Month: January 2020

“Let them eat Whole Foods!”

This latest front in the food wars has emerged over the last few years. Communities like Oklahoma City, Tulsa, Fort Worth, Birmingham, and Georgia’s DeKalb County have passed restrictions on dollar stores, prompting numerous other communities to consider similar curbs. New laws and zoning regulations limit how many of these stores can open, and some require those already in place to sell fresh food. Behind the sudden disdain for these retailers—typically discount variety stores smaller than 10,000 square feet—are claims by advocacy groups that they saturate poor neighborhoods with cheap, over-processed food, undercutting other retailers and lowering the quality of offerings in poorer communities. An analyst for the Center for Science in the Public Interest, for instance, argues that, “When you have so many dollar stores in one neighborhood, there’s no incentive for a full-service grocery store to come in.” Other critics, like the Institute for Local Self-Reliance, go further, contending that dollar stores, led by the giant Dollar Tree and Dollar General chains, sustain poverty by making neighborhoods seem run-down.

Here is the full article, via Walter Olson.

Those old service sector jobs

At Fountain Court Chambers in central London, the senior clerk is called Alex Taylor. A trim, bald 54-year-old who favors Italian suiting, Taylor isn’t actually named Alex. Traditionally in English law, should a newly hired clerk have the same Christian name as an existing member of the staff, he’s given a new one, allegedly to avoid confusion on the telephone. During his career, Taylor has been through no fewer than three names. His birth certificate reads “Mark.” When he first got to Fountain Court in 1979, the presence of another Mark saw him renamed John. Taylor remained a John through moves to two other chambers. Upon returning to Fountain Court, in 2008, he became Alex. At home his wife still calls him Mark.

Alex/John/Mark Taylor belongs to one of the last surviving professions of Dickensian London. Clerks have co-existed with chimney sweeps and gene splicers. It’s a trade that one can enter as a teenager, with no formal qualifications, and that’s astonishingly well-paid. A senior clerk can earn a half-million pounds per year, or more than $650,000, and some who are especially entrenched make far more.

Clerks—pronounced “clarks”—have no equivalent in the U.S. legal system, and have nothing in common with the Ivy League–trained Supreme Court aides of the same spelling.

Here is the full story, interesting throughout, via the excellent Samir Varma.

The politics of zero-sum thinking

The tendency to see life as zero-sum exacerbates political conflicts. Six studies (N = 3223) examine the relationship between political ideology and zero-sum thinking: the belief that one party’s gains can only be obtained at the expense of another party’s losses. We find that both liberals and conservatives view life as zero-sum when it benefits them to do so. Whereas conservatives exhibit zero-sum thinking when the status quo is challenged, liberals do so when the status quo is being upheld. Consequently, conservatives view social inequalities—where the status quo is frequently challenged—as zero-sum, but liberals view economic inequalities—where the status quo has remained relatively unchallenged in past decades—as such. Overall, these findings suggest potentially important ideological differences in perceptions of conflict—differences that are likely to have implications for understanding political divides in the United States and the difficulty of reaching bipartisan legislation.

That is the abstract of a new paper by Shai Davidai and Martino Ongis.  Via Matt Grossmann.

Sunday assorted links

1. NYT covers Prager U.

2. A retirement home for whales?

3. Disagreement on disagreement.  Note that the top option “Willing to bet on position” is incoherent, because to each bet there is a counterparty with the opposite opinion.  Of those indicators, I say go first with the Turing test score.

4. A two-meter floodwall for St. Mark’s square in Venice?

5. Henry Oliver with advice for Dominic Cummings.

6. “Northern Virginia is estimated to get 71 percent of the new jobs in the period, compared to 15 percent in the District and 14 percent in suburban Maryland…”  NoVa on the march.

State support for nuclear power

John Cochrane, in a series of interesting observations on State Capacity Libertarianism, notes:

I don’t see just why nuclear power needs “state support,” rather than a clear workable set of safety regulations that are not excuses for anyone to stop any project.

