Month: January 2020
Saturday assorted links
1. The 2018 Danish movie The Guilty is excellent start to finish.
2. Apps lower women’s dating standards. [this one a joke it turns out]
3. Christopher Caldwell’s Age of Entitlement.
4. The ten most hated classic novels are, on the whole, better than the ten most loved.
Woke terrorists what about plastic straws?
Terrorist group al Shabaab has banned single-use plastic bags.
The Somali militant Islamist group, which has links to al Qaeda, has long had an interest in environmental issues.
It made the official announcement on Radio Andalus, which is operated by al Shabaab.
Jubaland regional leader Mohammad Abu Abdullah said the group had come to the decision due to the “serious” threat posed by plastic bags to both humans and livestock.
He added that pollution caused by plastic was damaging to the environment.
In the same announcement, the group said it has banned the logging of rare trees.
Details of how the eco-friendly bans would be enforced were not shared with listeners.
Here is the link.
Vancouver vending machine markets in everything
Health advocates say a safe supply of opioids is critical to help prevent people from overdosing on tainted street drugs.
Now, a pilot project in Vancouver’s Downtown Eastside provides some high-risk users with access to an automated machine that dispenses opioids prescribed by a doctor…
The machine, called MySafe, is stocked with hydromorphone tablets that are released on a pre-determined schedule to high-risk opioid users. A user must scan their palm on the machine to identify themselves. The machine recognizes each individual by verifying the vein pattern in their hand and then dispenses their prescription.
Made of steel and bolted to the floor, MySafe resembles an ATM or vending machine. It logs every package that is released and sends that information to a web feed that only program administrators can access.
Here is the full article, please solve for the equilibrium. Via Michelle Dawson.
My spring 2020 Industrial Organization reading list and syllabus
It is long, do note that many topics are covered in the other half of the class, I tried to put this beneath the fold, but today WordPress software is not cooperating…
- Productivity
American Economic Review Symposium, May 2010, starts with “Why do Firms in Developing Countries Have Low Productivity?” runs pp.620-633.
Nicholas Bloom, Raffaella Sadun, and John Van Reenen, “Recent Advances in the Empirics of Organizational Economics,” http://cep.lse.ac.uk/pubs/download/dp0970.pdf.
Serguey Braguinsky, Lee G. Branstetter, and Andre Regateiro, “The Incredible Shrinking Portuguese Firm,” http://papers.nber.org/papers/w17265#fromrss.
Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. “Management as a Technology?” National Bureau of Economic Research working paper 22327, June 2016.
David Lagakos, “Explaining Cross-Country Productivity Differences in Retail Trade,” Journal of Political Economy, April 2016, 124, 2, 1-49.
Dani Rodrik, “A Surprising Convergence Result,” http://rodrik.typepad.com/dani_rodriks_weblog/2011/06/a-surprising-convergence-result.html, and his paper here http://www.hks.harvard.edu/fs/drodrik/Research%20papers/The%20Future%20of%20Economic%20Convergence%20rev2.pdf
Tyler Cowen, The Complacent Class, chapter four, “Why Americans Stopped Creating,” 2017.
Ufuk Akcigit and Sina T. Ates, “Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory,” NBER working paper 25755, April 2019.
Syerson, Chad “What Determines Productivity?” Journal of Economic Literature, June 2011, XLIX, 2, 326-365.
Michael Kremer, “The O-Ring Theory of Economic Development,” Quarterly Journal of Economics, August 1993, 108, 3, 551-575.
Song, Jae, David J. Price, Fatih Guvenen, and Nicholas Bloom. “Firming Up Inequality,” Federal Reserve Bank of Minneapolis working paper 750, April 2018. Do not bother with the very long appendix.
Nicholas Bloom, Raffaella Sadun, and John Van Reenen, the slides for “Americans do I.T. Better: US Multinationals and the Productivity Miracle,” http://www.people.hbs.edu/rsadun/ADITB/ADIBslides.pdf, the paper is here http://www.stanford.edu/~nbloom/ADIB.pdf but I recommend focusing on the slides.
