Month: September 2024
Wednesday assorted links
1. Innovation networks in the Industrial Revolution.
2. Self-treatment of many diseases and maladies is going to accelerate a good deal. Can you guess why?
3. Four percent of humanity subscribes to OnlyFans? Who says Britain is in decline?
4. Those new service sector jobs, Argentina Milei edition.
5. A summary of some John Cochrane. And Cliff Asness profile.
6. Mansour Seck, RIP.
7. Supply is elastic for vaccinations too.
8. Is there too much serial correlation in Fed decisions?
9. Haitian immigrant incarceration rates.
10. James Broughel defends the sovereign wealth fund idea for America.
Median income facts
Inflation-adjusted median household income was $80,610 in 2023, up 4% from the 2022 estimate of $77,540, the bureau said in its annual report card on households’ financial well-being. This move returned incomes to about where they were in 2019, the peak that was hit just before the pandemic.
Here is more from the WSJ. The Midwest did especially well, with 6.6% gains.
Should we keep the wealthy non-diversified? (from my email)
Byrne Hobart writes to me:
One of the purposes of inheritance taxes is to avoid compounding intergenerational wealth. But The Missing Billionaires points out that if all of America’s millionaires had put their money in broad market indices in 1900, their heirs would number 16,000 billionaires, even accounting for taxes, splitting estates among multiple children, etc.
So one of the forces that prevents compounding inequality is that rich people tend to have less diversified portfolios than the rest of us—they own a lot of whatever it is that made them rich! If we give them an incentive to stay undiversified, and to do so even when they’re quite old and thus not in a great position to monitor or manage their assets well, they’ll end up with suboptimal portfolios that are much more likely to lose most/all of their value than the average retirement account is. Given how much volatility can cut into returns (witness the 3x levered Microstrategy ETF that has lost 82% of its value in a year when Microstrategy itself doubled), it’s possible that the cost basis step-up actually contributes more to intergenerational economic mobility than the money collected by the estate tax itself, by encouraging them to white-knuckle their way through the last years of their life with all their eggs in one basket.
I’m not personally a fan of the estate tax or the step-up, for various reasons, but I found this argument fun nonetheless.
Speculative but interesting…
Bolivian soccer competition
The men’s national soccer team is hoping that hosting World Cup qualifiers at an altitude higher than ever will help it improve in the South American standings.
The Bolivians usually play in the capital La Paz at 3,640 meters (11,940 feet) above sea level, but the South American soccer body CONMEBOL has allowed them to move their games to El Alto, the second largest city in the country at an altitude of 4,150 meters (13,615 feet). That’s as high as nine Empire State Buildings on top of each other.
With one win and five losses, Bolivia is second to last in the standings, and needs a win on Thursday against visiting Venezuela, which is fifth and coming off a quarterfinal run at the Copa America.
New Bolivia coach Oscar Villegas will make his debut after replacing Antonio Carlos Zago, who was fired in July after a winless Copa. Villegas hopes to exploit the higher altitude by picking a squad in which 80% of the players are used to the thinner air, including six from Always Ready club in El Alto, and six more from Bolívar in La Paz…
Venezuela’s home matches are at sea level…
Here is the full article, via Mathan.
Against an American sovereign wealth fund
That is the topic of my latest Bloomberg column, here is one excerpt:
It is true that the expected rate of return of the US stock market is higher than the US government’s borrowing rate. But what matters is the net social increase in investment value, not the nominal returns on the government’s portfolio. If the government buys some of my mutual funds, for instance, and it earns the 7% return that I would otherwise have earned, there is no net increase in social value. On paper, the sovereign wealth fund looks like a big success, but the government has simply issued more debt and redistributed some equity returns away from the citizenry and toward itself.
To the extent the government can initiate new investments and “pick winners,” it could boost overall social returns. But that is a far trickier endeavor than just putting funds into the stock market. And just as Democratic administrations have encouraged or mandated labor and diversity standards for many government subsidies and contracts, they might impose similar requirements on US SWFs — which would then be eliminated, or revised, under a Republican administration.
Recommended, there are other significant arguments at the link.
Tuesday assorted links
1. Find the most and least expensive Taco Bell meal in America. The price dispersion is larger than I would have expected.
2. What will Apple Intelligence do for you? I was impressed by this demo. These whines sound like problems that will be fixed within a year?
