Month: May 2021
Concentration in product markets
Here are some new results:
This paper uses new data to reexamine trends in concentration in U.S. markets from 1994 to 2019. The paper’s main contribution is to construct concentration measures that reflect narrowly defined consumption-based product markets, as would be defined in an antitrust setting, while accounting for cross-brand ownership, and to do so over a broad range of consumer goods and services. Our findings differ substantially from well established results using production data. We find that 42.2% of the industries in our sample are “highly concentrated” as defined by the U.S. Horizontal Merger Guidelines, which is much higher than previous results. Also in contrast with the previous literature, we find that product market concentration has been decreasing since 1994. This finding holds at the national level and also when product markets are defined locally in 29 state groups. We find increasing concentration once markets are aggregated to a broader sector level. We argue that these two diverging trends are best explained by a simple theoretical model based on Melitz and Ottaviano (2008), in which the costs of a firm supplying adjacent geographic or product markets falls over time, and efficient firms enter each others’ home product markets.
That is a new NBER working paper by C. Lanier Benkard, Ali Kurukoglu, and Anthony Lee Zhang. It is very supportive of recent research by Estaben Rossi-Hansberg (here and here, with co-authors) that market concentration simply has not been going up in recent times.
New results on Work From Home
By Jose Maria Barrero, Nicholas Bloom, and Steven J. Davis, there are several points of note, with emphasis added by this author:
COVID-19 drove a mass social experiment in working from home (WFH). We survey more than 30,000 Americans over multiple waves to investigate whether WFH will stick, and why. Our data say that 20 percent of full workdays will be supplied from home after the pandemic ends, compared with just 5 percent before. We develop evidence on five reasons for this large shift: better-than-expected WFH experiences, new investments in physical and human capital that enable WFH, greatly diminished stigma associated with WFH, lingering concerns about crowds and contagion risks, and a pandemic-driven surge in technological innovations that support WFH. We also use our survey data to project three consequences: First, employees will enjoy large benefits from greater remote work, especially those with higher earnings. Second, the shift to WFH will directly reduce spending in major city centers by at least 5-10 percent relative to the pre-pandemic situation. Third, our data on employer plans and the relative productivity of WFH imply a 5 percent productivity boost in the post-pandemic economy due to re-optimized working arrangements. Only one-fifth of this productivity gain will show up in conventional productivity measures, because they do not capture the time savings from less commuting.
Here is the link to the NBER working paper.
Monday assorted links
1. Stapp and Dourado criticizing bitcoin. Better than the usual b.s.
3. How old are you? Recommended for all those above a certain age, but which age might that be? There is only one way to find out.
5. Johnny Rogan, one of the best biographers, has passed away.
6. “We find that the shutdown of Google News reduces overall news consumption by about 20% for treatment users, and reduces page views on publishers other than Google News by 10%. This decrease is concentrated around small publishers.” Link here.
Solve for the education equilibrium
Astonishing job losses in American higher education. https://t.co/4cnlxyk2i0 pic.twitter.com/6wAwKE2j9E
— Nicholas Poggioli (he) (@nalanpog) May 1, 2021
Via Ilya Novak.
What should we regulate *more*?
Since the Biden team does not seem too favorably disposed to deregulation, perhaps it is worth asking in which areas we should be pushing for additional regulation. Here are a few possible picks, leaving pandemic-related issues aside, noting that I am throwing these ideas out and in each case it will depend greatly on the details:
1. Air pollution. No need to go through this whole topic again, carbon and otherwise. Remember the “weird early libertarian days” when all air pollution was considered an act of intolerable aggression?
2. Noise pollution. There is good evidence of cognitive effects here, but what exactly are we supposed to do? Can’t opt for NIMBY now can we!?
3. Something around chemicals? How about more studies at least?
4. Housing production. You can look at this as more or less regulation depending on your point of view. But perhaps cities of a certain size should be required by the state government to maintain sufficient affordability.
5. Mandates for standardized reporting of data? For example, the NIH requires that scientists report various genomic data in standardized ways, and this is a huge positive for science. What else might work in this regard?