Tyler Cowen and Ben Southwood, “Is the rate of scientific progress slowing down?”, https://docs.google.com/document/d/1cEBsj18Y4NnVx5Qdu43cKEHMaVBODTTyfHBa8GIRSec/edit
Patrick Collison and Michael Nielsen, “Science is Getting Less Bang for its Buck,” Atlantic, November 16, 2018, https://www.theatlantic.com/science/archive/2018/11/diminishing-returns-science/575665/
Decker, Ryan and John Haltiwanger, Ron S. Jarmin, and Javier Miranda. “Where Has all the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S. National Bureau of Economic Research working paper 21776, December 2015.
Furman, Jason and Peter Orszag. “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality.” October 16, 2015.
2. Competition and monopoly
Bresnahan, Timothy F. “Competition and Collusion in the American Automobile Industry: the 1955 Price War,” Journal of Industrial Economics, 1987, 35(4), 457-82.
Asker, John, “A Study of the Internal Organization of a Bidding Cartel,” American Economic Review, (June 2010), 724-762.
Tim Sablik and Nicholas Trachter, “Are Markets Becoming Less Competitive?” Economic Brief, Federal Reserve Bank of Richmond, June 2019.
Susanto Basu, “Are Price-Cost Markups Rising in the United States? A Discussion of the Evidence,” Journal of Economic Perspectives, Summer 2019, 33, 3, 3-22.
Esteban Rossi-Hansberg, Pierre-Daniel Sarte, and Nicholas Trachter, “Diverging Trends in National and Local Concentration,” NBER Working Paper 25066, Septemmber 2018.
David Autor, David Dorn, Lawrence Katz, Christina Patterson, John Van Reenen, “The Fall of the Labor Share and the Rise of Superstar Firms,” https://economics.mit.edu/files/12979, make sure you get the Oct. 2019 version, not the earlier NBER paper.
Whinston, Michael D., “Antitrust Policy Toward Horizontal Mergers,” Handbook of Industrial Organization, vol.III, chapter 36, see also chapter 35 by John Sutton.
Jan De Loecker and Jan Eeckhout, “The Rise of Market Power and its Macroeconomic Implications,” http://www.janeeckhout.com/wp-content/uploads/RMP.pdf. My comment on it is here: https://marginalrevolution.com/marginalrevolution/2017/08/rise-market-power.html and see also me on intangible capital, https://marginalrevolution.com/marginalrevolution/2017/09/intangible-investment-monopoly-profits.html.
Chang-Tai Hsieh and Esteban Rossi-Hansberg, “The Industrial Revolution in Services, September 20, 2019, on-line.
Klein, Benjamin and Leffler, Keith. “The Role of Market Forces in Assuring Contractual Performance.” Journal of Political Economy 89 (1981): 615-641.
Breit, William. “Resale Price Maintenance: What do Economists Know and When Did They Know It?” Journal of Institutional and Theoretical Economics (1991).
Bogdan Genchev, and Julie Holland Mortimer. “Empirical Evidence on Conditional Pricing Practices.” NBER working paper 22313, June 2016.
Sproul, Michael. “Antitrust and Prices.” Journal of Political Economy (August 1993): 741-754.
McCutcheon, Barbara. “Do Meetings in Smoke-Filled Rooms Facilitate Collusion?” Journal of Political Economy (April 1997): 336-350.
Crandall, Robert and Winston, Clifford, “Does Antitrust Improve Consumer Welfare?: Assessing the Evidence,” Journal of Economic Perspectives (Fall 2003), 3-26, available at http://www.brookings.org/views/articles/2003crandallwinston.htm.
FTC, Bureau of Competition, website, http://www.ftc.gov/bc/index.shtml, an optional browse, perhaps read about some current cases and also read the merger guidelines.
