Month: February 2020

From Mark Lutter — charter city for Zambia?

I’m pleased to announce the Charter Cities Institute has signed a memorandum of understanding with the Zambian Development Agency. They are planning to propose changes to their special economic zone act to parliament, and we are working with them to improve their proposal and make it adhere closer to charter city best practices, namely, larger size, mixed use developments, deeper reforms, and local autonomy.

The memorandum of understanding is an important step in piloting charter cities. We are proud to partner with the Zambia Development Agency and Nkwashi in bringing charter cities to reality.

Mark, along with Tamara Winter, was part of the first cohort of EV winners.

Penny Goldberg resigns as Chief Economist at the World Bank

When autocratic, oil-rich nations enjoy a windfall from higher crude prices, where does the money go? One place to look is Swiss bank accounts. Sure enough, an increase in oil prices is followed by a spike in deposits held by these countries in financial havens, according to a 2017 paper by Jorgen Juel Andersen of Norwegian Business School, Niels Johannesen of the University of Copenhagen and their co-authors.

When Mr Johannesen presented this result at the World Bank in 2015, the audience included Bob Rijkers, a member of the bank’s research group. The two of them joined forces with Mr Andersen to investigate if something similar happened after another kind of windfall: infusions of aid from foreign donors. Their conclusion was dispiriting. World Bank payouts to 22 aid-dependent countries during 1990-2010 were followed by a jump in their deposits in foreign financial havens. The leaks averaged about 5% of the bank’s aid to these countries.

It seems the World Bank would not publish the paper — the reasons are disputed — and Goldberg resigned her post as chief economist — again the reasons are disputed.  Here is the full story from The Economist.

Claims about Chennai naps

A three-week treatment providing information, encouragement, and sleep-related items increased sleep quantity by 27 minutes per night without improving sleep quality. Increased night sleep had no detectable effects on cognition, productivity, decision-making, or psychological and physical well-being, and led to small decreases in labor supply and thus earnings. In contrast, offering high-quality naps at the workplace increased productivity, cognition, psychological well-being, and patience.

That is from a new NBER working paper by Pedro Bessone, Gautam Rao, Frank Schilbach, heather Schofield, Mattie Toma.

Thursday assorted links

Is the world fortunate that the coronavirus hit China first?

Is the world fortunate that the coronavirus hit China first? China’s government has totalitarian impulses but that–for the most part– is working to its favor in combating the virus. What other country in the world could quarantine a city of 11 million people on the basis of (at the time) 17 reported deaths?

CNN: Across China, 15 cities with a combined population of over 57 million people — more than the entire population of South Korea — have been placed under full or partial lockdown.

Wuhan itself has been effectively quarantined, with all routes in and out of the city closed or highly regulated. The government announced it is sending an additional 1,200 health workers — along with 135 People’s Liberation Army medical personnel — to help the city’s stretched hospital staff.

China’s response to the virus has been unprecedented and one cannot help but be a little bit impressed.

I was in India recently and if the coronavirus hits India it could spread very rapidly and millions could die not just in India but around the world. India does not have a strong public health system (it has invested instead in sickness treatment, another example of premature imitation), it also has plenty of other opportunistic diseases and bacteria which would magnify viral sickness and overwhelm the public health system, and India does not have a state strong enough to effectively lock down cities. India’s only big advantage versus China is that it’s relatively free press and communication system could make an outbreak more quickly spotted. China, in contrast, tried to hide the initial outbreak. This does, however, cut both ways. India’s 1994 outbreak of the plague quickly became news, which led to official action, but hundreds of thousands of people quickly left the epicenter in Surat–smart action at the time but deadly if those fleeing are infectious.

We need a Manhattan Project to research, develop and produce new vaccines at a faster pace; the US is best placed to be the world leader in this regard. On other actions, the United States stands somewhere in between China and India. US quarantine action would certainly be slower than in China but it could happen, probably through the military, as we are seeing now.

