Month: October 2019
Learning from Night Lights
It’s well known that you can see the deleterious effects of communism from outer space but you can also learn about development, war, and international law as this video demonstrates:
Hat tip: Roman Hardgrave.
Does walkability boost economic mobility?
Intergenerational upward economic mobility—the opportunity for children from poorer households to pull themselves up the economic ladder in adulthood—is a hallmark of a just society. In the United States, there are large regional differences in upward social mobility. The present research examined why it is easier to get ahead in some cities and harder in others. We identified the “walkability” of a city, how easy it is to get things done without a car, as a key factor in determining the upward social mobility of its residents. We 1st identified the relationship between walkability and upward mobility using tax data from approximately 10 million Americans born between 1980 and 1982. We found that this relationship is linked to both economic and psychological factors. Using data from the American Community Survey from over 3.66 million Americans, we showed that residents of walkable cities are less reliant on car ownership for employment and wages, significantly reducing 1 barrier to upward mobility. Additionally, in 2 studies, including 1 preregistered study (1,827 Americans; 1,466 Koreans), we found that people living in more walkable neighborhoods felt a greater sense of belonging to their communities, which is associated with actual changes in individual social class.
Here is the paper by Oishi, S., Koo, M., & Buttrick, N. R., via Anecdotal.
Hypersonic is not always as fast as you think
Moreover, hypersonic gliders are actually at a speed disadvantage compared with ballistic missiles of the same range. Ballistic missiles are also boosted to high speed by large rockets, before arcing through the vacuum of space. A glider, by contrast, spends most of its trajectory in the atmosphere, using aerodynamic lift to extend its range. The increased range comes at the cost of faster deceleration caused by atmospheric friction. One implication of this reduced speed is that hypersonic gliders may be more vulnerable to interception by U.S. “point” missile defenses (especially after such defenses have been optimized for that purpose). Like cornerbacks in football, point missile defenses are intended to protect small but important areas — such as U.S. military bases in the western Pacific.
Here is the full piece by James Acton.
Saturday assorted links
1. Knur and Spell: the creative destruction of bygone sports.
2. Is The Sheraton censoring Taiwan?
3. Bank of Jamaica uses reggae music to teach monetary policy (WSJ).
4. The origins of various PC ideas.
5. How to avoid currency conversion charges on your credit card use overseas (NYT).
6. China announced fact of the day: “China’s Ministry of Education announced that the country has built the world’s largest higher education system with the gross enrollment ratio in higher education rising to 48.1 percent from 0.26 percent in 1949.”
Which thinker from the past would you resurrect?
The Scholar’s Stage writes:
If I were to resurrect one person to comment on our current dilemmas, that person would be Hannah Arendt.
What issue of importance today did she not ponder? How should Western countries understand and respond to authoritarian states? What makes meaningful community possible? Does bureaucracy, technology, and settled life diminish our freedom? Why do politicians lie—and what consequences should there be for lying in office? How do political institutions decay? Should we forgive our political enemies? When is violence justified, and when is it not? How can it be controlled or avoided? What should the ‘justice’ in phrases like ‘social justice’ actually mean? What role should guilt, rage, and fear play in our political lives? How should we translate abstract political principles into living realities?Arendt wrote about all of these things and more. She would have the intellectual background needed to say something useful about the biggest political and social challenges we face today: America’s relationship with China, technology’s encroach upon democracy, the unsettled relation between the sexes, the collapse of American social capital and community life, the strengths and foibles of social justice campaigning, partisanship and ‘post-reality’ politics, and of course, the presidency of Donald Trump.
I wish we could hear her opinions on these things. I wish this because I honestly do not know what her opinions would be. I recognize positions she would not adopt, but I can only guess what she would make of Facebook or consider the proper political grounding for impeachment.
A case is made against several other plausible options, including the Founding Fathers. One approach is simply to ask who would be good on television, or on social media. Another is to pick a person whose historical reputation is so strong that he or she cannot be ignored — perhaps that would militate in favor of Abraham Lincoln or how about Jane Austen? Perhaps attention is the true scarcity that needs to be overcome.
I believe I would revive Confucius, at least assuming everyone would accept that it is indeed the real Confucius. He is perhaps the person most likely to have an influence in China, and there is some chance he would seek to reverse the current course of political events.
