Month: February 2019
An excellent and original economic history of venture capital, with lots of new material, brought together in a convenient and readable form. Here is one excerpt:
…nineteenth century whaling can be compared to modern venture capital in at least three respects. First, whaling was the archetypical skewed-distribution business, sustained by highly lucrative but low-probability payoff events. Voyages often lasted several years and and covered geographic areas in the search for elusive whale pod. The long-tailed distribution of profits held the same allure for funders of whaling voyages as it does for a venture capital industry reliant on extreme returns from a very small subset of investments. Although other industries across history, such as gold exploration and oil wildcatting, have been characterized by long-tail outcomes, no industry gets quite as close as whaling does to matching the organization and distribution of returns associated with the VC sector.
The book also covers VC in the Industrial Revolution, to what extent Mellon and Morgan can be thought of as venture capitalists, the institutionalization of venture capital in the 1950s, how the limited partnership structure came to VC, the roles of Intel and Genentech, Sequoia Capital, and the growth of a true Silicon Valley ecosystem.
How about this?:
During the 1970s, San Jose State University was graduating more scientists and engineers than Stanford or Berkeley, while local community colleges within the California system provided crucial access to technical training programs.
Recommended to anyone with an interest in the topic, you can pre-order here.
‘NIRC’ – it’s a uniquely Singaporean economic abbreviation that stands for net investment returns contribution…
The total size of Singapore’s total reserves is a state secret, but estimates by most analysts put it at well above S$500 billion (US$370 billion)…
The Temasek Holdings chief executive wrote about how returns from the firm she leads, as well as GIC Private Limited, and the foreign reserves held by the central bank were the “single largest contributor” to the Singapore budget.
“Without tapping on the dividends or returns from GIC, [the Monetary Authority of Singapore], and Temasek, the government would have had to raise taxes long ago for social spending,” Ho wrote.
Without the NIRC, the Pioneer Generation Package – a S$9 billion programme unveiled in 2014 to help cover the health care costs of citizens born before 1949 – would probably have been funded by “higher taxes or cuts to other essential programmes”, according to Ho.
Here is the full story, via a loyal MR reader. If you wish to understand Singapore’s relatively low rates of taxation, you also need to understand NIRC. Here is my earlier post Singapore as financial corporation.
Missionaries for The Church of Jesus Christ of Latter-day Saints can now call, text or video chat weekly, the First Presidency announced Friday.
This update to guidelines regarding communication between full-time missionaries and their families follows a decades-long tradition of missionaries only calling home twice a year — on Christmas and on Mother’s Day.
Effective immediately, the Church’s 65,000 missionaries are authorized to communicate with their families each week on preparation day by text messages, online messaging, phone calls and video chats, in addition to letters and emails.
5. Robin Hanson overlooks Kg6. And Kg8.
7. India’s counterforce temptations with Pakistan (very important reading right now).
This is a bleg, so please leave your sagacious answers in the comments. Kelly Smith, of Prenda, writes me:
To summarize, I want kids to love writing, to see themselves as writers, and to improve their skill. I’d love to know about anyone who has done that systematically.
Are you able to help? Rest assured that your answers will be put to good use.
Here is an email I received from James Liu:
I think metropolitan geography was underdiscussed in the Amazon-NYC breakup. If you look at the Seattle, DC, and NYC areas, the main-city–secondary-city dynamic explains quite a bit.
Apparently, Americans don’t like living near tall buildings. In DC, the tall buildings were banished to the suburbs, and so it seems not unsuitable for a 25,000 person office campus to be built in Crystal City. In NYC, the tall buildings have been banished to Manhattan. When I lived in Brooklyn, they were planning the complex where the Nets would wind up. I watched a great deal of rage about plans to have 30-story buildings put up in downtown Brooklyn. This even though Brooklyn was a city of a million people but had fewer towers than, say, Milwaukee, or Jersey City, or take your pick. The argument was that tall buildings were appropriate for Manhattan, but not Brooklyn.