The US approach of slow but eventually decisive action is probably best but how slow is too slow? Right now most people assume that the coronavirus is a blow to China but if does create a serious pandemic then China may be the first to recover and stabilize.

Hat tip: Lunch discussions with Robin, John and Ajay.

“Boring Friends”

We know only four boring people. The rest of our friends we find very interesting. However, most of the friends we find interesting find us boring: the most interesting find us the most boring. The few who are somewhere in the middle, with whom there is reciprocal interest, we distrust: at any moment, we feel, they may become too interesting for us, or we too interesting for them.

That is a Lydia Davis short story (yes, the whole thing) from her excellent book Samuel Johnson is Indignant.

Why are people getting worse at The Price is Right?

Americans are worse at The Price Is Right than they used to be. On the game show, which has been running since 1972, four contestants are asked to guess the price of consumer products, like washing machines, microwaves, or jumbo packs of paper towels. The person who gets closest to the actual price, without going over, gets to keep playing and the chance to win prizes like a new car. In the 1970s, the typical guess was about 8% below the actual price. People underestimate the price by more than 20% in the 2010s.

This finding comes from recently released research by Jonathan Hartley, a data analyst currently studying public policy at Harvard University. A longtime fan of the show, Hartley was inspired to conduct his research after reading a research paper from 1996 that reveals contestants don’t use optimal bidding strategies—they too rarely bid just a dollar over the highest previous bid—and is one of the early economics papers to show how people could be irrational. Hartley wondered what else the data might show. He found that the accuracy of  people’s guesses sharply decreased from the 1970s to the 2000s, and then stabilized in the 2010s.

And why? There are three main hypotheses:

First, inflation in the US was much higher and much less stable in the 1970s and 80s. When inflation is high and variable, people become more attentive to prices, noticing they are paying more for goods than before.

Second, the rise of e-commerce may have made people less sensitive to price. Research by the economist Alberto Cavallo finds that online competition has made prices more similar across sellers, both online and off. As a result, people may feel less of a need to do price comparisons.

Third, there are more products than ever. There are 50 times as many products at a grocery store than 80 years ago, according to the economist James Bessen.

Here is the full 2019 piece by Dan Kopf, via Rasool Somji.

What is the best model for thinking about this lack of higher ed reporting?

The Education Department opened investigations into Harvard and Yale as part of a continuing review that it says has found U.S. universities failed to report at least $6.5 billion in foreign funding from countries such as China and Saudi Arabia, according to department materials viewed by The Wall Street Journal…

The department described higher-education institutions in the U.S., in a document viewed by the Journal, as “multi-billion dollar, multi-national enterprises using opaque foundations, foreign campuses, and other sophisticated legal structures to generate revenue.”

…Universities are required to disclose to the Education Department all contracts and gifts from a foreign source that, alone or combined, are worth $250,000 or more in a calendar year. Though the statute is decades old, the department only recently began to vigorously enforce it.

Officials accused schools of actively soliciting money from foreign governments, companies and nationals known to be hostile to the U.S. and potentially in search of opportunities to steal research and “spread propaganda benefitting foreign governments,” according to the document.

In addition, while the department said it has found foreign money generally flows to the country’s richest universities, “such money apparently does not reduce or otherwise offset American students’ tuition costs,” the document said.

Here is the full WSJ story.

Transcript of my chat with Thomas Kalil

We have the transcript live on our Day One Project site: https://www.dayoneproject.org/cowen-kalil-transcript

Here was the video version, with some sound imperfections.  And from Schmidt Futures:

…some context on the broader event is here, along with details on our open call for innovation, science, and tech policy ideas to inform the priorities of the next presidential term – your community undoubtedly would have great contributions. We are accepting submissions of these ideas through the Day One Accelerator until March 1.

I am very much looking to my Schmidt Futures event coming up this March.

My Conversation with Tim Harford

Here is the transcript and audio, here is part of the summary:

Tim joined Tyler to discuss the role of popular economics in a politicized world, the puzzling polarization behind Brexit, why good feedback is necessary (and rare), the limits of fact-checking, the “tremendously British” encouragement he received from Prince Charles, playing poker with Steve Levitt, messiness in music, the underrated aspect of formal debate, whether introverts are better at public speaking, the three things he can’t live without, and more.