Parente, Stephen L. and Prescott, Edward. “Monopoly Rights: A Barrier to Riches.” American Economic Review 89, 5 (December 1999): 1216-1233.
Demsetz, Harold. “Why Regulate Utilities?” Journal of Law and Economics (April 1968): 347-359.
Armstrong, Mark and Sappington, David, “Recent Developments in the Theory of Regulation,” Handbook of Industrial Organization, chapter 27, also on-line.
Shleifer, Andrei. “State vs. Private Ownership.” Journal of Economic Perspectives (Fall 1998): 133-151.
Xavier Gabaix and David Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,”http://papers.ssrn.com/sol3/papers.cfm?abstract_id=728545.
Strictly optional, most of you shouldn’t read this: Ariel Pakes and dynamic computational approaches to modeling oligopoly:
http://www.economics.harvard.edu/faculty/pakes/files/Pakes-Fershtman-8-2010.pdf
http://www.economics.harvard.edu/faculty/pakes/files/handbookIO9.pdf
III. Economics of Tech
Farrell, Joseph and Klemperer, Paul, “Coordination and Lock-In: Competition with Switching Costs and Network Effects,” Handbook of Industrial Organization, vol.III, chapter 31, also on-line.
Weyl, E. Glenn. “A Price Theory of Multi-Sided Platforms.” American Economic Review, September 2010, 100, 4, 1642-1672.
Gompers, Paul and Lerner, Josh. “The Venture Capital Revolution.” Journal of Economic Perspectives (Spring 2001): 145-168.
Paul Graham, essays, http://www.paulgraham.com/articles.html, to browse as you find useful or not.
Acemoglu, Daron and Autor, David, “Skills, Tasks, and Technologies: Implications for Employment and Earnings,” http://econ-www.mit.edu/files/5607
Robert J. Gordon and Ian Dew-Becker, “Unresolved Issues in the Rise of American Inequality,” http://www.people.fas.harvard.edu/~idew/papers/BPEA_final_ineq.pdf
Browse through the first issue of Nakamoto.com on blockchain governance, read (or not) as you find useful.
IV. Organization and capital structure
Ronald Coase and Oliver Williamson on the firm, if you haven’t already read them, but limited doses should suffice.
Gibbons, Robert, “Four Formal(izable) Theories of the Firm,” on-line at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=596864.
Van den Steen, Eric, “Interpersonal Authority in a Theory of the Firm,” American Economic Review, 2010, 100:1, 466-490.
Lazear, Edward P. “Leadership: A Personnel Economics Approach,” NBER Working Paper 15918, 2010.
Oyer, Paul and Schaefer, Scott, “Personnel Economics: Hiring and Incentives,” NBER Working Paper 15977, 2010.
Tyler Cowen chapter on CEO pay in big Business, to be distributed.
Ben-David, Itzhak, and John R. Graham and Campbell R. Harvey, “Managerial Miscalibration,” NBER working paper 16215, July 2010.
Glenn Ellison, “Bounded rationality in Industrial Organization,” http://cemmap.ifs.org.uk/papers/vol2_chap5.pdf
Miller, Merton, and commentators. “The Modigliani-Miller Propositions After Thirty Years,” and comments, Journal of Economic Perspectives (Fall 1988): 99-158.
Myers, Stewart. “Capital Structure.” Journal of Economic Perspectives (Spring 2001): 81-102.
Hansemann, Henry. “The Role of Non-Profit Enterprise.” Yale Law Journal (1980): 835-901.
Kotchen, Matthew J. and Moon, Jon Jungbien, “Corporate Social Responsibility for Irresponsibility,” NBER working paper 17254, July 2011.
