Month: September 2017

China Philippines fact of the day

Gulangyu — known as Kulangsu in the local Fujian dialect — is a typical example of this [growing tourism] trend, which has been repeated from Tibet to the Great Wall.

The 2 sq km island just off the thriving port city of Xiamen gets more than 10m visitors a year, almost double the number that visited the entire Philippine archipelago last year. On peak days in the past, more than 100,000 visitors clogged the winding, vehicle-free streets of the island, whose resident population is just 20,000. But the government capped the numbers at 35,000 per day this year as part of the Unesco bid.

That is from Ben Bland at the FT.

Should Harvard admit more legacy students?

That is the question behind my latest Bloomberg column, and basically the answer is yes.  Schools could scale up, using legacy admissions as a further source of finance.  But why don’t they?:

So why don’t top schools do more to expand their reach? No one doubts that they could find many more qualified students to admit. But there are two problems, both of which we should be willing to live with. First, expanding the size of top schools would lower faculty standards on the research side. That said, teaching quality is unlikely to suffer, as Harvard doesn’t select for the very best teachers. In any case, Harvard’s best researchers could continue their highly productive efforts without missing a beat. Second, administrators would face headaches and potential reputational liabilities from the new initiatives. But that is true in any kind of startup endeavor, and it isn’t a reason to remain stuck in the past.

The actual constraint on how big top schools could grow is how many eligible donors they can find and cultivate, if only through admitting their children. One question is how many such donors there are period, but in an age of high income inequality it seems America’s top schools have hardly tapped out this pool. Legacies make up a sixth of undergraduates at the University of Pennsylvania. A more unfortunate reality is that some donors might limit their support if say Princeton offered them and their children a less tony and exclusive experience. If that attitude can be overcome, America’s top schools could grow a great deal larger and more diverse.

Do read the whole thing.

*Incontinence of the Void*

That is the new, forthcoming Žižek book, here is one brief excerpt:

Peter Sloterdijk endorses Badiou’s thesis, from his Le siecle, that the defining feature of the twentieth century was “the passion for the real,” the gravitational pull toward the real basis of our lives (economic base, libido, will, etc.).  What we witness is the reversal of the traditional relation between public theology and occult materialism preached in elite circles — today, materialism is public while gnostic theology grows in the underground…Passion for the Real is not just a realist-cynical stance of reducing ideological chimeras to their “actual base” (“it’s all really about the economy, power, sex”), it is also sustained by a messianic logic of extermination: the cobweb of (religious, moral, etc.) illusions has to be ruthlessly erased, and it has to be done now.  The twentieth century was a time of extremis, of passage a’ l’acte, not of hope for some future.  Sloterdijk, of course, for this very reason sees the twentieth century as the age of extremism and ethical catastrophes, from Nazism to Stalinism.

I have several other of his books in my pile to read; this latest one focuses much of its energy on Lacan and also the Slovenian theorist Alenka Zupančič.  It turns out Žižek also is a big fan of Liu Cixin and The Three-Body Problem.

Silphium

Long ago, in the ancient city of Cyrene, there was a herb called silphium. It didn’t look like much – with stout roots, stumpy leaves and bunches of small yellow flowers – but it oozed with an odiferous sap that was so delicious and useful, the plant was eventually worth its weight in gold.

Image result for silphiumThat’s the opening to an excellent story about silphium, a herb widely-used and loved by the Romans but that hasn’t been seen for nearly two thousand years. Part of the problem was biological, the plant grew only in a tiny region of modern day Libya:

Its entire range consisted of a narrow strip of land about 125 miles (201km) by 35 miles (40km).

Try as they might, neither the Greeks or the Romans could work out how to farm it in captivity. Instead silphium was collected from the wild, and though there were strict rules about how much could be harvested, there was a thriving black market.

Even today there are plants, like huckleberry which resist all efforts to farm them. (Ala Jared Diamond’s Guns, Germs and Steel). Part of the problem was also economic–a tragedy of the commons–as prices shot up and property rights weren’t strong enough to prevent over-farming.

