Month: August 2019
*Fully Grown: Why a Stagnant Economy is a Sign of Success*
That is the new book by Dietrich Vollrath, strongly recommended, it is a primer on the current state of knowledge about economic growth. Tightly argued, and a remarkable amount is covered in 216 pp. of regular text. Here is one excerpt:
Although there were plenty of changes in the individual markups firms charge, many of them actually fell over the last twenty years. What explained the overall rise in markups from 1.18 to 1.67 was that spending shifted away from firms with low markups and toward firms with high markups. Which high markup firms did we shift our spending to? Well, a lot of service firms, including those involved in communications, technology, health care, and education. In short, the rise in economic profits and markups we see at the aggregate level is part of the overall shift toward services we discussed a few chapters ago.
Here is where things get a little weirder. Baqaee and Farhi show that the shift toward high-markup firms was good for productivity growth. Whatever the source of a high markup, it indicates a product that is very valuable relative to its marginal cost. If we take the inputs required to produce a low-markup product and use them to instead produce a high-markup product, then we have raised the value of what we produce. As this increase in value came from reallocating our existing inputs toward a different use, rather than from accumulating new physical or human capital, the shift in spending toward high-markup firms shows up as an increase in productivity growth.
More books should be like this, it actually tries to teach the reader something! And succeeds. Definitely recommended. Due out in January, you can pre-order here.
Saturday assorted links
Median income data overstate progress in some ways
Those numbers are not age-adjusted:
Has the median man made progress economically since 1980? Not really. While male median income rose (in 2017 $) from $35,589 to $40,396, or 13.5 percent, this modest increase masks the fact that the share of men in their peak earnings years has increased, and that earnings at the median within peak earnings years categories have decreased.
Note that population share for 35-64, prime earnings years, rose from 1980 to 2017; earnings fell for every population group between 25 and 54. The median 30 year old is making less than their counterpart from 27 years earlier, as is the median 40 year old, as is the median 50 year old.
Had income within each age category remained constant at 1980 levels, current median income for men could be $40,306, or almost exactly where it us now.
Here is the full Richard Green post, with a useful chart, via Mark Thoma.
*The Economist’s Hour: False Prophets, Free Markets, and the Fracture of Society*
That is the new and forthcoming book by New York Times writer Binyamin Appelbaum. I did not agree with all of the perspectives in the book, but enjoyed reading it, and found no errors of fact in it (rare for a book on free market economics!). I was happy to give it this blurb:
“I very much enjoyed reading The Economists’ Hour, an entertaining and well-written look at how market-oriented ideas rose from the academy and transformed nations. I do not agree with each and every perspective, but found this a valuable and highly recommendable book, which I devoured in a single sitting.”
The text even covers Walter Oi, who is arguably the most accomplished blind economist to have lived. Lots more on Laffer, Friedman, Alfred Kahn, Aaron Director, Thomas Schelling, the Chile episode, and more.
First world problems
Soon there may be non-stop 19 hour flights from New York to Sydney, Australia:
On long-haul flights, cabin lights are typically dimmed about two hours after take-off and turned back up about two hours before landing, said Sveta Postnova, a senior lecturer in neurophysics and brain dynamics at the University of Sydney. Depending on the destination, that practice can make jet lag worse, she noted.
One of the test [19 hour] flights from New York will follow the normal pattern. But on the other flight, lights will stay on for about six or seven hours after departure. Researchers will compare passenger data from the two flights to determine whether the lighting change affected jet lag. Meal service will be aligned with the lighting, Ms. Postnova said.
Light plays a key role in regulating sleep, but “recently we are learning that meals, exercise and other environmental factors also affect our body clock,” Ms. Postnova said. A big unknown for air travel is how to schedule lighting, meals and exercise to minimize jet lag.
Here is the WSJ article. My preference is for them to keep the lights on, and the windows open, for much longer than is currently the case. Eyemasks are cheap and underused.
Also, it may be my imagination, but anecdotally I observe that screen viewing has (additionally) replaced reading to an extraordinary extent even in just the last five years. True?
Friday assorted links
1. A pianist’s tips on how to practice (“avoid flow.”)
2. New results on the sheepskin effect.
3. “Federal fraud indictment: KU professor secretly worked for Chinese university.”
4. “Fidel Castro’s crocodile bites man at aquarium party.”