And in the Seattle metro, there is a cluster of tall buildings in Bellevue, just across a lake from Seattle, which is home to some tech firms (Zillow, Expedia, companies you’ve heard of). I don’t know how the city government was prevailed upon to allow it, but anyway it is there. I don’t think Amazon has much presence there, but Microsoft does, I think to compete with Amazon for transit-preferring workers. In some ways, Bellevue is like a bridge-and-tunnel borough more than it is like a suburb (Jersey City is a borough too, in that sense). Those who prefer to see it that way call Seattle the West Side and Bellevue (maybe Bellevue/Kirkland/Redmond) the East Side.
So it was not beyond imagining by a Seattle company that it was possible to build a tech campus in an outer borough. I don’t know how in the world NY’s city government would have imagined that such a thing was possible. Perhaps because De Blasio drives to work. A subway mayor like Bloomberg or Koch would have insisted on Hudson Yard. And New York would still have an HQ2.5. But that is another story for another email.
1. Cat ladders the culture that is Swiss (good photos, recommended).
2. Quecca, ronna, and yotta: new prefixes are needed! Micro and nano ain’t enough.
3. How the conservative revolution stalled in the states (powerpoints, also recommended, strongly, for anyone working on social change). Matt Grossman and his work should be much, much better known.
7. Forget the Academy Awards, here is the 2019 European Tree of the Year contest.
News from the Middle Kingdom seems to be coming out systematically worse than what you might have been expecting, at least these days. Here is an update on censorship and content control:
The platform has been designed with a built-in “Xi Study Points” system (学习积分系统) that allows users to accumulate points on the basis of habitual use of the platform, from reading and viewing of content to the posting of comments and other forms of engagement. It has been widely promoted by local governments and ministries and departments across China, and there have also been reports that some work units have ordered employees to attain specified point levels, with disciplinary measures to be imposed for those who fail to comply…
The app defines several periods of activity as “lively intervals,” or huoyue shiduan (活跃时段), during which users engaging with the platform can earn double points — 0.2 for each article or video, 2 points for a full 30 minutes of use, and so on. The intervals are Monday through Friday from 8:30 PM to 10 PM, and on Saturdays and Sundays from 9:30 AM to 10:30 AM, and 3:30 PM to 4:30 PM. The system, then, incentivises Party members, once home from the office and done with family dinner, to spend golden hours of otherwise discretionary personal time engaging with “Xi Jinping Thought.”
Interesting and frightening throughout, via Comrade Balding.
Dr. Jorge Pérez, an evolutionary biologist from the University of La Paz, and several companions, were exploring the Andes Mountains when they found a small valley, with no other animals or humans. Pérez noticed that the valley had what appeared to be a natural fountain, surrounded by two peaks of rock and silver snow.
Pérez and the others then ventured further into the valley. “By the time we reached the top of one peak, the water looked blue, with some crystals on top,” said Pérez.
Pérez and his friends were astonished to see the unicorn herd. These creatures could be seen from the air without having to move too much to see them – they were so close they could touch their horns.
While examining these bizarre creatures the scientists discovered that the creatures also spoke some fairly regular English. Pérez stated, “We can see, for example, that they have a common ‘language,’ something like a dialect or dialectic.”
Dr. Pérez believes that the unicorns may have originated in Argentina, where the animals were believed to be descendants of a lost race of people who lived there before the arrival of humans in those parts of South America.
While their origins are still unclear, some believe that perhaps the creatures were created when a human and a unicorn met each other in a time before human civilization. According to Pérez, “In South America, such incidents seem to be quite common.”
However, Pérez also pointed out that it is likely that the only way of knowing for sure if unicorns are indeed the descendants of a lost alien race is through DNA. “But they seem to be able to communicate in English quite well, which I believe is a sign of evolution, or at least a change in social organization,” said the scientist.
Click here for the rest of the story.
1. The law serves a primary purpose of publicity, and advertising for a polity, and also the law serves symbolic functions. People still don’t give Singapore a break for making chewing gum illegal and the like, even though this restriction is not in fact a big source of tyranny there. I don’t see it as good for the United States and its reputation to make blackmail legal, even if the “legalize blackmail” arguments are perfectly sound in a Steve Landsburg kind of way. It’s just not worth the bad publicity.
