Month: August 2019

Has anyone said this yet?

Consider the right-wing, conservative, and libertarian movements — is there a good word for them as a general collective?  For now I’ll use “conservative,” while recognizing that the lack of generally recognized standard bearers means that “conservative” and “radical” these days blur into each other, and furthermore conservative and libertarian views have areas of real and significant conflict.

Who is today the most influential conservative intellectual with other conservative and libertarian intellectuals?  (I once said Jordan Peterson is the most influential intellectuals with the general public.)

It seems obvious to me that this is Peter Thiel (admittedly I am a biased observer, for a number of reasons, one being that the Thiel Foundation is a supporter of Emergent Ventures).  Quite simply, if Peter gives a talk with new material in it, it gets discussed more than if anyone else does.

What else might his qualifications be for “most influential conservative intellectual”?

He has had a major hand in the tech revolution, and with his later view that technology is stagnating more generally.

He is the talent spotter par excellence, having had a hand in the rise of Mark Zuckerberg, Elon Musk, Reid Hoffman, Eric Weinstein, and others.

A major hand in Trump/populism/nationalism, or whatever it should be called.  I should note that Peter is often highly influential with those who disagree with him about Trump.

Spoke/wrote/co-authored a bestselling book — Zero to One — which also was a huge hit in China.  And the samizdat lecture notes, from Peter’s Stanford talks, were a big hit in advance of the book.

A major hand in the critique of political correctness, and the spread of that critique.

He foresaw that globalization might contract rather than keep on expanding.  The final answer isn’t in yet on this one, but so far Peter is looking prescient.

A major hand in causing people to rethink higher education, through his Thiel Fellows program.

A major hand in stimulating the interest of others in Girard and Strauss, and maybe someday Christianity?

This point has nothing to do with how much you agree with Peter or not.  It simply occurred to me that no one had said this before, or have they?

By the way, here is David Perell on Peter Thiel on Christianity.

Scotland Trainspotting fact of the day

Last year there were 1,187 drug-related deaths in Scotland, a record, and a staggering increase of 27 percent from the year before. Overdoses are more common in Scotland, by some measures, than even in the United States.


Scotland wasn’t always the “sick man of Europe.”

Until around 1950, life expectancy there was on par with most of Western Europe, or better. But after World War II, things in Scotland improved more slowly than in any other Western European country.

If you would like an anecdote:

Mr. Nugent had been using the drug on and off since he was 19, but overdosed the first time he shot up again. He has overdosed three more times since last year.

“I’ve nearly died four times,” said Mr. Nugent, who turns 43 this month. “It’s getting harder for me to recover as I get older.”

Here is the full NYT story by Allison McCann.

Wednesday assorted links

1. Vegan butchers (NYT).

2. Does gamification induce people to work harder?

3. Why are Christian Scientists dwindling? (how much lower again is their life expectancy?  It’s a huge amount, isn’t it, maybe decades?)

4. What Razib Khan has changed his mind about.

5. Does eviction cause poverty? (maybe not that much)

6. How the Panama Canal influenced the economic geography of the United States?

7. Toni Morrison and the thrill of imperiousness.

Net neutrality for me but not for thee?

To be perfectly clear, I would prefer that 8chan did not exist. At the same time, many of those arguing that 8chan should be erased from the Internet were insisting not too long ago that the U.S. needed to apply Title II regulation (i.e. net neutrality) to infrastructure companies to ensure they were not discriminating based on content. While Title II would not have applied to Cloudflare, it is worth keeping in mind that at some point or another nearly everyone reading this article has expressed concern about infrastructure companies making content decisions.

That is from the excellent Ben Thompson and yes you should pay for his tech email newsletter.

Why not more annuities?

From a reader in the know:

Annuities are often unappealing because they’re expensive, and they’re expensive because of the capital rules and market dynamics. Capital rules make it challenging for insurers to back annuities with anything but investment grade debt. Using a 50/50 A/BBB portfolio would require capital of about 5% of annuity premium. Additionally these products never sell without the intervention of a sales rep, who will require a commission of 3-10% depending on annuity type.

So now the insurer’s shareholders have committed 10% of premium and need to earn a return on that equity. If I target an ROE of 12% (common in the industry), I need to earn a net 120 bps of spread (and more to amortize the commission!). So in effect, the customer is paying to get a treasury yield or worse. It’s understandable why they may prefer to take their chances with more traditional investments.

Has the time come and passed for negative interest rates?

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

Step back and consider the cultural context. Germany is still scarred by the memories of two world wars, fascism, communism, deflation and hyperinflation: in general, huge instability. Since the end of World War II, however, personal savings and the banking system have been an oasis of predictability and a driver of growth. Many Germans treasure their frugality, perhaps excessively or irrationally, and it has become an important part of the narrative Germans tell themselves about the economic order they have built.

