network with itself as the first-and-best customer; in the long run it seems obvious said logistics services will be exposed as a platform.

This, though, is what was missing from Amazon’s grocery efforts: there was no first-and-best customer. Absent that, and given all the limitations of groceries, AmazonFresh was doomed to be eternally sub-scale.

WHOLE FOODS: CUSTOMER, NOT RETAILER

This is the key to understanding the purchase of Whole Foods: to the outside it may seem that Amazon is buying a retailer. The truth, though, is that Amazon is buying a customer — the first-and-best customer that will instantly bring its grocery efforts to scale.

Today, all of the logistics that go into a Whole Foods store are for the purpose of stocking physical shelves: the entire operation is integrated. What I expect Amazon to do over the next few years is transform the Whole Foods supply chain into a service architecture based on primitives: meat, fruit, vegetables, baked goods, non-perishables (Whole Foods’ outsized reliance on store brands is something that I’m sure was very attractive to Amazon). What will make this massive investment worth it, though, is that there will be a guaranteed customer: Whole Foods Markets.

…At its core Amazon is a services provider enabled — and protected — by scale.

Here is the full piece, with many more background and points.