4. Scott Sumner on Boston and modernism.
5. “I find your lack of faith disturbing” — James Earl Jones, RIP (NYT). He also was the last surviving cast member of Dr. Strangelove.
6. Attempted drone assassination in Ecuador.
7. Germany extends temporary controls to all its land borders (FT).
8. Henry Oliver’s very good new book Second Act is being released in the U.S: today, it covers the topic of late bloomers, here is a dialogue about the book.
LLMs are Creative Reasoners
It’s bizarre to me that there are still people claiming that LLMs are not reasoning or are not creative when by any objective measure they are obviously creative reasoners! By objective measure I mean a test that evaluates creativity and reasoning by evaluating outputs not by idle philosophical speculation that rules AIs out by definition. Here’s a good paper, Can LLMs Generate Novel Research Ideas? A Large-Scale Human Study with 100+ NLP Researchers, which illustrates one such test. The authors asked top researchers in the field of natural language processing to propose research ideas which were then presented in a standardized format to a ratings panel of other NLP experts. The AI created ideas were judged more creative than the human ideas.
Now one might argue that the humans weren’t giving their best ideas–some data in the paper suggests they were giving ideas at the median of those for top researchers–and humans might also be looking for ideas that were perhaps easier to get funding precisely because they were less creative but more doable. Either way, however, the AIs are coming up with good ideas that could usefully supplement human generated ideas.
What I’ve been reading
1. Bécquer Seguín, The Op-Ed Novel: A Literary History of Post-Franco Spain. I liked this book very much, as it gave me extremely useful background on the Spanish fiction I enjoy. It may make less sense to read if you don’t already know the relevant fiction, but in any case a fine work. Imagine, by the way, if America had an equally strong correlation between novelists and Op-Ed columnists.
2. Ken McNab, Shake It Up, Baby! The Rise of Beatlemania and the Mayhem of 1963. At the beginning of that year, John and Paul despaired of making it as a rock band, and expected to end up as songwriters for other people, much like Goffin-King at the time. By the end of the year however… This is the story of how that happened. Very well done.
3. Ian Frazier, Paradise Bronx: The Life and Times of New York’s Greatest Borough. An excellent, fun, and much-needed book. I liked the parts about the 20th century best. I am still longing for that cost-benefit analysis of the Cross-Bronx Expressway, though. We know the Interstate Highway system passes the cost-benefit test massively, but do all of its constituent parts?
4. Simon Morrison, Tchaikovsky’s Empire: A New Life of Russia’s Greatest Composer. My favorite book about Tchaikovsky, engaging but it also covers the music for the music’s sake as well. I liked this sentence from the book jacket: “His life and art were framed by Russian national ambition, and his work was the emanation of an imperial subject: kaleidoscopic, capacious, cosmopolitan.” The book does go relatively light on Tchaikovsky’s um…personal life.
There is Matt Grossman and David A. Hopkins, and their suitably titled and subtitled Polarized Degrees: How the Diploma Divide and the Culture War Transformed American Politics.
Pakistan is a drastically undercovered country, but now Lahore has some coverage, in Manan Ahmed Asif’s Disrupted City: Walking the Pathways of Memory and History in Lahore.
Marieke Brandt, Tribes and Politics in Yemen: A History of the Houthi Conflict had far more detailed than I was seeking. But I read about one fifth of it, and learned a great deal from that.
J.C.D. Clark, The Enlightenment: An Idea and its History, sounds smart but somehow stays too much at the meta-level of commentary on the commentary?
Victor Davis Hanson has a new book The End of Everything: How Wars Descend into Annihilation.
Why Indian firms don’t scale
Surveying the literature on the impact of labor regulation, we find that India’s firm-level labor regulations punish businesses in two ways. First, the regulations are too onerous, preventing firms from remaining competitive. While some sectors and large-scale industries might be able to comply with this regulatory overload, most regulations are imposed on firms with as few as 10 employees, disincentivizing firm growth and large-scale employment. Second, labor-related regulations tend to micromanage factory operations through uncertain enforcement by a labor inspection system, further discouraging firms from expanding. India’s labor laws do too much, too soon in a firm’s life cycle.