Strictly optional but recommended for the serious: Ponder reading some books on competitive strategy, for MBA students. Here is one list of recommendations: http://www.linkedin.com/answers/product-management/positioning/PRM_PST/20259-135826
Furman, Jason. ”Business Investment in the United States: Facts, Explanations, Puzzles, and Policy.” Remarks delivered at the Progressive Policy Institute, September 30, 2015, on-line at https://m.whitehouse.gov/sites/default/files/page/files/20150930_business_investment_in_the_united_states.pdf.
Scharfstein, David S. and Stein, Jeremy C. “Herd Behavior and Investment.” American Economic Review 80 (June 1990): 465-479.
Stein, Jeremy C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.” Quarterly Journal of Economics 104 (November 1989): 655-670.
V. Sectors: finance, health care, education, international trade, others
Gorton, Gary B. “Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1401882, published on-line in 2009.
Erel, Isil, Nadault, Taylor D., and Stulz, Rene M., “Why Did U.S. Banks Invest in Highly-Rated Securitization Tranches?” NBER Working Paper 17269, August 2011.
Healy, Kieran. “The Persistence of the Old Regime.” Crooked Timber blog, August 6, 2014.
More to be added here, depending on your interests.
Commercial silence about China, what is the equilibrium?
OK, the NBA and its players won’t much exercise their free speech rights, nor will university presidents, so how will this all look in the longer term? Surely India and other nations are learning from the Chinese experience, and so here is one excerpt from my Bloomberg column:
Prime Minister Narendra Modi of India is an avowed student of the Chinese experiment. Is it so far-fetched to imagine that he would help to create comparable pressures on speech for institutions doing business with India? The more China’s strategy succeeds, the more likely it is to spread. Modi has not shied away from controversy in making Indian policy, so the domestic pressure to follow the Chinese model could be quite strong.
Imagine a world, not so far off, where Indonesia is a business’s fifth-largest customer or a university’s seventh-largest supplier of students. Will it really be so safe to criticize the government of Indonesia, even for employees of those institutions on their social media accounts? U.S. businesses today are quite reluctant to criticize their customers at all, regardless of how much they collectively or individually account for revenue.
The world is evolving into a place where countries and regimes are exempt from all significant public criticism from any entity (or its employees) with substantial interests overseas — whether commercial or academic. That scenario may sound dystopian, but in fact it would not be a major shift from the status quo.
It is also easy to imagine a norm evolving where major customers, say China and India, become offended if a business or its employees criticize a much smaller nation. The theory might be that if any criticism is allowed at all, eventually it will reach the larger (and more controversial) nations. Or perhaps the smaller nation is an ally or friend of the larger, more powerful one. So you had better not criticize Kiribati, either.
And my parenthetical:
(Paradoxically, China’s concern for speech over actions shows a respect for the power of discourse — and free speech — that contemporary America could learn from.)
Recommended, and here is India already flexing its muscle over Bezos and WaPo (NYT).
*Escaping Paternalism*
The authors are Mario Rizzo and Glen Whitman, and the subtitle is Rationality, Behavioral Economics, and Public Policy. This is the most comprehensive, definitive attempt to respond to paternalism and nudge that I have seen, written from a (mostly) libertarian and partially Austrian perspective. Excerpt:
In our discussion of preferences, the overriding theme was that preferences need not conform to rigid models. We should countenance a much wider range of preferences, in both form and content, than economists have been inclined to accept. But does the same permissive attitude apply to beliefs?…we will argue for a more permissive attitude towards beliefs. Much like our position on preferences, our position on beliefs is that economists, and to a lesser extent other social scientists, have become slaves to an exceedingly narrow conception of both the function and operation of beliefs.
They argue for nudge as personal advice rather than as policy, and overall defend the John Stuart Mill tradition of limited paternalism at most.
Friday assorted links
1. “San Diego is now home to the largest mass surveillance operation across the country.” And 23andMe to start layoffs.