The Wage Penalty to Undocumented Immigration
This paper examines the determinants of the wage penalty experienced by undocumented workers, defined as the wage gap between observationally equivalent legal and undocumented immigrants. Using recently developed methods that impute undocumented status for foreign-born persons sampled in microdata surveys, the study documents a number of empirical findings. Although the unadjusted gap in the log hourly wage between the average undocumented and legal immigrant is very large (over 35%), almost all of this gap disappears once the calculation adjusts for differences in observable socioeconomic characteristics. The wage penalty to undocumented immigration for men was only about 4% in 2016. Nevertheless, there is sizable variation in the wage penalty over the life cycle, across demographic groups, across different legal environments, and across labor markets. The flat age-earnings profiles of undocumented immigrants, created partly by slower occupational mobility, implies a sizable increase in the wage penalty over the life cycle; the wage penalty falls when legal restrictions on the employment of undocumented immigrants are relaxed (as with DACA) and rises when restrictions are tightened (as with E-Verify); and the wage penalty responds to increases in the number of undocumented workers in the labor market, with the wage penalty being higher in those states with larger undocumented populations.
By George Borjas and Hugh Cassidy, via the excellent Kevin Lewis.
Why firms stay private longer?
Yes, Sarbanes-Oxley is one well-known reason but there are more reasons, most of all stemming from a shift in the balance of power toward founders, boosting their ability to raise private capital:
One such notable deregulation event has been the National Securities Markets Improvement Act (NSMIA), passed in October 1996. NSMIA has made it easier for both private startups and the private funds investing in them to raise capital. First, NSMIA exempts private firms selling unregistered securities under Rule 506 of Regulation D from state securities regulations known as blue sky laws (Rule 506 is one of the exemptions firms can use to issue private shares not registered with the SEC). As a result, NSMIA has made it easier for startups to raise private capital from out-of-state investors by exempting private firms from complying with the blue sky laws of every new state where they issue securities (public firms have long been exempt from blue sky laws). Second, NSMIA has made it easier for private funds such as venture capital (VC) and private equity (PE) funds to raise large amounts of capital by increasing the number of investors in a fund that force the fund to register under the Investment Company Act (ICA).2Registered funds have to regularly disclose their investment portfolio and face leverage and other restrictions, and so VC and PE funds tend to avoid having to register.
That is from a new NBER working paper by Michael Ewens and Joan Farre-Mensa.
Andrew McAfee Places His Bets!
Andrew McAfee is offering to take a number of bets centered around predictions and implication from his new book More From Less. Here are a few of Andrew’s bold predictions that he is willing to bet on through the Long Bets division of the Long Now Foundation.
- In 2029, the US will consume less total energy than it did in 2019.
- In 2029, the US will produce less total CO2 emissions than it did in 2019, even after taking offshoring into account.
- Over the five years leading up to 2029, the US will use less paper in total than it did over the five years leading up to 2019.
The most famous Long Bet was between Warren Buffett and Protege Partners
- Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.
Buffett won that bet and earned over $2 million dollars for his favorite charity.
The purpose of Long Bets is to elicit argument and debate and to better encourage long thinking. All bet winnings go to charity.
Friday assorted links
1. Paul Krugman on Riverside Park and NYC.
2. “It’s possible that in the long run, then, we face a choice: Fixed money supply. Proof of work. Adequate security. Pick two (at most). How Bitcoin addresses this trilemma will be fascinating to watch. If not in 2020, then at some point.” Link here.
3. The next Nobel laureates as predicted by citations? And further predictions.
4. Tools for transformative thought, by Andy Matuschak and Michael Nielsen. A better way of learning?
Robert Kagan has solved for the equilibrium
Consider what it will mean if we decide that what Trump and Giuliani have already acknowledged doing in Ukraine becomes an acceptable practice for all future presidents. Sending the signal that other governments can curry favor with a U.S. president by helping to dig up dirt on his or her political opponents would open our political system and foreign policy to intervention and manipulation on a global scale. Every government in the world wishing to influence U.S. foreign policy will have an incentive to come to a sitting president with information on his or her potential political opponents.
That information might be related to investments or other financial dealings in a particular country, as in Ukraine. Or it might have to do with the behavior of a particular individual while traveling abroad — who he or she sees and what he or she does. Other governments will therefore have an incentive to conduct surveillance of political figures traveling through their countries on the off chance of gleaning some bit of information that could be traded in Washington for some favor. Nor would other governments be limited to what they can see in their own countries. They would have an incentive to dig into the lives of potential opposition politicians in the United States, through monitoring their social media and other Internet presences, their bank accounts and other personal information — as already happened in 2016, and which Trump openly welcomed then, too.
Here is the full piece. I mostly agree, but wonder if foreign governments haven’t already been doing this for some time, but hoarding the information rather than releasing it to select American politicians (no reason to encourage them further, of course).
Does regulation have a role in the repo rise?