Now enter the ECB, in essence telling Germans (and others) that savings are a bad thing, to be taxed and penalized. The very word “negative,” as in “negative interest rate,” makes the policy hard to sell politically. The German word “Strafzinsen” refers to a penalty rate, but the root “Straf” also refers to punishment, and it was used effectively by Franz Kafka in his famous torture-laden short story “In the Penal Colony” (the German title is “In der Strafkolonie”). One German newspaper referred to the “final expropriation” of the German saver, noting that the ECB’s decision to deviate from its inflation target carries “grave consequences.”

More generally, a significant segment of the German population is upset or outraged by the policy. There is even a claim that the revenue from the negative interest payments will be used to finance other EU countries.

Most economists and central bankers view negative interest rates as an acceptable tool of macroeconomic management. Maybe so. But in an era when trust, including trust among nations, is much lower than previously thought, it probably isn’t a good idea to place a punishing new tax on the German national virtue of saving. Central bankers must also be sensitive to public relations.

I find it striking how many people are responding to this column by insisting that Merkel should do more fiscal stimulus.  She should (though I don’t find “stimulus” to be the most instructive word here), as I suggest in the piece, because the Germans have been letting their infrastructure run down for a good while now — internet speeds anybody?  But at the end of the day, I don’t think that spending will eliminate the basic macroeconomic problem facing the EU, nor is most of that spending likely to land on the doorstep of the countries which most need it (though Huawei may benefit a good deal).  There is also this:

So if a policy of negative interest rates is just a Band-Aid, it is one that should be ripped off. And if monetary policy is insufficiently expansionary, that is going to require an increase in the ECB’s inflation target, or a move to nominal GDP targeting, not a jerry-rigged tax on deposits.

There is also an argument that Germans are saving too much. But by some measures, they have a level of national wealth relatively low for their per capita income, in part because Germans are less likely to own their own homes. According to the OECD, Germany’s near neighbors Sweden, Denmark, the Netherlands, and Switzerland all save more in percentage terms than Germany does.

German savers: underrated.

Tuesday assorted links

1. Solve for the equilibrium price of real estate.

2. Kanye + Star Wars vs. NIMBY.

3. Reputation markets in everything: “The Wall Street Journal’s Erich Schwartzel recently wrote a story revealing that none of these tough-guy actors likes it very much when the characters they play get pummeled on screen. One of them even negotiated limits on how much his character can get beat up. Another has his sister, a producer, count how many times his character gets punched, to make sure he gives as good as he gets.

Today, Erich joins us to talk about the lengths these actors have gone to preserve their ever-so-fragile reputations for macho toughness. And the incentives they have for doing so.”

4. A Straussian take on Kenyan rebellion (song, The Rivingtons, 1962).  This was the recording that prompted Dave Marsh to describe Bob Dylan’s “The Times They Are a Changin'” as a “dull diatribe.”

5. A new piece on Harriet Martineau.

6. Stephen Williamson on the Fed.

Open Borders in Svalbard!

Well north of Iceland there is a island archipelago that is governed by Norway but because of a peculiar treaty it has entirely open borders:

When you land in Longyearbyen, the largest settlement in the Norwegian archipelago of Svalbard, you can step off the plane and just walk away. There’s no passport control, no armed guard retracing your steps, no biometric machine scanning your fingers. Svalbard is as close as you can get to a place with open borders: As long as you can support yourself, you can live there visa-free.

In an excellent piece in The Nation, Atossa Araxia Abrahamian describes the history and what it is like to visit:

Formally, Svalbard—known as Spitsbergen until the 20th century—belongs to Norway, which writes the laws, enforces order, builds infrastructure, and regulates hunting, fishing, and housing. Last year, when a Russian man was caught trying to rob a bank in town, a Norwegian judge sentenced him under Norwegian law to a Norwegian jail. But Norway’s control over Svalbard comes with obligations outlined by an unusual 1920 treaty signed as part of the Versailles negotiations ending World War I.

Written in the aftermath of the war, the Svalbard Treaty is both of and ahead of its time. Its architects stipulated that the territory cannot be used for “warlike” purposes. They included one of the world’s first international conservation agreements, making Norway responsible for the preservation of the surrounding natural environment. The treaty also insists that the state must not tax its citizens more than the minimum needed to keep Svalbard running, which today typically amounts to an 8 percent income tax, well below mainland Norway’s roughly 40 percent.

Most radically, the treaty’s architects held Norway to what’s known as the nondiscrimination principle, which prevents the state from treating non-Norwegians differently from Norwegians. This applies not just to immigration but also to opening businesses, hunting, fishing, and other commercial activities. Other countries could not lay formal claims on Svalbard, but their people and companies would be at no disadvantage.

Some 37 percent of Svalbard’s population is foreign born and there is an abandoned Soviet town with statues of Vladmir Lenin. Tyler will also be pleased to know that there are puffins.

I can’t say that I am tempted to move, but given global climate change it’s good to know that I could.

Hat tip: The Browser.

The Pigouvian culture and polity that is Sweden

A Swedish town has become the first in the country to introduce an official begging permit, requiring anyone who asks for money in the street to pay SEK 250 (£21) upfront for a licence.

Valid for three months, the permit can be obtained by filling in a form online or at a police station and requires a valid ID. Anyone found begging for money in Eskilstuna, west of Stockholm, without one faces a fine of up to SEK 4,000 (£342).