2. As Coase pointed out long ago, blackmail typically involves an exchange setting with bilateral monopoly. And the material in question is often emotionally fraught, such as knowledge of a crime, of an affair, photos of private body parts, and so on. The process of the trading is painful and stressful for many people. Limiting that process could produce welfare gains, or at the very least legalizing that process, and thus producing more of it, won’t involve huge benefits. When the process of trade and bargaining is itself painful, some of the welfare theorems need to be rethought a bit. Of course the unilateral release of gossip can be terrible too, but perhaps it involves less potential for drawn-out situations and painful bargaining because the transacting it not allowed in the first place.
3. As Scott Sumner points out: “In practice, I suspect that most blackmail involves issues of sex, gender and drugs. (Soon we’ll have to add race to this list.) I don’t expect to convince others of my views here, but let me just say that I believe that our society is unable to think rationally in these areas. Thus I don’t see any great value in legalizing blackmail.”
4. Sometimes the efficient blackmailers are your immediate family, not strangers. Outlawing blackmail from outsiders gives them a semi-monopoly for an efficient, do-it-yourself at home, low transactions cost Coasean deal (“Darling, someone needs to take out the garbage…”). Let’s do blackmail right! And privately, out of the public eye, to avoid the problems discussed under #1. And as a matter of justice, shouldn’t it be the aggrieved spouse getting the gains here, not the National Enquirer?
I show that decentralizing the optimal allocation requires not only high carbon prices but also fundamental changes to tax policy: If the government discounts the future less than households, implementing the optimal allocation requires an effective capital income subsidy (a negative intertemporal wedge), and, in a setting with distortionary taxation, an effective labor-consumption tax wedge that is decreasing over time. Second, if the government cannot subsidize capital income, the constrained-optimal carbon tax may be up to 50% below the present value of marginal damages (the social cost of carbon) due to the general equilibrium effects of climate policy on household savings. Third, given the choice to optimize either carbon, capital, or labor income taxes, the socially discounting planner’s welfare ranking is ambiguous over a standard range of parameters. Overall, in general equilibrium, a policy-maker’s choice to adopt differential social discounting may thus overturn conventional recommendations for both environmental and fiscal policy.
That is from her discount rate paper. The broader lesson here is that all your intuitions about climate change, discount rates, and taxes might not hang together. Do not follow mood affiliation, rather think the issues through carefully.
Amazon will pay property tax on its new Long Island City offices. It will pay corporate tax — not just on its profits, but on its capital base. Its employees, especially highly paid ones, will pay the city’s personal income tax. Those taxes, of course, will be somewhat offset by the incentives that the city has promised the company — up to $2 billion, depending on how many people the company hires and how many facilities it builds. Those incentives were a wasteful way to attract corporate investment. But in the long run, the tax revenue New York City gets from HQ2 will probably far exceed the cost.
That is from Noah Smith at Bloomberg. The “will” needs to be changed, otherwise right on target…
The co-directors of this new institution are Suresh Naidu, Dani Rodrik, and Gabriel Zucman. Here is the Twitter announcement. Here is an 87-pp. eBook introduction, ungated and free, with a short and readable introduction. Here is a brief excerpt:
This is a time when we need new ideas for policy. We think economists, among other social scientists, have a responsibility to be part of the solution, and that mainstream economics – the kind of economics that is practiced in the leading academic centers of the country – is indispensable for generating useful policy ideas. Much of this work is already being done. In our daily grind as professional economists, we see a lot of policy ideas being discussed in seminar rooms, policy forums, and social media. There is considerable ferment in economics that is often not visible to outsiders. At the same time, the sociology of the profession – career incentives, norms, socialization patterns – often mitigates against adequate engagement with the world of policy, especially on the part of younger academic economists.
Many news outlets and scholars have expressed concerns that workers have been unfairly exploited by employers in the Chinese manufacturing sector. Economic theory suggests that this exploitation, if it exists, is the result of employers in the manufacturing sector having considerable monopsony power. While there is a vast economic literature on monopsony power in the United States and other nations, little monopsony research has been conducted on the Chinese manufacturing market. This paper follows the monopsony research tradition and examines the Chinese manufacturing sector along several likely indicators of monopsony power. These include the turnover rate in the manufacturing sector, the relation between marginal factor cost and average factor cost, the relation between average real labor productivity and real wage in the manufacturing sector, and the comparison of labor costs between China and other countries. This study found that worker exploitation/monopsony in the manufacturing sector is not as severe as previously reported.