And might silphium still be found somewhere in remote regions of Libya? Read the whole thing.

Friday assorted links

How much does Fox News matter?

…we first propose a new instrument for exposure to media bias to complement estimates based on news channel availability: the channel positions of news channels in cable television lineups. The channel position is the ordinal position of news channels in the cable lineup. The assertion is thus that the Fox News Channel will be watched more when it is channel position 25 instead of channel position 65. We demonstrate that a one-standard-deviation decrease in Fox News’s channel position is associated with an increase of approximately 2.5 minutes per week in time spent watching Fox News. We estimate that watching the Fox News Channel for this additional 2.5 minutes per week increases the vote share of the Republican presidential candidate by 0.3 percentage points among voters induced into watching by variation in channel position. The corresponding effect of watching MSNBC for 2.5 additional minutes per week is an imprecise zero.

That is by Gregory J. Martin and Ali Yurukoglu, just published in the most recent AER.  Here are ungated copies.

Many Indian children can use math to solve market problems, but not school problems

The untapped math skills of working children in India: Evidence, possible explanations, and implications (with A. V. Banerjee, S. Bhattacharjee & R. Chattopadhyay)

It has been widely documented that many children in India lack basic arithmetic skills, as measured by their capacity to solve subtraction and division problems. We surveyed children working in informal markets in Kolkata, West Bengal, and confirmed that most were unable to solve arithmetic problems as typically presented in school. However, we also found that they were able to perform similar operations when framed as market transactions. This discrepancy was not explained by children’s ability to memorize prices and quantities in market transactions, assistance from others at their shops, reliance on calculation aids, or reading and writing skills. In fact, many children could solve hypothetical transactions of goods that they did not sell. Our results suggest that these children have arithmetic skills that are untapped by the school system.

Latest manuscript

Online appendix

Sourced here.

Sticky wages are part of the macro labor market story, but not at the center

I can recommend to you this new survey by Lars Ljungqvist and Thomas J. Sargent, just published in the American Economic Review.  The serious work on unemployment these days is using models of matching markets, and varying returns to finding matches during tough times, including recessions.  That is how to think about the job creation process for unemployed workers, who do not currently have a nominal wage to even be sticky.  Here is their abstract:

To generate big responses of unemployment to productivity changes, researchers have reconfigured matching models in various ways: by elevating the utility of leisure, by making wages sticky, by assuming alternating-offer wage bargaining, by introducing costly acquisition of credit, by assuming fixed matching costs, or by positing government-mandated unemployment compensation and layoff costs. All of these redesigned matching models increase responses of unemployment to movements in productivity by diminishing the fundamental surplus fraction, an upper bound on the fraction of a job’s output that the invisible hand can allocate to vacancy creation. Business cycles and welfare state dynamics of an entire class of reconfigured matching models all operate through this common channel.

As you will see in the paper, sticky or constant wages still can play a significant role in these accounts, but they are one part of a broader story. This is useful from the concluding remarks:

The fundamental surplus fraction is the single intermediate channel through which economic forces generating a high elasticity of market tightness with respect to productivity must operate. Differences in the fundamental surplus explain why unemployment responds sensitively to movements in productivity in some matching models but not in others. The role of the fundamental surplus in generating that response sensitivity transcends diverse matching models having very different outcomes along other dimensions that include the elasticity of wages with respect to productivity, and whether outside values affect bargaining outcomes.
For any model with a matching function, to arrive at the fundamental surplus, take the output of a job, then deduct the sum of the value of leisure, the annuitized values of layoff costs and training costs and a worker’s ability to exploit a firm’s cost of delay under alternating-offer wage bargaining, and any other items that must be set aside. The fundamental surplus is an upper bound on what the invisible hand could allocate to vacancy creation. If that fundamental surplus constitutes a small fraction of a job’s output, it means that a given change in productivity translates into a much larger percentage change in the fundamental surplus. Because such large movements in the amount of resources that could potentially be used for vacancy creation cannot be offset by the invisible hand, significant variations in market tightness ensue, causing large movements in unemployment.