5. On turning 40 with an ancient heart.
6. Eric Weinstein podcast with Timur Kuran.
Latitude
Are there systematic trends around the world in levels of creativity, aggressiveness, life satisfaction, individualism, trust, and suicidality? This article suggests a new field, latitudinal psychology, that delineates differences in such culturally shared features along northern and southern rather than eastern and western locations. In addition to geographical, ecological, and other explanations, we offer three metric foundations of latitudinal variations: replicability (latitudinal gradient repeatability across hemispheres), reversibility (north-south gradient reversal near the equator), and gradient strength (degree of replicability and reversibility). We show that aggressiveness decreases whereas creativity, life satisfaction, and individualism increase as one moves closer to either the North or South Pole. We also discuss the replicability, reversibility, and gradient strength of (a) temperatures and rainfall as remote predictors and (b) pathogen prevalence, national wealth, population density, and income inequality as more proximate predictors of latitudinal gradients in human functioning. Preliminary analyses suggest that cultural and psychological diversity often need to be partially understood in terms of latitudinal variations in integrated exposure to climate-induced demands and wealth-based resources. We conclude with broader implications, emphasizing the importance of north-south replications in samples that are not from Western, educated, industrialized, rich, and democratic (WEIRD) societies.
Here is the article, via several MR readers.
Starbucks monetary policy
Starbucks has around $1.6 billion in stored value card liabilities outstanding. This represents the sum of all physical gift cards held in customer’s wallets as well as the digital value of electronic balances held in the Starbucks Mobile App.* It amounts to ~6% of all of the company’s liabilities.
This is a pretty incredible number. Stored value card liabilities are the money that you, oh loyal Starbucks customer, use to buy coffee. What you might not realize is that these balances simultaneously function as a loan to Starbucks. Starbucks doesn’t pay any interest on balances held in the Starbucks app or gift cards. You, the loyal customer, are providing the company with free debt.
Starbucks isn’t the only firm to get free lending from its customers. So does PayPal. That’s right, customers who hold PayPal balances are effectively acting as PayPal’s creditors. Customer loans to PayPal currently amount to over $20 billion. Like Starbucks, PayPal doesn’t pay its customers a shred of interest. But Starbucks’s gig is way better than PayPal’s. PayPal is required to store customer’s funds in a segregated account at a bank, or invest them in government bonds (see tweet below). So unfortunately for PayPal, it earns a paltry amount of interest on the funds that customers have lent it.
Here is more from JP Koning.
Those new (old) service sector jobs: personal book curator
From the unusual products flogged on health and wellbeing site Goop to her one-of-a-kind beauty habits, Gwyneth Paltrow never fails to surprise us. Case in point: she once hired a ‘personal book curator’.
Back in 2001, the former actress decided to redesign her Los Angeles home and realised that to complete the gram-worthy look, she needed a good five to six hundred books to fill the empty shelves.
So what does a Hollywood star do when their personal novel collection doesn’t quite make the necessary requirements? They call in a celebrity-approved book curator of course.
The 46-year-old asked longtime friend, Thatcher Wine, a long-time book collector and the founder of Juniper Books, to complete the task. But with A-list clientele including the likes of Laura Dern and Shonda Rhimes, he was certainly no stranger to the job in hand.
And this is indeed an art:
Over in the dining room, Wine made sure to organise the books in a more minimal fashion in keeping with a “rigid colour palette of black, white, and grey since it was less of a space where one might hang out and read”.
Upon closer inspection, heavyweight coffee table books take price of place with shelves dedicated to artists including Frida Kahlo, Salvador Dali and Leonardo Da Vinci.
Here is the full story, here is the interview with Thatcher Wine. Via Ted Gioia.
Would a payroll tax cut help avoid a recession?
Right now, probably not. Here is an excerpt from my latest Bloomberg column:
The inclination in American politics is to cut the payroll tax on the worker side, not the employer side. That is the opposite of what should be done.
In a recession, the usual problem is that too many people are seeking too few jobs. The reluctance lies on the side of the employer, not the worker. So cutting the taxes paid by the worker won’t help much. In contrast, cutting the taxes paid by the employer might at least boost the demand for workers and thus stimulate employment.
In the long run, according to economic theory, it does not matter whether you cut payroll taxes for workers or employers; eventually wages will adjust so that the true, tax-adjusted set of wage offers ends up the same. But for the purposes of fighting a near-term recession, it matters very much whose taxes are cut.
Do read the whole thing. Do note, however, that I am not currently expecting a recession, I just don’t see enough pointers in that direction, and furthermore most of the time recessions do not happen.
Thursday assorted links
1. Leela Chess Zero. And the latest in computer chess. And podcast with Ken Regan. And Shelby Lyman passes away (NYT).
3. Not a mistake, but touch football is now requiring helmets (NYT).
4. Cinematic markets in everything for Canadian service dogs.
5. “Teacher-designed practice was perceived as less relevant to improving performance on the violin than practice alone. Further, amount of teacher-designed practice did not account for more variance in performance than amount of practice alone.” Link here.
The bullish case for ride-sharing services
In a survey by AARP last year, only 29 percent of those over 50 had used ride-hailing apps. Two-thirds said they weren’t likely to do so in the coming year, citing in part concerns about safety and privacy.
I don’t think today’s young will lose the capacity to use ride-sharing services as they age. In the meantime, there is this:
So Lyft and Uber and others are contracting with third parties, bypassing the need for older riders to use apps or to have smartphones at all.