Apart from the fact that our government created nuclear power at great expense and hurry, I would most of all cite the Price-Anderson Nuclear Indemnities Act of 1957  Here is Wikipedia:

The Act establishes a no fault insurance-type system in which the first approximately $12.6 billion (as of 2011) is industry-funded as described in the Act. Any claims above the $12.6 billion would be covered by a Congressional mandate to retroactively increase nuclear utility liability or would be covered by the federal government. At the time of the Act’s passing, it was considered necessary as an incentive for the private production of nuclear power — this was because electric utilities viewed the available liability coverage (only $60 million) as inadequate.

I am less clear on where the insurance industry stands on this matter today, but in general American society has become far more litigious, and it is much harder to build things, and risk-aversion and infrastructure-aversion have risen dramatically. Furthermore:

  • Jurisdiction is automatically transferred to federal courts no matter where the accident occurred.
  • All claims from the same incident are consolidated into one Federal court, which is responsible for prioritizing payouts and sharing funds equitably should there be a shortfall.
  • Companies are expressly forbidden to defend any action for damages on the grounds that an incident was not their fault.
  • An open-ended time limit is applied, which allows claimants three years to file a claim starting from the time they discover damage.
  • Individuals are not allowed to claim punitive damages against companies.

So the odds are that without a Price-Anderson Act America’s nuclear industry would have shut down some time ago, with no real chance of a return.

More generally, I am not sure which level or kind of liability should be associated with “the free market,” especially when the risks in question are small, arguably ambiguous, but in the negative scenarios involve very very high costs.  Which is then “the market formula”?  That question does not make much sense to me, so it seems to me that, details of the Price-Anderson Act aside, all scenarios are by definition somewhat governmental.

What are the most important lessons for Dominic Cummings and British civil service reformers?

Please leave your suggestions in the comments, only on-topic comments are welcome.  If you are not quite up to speed, again here is a link to the relevant Dominic Cummings blog post.  Or here is a good summary from The Economist.

After digesting all of your marvelous inputs, I will write a synthetic post of my own, with the best of your ideas and some of mine as well.

Saturday assorted links

Nuclear Energy Saves Lives

Germany’s closing of nuclear power stations after Fukishima cost billions of dollars and killed thousands of people due to more air pollution. Here’s Stephen Jarvis, Olivier Deschenes and Akshaya Jha on The Private and External Costs of Germany’s Nuclear Phase-Out:

Following the Fukashima disaster in 2011, German authorities made the unprecedented decision to: (1) immediately shut down almost half of the country’s nuclear power plants and (2) shut down all of the remaining nuclear power plants by 2022. We quantify the full extent of the economic and environmental costs of this decision. Our analysis indicates that the phase-out of nuclear power comes with an annual cost to Germany of roughly$12 billion per year. Over 70% of this cost is due to the 1,100 excess deaths per year resulting from the local air pollution emitted by the coal-fired power plants operating in place of the shutdown nuclear plants. Our estimated costs of the nuclear phase-out far exceed the right-tail estimates of the benefits from the phase-out due to reductions in nuclear accident risk and waste disposal costs.

Moreover, we find that the phase-out resulted in substantial increases in the electricity prices paid by consumers. One might thus expect German citizens to strongly oppose the phase-out policy both because of the air pollution costs and increases in electricity prices imposed upon them as a result of the policy. On the contrary, the nuclear phase-out still has widespread support, with more than 81% in favor of it in a 2015 survey.

If even the Germans are against nuclear and are also turning against wind power the options for dealing with climate change are shrinking.

Hat tip: Erik Brynjolfsson.