Here is much more, via Shaffin.  Note that some beggars are trying to circumvent the ban by “selling blueberries.”

The rise of niche consumption

Here is a new and neat paper which, to the extent it is true, would appear to address several significant puzzles at once.  From Brent Neiman and Joseph S. Vavra:

We show that over the last 15 years, the typical household has increasingly concentrated its spending on a few preferred products. However, this is not driven by “superstar” products capturing larger market shares. Instead, households increasingly focus spending on different products from each other. As a result, aggregate spending concentration has in fact decreased over this same period. We use a novel heterogeneous agent model to conclude that increasing product variety is a key driver of these divergent trends. When more products are available, households can select a subset better matched to their particular tastes, and this generates welfare gains not reflected in government statistics. Our model features heterogeneous markups because producers of popular products care more about maximizing profits from existing customers, while producers of less popular niche products care more about expanding their customer base. Surprisingly, however,our model can match the observed trends in household and aggregate concentration without any resulting change in aggregate market power.

This is related to what I called “matching” in The Complacent Class.

The Entire German Yield Curve is Trading Below Zero

The German government could today borrow billions of Euro and in a decade they could give back to investors less than they borrowed and the investors would be happy. Does the German government have no net positive investments to make?

The global savings glut which drives asset prices higher and makes them more volatile is very much still with us. Around the world there is now over 15 trillion in negative interest debt.

From the FT.

The labor share is not in general falling

We study the joint impact of three measurement issues in the empirical literature on the labor share: (i) start and end periods for the empirical analysis; (ii) accounting for self-employment; and (iii) accounting for residential real estate income. When we correct for these three potential biases, we do not find a general decline in the labor share in our sample of advanced economies. In that respect the behavior of the US labor share after 2000 presents a puzzle.

That is from a new NBER Working Paper by Gilbert Cette, Lorraine Koehl, and Thoimas Philippon.

Identity Politics Versus Independent Thinking

Anthony Kronman, former Dean of the Yale Law school, writes in the WSJ:

The politically motivated and group-based form of diversity that dominates campus life today discourages students from breaking away, in thought or action, from the groups to which they belong. It invites them to think of themselves as representatives first and free agents second. And it makes heroes of those who put their individual interests aside for the sake of a larger cause. That is admirable in politics. It is antithetical to one of the signal goods of higher education.

…Grievance is the stuff of political life…Academic disagreements are different. Important ones are often inflamed by passion too. But the goal of those involved is to persuade their adversaries with better facts and arguments—not to bludgeon them into submission with complaints of abuse, injustice and disrespect to increase their share of power. Today, the spirit of grievance has been imported into the academy, where it undermines the common search for truth by permeating it with a sense of hurt and wrong on the part of minority students, and guilt on the part of those who are blamed for their suffering.

…For college students, the search for truth is important not because reaching it is guaranteed—there are no such guarantees—but as a discipline of character. It instills habits of self-criticism, modesty and objectivity. It strengthens their ability to subject their own opinions and feelings to higher and more durable measures of worth. It increases their self-reliance and their respect for the values and ideas of those far removed in time and circumstance. In all these ways, the search for truth promotes the habit of independent-mindedness that is a vital antidote to what Tocqueville called the “tyranny of majority opinion.”

…Tocqueville was an enthusiastic admirer of America’s democracy. He thought it the most just system of government the world had ever known. But he was also sensitive to its pathologies. Among these he identified the instinct to believe what others do in order to avoid the labor and risk of thinking for oneself. He worried that such conformism would itself become a breeding ground for despots.

As a partial antidote, Tocqueville stressed the importance of preserving, within the larger democratic order, islands of culture devoted to the undemocratic values of excellence and truth. These could be, he thought, enclaves for protecting the independence of mind that a democracy like ours especially needs.

Today our colleges and universities are doing a poor job of meeting this need, and the idea of diversity is at least partly to blame. It has become the basis of an illiberal and antirational academic cult—one that undermines the spirit of self-reliance and the commitment to truth on which not only higher education, but the whole of our democracy, depends.

How carbon-unfriendly is the act of flying?

That is the topic of my latest Bloomberg column, with a focus on Greta Thunberg, whom I admire but I wish she would endorse nuclear power and other practical possible solutions to climate change problems.  At this point, I don’t think the returns to “simple moralizing” are that high, and they may be a substitute for concrete actions.  Excerpt:

Or think more broadly about how to choose one’s symbolic commitments to combat climate change. Buying a carbon offset, verifiable by an independent third party, seems like a good practical step. Thunberg also could take a stand in favor of nuclear power — a feasible source of green energy — except that she opposes it. Nuclear power has worked quite well for France for about 70 years, even if it is not suitable for earthquake zones.

Another way to show one’s dedication to limiting global temperatures would be to educate the public on carbon sequestration, which recently has made a good deal of real progress. How about a strike or demonstration to call people’s attention to the possibilities of this new technology, and to ask for additional funding?

There is much more at the link.