They’re joining forces with health care systems, for instance. In the past 18 months, more than 1,000 — including MedStar, in the Washington area, and the Boston Medical Center — have signed on with Uber Health for “nonemergency medical transportation,” the company said.
Case managers and social workers can use Uber or Lyft to ferry patients to or from clinics and offices, reducing missed appointments.
Here is the full NYT story by Paula Span.
Lie to Me
From A Test of the Micro Expressions Training Tool:
The theory behind micro‐expressions posits that when people attempt to mask their true emotional state, expressions consistent with their actual state will appear briefly on their face. Thus, while people are generally good at hiding their emotions, some facial muscles are more difficult to control than others and automatic displays of emotion will produce briefly detectable emotional “leakage” or micro‐expressions (Ekman, 1985). When a person does not wish to display his or her true feelings s/he will quickly suppress these expressions. Yet, there will be an extremely short time between the automatic display of the emotion and the conscious attempt to conceal it, resulting in the micro‐expression(s) that can betray a true feeling and according to theory, aid in detecting deception.
…The METT Advanced programme, marketed by the Paul Ekman Group (2011), coined an “online training to increase emotional awareness and detect deception” and promoted with claims that it “… enables you to better spot lies” and “is meant for those whose work requires them to evaluate truthfulness and detect deception—such as police and security personnel” (Paul Ekman Group, METT Advanced‐Online only, para. 2). The idea that micro‐expression recognition improves lie detection has also been put forth in the scientific literature (Ekman, 2009; Ekman & Matsumoto, 2011; Kassin, Redlich, Alceste, & Luke, 2018) and promoted in the wider culture. One example of this is its use as a focal plot device in the crime drama television series Lie to Me, which ran for three seasons (Baum, 2009). Though a fictional show, Lie to Me was promoted as being based on the research of Ekman. Ekman himself had a blog for the show in which he discussed the science of each episode (Ekman, 2010). Micro‐expression recognition training is not only marketed for deception detection but, more problematically, is actually used for this purpose by the United States government. Training in recognising micro‐expressions is part of the behavioural screening programme, known as Screening Passengers by Observation Technique (SPOT) used in airport security (Higginbotham, 2013; Smith, 2011; Weinberger, 2010). The SPOT programme deploys so‐called behaviour detection officers who receive various training in detecting deception from nonverbal behaviour, including training using the METT (the specific content of this programme is classified, Higginbotham, 2013). Evidently, preventing terrorists from entering the country’s borders and airports is an important mission. However, to our knowledge, there is no research on the effectiveness of METT in improving lie detection accuracy or security screening efficacy.
…Our findings do not support the use of METT as a lie detection tool. The METT did not improve accuracy any more than a bogus training protocol or even no training at all. The METT also did not improve accuracy beyond the level associated with guessing. This is problematic to say the least given that training in the recognition of micro‐expressions comprises a large part of a screening system that has become ever more pervasive in our aviation security (Higginbotham, 2013; Weinberger, 2010).
Note that the online training failed but micro-expressions are real and better, more intensive training or maybe an AI could do better though on that last I wouldn’t accept the hype.
Hat tip the excellent Rolf Degen on twitter.
The nature of pessimism
Pessimists are happy dreamers. They make the world in their own image and so always manage to feel at home.
That is from Fernando Pessoa, The Book of Disquiet.
What I’ve been reading
1. Robert Lawson and Benjamin Powell, Socialism Sucks: Two Economists Drink Their Way Through the Unfree World. A good, short “give it to your high school kid” book on why socialism is not an entirely ideal way to arrange society.
2. Ben Lewis, The Last Leonardo: The Secret Lives of the World’s Most Expensive Painting. I felt I knew this story already, but nonetheless found interesting information and conceptual analysis on virtually every page. And while the author is agnostic and balanced, the text upped my opinion of the “likely Leonardo weighted expected value” component from about 0.1 to maybe 0.25? Yet so much fuss about a painting that resurfaced in 1907 — model that… And don’t forget: “None of the great art historians and connoisseurs who saw it before 1958 identified it as a Leonardo.” Recommended.
3. Lene Rachel Andersen and Tomas Björkman, The Nordic Secret: A European story of beauty and freedom. There should be many more books about why the Nordics are special, and this is one of them. The central notion here is “secular Bildung” as a means of elevating society and cooperative relations. Uneven in its structure of exposition, but definitely interesting in parts and the importance of the question makes this better than most of the other books you might be likely to read. Just don’t expect 100% polish.
4. David Cahan, Helmholtz: A Life in Science. At 768 pp., I only read about half of this one. Nonetheless I read the better half, and it is one of the more useful treatments of 19th century German science. I hadn’t realized the strong connections with Siemens and Roentgen, for instance, and one clear lesson is that German science of that time had some pretty healthy institutions outside of the formal university system.