Don’t blame the Fed so much

Slow labor market recovery does not have to mean the core fix is or was nominal in nature, even if the original negative shock was nominal:

Recent critiques have demonstrated that existing attempts to account for the unemployment volatility puzzle of search models are inconsistent with the procylicality of the opportunity cost of employment, the cyclicality of wages, and the volatility of risk-free rates. We propose a model that is immune to these critiques and solves this puzzle by allowing for preferences that generate time-varying risk over the cycle, and so account for observed asset pricing fluctuations, and for human capital accumulation on the job, consistent with existing estimates of returns to labor market experience. Our model reproduces the observed fluctuations in unemployment because hiring a worker is a risky investment with long-duration surplus flows. Intuitively, since the price of risk in our model sharply increases in recessions as observed in the data, the benefit from creating new matches greatly drops, leading to a large decline in job vacancies and an increase in unemployment of the same magnitude as in the data.

That is from a new NBER working paper by Patrick J. Kehoe, Pierlauro Lopez, Virgiliu Midrigan, and Elena Pastorino.  Essentially it is a story of real stickiness, institutional failure yes but not primarily nominal in nature.

Perhaps more explicitly yet, from the new AER Macro journal, by Sylvain Leduc and Zheng Liu:

We show that cyclical fluctuations in search and recruiting intensity are quantitatively important for explaining the weak job recovery from the Great Recession. We demonstrate this result using an estimated labor search model that features endogenous search and recruiting intensity. Since the textbook model with free entry implies constant recruiting intensity, we introduce a cost of vacancy creation, so that firms respond to aggregate shocks by adjusting both vacancies and recruiting intensity. Fluctuations in search and recruiting intensity driven by shocks to productivity and the discount factor help bridge the gap between the actual and model-predicted job-filling rate.

Again, a form of real stickiness more than nominal stickiness.  The claim here is not that the market is doing a perfect job, or that the Great Depression was all about a big holiday, or something about video games that you might see mocked on Twitter.  There is a very real and non-Pareto optimal coordination problem.  Still, this model does not suggest that “lower interest rates” or a higher price inflation target from the Fed, say circa 2015, would have led to a quicker labor market recovery.

Even though the original shock had a huge negative blow to ngdp as a major part of it (which could have been countered more effectively by the Fed at the time).

Rooftops!

I am not sure there is any analytical inaccuracy I see on Twitter more often than this one, namely to blame the Fed for being too conservative with monetary policy over the last few years.

And please note these pieces are not weird innovations, they are at the core of modern labor and macro and they are using fully standard methods.  Yet the implications of such search models are hardly ever explored on social media, not even on Facebook or Instagram!  You have a better chance finding them analyzed on Match.com.

Words of wisdom, man the rooftops

While the prediction that rising market toughness could generate an increase in concentration and the profit share may seem counterintuitive, the ambiguous relationship between concentration, profit shares, and the stringency of competition often arises in industrial organization.

That is from Autor, Dorn, Katz, Patterson and Van Reenen.  In essence, rising market toughness reallocates a greater share of output toward highly productive superstar firms, which are more productive but also have higher fixed costs and mark-ups over marginal cost.

Have you ever wondered how “rising Chinese competition devastated parts of the American working class” and “market power is up” both could be true?  Well, this paper is the best available attempt to square that circle.  Market power is up as measured by price to marginal cost ratios, or concentration ratios, but in fact competition is much tougher than it used to be and the antitrust authorities should not (at least in this regard) be blamed for their laxness.

Very few people have put in the time to understand this point, which I should add comes from some of the top IO economists in the field.

Have I mentioned that changes in concentration are correlated with the most dynamic economic sectors?

Friday assorted links

1. Are the Republicans embracing industrial policy?

2. Dominic Cummings advertises for talent, recommended if you haven’t already read it.  They are hiring “assorted weirdos.”  (Is it better to advertise for weirdos, rather than just hire them?  I’ve never advertised for a weirdo — or have I?)  And commentary from Henry Oliver.

3. Henry Olson’s WaPo column on State Capacity Libertarianism.

4. What Devin learned in 2019, part I.

5. Might Maryland and Virginia move toward YIMBY?

6. “Why do we care (should we care) so much about the distribution of something that is essentially impossible to measure or define?”  More on Saez and Zucman, which really is not holding up very well.