6. Federal occupational licensing, in lieu of state and local.
7. Software as a service from China?
8. Animal welfare and meat production.
9. Is there a useful way to regulate to move toward less antibiotic use?
10. Should we have more regulation of AI that measures human emotions? How about facial and gait surveillance in public spaces?
11. How about regulating regulation itself?
What else?
I thank an MR reader for some useful suggestions behind this post.
Positive externalities through family member incarceration?
This result surprised me, but perhaps there are gains from getting the bad apples out of the household?:
Every year, millions of Americans experience the incarceration of a family member. Using 30 years of administrative data from Ohio and exploiting differing incarceration propensities of randomly assigned judges, this paper provides the first quasi-experimental estimates of the effects of parental and sibling incarceration in the US. Parental incarceration has beneficial effects on some important outcomes for children, reducing their likelihood of incarceration by 4.9 percentage points and improving their adult neighborhood quality. While estimates on academic performance and teen parenthood are imprecise, we reject large positive or negative effects. Sibling incarceration leads to similar reductions in criminal activity.
That is new from Samuel Norris, Matthew Pecenco, and Jeffrey Weaver, forthcoming in the AER. Via Ilya Novak. Here is Noah on this study, here is a related result from Sweden.
Sunday assorted links
1. Those new service sector jobs.
2. How much would be collected from a higher capital gains rate?
3. Fairfax County police chief under fire for earlier behavior.
4. “The Pfizer vaccine’s “280 different components, manufactured in 86 different sites across 19 countries, driven partly by the research of Turkish migrants to Germany, is globalization in a needle.”” Link here.
5. Income at the margin for Supreme Court Justices (Bloomberg). Is this a problem or not?
6. The difficulties of being Australian (Pakistani).
What predicts professional philosophers’ views?
The entire piece is interesting, but this segment caught my eye in particular:
Additionally, they found that being more politically right-leaning was associated with several philosophical views, such as theism, free will libertarianism, nonphysicalist views in philosophy of mind, and the correspondence theory of truth.
Here is more from Justin Weinberg. Belief in hard determinism, by the way, is correlated with lower levels of happiness.
I say this all boosts Strauss in relative status. It is important to believe that people really are special and possess agency, no matter what the actual truth.
What I’ve been reading
1. Marcel Proust, The Mysterious Correspondent: New Stories. Yes they read like fragments, but Proust’s fragments are still better than almost anything else.
2. Michele Alacevich, Albert O. Hirschman: An Intellectual Biography. There can never be enough books on Albert Hirschman, noting this one focuses on his ideas rather than his life.
3. Jennifer Ackerman, The Bird Way: A New Look at How Birds Talk, Work, Play, Parent, and Think. A good and entertaining overview of some of the most interesting questions about birds, including bird intelligence. “Extreme behavior in birds is more likely in Australia than anywhere else.”
4. Paul Betts, Ruin and Renewal: Civilizing Europe After World War II. The immediate aftermath of WWII was the last time the Western world was truly chaotic, and this book captures that time well, including its intellectual milieu. Are you interested in how West and East German books of manners differed in the late 1940s and 1950s? If so, this is your go-to book.
5. Tim Birkhead, The Wisdom of Birds: An Illustrated History of Ornithology. As I tweeted: “I am coming to the conclusion that the quality of books about birds is higher than about almost any other subject.” Simple question: have you read a better book about the history of ornithology than this one?
Tom Standage, A Brief History of Motion: From the Wheel, to the Car, to What Comes Next is a very good history of what it promises.
Jonathan Rauch, The Constitution of Knowledge: A Defense of Truth, is indeed…a defense of truth.
There is Niall Ferguson, Doom: The Politics of Catastrophe, lots of bad news yes, but is he short the market?
NFT virtual horse markets in everything
Is it simply that we have made gambling too much fun and too intriguing? Or should we upgrade our view of the welfare consequences of gambling?:
On Zed Run, a digital horse racing platform, several such events take place every hour, seven days a week. Owners pay modest entry fees — usually between $2 and $15 — to run their steeds against others for prize money.