Here is one bit near the opening:

COWEN: These are all easy questions. Let’s think about public speaking, which you’ve done quite a bit of. On average, do you think extroverts or introverts are better public speakers?

HARFORD: I am an introvert. I’ve never seen any research into this, so it should be something that one could test empirically. But as an introvert, I love public speaking because I like being alone, and you’re never more alone than when you’re on the stage. No one is going to bother you when you’re up there. I find it a great way to interact with people because they don’t talk back.

COWEN: What other non-obvious traits do you think predict being good at public speaking?

HARFORD: Hmmm. You need to be willing to rehearse and also willing to improvise and make stuff up as you go along. And I think it’s hard for somebody to be willing to do both. I think the people who like to rehearse end up rehearsing too much and being too stiff and not being willing to adapt to circumstances, whereas the people who are happy to improvise don’t rehearse enough, and so their comments are ill formed and ill considered. You need that capacity to do both.

And another segment:

HARFORD: …Brian Eno actually asked me a slightly different question, which I found interesting, which was, “If you were transported back in time to the year 700, what piece of technology would you take — or knowledge or whatever — what would you take with you from the present day that would lead people to think that you were useful, but would also not cause you to be burned as a witch?”

COWEN: A hat, perhaps.

HARFORD: A hat?

COWEN: If it’s the British Isles.

HARFORD: Well, a hat is useful. I suggested the Langstroth beehive. The Langstroth beehive was invented in about 1850. It’s an enormously important technology in the domestication of bees. It’s a vast improvement on pre-Langstroth beehives, vast improvement on medieval beehives. Yet, it’s fairly straightforward to make and to explain to people how it works and why it works. I think people would appreciate it, and everybody likes honey, and people have valued bees for a long time. So that would have been my answer.

And:

COWEN: I’ve read all of your books. I’ve read close to all of your columns, maybe all of them in fact, and I’m going to ask you a question I also asked Reid Hoffman. You know the truths of economics, plenty of empirical papers. Why aren’t you weirder? I’ve read things by you that I disagreed with, but I’ve never once read anything by you that I thought was outrageous. Why aren’t you weirder?

The conversation has many fine segments, definitely recommended, Tim was in top form.  I very much enjoyed our “Brexit debate” as well, too long to reproduce here, but I made what I thought was the best case for Brexit possible and Tim responded.

Might the coronavirus bring freer speech to China?

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

Chinese citizens are currently upset and panicked, and their online communication might exceed the ability of the censors to control it. Some censorship is done algorithmically, but much of it is performed by humans, if only because the algorithms are far from perfect and cannot pick up on the rapidly changing allusions and code words people use.

What happens if there are too many subversive messages to censor? The system might break down, and speech might become more free. Reimposing censorship might be difficult, politically and logistically.

There is yet another reason censorship might prove difficult. If you feel desperate and fear for your health, the penalties for speaking out online might not seem so bad by comparison. You might not care so much about that promotion at work or your standing in the party. Moreover, the stress of the situation may lower your inhibitions. And if public criticism becomes more common, it may seem safe to join the growing crowd. The eventual result of all this would be a partial collapse of censorship.

The link also considers the entirely possible scenario that Chinese liberties could instead decrease.

Emi Nakamura, 2019 John Bates Clark award winner

From a new JEP appreciation by Janice Eberly and Michael Woodford:

Emi’s exposure to economics began early in life. Her grandfather, Guy Orcutt, was a distinguished econometrician (Watts 1991). Both of her parents, Alice and Masao Nakamura, were academic economists; her mother, Alice Orcutt Naka-mura, is a past President of the Canadian Economic Association. In addition to an early exposure to economic ideas, Emi credits her parents with instilling in her “a deep sense of the importance of testing theories empirically” (Ng 2015). Emi attended academic conferences with her mother and began taking economics classes at the University of British Columbia as a high school student. She credits one of these early classes, a master’s class on economic measurement and index number theory taught by Erwin Diewert, with making an early mark in her drive for clarity in measurement. In a similar vein, Emi watched the film “The Race for the Double Helix” about the discovery of the structure of DNA with her parents. They emphasized the role of the empiricist Rosalind Franklin and the notion that “there is nothing worse than a wrong fact.”