One very simple way to put the point is that unemployment is not always such an easy problem to fix and labor markets are not always so easy to steer. This is a far cry from the simple Phillips curve talk I see so often in the financial press.

Here are ungated copies.

Alan Krueger on opioids and labor force participation

I haven’t had a chance to look at this one, but here is the headline summary from Brookings:

The new paper, published in the Fall 2017 edition of the Brookings Papers on Economic Activity, makes a strong case for looking at the opioid epidemic as one driver of declining labor force participation rates.

In fact, Krueger suggests that the increase in opioid prescriptions from 1999 to 2015 could account for about 20 percent of the observed decline in men’s labor force participation during that same period, and 25 percent of the observed decline in women’s labor force participation.

Here is the Brookings link.

The economics of Bitcoin mining

There is a new paper (pdf) by Huberman, Leshno, and Moallemi on that topic, I found it very useful.  Here is the abstract, non-newbies can skip ahead to the second paragraph:

Many crypto-currencies, Bitcoin being the most prominent, are reliable electronic payment systems that operate without a central, trusted authority. They are >enabled by blockchain technology, which deploys cryptographic tools and game theoretic incentives to create a two-sided platform. Profit maximizing computer servers called miners provide the infrastructure of the system. Its users can send payments anonymously and securely. Absent a central authority to control the system, the paper seeks to understand the operation of the system: How does the system raise revenue to pay for its infrastructure? How are usage fees determined? How much infrastructure is deployed?

A simplified economic model that captures the system’s properties answers these questions. Transaction fees and infrastructure level are determined in an equilibrium of a congestion queueing game derived from the system’s limited throughput. The system eliminates dead-weight loss from monopoly, but introduces other inefficiencies and requires congestion to raise revenue and fund infrastructure. We explore the future potential of such systems and provide design suggestions.

Recommended to many of those who are otherwise merely baffled.

Robin Hanson updates his forager vs. farmer schema

The post is interesting throughout, here are the closing paragraphs:

The left is more okay with people forming distinct subgroups, even as it thinks more in terms of treating everyone equally, even across very wide scopes, and including wide scopes in more divisive debates. The right wants to make redistribution more conditional, more wants to punish free riders, and wants norm violators to be more consistently punished. The left tends to presume large scale cooperation is feasible, while right tends to presume competition more. The left hopes for big gains from change while the right worries about change damaging things that now work.

Views tend to drift leftward as nations and the world gets richer. Left versus right isn’t very useful for prediction individual behavior outside of politics, even as it is the main parameter that robustly determines large scale political ciliations. People tend to think differently about politics on what they see as the largest scales; for example, there are whole separate fields of political science and political philosophy, which don’t overlap much with fields dealing with smaller scale politics, such as in clubs and firms.

I shouldn’t need to say it but I will anyway: it is obvious that a safe playful talky collective isn’t always the best way to deal with things. Its value varies with context. So sometimes those who are more reluctant to invoke it are right to be wary, while at other times those who are eager to apply it are right to push for it. It is not obvious, at least to me, whether on average the instincts of the left or the right are more helpful.

Do read the whole thing.

Japan facts of the day

The real interest rate Japan pays on its debt has fallen steadily. With short-term interest rates now negative, the country gets paid to borrow for short periods. The interest bill is even more manageable after factoring in revenues from Japan’s foreign exchange reserves and other public financial assets. As a result, economic stimulus under Mr Abe has finally stabilised Japan’s debt after years of relentless increase. It was 237 per cent of GDP in 2012. The International Monetary Fund forecasts 232 per cent of GDP for 2022.

Low interest rates mean the existing debt simply does not matter that much for fiscal sustainability. More importantly, and belying its reputation for wasteful public works, Japan has made a series of tough decisions on healthcare and pension spending. Real per capita outlays on the elderly have fallen. Tax revenues are up by six percentage points of GDP since 2000. “If this approach continues,” write Mr Weinstein and Mr Greenan, “Japan may very well avoid either a financial crisis or a major inflationary episode.”

That is from Robin Harding at the FT.