The horses in these online races are NFTs, or “nonfungible tokens,” meaning they exist only as digital assets….
“A breathing NFT is one that has its own unique DNA,” said Roman Tirone, the head of partnerships at Virtually Human, the Australian studio that created Zed Run. “It can breed, has a bloodline, has a life of its own. It races, it has genes it passes on, and it lives on an algorithm so no two horses are the same.” (Yes, owners can breed their NFT horses in Zed Run’s “stud farm.”)
People — most of them crypto enthusiasts — are rushing to snap up the digital horses, which arrive on Zed Run’s site as limited-edition drops; some of them have fetched higher sums than living steeds. One player sold a stable full of digital racehorses for $252,000. Another got $125,000 for a single racehorse. So far, more than 11,000 digital horses have been sold on the platform.
Alex Taub, a tech start-up founder in Miami, has purchased 48 of them. “Most NFTs, you buy them and sell them, and that’s how you make money,” Mr. Taub, 33, said. “With Zed, you can earn money on your NFT by racing or breeding.”
One implication here is that automation is never going to destroy all of the jobs. Here is the full NYT story.
Saturday assorted links
1. Testing Magnus Carlsen, recommended.
3. Good FT piece showing how and why Malcolm Gladwell is underrated.
4. Coronavirus corpus, linguistic.
5. NYT on Josquin. And the great Eli Broad has passed away (NYT).
6. Where is the best pizza? (NJ)
7. American policy for an economic recovery from the pandemic.
*American Republics*
That is the new Alan Taylor book and the subtitle is A Continental History of the United States, 1783-1850. Excerpt:
With 124,000 inhabitants in 1813, Mexico City was twenty times bigger than Washington, D.C. — and about forty times grander. Poinsett described the public buildings and churches as “vast and splendid,” providing “an air of grandeur…wanting in the cities of the United States.” A German intellectual, Alexander von Humboldt, thought the city’s statues and Baroque palaces “would appear to advantage in the finest streets of Paris, Berlin and [St.] Petersburg.”
…Mexico City had an array of cultural institutions created during the colonial era. “No city of the new continent, without even excepting those of the United States, can display such great and solid scientific establishments as the capital of Mexico,” marveled Humboldt. The United States had nothing to match Mexico’s Academy of Fine Arts, National Botanic Garden, National University, and School of Mines. Founded in 1551, the university was the oldest in the Americas.
The book is excellent, including on Mormons, and also the War of 1812, and it will be one of the best books of this year. It is time to admit that Taylor is not only one of the best historians, but he is one of the best writers period in any field. Recommended.
The American economy circa 2021
Spending on cars and trucks is 15.1 percent higher than it would have been on the 2019 trajectory; spending on furnishings and durable household equipment is 16.6 percent higher; and spending on recreational goods is a whopping 26 percent higher.
Altogether, durable goods spending is running $348.5 billion higher annually than it would have been in that alternate universe, as Americans have spent their stimulus checks and unused travel money on physical items.
The housing sector is experiencing nearly as big a surge. Residential investment was 14.4 percent above its prepandemic trend, representing $90 billion a year in extra activity. And that was surely constrained by shortages of homes to sell, and lumber and other materials used to make them. It is poised to soar further in coming months, based on forward-looking data like housing starts.
Another bright spot is business investment in information technology. The tech industry has been comparatively unscathed by the crisis. Spending on information processing equipment in the first quarter was 23 percent higher than its prepandemic trend, and investment in software 7.4 percent higher.
But:
Spending on transportation services remains 23 percent below its prepandemic trend, recreation services 31 percent, and restaurants and hotels 19 percent.
Those three sectors alone represent $430 billion in “missing” economic activity — largely equivalent, it’s worth noting, to the combined shift of economic activity toward durable goods and residential real estate.
A corollary shows up in trade data. Services exports are down 26 percent compared with the prepandemic trend, which reflects in significant part the freeze-up in global travel.
Here is the full NYT story.