Month: March 2023
Silicon Valley Bank
I am seeing estimates that over 97% of the funds are not FDIC insured, and many of those accounts are held by start-ups. An outright failure would be calamitous for the Silicon Valley start-up ecosystem. Likely the best outcome is if a major bank steps up and buys the thing, rendering depositors whole. Without such a buyout, regulators are in an awkward position. Leaving depositors hanging might generate additional bank runs or financial market runs. Making depositors whole, however, sets a crazy precedent (“in fact, we’re raising the guarantee to $10 million!).
So what exactly does the FDIC/Fed/Treasury have to do to get a deal consummated ASAP? What kind of behind the scenes horsetrading will be involved?
Here is NYT coverage of the basic facts. Note that every now and then the U.S. banking system is semi-insolvent, but matters work out because “on paper” losses do not have to be either realized or reported as such. Remember the 1980s? One danger is that if other banks start selling their bonds at a loss, the problems in the system will become increasingly transparent and compound themselves. That is not the most likely scenario, but it is something to watch out for. And here is the black humorous but not true take…
Friday assorted links
1. Singapore grades itself on its pandemic responses.
2. Higher U.S. high school graduation rates seem to be real.
3. New on-line journal FUSION is soliciting submissions, mix of liberty and tradition ideas. And Civic Future fellowship (UK, improving the public sector and its workers).
4. How much safer is construction?
6. Is GPT-4 coming next week? (speculative)
readtrellis.com
Diamond Age is here, you can visit readtrellis.com.
Your tireless, endlessly creative AI Tutor…With every Trellis, you get a Socratic Guide to teach you the material. It can even quiz you for your understanding!
Here is readtrellis on Product Hunt.
Better predicting food crises
Anticipating food crisis outbreaks is crucial to efficiently allocate emergency relief and reduce human suffering. However, existing predictive models rely on risk measures that are often delayed, outdated, or incomplete. Using the text of 11.2 million news articles focused on food-insecure countries and published between 1980 and 2020, we leverage recent advances in deep learning to extract high-frequency precursors to food crises that are both interpretable and validated by traditional risk indicators. We demonstrate that over the period from July 2009 to July 2020 and across 21 food-insecure countries, news indicators substantially improve the district-level predictions of food insecurity up to 12 months ahead relative to baseline models that do not include text information. These results could have profound implications on how humanitarian aid gets allocated and open previously unexplored avenues for machine learning to improve decision-making in data-scarce environments.
Here is more from Ananth Balashankar, Lakshminarayanan Subramanian, and Samuel P. Fraiberger.
Scalping Girl Scout cookies?
Samoas, Trefoils and Thin Mints, move over. A new Girl Scout cookie flavor, Raspberry Rally, is in such high demand that, after swiftly selling out online, boxes are now being peddled for far higher prices on resale websites.
Single boxes of the cookies, which have a crispy raspberry-flavored center coated in chocolate, cost from $4 to $7, but they are selling for as much as five times the usual price on the secondary market.
Girl Scouts of the U.S.A. has expressed dismay over the situation. The organization said in a statement that most local Girl Scout troops had sold out of the “extremely popular” Raspberry Rally cookies for the season and emphasized that it was “disappointed” to see unauthorized resales of the flavor…
The Raspberry Rally cookies, which first became available late last month, can be bought only online. The cookie is considered a “sister” to the Thin Mint, the top-selling Girl Scout cookie, according to the Girl Scouts website.
Here is more from the NYT, via a loyal MR reader. How about teaching Girl Scouts how to raise the price?
Restrictions on state public health authorities
Conservative and libertarian forces have defanged much of the nation’s public health system through legislation and litigation as the world staggers into the fourth year of covid.
At least 30 states, nearly all led by Republican legislatures, have passed laws since 2020 that limit public health authority, according to a Washington Post analysis of laws collected by Kaiser Health News and the Associated Press as well as the Association of State and Territorial Health Officials and the Center for Public Health Law Research at Temple University.