7. Why do doctors think they are so great?

Solitary Confinement is Torture

Rather than fading away, solitary imprisonment, a form of torture in my view, has become more common:

Criminal Justice Policy Review: Solitary confinement is a harsh form of custody involving isolation from the general prison population and highly restricted access to visitation and programs. Using detailed prison records covering three decades of confinement practices in Kansas, we find solitary confinement is a normal event during imprisonment. Long stays in solitary confinement were rare in the late 1980s with no detectable racial disparities, but a sharp increase in capacity after a new prison opening began an era of long-term isolation most heavily affecting Black young adults. A decomposition analysis indicates that increases in the length of stay in solitary confinement almost entirely explain growth in the proportion of people held in solitary confinement. Our results provide new evidence of increasingly harsh prison conditions and disparities that unfolded during the prison boom.

Hat tip: Kevin Lewis.

Emergent Ventures, sixth cohort

Sonja Trauss of YIMBY, assistance to publish Nicholas Barbon, A Defence of the Builder.

Parnian Barekatain.

Anna Gát, for development as a public intellectual and also toward the idea and practice of spotting and mobilizing talent in others.

M.B. Malabu, travel grant to come to the D.C. area for helping in setting up a market-oriented think tank in Nigeria.

Eric James Wang and Jordan Fernando Alexandera joint award for their work on the project Academia Mirmidón, to help find, mobilize, and market programming and tech talent in Mexico.

Gonzalo Schwarz, Archbridge Institute, for research and outreach work to improve policy through reforms in Uruguay and Brazil. 

Nolan Gray, urban planner from NYC, to be in residence at Mercatus and write a book on YIMBY, Against Zoning.

Samarth Jajoo, an Indian boy in high school, to assist his purchase of study materials for math, computer science, and tutoring.  Here is his new book gifting project.

One other, not yet ready to be announced.  But a good one.

And EV winner Harshita Arora co-founded AtoB, a startup building a sustainable transportation network for intercity commuters using buses.

Here are previous MR posts on Emergent Ventures.

What I’ve been reading

Chris W. Surprenant and Jason Brennan, Injustice For All: How Financial Incentives Corrupted and Can Fix the US Criminal Justice System.  A good and clear introduction to exactly what the title promises.  Possible reforms are “End Policing for Profit,” “Stop Electing Prosecutors and Judges,” “Required Rotation of Public Defenders and Prosecutors,” and others.

Laurence B. Siegel, Fewer, Richer, Greener: Prospects for Humanity in an Age of Abundance.  A Julian Simon-esque take on the nature and benefits of economic growth and progress.

Lindsay M. Chervinsky, The Cabinet: George Washington and the Creation of an American Institution traces how Washington created a cabinet more than two years into his first term, and modeled after the military councils of the Continental army.

Maxine Eichner, The Free-Market Family: How the Market Crushed the American Dream (and How It Can Be Restored). There are so many anti-market books floating around these days, but this one is more likely to be true than most (the book is not as exaggerated as the subtitle).  The author takes too much of a “kitchen sink” approach for my taste, and doesn’t carefully enough consider trade-offs (U.S. as Finland is not actually a dream), but still I would rather spend time with this book than most of what is coming out these days.

Peter Andreas, Killer High: A History of War in Six Drugs, does a good job of restoring drugs and alcohol to their rightful place in the history of war.

What changes the probability of divorce?

We study how promotions to top jobs affect the probability of divorce. We compare the relationship trajectories of winning and losing candidates for mayor and parliamentarian and find that a promotion to one of these jobs doubles the baseline probability of divorce for women, but not for men. We also find a widening gender gap in divorce rates for men and women after being promoted to CEO. An analysis of possible mechanisms shows that divorces are concentrated in more gender-traditional couples, while women in more gender-equal couples are unaffected.

That is from a new paper by Olle Folke and Johanna Rickne, just published in the American Economics Journal: Applied Economics.  Elsewhere in that issue, Adukia, Asher, and Novosad find that better roads aid education in India by boosting the returns to schooling.