Perhaps one lesson here is the importance of mobilizing talent from very early ages.  Here is previous MR coverage of Emi Nakamura.

Why does the Indian state both fail and succeed?

From the Journal of Economic Perspectives by Devesh Kapur:

The Indian state’s performance spans the spectrum from woefully inadequate, especially in core public goods provision, to surprisingly impressive in successfully managing complex tasks and on a massive scale. It has delivered better on macroeconomic rather than microeconomic outcomes, where delivery is episodic with inbuilt exit than where delivery and accountability are quotidian and more reliant on state capacity at local levels, and on those goods and services where societal norms on hierarchy and status matter less than where they are resilient. The paper highlights three reasons for these outcomes: under-resourced local governments, the long-term effects of India’s “precocious” democracy, and the persistence of social cleavage. However, claims that India’s state is bloated in size and submerged in patronage have weak basis. The paper concludes by highlighting a reversal of past trends in that state capacity is improving at the micro level even as India’s macro performance has become more worrisome.

The downside is well-known, here is the sometimes underappreciated upside:

But on the other side, the Indian state has a strong record in successfully managing complex tasks and on a massive scale. It has repeatedly conducted elections for hundreds of millions of voters—nearly 900 million in the 2019 general elections—without national disputes. In this decade, it has scaled up large programs such as Aadhaar, the world’s largest biometric ID program (which crossed one billion people enrolled within seven years of its launch). Most recently, it has implemented the integrated Goods and Services Tax (GST), one of the most ambitious tax reforms anywhere in recent times. India ranks low on its ability to enforce contracts, but its homicide rate has dropped markedly from 5.1 in 1990 to 3.2 (per 100,000) in 2016 (UNODC 2019).

And this:

Public health services in India leave much to be desired. Yet India achieved a remarkable public health milestone when it completed a full five years as a “ polio-free nation” on January 13, 2016. Even into the 1980s, tens of thousands of children were contacting polio each year. As late as 2009, India reported 741 polio cases, more than any other country in the world. It faced daunting challenges in eradicating polio: high population density and birth rate, poor sanitation, widespread diarrhea, inaccessible terrain, and the reluctance of a section of the population to accept the polio vaccine. The sheer scale of the effort, requiring 172 million children to be vaccinated twice each year, all within a day or two, with the assistance of about 2.5 million volunteers and 150,000 vaccine administration Why Does the Indian State Both Fail and Succeed? 39supervisors, required substantial state capacity in logistics and coordination. Again, the Indian state performed well in a “mission mode” activity that was highly temporally concentrated

Recommended.

Utah sends employees to Mexico for lower prescription prices

Ann Lovell had never owned a passport before last year. Now, the 62-year-old teacher is a frequent flier, traveling every few months to Tijuana, Mexico, to buy medication for rheumatoid arthritis — with tickets paid for by the state of Utah’s public insurer.

Lovell is one of about 10 state workers participating in a year-old program to lower prescription drug costs by having public employees buy their medication in Mexico at a steep discount compared to U.S. prices. The program appears to be the first of its kind, and is a dramatic example of steps states are taking to alleviate the high cost of prescription drugs.

In one long, exhausting day, Lovell flies from Salt Lake City to San Diego. There, an escort picks her up and takes her across the border to a Tijuana hospital, where she gets a refill on her prescription. After that, she’s shuttled back to the airport and heads home.

Lovell had been paying $450 in co-pays every few months for her medication, though she said it would have increased to some $2,400 if she had not started traveling to Mexico. Without the program, she would not be able to afford the medicine she needs.

Here is the full story, via Jonathan Falk.

Tuesday assorted links