Health officials and governors in more than half the country are now restricted from issuing mask mandates, school closures, and other protective measures or must seek permission from their state legislatures before renewing emergency orders, the analysis showed.
Here is more from the Washington Post.
Thursday assorted links
1. Stereotypes disrupt probabilistic category learning.
2. The implications of LLM scaling laws. And over 100+ new products this week with the API ChatGPT release.
3. Henry Farrell on conservatives on campus.
4. New thinking on peer review from the NIH.
5. Is there a dominant style for AI-generated art?
The Collectivization of Innovation
In Collective Action Kills Innovation I wrote:
We have innovations like Uber and Airbnb and many others only because entrepreneurs didn’t have to ask for permission. Had we put these ideas to the vote they would have been defeated. Allow almost anyone with a car to drive customers around town? Stranger danger! Let any house be turned into a hotel? Not in my neighborhood! Once the innovations were brought into existence, the masses saw the benefits but they would not have seen those benefits if the idea had been put to a vote. Demonstration is more powerful than imagination.
More and more, however, the sphere of individual action shrinks and that of collective action grows.
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A small but sadly amusing case in point is building in San Francisco. A plan was proposed to build the apartments at right. Love it, hate it. I don’t care. But it shouldn’t be up for collective action. Instead, what we have, however, is a planning process in which the President of the SF Planning Commission, Myrna Melgar, can opposed the plan because:
….I have to just state that I hate the design. Nothing against the architect, I think that the big windows, to me, are a statement of class and privilege. …having that building, with all of those windows it’s such a statement of, to me, class privilege because you know, poor people don’t do that, they don’t you know, like, win- you know, have everything out on the street. It just, so it just, it really rankles me the wrong way. So I just have to say it is a design issue. To me, design guidelines for what’s going to come are going be really important because I do think it does say to the community – is this still our community, what are we building for?
The building was proposed as a replacement for an auto shop (!) in 2014! Building didn’t start until 2022 and as of January 2023 it still wasn’t complete, although it looks like they got most of the windows approved.
An amusing video on some of the hypocrisy involved.
Hat tip: M. Nolan Gray and twitter thread.
Mexico facts of the day
The peso is the top performing major currency this year, according to Bloomberg, and has more than recovered from its coronavirus pandemic weakness. It has risen 8.5 per cent this year to trade above 18 to the dollar…
Foreign direct investment in Mexico hit $35.3bn last year, the highest level since 2015, according to economy ministry data. Transport manufacturing accounted for 12 per cent of that.
Another source of foreign income has been resilient remittances from Mexican migrants in the US. The transfers from abroad now make up 4 per cent of the country’s gross domestic product. Even after growing to record levels last year, in January remittances were 12.5 per cent higher than the same month a year earlier, according to Bank of Mexico figures.
That all said, the forecast growth rate for this year is only 1.2 percent. Here is more from the FT.
My Conversation with Yasheng Huang
Here is the audio, video, and transcript, Yasheng is a China scholar and a professor at MIT. Here is part of the episode summary:
Yasheng joined Tyler to discuss China’s lackluster technological innovation, why declining foreign investment is more of a concern than a declining population, why Chinese literacy stagnated in the 19th century, how he believes the imperial exam system deprived China of a thriving civil society, why Chinese succession has been so stable, why the Six Dynasties is his favorite period in Chinese history, why there were so few female emperors, why Chinese and Chinese Americans have less well becoming top CEOs of American companies than Indians and Indian Americans, where he’d send someone on a two week trip to China, what he learned from János Kornai, and more.
And an excerpt:
COWEN: Now, in your book, you write of what you call Tullock’s curse— Gordon Tullock having been my former colleague — namely, embedded succession conflict in an autocracy. Why has Chinese succession been so stable up to now? And will we see Tullock’s curse whenever Xi steps down, passes on, whatever happens there?