Fed data show large banks are keeping a disproportionate amount in reserves, relative to their assets. The 25 largest US banks held an average of 8 per cent of their total assets in reserves at the end of the second quarter, versus 6 per cent for all other banks. Meanwhile, the four largest US banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — together held $377bn in cash reserves at the end of the second quarter this year, far more than the remaining 21 banks in the top 25.
Since the financial crisis, large banks have been obliged to meet a liquidity coverage ratio (LCR) — a portion of high-quality assets such as cash reserves and Treasuries that can be sold quickly to keep the lights on for a month in a crisis. But regulations also require them to track intraday liquidity — cash they can immediately access — which does not include Treasuries. This additional requirement can vary depending on their business models, which in turn inform supervisors’ and examiners’ bank-specific demands. Executives at several large banks say this puts a de facto premium on reserves that varies by bank..
Second-quarter data from the four largest reserve holders show Wells Fargo held 39 per cent of its high-quality liquid assets in reserves. JPMorgan held 22 per cent, Bank of America held 15 per cent and Citigroup 14 per cent.
“If you have a very large concentration in a few institutions and you lose one or two on any day, then you are losing a major portion of your funding,” said Jim Tabacchi, chief executive at South Street Securities, a broker dealer active in short-term debt markets. “Rates have to skyrocket. It’s simple math.”
Here is the full FT article.
The ocean of Encedalus, moon of Saturn
Last year, some of the same research team reported finding complex organic macromolecules within the water vapor that were likely floating on the surface of Enceladus’ ocean. This year, they followed up with a more sophisticated analysis of what sorts of molecules were dissolved into the ocean water. The compounds found within Enceladus’ water vapor plumes, which are responsible for most of the content of Saturn’s E ring, are believed to be present in the liquid subsurface ocean that exists underneath the south pole rather than being the result of contamination as the water escapes from its subsurface prison. That’s significant because many of the nitrogen and oxygen-based compounds the researchers detected are also essential to amino acids here on Earth…
“If the conditions are right, these molecules coming from the deep ocean of Enceladus could be on the same reaction pathway as we see here on Earth,” said Nozair Khawaja, who led the research team of the Free University of Berlin. “We don’t yet know if amino acids are needed for life beyond Earth, but finding the molecules that form amino acids is an important piece of the puzzle.” Khawaja’s findings were published Oct. 2 in the Monthly Notices of the Royal Astronomical Society.
Here is further information.
Thursday assorted links
Against central bank digital currencies
That is the theme of my latest Bloomberg column, note that the idea would to some extent cut private banks out of the intermediation equation. Here is one excerpt:
An alternative scenario is that the central bank decides to enter the commercial lending business, much as your current bank does. Will the central bank be a better lender than the private banks? Probably not. Central banks are conservative by nature, and have few “roots in the community” as the phrase is commonly understood. The end result would be more funds used to buy Treasury bonds and mortgage securities — highly institutionalized investments — and fewer loans to small and mid-sized local businesses.
And:
The problems run deeper yet. Financial regulation makes a relatively tight distinction between banks and non-banks. Banks have access to the payments system directly and enjoy other privileges, and in return their risk-taking is regulated more heavily (by not only the Fed but also other federal agencies and states). A fintech startup, in contrast, avoids most bank regulations, but it must work through banks to make payments. This division of responsibilities is imperfect, but it has allowed many parts of the U.S. economy to grow and innovate without facing all of the regulations imposed on banks.
This leads to my primary objection to an official government e-currency: It would, in effect, make many more economic institutions more like banks. Over time, those institutions would probably be regulated more like banks, too. For instance, if the Fed is directly transmitting payments made by a private company, it might be wary of credit risk and impose capital and reserve requirements on that company, much as it does on banks. Banks also might complain that they are facing unfair competition, and ask that consistent regulations be imposed. In any case, more of the economy likely will be subject to financial regulation, not just the relatively narrow core of the banking system.
Not all innovation is good innovation.
The generator mafia in Lebanon
…blackouts are costing the Lebanese economy about $3.9 billion per year, or roughly 8.2 percent of the country’s GDP.
I asked why the Lebanese government can’t put the private generators out of business. He replied that EdL [the state-owned electricity company] is losing some $1.3 billion per year, while the private generators are taking in as much as $2 billion per annum. “It’s a huge business,” he said, “and it’s very dangerous to interfere with this business.”
…Nakhle, an official in the Energy Ministry, was admitting that the generator mafia bribes Lebanese politicians to make sure that EdL stays weak and blackouts persist…
Maya Ammar, a model and architect in Beirut…told me, “The one reason is in Lebanon that we do not have electricity is corruption, plain and simple.”…The electric grid, she continued, is “a microcosmic example of how this country runs.”
That is from the forthcoming and excellent book by Robert Bryce, A Question of Power: Electricity and the Wealth of Nations.