We argue that to scale manufacturing across industries and foster job creation, India needs to revise its stringent labor regulations. This paper begins by describing the predominance of small-scale firms, indicating the extent of informality in India’s manufacturing sector, which is well established in the literature. It then shows that India’s labor law tries to do too much; instead of merely setting standards, the statutes micromanage workplaces, colors, fonts, uniforms, and more by requiring permissions for a host of workplace activities such as changing the tasks of a worker. It argues that the laws apply too soon in firms’ life cycle—namely, at low employee thresholds (typically as low as 10 workers). Both these aspects increase labor and compliance costs and discourage firms from scaling. Next, the paper offers recommendations for reforms to stop disincentivizing firms from scaling—including streamlining labor laws, raising employee thresholds, optimizing inspections, and avoiding excessive reliance on criminal penalties to ensure compliance.
AI prediction markets
From Dan Hendrycks:
We’ve created a demo of an AI that can predict the future at a superhuman level (on par with groups of human forecasters working together). Consequently I think AI forecasters will soon automate most prediction markets.
Here are the links.
Monday assorted links
1. Converts research papers into audio discussions.
2. Interest in reading, by gender, across various countries.
3. Max Richter on the music that made him.
4. A simple recipe for robot dexterity. And short video of robots picking strawberries. They even judge which ones are ripe.
5. Steam-powered vs. gas-powered tractors.
6. What was the Fortune 500 equivalent in 1812?
7. Wordy, but some interesting claims about where generative AI is headed.
Kalshi wins
From an announcement, slightly edited by me:
Kalshi has defeated the CFTC, legalizing election markets in the US for the first time in 100 years. After years of battling with the US government, we won in court: the District Court of Columbia just ruled in our favor, legalizing trading on U.S. elections and overthrowing a long-time ban that has been standing since the Great Depression.
A bit more on wealth taxes
From my Bloomberg column of last week:
Just as more capital assets would go to foreigners, they would also go to domestic nonprofit and other non-taxpaying institutions. Rather than donating money to their favorite charity, people would be more likely to give them stock or other assets. But it would be harder for those institutions to liquidate those assets, because appropriate for-profit investors will face the new and higher tax burden. So an inefficiently high quantity of capital assets will be held in the nonprofit sector. The nonprofits will be riskier, and in the longer run they might be richer — at the expense of the private sector.
Much of the rest of the column concerns the incentive to sell capital to non-resident foreigners, following a wealth or higher capital gains tax.
Honduras and its disputes
More importantly, Honduras is not just locked in a dispute with Silicon Valley billionaires, as the authors would lead you to believe. Other claimants against Honduras at the International Center for the Settlement of Investment Disputes (ICSID) include the Paiz family, one of the wealthiest in Guatemala, the U.S. bank JPMorgan Chase, and others from Honduras, Panama, Mexico, Chile, Norway, and the Caymans. More claims were brought by private energy companies after Castro’s 2022 reforms pushed out private investment to expand the state’s role in electricity production. Predictably, there are no signs of progress for Honduras’ crippled energy grid. The state-run National Electric Energy Company loses over $30 million every month, with debts amounting to more than 10 percent of Honduran GDP.
This is to say that Honduras’ current feud with Próspera is part of a pattern of reneging on obligations to investors and expanding state influence, not a one-time rectification of a coup by Silicon Valley billionaires.
Equally absent the article is any mention that the supposedly “center-left” Castro is a self-proclaimed socialist strongly aligned with Venezuela and, in shirking foreign investors and the US, following in its footsteps quite neatly. Castro has indeed gone so far as to remove Honduras from the ICSID over the massive list of outstanding claims against it—a move familiar to Venezuela, which left in 2012. The Honduran government’s rationale—that the ICSID favors corporations instead of states—is the same that Venezuela used. The practical effects of this move are limited, but the symbolic ones are meaningful. Honduras is branding itself as a bad place to do business.
Here is more from Snowden Todd.
France frozen croissant fact of the day
In France, frozen products accounted for 24 per cent of all pastries and other sweet baked goods in 2021. In the UK 21 per cent of pastries were frozen, compared with 13 per cent in Spain and 17 per cent in the US, according to research groups Gira and Global Market Insights.
Industry researchers have predicted that sales of frozen baked goods, including both bread and pastries, would increase by 7 per cent a year from 2021-26. They said the baked goods market overall, comprising both fresh and frozen food, would expand by just 1-2 per cent a year.
Here is more from Barney Jopson at the FT. The producers of the frozen products, as interviewed in the piece, claim their outputs can pass a blind taste test.