HUANG: I do want to modify the word that you use, stable. There are two ways to use that term. One is to describe the succession process itself. If that’s the situation we’re trying to describe, it is not stable at all. If you look at the entire history of the PRC, there have been so many succession plans that failed, and at a catastrophic level. One potential successor was persecuted to death. Another fled and died in a plane crash. Others were unceremoniously dismissed, and one was put under house arrest for almost 15 years, and he died —
COWEN: But no civil war, right?
HUANG: Yes, that’s right.
COWEN: No civil war.
HUANG: That’s right. There’s another way to talk about stability, which is stability at the system level, and that, you are absolutely right. Despite all these problems with these successions, the system as a whole has remained stable. The CCP is in power. There’s no coup, and there were not even demonstrations on the street associated with the succession failures. So, we do need to distinguish between these two kinds of stability. By one criterion, it was not stable. By the other criterion, it is quite stable.
The reason for that is, I think — although it’s a little bit difficult to generalize because we don’t really have many data points — one reason is the charisma power of individual leaders, Mao and Xiaoping. These were founding fathers of the PRC, of the CCP, and they had the prestige and — using Max Weber’s term — charisma, that they could do whatever they wanted while being able to contain the spillover effects of their mistakes. The big uncertain issue now is whether Xi Jinping has that kind of charisma to contain future spillover effects of succession failure.
This is a remarkable statistic: Since 1976, there have been six leaders of the CCP. Of these six leaders, five of them were managed either by Mao or by Deng Xiaoping. Essentially, the vast majority of the successions were handled by these two giants who had oversized charisma, oversized prestige, and unshakeable political capital.
Now we have one leader who doesn’t really have that. He relies mostly on formal power, and that’s why he has accumulated so many titles, whereas he’s making similar succession errors as the previous two leaders.
Obviously, we don’t know — because he hasn’t chosen a successor — we don’t really know what will happen if he chooses a successor. But my bet is that the ability to contain the spillover effect is going to be less, rather than more, down the road, because Xi Jinping does not match, even in a remote sense, the charisma and the prestige of Mao Zedong and Deng Xiaoping. There’s no match there.
Recommended. And I am happy to recommend Yasheng Huang’s forthcoming book The Rise and Fall of the East.
Pre-order here: https://www.amazon.com/dp/0300266367?ref_=cm_sw_r_cp_ud_dp_CXCHDSQB8JBKEXM4J5BE
Wednesday assorted links
1. Does the moon deserve its own time zone? (NYT) They fail to ask whether the moon also should have Daylight Savings Time.
3. Lina Khan, Atlas Shrugged villain.
4. How good are superforecasters?
5. A classic Thomas Sargent slide.
6. The Covid-19 Stringency Index.
7. Derek Thompson on schools and teen mental health problems (Atlantic).
On graduate student mental health (from my email)
…we often discuss mental health in terms of treatment and selection effects. While more causal inference is needed, I believe it some points are often overlooked.
Personality plays a role: Many in the field can be characterized as overachievers. This behavior can easily turn pathological if it is driven by a fear of failure or a sense that self-worth is contingent on competence. Moreover in a competitive academic environment. Exit may be psychologically very difficult if your self-worth is on the line.
Policies within graduate programs exacerbate the issue: In my program, if a student drops out, the University will not award them a master’s degree if they already have a similar degree from another university. This policy discourages students exit and may keep them in situations that are not beneficial for their mental health.
Economists tend to overrate the effectiveness of educational signals in selecting prospective grad study: Interviews are often not a part of the selection process, which I believe is a missed opportunity to assess a student’s psychological readiness for a PhD program. For many far less stressful jobs psychological testing is standard. In my experience, I only received interviews from programs that had already accepted me (meant to convince me to accept offers).
From anonymous.
The Era of Planetary Defense Has Begun
In Modern Principles of Economics, Tyler and I use asteroid defense as an example of a public good (see video below). As of the 5th edition, this public good wasn’t being provided by either markets or governments. But thanks to NASA, the era of planetary defense has begun. In September of 2022 NASA smashed a spacecraft into an asteroid. A new set of five papers in Nature has now demonstrated that not only did NASA hit its target, the mission was a success in diverting the asteroid:
DART, which was the size of a golf cart, collided with a Great Pyramid-sized asteroid called Dimorphos. The impact caused the asteroid’s orbit around another space rock to shrink — Dimorphos now completes an orbit 33 minutes faster than before the impact, researchers report1 today in Nature.