2. Joseph Ferraro does a podcast with me, his core theme is how to get one percent better every day. Much of this one is on my interviewing philosophy. With the passing of Terry Jones, it is worth noting that the single biggest influence on my interviewing philosophy probably is Monty Python. Whenever they would start a skit with an interview set up, and two people in chairs, I felt something especially good was coming up (try “Miss Anne Elk”). What a delicious sensation! Thus it seemed to me that an interview should grab the attention of the listener/viewer right away. My friend Noam understands quite well how rooted a good podcast (including CWT) is in entertainment, no matter what the ostensible topic may be.
3. Coronavirus data?
5. Bryan Caplan on austerity for education, a response to me. I say the actual equilibrium of price controls for higher education is that public spending does not make up the gap, and you end up with something like the German system. I don’t favor this, to be clear, but there is much less higher ed signaling in Germany than the United States, even though the German system is very close to nominally free for students.
Are political leaders with a business background any different?
The argument holds that leaders with business experience make smaller contributions to collective defense because they are egoistic and more comfortable relying on a powerful ally for their defense. An analysis of defense expenditures in 17 non‐U.S. members of the North Atlantic Treaty Organization from 1952 to 2014 provides evidence consistent with the theory. The findings suggest that leaders with business experience are more likely than other heads of government to act as self‐interested utility maximizers.
Here is the full study, by Matthew Fuhrmann. Via the excellent Kevin Lewis.
*Serious Noticing*, the new James Wood book
The subtitle is Selected Essays 1997-2019, here is one excerpt:
A genre is hardening. It is becoming possible to describe the contemporary ‘big, ambitious novel’. Familial resemblances are asserting themselves, and a parent can be named: Dickens. Such recent novels as Rushdie’s The Ground Beneath Her Feet, Pynchon’s Mason & Dixon, DeLillo’s Underworld, David Foster Wallace’s Infinite Jest, and Zadie Smith’s White Teeth overlap rather as the pages of an atlas expire into each other at their edges.
The big contemporary novel is a perpetual motion machine that appears to have been embarrassed into velocity. It seems to want to abolish stillness, as if ashamed of silence. Stories and sub-stories sprout on every page, and these novels continually flourish their glamorous congestion. Inseparable from this culture of permanent storytelling is the pursuit of vitality at all costs. Indeed, vitality is storytelling, as far as these books are concerned.
I do not love the big, ambitious novel, as portrayed here. As for Wood, the best parts of this book are excellent, and none of the lesser parts would seem to lower the sustainable growth rate of gdp.
Thursday assorted links
1. New Sam Peltzman paper about people moving to the political right as they age: “The change in mean Libcon from early adulthood (25) to old age (80) is substantial (over. 20 on the -1, 1 scale), and around half of this occurs after age 45.
3. Meet the Pioneers crop of January 2020.
4. “Sperm donations taken from men after they have died should be allowed, a study says.”
5. Malaysian 3-year-old joins Mensa (NYT).
Countering The Narrative
A surprising fact about the 2016 election is that Trump received fewer votes from whites with the highest levels of racial resentment than Romney did in 2012…Trump’s vote totals improved the most among swing voters: low-socioeconomic status whites who are political moderates.
That is from recent research by Justin Grimmer and William Marble, hat tip anonymous.
Peter Thiel on the funding of science
At a keynote address at the Precision Medicine World Conference, Thiel argued for enabling riskier research grant-making via institutions such as the NIH, as well as abandoning the scientific staple of the double-blind trial and encouraging the U.S. FDA to further accelerate its regulatory evaluations. He said that these deficiencies are inhibiting the ability of scientists to make major advances, despite the current environment that is flooded with capital and research talent.
Make science great again?
“There’s a story we can tell about what happened historically in how processes became bureaucratized. Early science funding was very informal – DARPA’s a little bit different – but in the 1950s and 1960s, it was very generative,” said Thiel. “You just had one person [who] knew the 20 top scientists and gave them grants – there was no up-front application process. Then gradually, as things scaled, they became formalized.