…As DART hurtled towards Dimorphos at more than 6 kilometres per second, the first part that hit was one of its solar panels, which smashed into a 6.5-metre-wide boulder. Microseconds later, the main body of the spacecraft collided with the rocky surface next to the boulder — and the US$330-million DART shattered to bits….the spacecraft hit a spot around 25 metres from the asteroid’s centre, maximizing the force of its impact….large amounts of the asteroid’s rubble flew outwards from the impact. The recoil from this force pushed the asteroid further off its previous trajectory. Researchers estimate that this spray of rubble meant Dimorphos’ added momentum was almost four times that imparted by DART.
…Although NASA has demonstrated this technique on only one asteroid, the results could be broadly applicable to future hazards…if a dangerous asteroid were ever detected heading for Earth, a mission to smash into it would probably be able to divert it away from the planet.
Income and happiness, revisited
Measures of well-being have often been found to rise with log (income). Kahneman and Deaton [Proc. Natl. Acad. Sci. U.S.A. 107, 16489–93 (2010)] reported an exception; a measure of emotional well-being (happiness) increased but then flattened somewhere between $60,000 and $90,000. In contrast, Killingsworth [Proc. Natl. Acad. Sci. U.S.A. 118, e2016976118 (2021)] observed a linear relation between happiness and log(income) in an experience-sampling study. We discovered in a joint reanalysis of the experience sampling data that the flattening pattern exists but is restricted to the least happy 20% of the population, and that complementary nonlinearities contribute to the overall linear-log relationship between happiness and income. We trace the discrepant results to the authors’ reliance on standard practices and assumptions of data analysis that should be questioned more often, although they are standard in social science.
That is from a recent collaboration by Matthew A. Killingsworth, Daniel Kahneman, and Barbara Mellers. Via the excellent Kevin Lewis. So if you’re rich, don’t be a sad sack! No need for that. And via Daniel Lippman, here is some Bloomberg coverage of the same.
Competing for residents rather than businesses
Amazon is pulling back from its second headquarters expansion in Crystal City (yes I still call it that), and this will herald a new age of lesser competition for businesses and their main offices:
…the growing difficulty of courting corporations. If Amazon stiffs Northern Virginia, future politicians elsewhere may be less eager to promise tax breaks and infrastructure investments, not to mention spend their reputational capital. Politically speaking, it will be harder for urban and suburban leaders to rise to the top by attracting a new major corporate tenants. “Pro-business” local governments may be less common in the years to come.
Another relevant trend is the work-from-home and hybrid models. Why should a major corporation invest in more office space if a lot of that space will be used only part of the time?
It is worth thinking through how remote and hybrid work will affect regional evolution. There have already been “booms” in some relatively small resort areas, such as parts of Maine, Long Island and West Virginia. But there will be a more general impact as well. To the extent corporations give up on clustering their talent in big office buildings, people will spread out where they live. Not everyone will set down stake in the Hamptons or along the Irish coast. Plenty of people will want to live near family or where they were born, or perhaps a few hours away from the main office as part of a hybrid arrangement.
In this new world, it will be much harder for a well-governed region to rise to the top. Even if its leaders succeed in convincing a company to relocate, for instance, there may be fewer workers who do so. Or perhaps there will be the same number of workers but they will come into the office less frequently and live scattered in many directions, sometimes in other states or metropolitan areas.
There is nothing necessarily wrong with this outcome. But the potential parvenu region just won’t feel that exciting, and the level of activity won’t feed upon itself in terms of attracting more retail and cultural amenities.
And:
Overall, there may be less competition to attract corporations. At the same time, political competition for residents may become more intense, because more people will be able to choose where to live regardless of where they work. This competition could lead to improvements in schools and parks.
Here is the rest of my Bloomberg column.