“One question is always how things scale,” he continued. “There are certain types of businesses where they work better and better at bigger and bigger scales,” he said, pointing to big tech.. “And, if big tech is an ambiguous term, I wonder whether big science is simply an oxymoron.”
He then cited the success of major scientific programs – such as the development of the atomic bomb in the Manhattan Project, the Apollo space program and Watson and Crick’s discovery of DNA – that hinged on having “preexisting, idiosyncratic, quirky, decentralized scientific culture[s]” and were accelerated rapidly by a major infusion of cash.
And:
When I invest in biotech, I have a sort of a model for the type of person I’m looking to invest in,” said Thiel. “There’s sort of a bimodal distribution of scientists. You basically have people who are extremely conventional and will do experiments that will succeed but will not mean anything. These will not actually translate into anything significant, and you can tell that it is just a very incremental experiment. Then you have your various people who are crazy and want to do things that are [going to] make a very big difference. They’re, generally speaking, too crazy for anything to ever work.”
“You want to … find the people who are roughly halfway in between. There are fewer of those people because of … these institutional structures and whatnot, but I don’t think they’re nonexistent,” he continued. “My challenge to biotech venture capitalists is to find some of those people who are crazy enough to try something bold, but not so crazy that it’s going to be this mutation where they do 100 things differently.”
Here is the full story, via Bonnie Kavoussi.
The economics of pandemic preparation
That is the topic of my latest Bloomberg column, here is one short excerpt:
…most of the vaccine-making capacity against a new virus would be concentrated in a few multinationals, and much of that activity occurs outside the U.S. If a pandemic were to become truly serious, politics might intervene and prevent the export of doses of the vaccine, no matter what the price.
The economic case for free trade is entirely sound. But here is one case where the U.S. government should take the initiative to support a domestic vaccine industry — because that trade is unlikely ever to be free.
And if you think the market will provide the solution, consider that potential suppliers may fear being hit with price caps, IP confiscations, or other after-the-fact “takings” by the U.S. government. So it is important to think now about how to create the right structures for the eventual creation of treatments and cures.
In the meantime, wash your hands! Nonetheless, so far the smart money still ought to bet that this one will evolve into less virulent forms, and it already seems that a disproportionate number of the people dying are quite old.
How bad are smart phones for people and kids?
The latest research, published on Friday by two psychology professors, combs through about 40 studies that have examined the link between social media use and both depression and anxiety among adolescents. That link, according to the professors, is small and inconsistent.
“There doesn’t seem to be an evidence base that would explain the level of panic and consternation around these issues,” said Candice L. Odgers, a professor at the University of California, Irvine, and the lead author of the paper, which was published in the Journal of Child Psychology and Psychiatry…
The new article by Ms. Odgers and Michaeline R. Jensen of the University of North Carolina at Greensboro comes just a few weeks after the publication of an analysis by Amy Orben, a researcher at the University of Cambridge, and shortly before the planned publication of similar work from Jeff Hancock, the founder of the Stanford Social Media Lab. Both reached similar conclusions.
“The current dominant discourse around phones and well-being is a lot of hype and a lot of fear,” Mr. Hancock said. “But if you compare the effects of your phone to eating properly or sleeping or smoking, it’s not even close.”
*Smith: It’s a Capitalist World*
That is a new magazine, on UK-style paper, nice-looking, and presented by Jamie Whyte. The first issue was published this December, and contributors include Dominic Hilton, Vernon Bogdanor, Helen Dale, David Friedman, Steven Landsburg (who seems to have a column on economic puzzles), Matt Ridley, Martha Bayles, and others.
So far my impressions are positive, though I despair at the economics of magazines more generally.
Googling the title of the magazine seems to yield nothing, and the issue I was sent does not obviously explain how to subscribe. So I am not sure where to send those of you looking for more, but if anyone from the magazine is reading, would you please include that information in the comments section of this post?
Addendum: “Anybody who would like to see the PDF of Smith, please email me and I will send it to you. [email protected]”